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Marshall Elder and Estate Planning Blog: June 2012
In a surprise,
Chief Justice John Roberts joined four liberal US Supreme Court Justices to uphold
the constitutionality of most of the Affordable Care Act (the “ACA” or “health
reform”). See NATIONAL
FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS. This is generally good news
for seniors. It means that the following beneficial aspects of the health
reform law remain in effect:
drug savings. Under the ACA Medicare beneficiaries get discounts on drugs when
they are hit by the so-called “doughnut hole.” Without the law, there would be no help with the cost of their medications when they are in the hole.
The ACA provides increasing drug coverage and will entirely eliminate the
doughnut hole by 2020. As a result of the
health reform law, Medicare beneficiaries saved an average of $604 on
prescription drugs in 2011.
• Free preventive
services. Medicare beneficiaries who participate in traditional Medicare (like me) receive preventive services such as colonoscopies with no deductible or co-payment.
• Annual wellness
visits. Medicare enrollees can see their doctor once a year for a free assessment development of a personalized plan. The Federal government reports that 26
million people benefited from the wellness and preventative services portions
of the law in 2011.
In addition, promising practices like Accountable
Care Organizations and Health
Insurance Exchanges will now be able to continue to develop. The reform law also extends the financial viability of the Medicare
program. It does so by reducing payments to providers like Medicare
Advantage Plans and by imposing some tax increases on higher income
taxpayers. See my earlier blog article: New
Medicare Contribution Tax on Investment Income starts on January 1, 2013. And the employee portion of the Medicare
hospital insurance tax is increased by 0.9% on wages that exceed a threshold
amount ($200,000 for most individuals, and $250,000 for joint and surviving
spouse returns). The Court did effectively rewrite one aspect of the health
reform law - a provision that would have required states to provide Medicaid
coverage for virtually all poor Americans (up to 133% of the poverty level) or
risk losing all of their federal Medicaid funding. The Court held that this
penalty was too severe (a “gun to the head” of states) to be constitutional.
The federal government can, however, withhold Medicaid expansion funding from
states that decide not to expand. Since most people who are over age 65 get
Medicare, this provision mainly impacts poor people who are younger than that,
including many older adults between 50 and 65 who have lost their employment
based insurance. The Court’s decision on Medicaid means that states, like
Pennsylvania, will now have the ability to choose whether or not to expand their Medicaid programs to cover millions of currently uninsured poor. Under the health reform
law, the federal government will pay 100% of the costs of the expansion until
2016 and eventually 90%. While it seems like a “no-brainer” for states to accept this federal financial
largess to provide health coverage to their uninsured poor, it may turn out
that some Republican controlled states, like Pennsylvania, will refuse the
money. Refusal may stem in part from philosophical or partisan
opposition to “Obamacare” in general, but states will in fact incur some additional
administrative costs if they add individuals to their Medicaid roles. And some state
officials may worry that a future Congress will reduce the generous federal
share and shift more of the cost of expansion to the states. See, Uncertainty
Over States And Medicaid Expansion, Robert Pear, New York Times,
June 29, 2012. This reduction could happen as part of a transition of Medicaid
grant funding as has been proposed in the budget passed this year by the House
of Representatives and supported by Governor Romney. In Pennsylvania, Governor Corbett issued a Press
Release which expressed his disappointment about the Supreme Court ruling,
but which did not express his view on the Medicaid expansion issue. Pennsylvania,
led by the Governor, was one of the states which had sued the federal
government in the National Federal case. Pennsylvania and other states should have at least until
next summer to decide whether to opt in or opt out of expanding health coverage
to the poor. This should be a hot topic in the upcoming political year. Hospitals
and advocates for the poor will likely lobby powerfully for expansion. Although the Supreme Court resolved the issue of the constitutionality
of the health reform law, much political uncertainty remains about its future. Nationally,
Republicans have vowed to repeal it, which they will be able to do in January
if they gain the Presidency and a majority in both the Senate and the House. Even if the Republicans don’t gain control of
Congress, Governor Romney will be likely to retard the implementation of the
law if he is elected President. So health reform moves forward, but only
grudgingly. The election in November will have consequences. Posted by
Medicare changes likely no matter who wins the election
No matter who wins the upcoming election, sooner or later our political system
will have to deal with the imbalance between government revenues and spending.
And the solution is likely going to involve significant change to Medicare. During the coming decade the aging of the population and
rising costs for health care will continue to exert pressure on the federal
budget. The number of people age 65 or older will increase by about one-third
between 2012 and 2022— from 14 percent of the population to 17 percent—
substantially raising the cost of Social Security, Medicare, and Medicaid. Spending on these three programs is expected to increase
at an average annual pace that will far outstrip general economic growth.
