Advisors who serve veterans with extended long-term care needs may want to consider an immediate annuity to help them qualify for an aid and attendance (A&A) or housebound pension through the Veterans Administration, according to Dale Krause, president and CEO of The Krause Agency and an elder law attorney.
Veterans may qualify for one of these types of supplemental pensions in addition to their base pension if they have long-term care needs. However, there are income restrictions to qualify for the benefit that may force veterans to reduce their monthly income and net worth.
Krause spoke on a webinar held by Retirement Experts Network on Tuesday explaining who qualifies for these types of supplemental pensions, and how advisors can use them to help those clients.
Qualification and Eligibility
Veterans are eligible for a base pension from the Veterans Administration, which can be supplemented by the housebound pension or aid and attendance pension if they have long-term care needs. There are three benefit tiers for single or married veterans, and spouses of deceased veterans as long as they haven't remarried, Krause said.
Veterans can qualify for the A&A pension booster if they require help with daily activities like dressing, eating, bathing or adjusting prosthetic devices. Combined base pension and A&A benefits are as much as $1,794 per month for a single veteran, while married veterans who need care may qualify for up to $2,127 per month, according to Krause. Surviving spouses may receive up to $1,153.
However, Genworth's 2016 Cost of Care survey found that the average cost of a private, one-bedroom room in an assisted living facility was $3,628 per month.
A&A benefits are "really there as an extra pension check to help qualified veterans pay for their long-term care services," Krause said.
The housebound pension is available for veterans who are "substantially confined" to their homes due to a permanent disability, according to the VA, and who aren't receiving A&A benefits. Combined benefits for claimants who receive the housebound pension range from $1,314 to $1,647 per month for single or married veterans, or $881 per month for a surviving spouse who has not remarried.
Genworth found the cost of homemaker services or home health aides was between $3,813 and $3,861.
To qualify for a VA pension, veterans must have served at least 90 days of active duty, including at least one day of wartime service; may not have a dishonorable or bad conduct discharge; and must be permanently disabled.
Krause noted that for veterans who are 65 or older, "because you're getting a Social Security check and you're no longer employed, you're typically presumed to be disabled" by the VA.
Financially, veterans must have a limited net worth and a low monthly income to qualify for the benefits.
There's no set limit to meet the low net worth qualification, Krause said, but he recommended the veteran keep net worth around $15,000 in cash assets to qualify for the benefit. The VA includes things like second cars or boats, checking and savings accounts including retirement accounts, CDs, cash value life insurance and tax deferred annuities when determining a claimant's net worth.
Things that aren't included in a claimant's net worth are the home, regardless of its value; a single vehicle; immediate annuities; a prepaid burial plan; and the $15,000 in cash Krause recommended.
Krause looks at his veteran clients' total out-of-pocket medical expenses to see if they exceed the client's income. "Any time that the income is more than their medical expenses, then typically you're going to reduce the potential benefit," he said. "For every dollar that your monthly income is more than your unreimbursed monthly medical expenses, you potentially [have] a dollar-for-dollar reduction in the pension benefit," he said.
