In a somewhat stunning development, many veteran benefits planners are reporting that the Department of Veterans Affairs (VA) has started denying some applications for benefits in cases where the veteran has made a recent transfer to reduce net worth to obtain benefits. For many years and in accordance with its own rules, the Department of Veterans Affairs (VA) has permitted most transfers (assuming the transfers are not to a spouse or to a person in the same household) to reduce the net worth of the veteran or his surviving spouse so that the veteran or his surviving spouse may get non-service connected disability benefits (often referred to as Aid and Attendance) if their medical expenses exceed income (in most cases). The benefits generally range from $1,094 a month for the surviving spouse of a wartime veteran to over $2,500 per month for two veterans who are married seeking benefits.

As reported in the June issue of the Texas Elder Law E-letter, the Government Accounting Office (GAO) issued a scathing report against the inconsistent VA rules and urged VA to re-write the rules to prevent abuse. One of the rules at the center of attention is the permission of transfers without penalty to achieve benefits (unlike most Medicaid programs which has an anti-fraud “look-back period” to presume transfers are done for the purpose of achieving benefits). VA agreed with GAO and promised it is working on changing the rules, and it is anticipated that there may be new rules as early as year 2013.

While it is certainly expected that the rules will change and there will be a look-back period akin to Medicaid to curtail abuse, it is somewhat surprising that there are reported cases of denial of benefits prior to changing the law. Normally most governmental agencies use the law as it exists at the time of the action. However, there have been several reported cases that VA has decided to interpret the rules differently than it has for many years and issue a denial on cases where the veteran has made a transfer (whether by gift, trust, etc.). So, even before the law has changed, there have been cases of denial.

It is this author’s opinion that although there may be a lack of clarity in the rules and it is certainly recommended that VA have an anti-fraud rule akin to Medicaid, there should not be arbitrary and capricious determinations denying eligibility resulting from a transfer until there is clarity in the rules drafted by the government. If there is a lack of clarity of the rules, then there should be a determination against the one (in this case, VA) who wrote such rules.

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