Because of the aging of the population and rising costs for
health care, is seems unlikely that the tax and spending policies that are
currently in effect will be maintained. To keep deficits and debt from
bankrupting our economy, policymakers will need to allow federal revenues to
increase to a much higher percentage of GDP, or make major changes to Social
Security, Medicare and Medicaid, or pursue some combination of the two
approaches. The bottom line: Expect big changes in Medicare over the
next few years. Medicare changes that
might be included in a “grand bargain’ Most political commentators seem to think that Congress will
not be so irresponsible as to drive us off the currently scheduled “fiscal
cliff.” The common wisdom is that Congress and whoever is elected President will wait
until after the election and try to come up with a "grand bargain" during a lame
duck session of Congress, or in early 2013. If a grand bargain is out of reach we may see another short term
postponement that would continue tax and spending policies (and destructive uncertainties)
for another year or two. Most commentators and politicians agree that eventually our
lawmakers will have to come up with a plan that deals with the big issues:
Taxes, Medicare, Medicaid, and Social Security. Here are some thoughts on how Medicare may be affected.
Premium Support Unless there is a democratic sweep, the next Congress will
be poised to change the Medicare payment and delivery system to one which
includes an option based on premium support. That is the Republican model
championed by Congressman Paul Ryan and supported by Mitt Romney. Under a premium support approach, the government would tell Medicare
beneficiaries to find insurance plans on their own in the private market; the
government would provide vouchers that would pay the bulk of the premiums. Representative Ryan originally proposed shifting all new
Medicare recipients to the private market in 10 years. But, confronted by the
Democrats charge that he was trying to end Medicare, Ryan adopted a new version
would allow people the option of staying with traditional Medicare. Governor
Romney has embraced this general concept. The Simpson
Bowles report recognized that “a voucher or subsidy system holds
significant promise of controlling costs, but also carries significant
potential risks. To assess the balance of benefits and risks it recommended
using the federal employees health benefits programs as a pilot to test premium
support. Even if we enter 2013 with a continuation of politically
divided government, it seems like moving Medicare toward a premium support
model will have a good chance of being included in a grand bargain. Increase in the Standard
Age of Eligibility Another significant change we may see with Medicare
is an increase in the standard age for eligibility. One idea would be to
gradually move the age from 65 to 67. Even the Obama administration has
indicated a willingness to accept an increase in the Medicare eligibility age,
so this change is likely to survive any election results. Higher Premiums We are also likely to see a continuation of the trend toward requiring higher
income retirees to pay higher premiums for their Medicare Parts B and D
Other changes being discussed include:
the coverage obtainable through Medicare supplement (Medigap) insurance so that
beneficiaries will have to pay more out of pocket; • Adding
co-payment requirements for some services that are now fully coverage. An
example would be to impose a co-pay requirement on the first 20 days of
Medicare covered care in a skilled nursing facility. In general, it looks like people are going to be paying more
for their Medicare coverage in the future, and they are going to be getting even more of that
coverage through private insurance companies.
IRS publishes regulations on portability of estate and gift tax exclusion
In December 2010, Congress and the
President came to agreement on legislation that significantly but temporarily
changed the federal estate, gift, and generation skipping tax (GST) rules. That
law was named the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation
Act of 2010, Public Law 111-312 (124 Stat. 3296, 3302) (TRUIRJCA). The Act set the estate tax at a significantly
higher applicable exclusion amount of $5 million, and a lower maximum tax rate of
35 percent, than was set to occur. It also established a generous exemption from tax for lifetime gifts of up to $5 million. The estate tax regime created by TRUIRJCA is
temporary and is set to expire as part of the "fiscal cliff" we may drive off at the end of 2012. TRUIRJCA also provides
for "portability" between spouses of the estate tax applicable exclusion
amount for estates of persons dying in 2011 and 2012. Portability means that a
surviving spouse can elect to take advantage of the unused portion of the
estate tax applicable exclusion amount (but not any unused GST tax exemption)
of the predeceased spouse, thereby providing the surviving spouse with a
potentially larger exclusion amount upon his or her death. To preserve the first
deceased spouse's unused exclusion amount (which is being referred to as the
DSUE amount), the personal representative for such spouse must file an estate
tax return to make an election even if filing a return would otherwise not be
required. Although the current estate tax regime is set to expire it is widely assumed that any new law will re-enact TRUIRJCA's portability provisions. The IRS has now issued temporary
regulations that provide guidance on the requirements for
electing portability of a deceased spousal unused exclusion (DSUE) amount to
the surviving spouse and on the surviving spouse’s use
of this DSUE amount. The regulations are published in Federal Register for June
18, 2012. To review them go to http://www.gpo.gov/fdsys/pkg/FR-2012-06-18
and select Internal Revenue Service. Portability was intended to
simplify estate planning, but it has also complicated estate administration. As I have previously written “surviving
spouses (and their lawyers) must now decide to whether to go to the expense of
filing a federal estate tax return in order to preserve the DSUEA.” See Estate
and Gift Tax Portability Law Creates some Unconventional Planning Opportunities.
The regulations address the cost and burden associated with
filing an estate tax return by simplifying the rules for establishing and substantiating the values reported
for those estates that are not required to file a return but are filing just to
elect portability of the decedent’s DSUE amount.
The regulations (in §20.2010-2T(a)(1)) specify that every estate electing portability of a decedent’s DSUE amount (even
those not otherwise required to file) must file an estate tax return within 9
months of the decedent’s date of death, unless an extension of time for filing
has been granted. However, executors of
estates that are not otherwise required to file an estate tax return are given
some relief from the costs that are involved in obtaining and reporting values
for the certain assets in the gross estate. Executors will not have to report
the value of certain property that qualifies for the marital or charitable
deduction. If an executor chooses to
make use of this special rule in filing an estate tax return, the executor must
estimate the total value of the gross estate (including the values of the property
that do not have to be reported on the estate tax return under this provision),
based on a determination made in good faith and with due diligence regarding
the value of all of the assets includible in the gross estate. The instructions issued with respect to the
estate tax return (“Instructions for Form 706”) will provide ranges of dollar
values, and the executor must identify on the estate tax return the particular
range within which falls the executor’s best estimate of the total gross estate. This change should make it easier and less expensive for executors to pass the DSEU amount on to the surviving spouse. Other matters clarified in the
· If no estate tax return is required for a decedent’s
estate, not filing a timely return will be considered to be an affirmative
statement signifying the decision not to make a portability election.
· The appointed executor or administrator of an
estate is the person authorized to make the portability election. But if there is no appointed representative,
any person in actual or constructive possession of any property of the decedent
may file the estate tax return to elect portability. §20.2010-2T(a)(6)(ii)). The regulations refer
to such a person as a “nonappointed executor.” · The regulations clear up some terminology confusion created by Section
2010(c)(4) of TRUIRJCA by interpreting that section to refer to the applicable
exclusion amount, rather than the basic exclusion amount.
· Section §20.2010-2T(c)(2) of the regulations provide
that amounts on which gift taxes were paid by a decedent are excluded from
adjusted taxable gifts for the purpose of computing that decedent’s DSUE
· The regulations in §§20.2010-3T(a) and
25.2505-2T(a) provide clarification on when the DSUE amount of a decedent is
available to the surviving spouse or to the surviving spouse’s estate for use
in determining the surviving spouse’s applicable exclusion amount. They provide
that, if the decedent is the last deceased spouse of the surviving spouse on
the date of a transfer by the surviving spouse that is subject to gift or
estate tax, the surviving spouse, or the estate of the surviving spouse, of
that decedent may take into account that decedent’s DSUE amount in determining
the applicable exclusion amount of the surviving spouse when computing the
surviving spouse’s gift or estate tax liability on that transfer. In addition,
the temporary regulations in §§20.2010-3T(c)(1) and 25.2505-2T(d)(1) provide
that a portability election made by the executor of a decedent’s estate is
effective as of the date of the decedent’s death. · The regulations provide guidance as to the scope
of the last deceased spouse limitation in the portability law. A surviving
spouse does not lose his or her DSUE by remarrying. It is the act of surviving the second spouse’s
death that destroys the DSUE received from the first spouse. (See regulations §§20.2010-3T(a)(3)
and 25.2505-2T(a)(3)). The identity of the last deceased spouse of the
surviving spouse for purposes of portability is not affected by whether the
estate of the last deceased spouse elects portability of the deceased spouse’s
DSUE amount or whether the last deceased spouse has any DSUE amount available.
However, §25.2505-2T(a) provides that for purposes of determining a surviving
spouse’s applicable exclusion amount when the surviving spouse makes a taxable
gift, the surviving spouse’s last deceased spouse is identified as of the
date of the taxable gift. See
§20.2010-3T(a) for a comparable rule for estate tax purposes.
· §25.2505-2T(b) of the regulations creates an ordering
rule by providing that, when a surviving spouse makes a taxable gift, the DSUE
amount of the decedent who is the last deceased spouse of such surviving spouse
will be considered to apply against the amount of the surviving spouse’s
taxable gifts for that calendar year before the surviving spouse’s own basic
exclusion amount will apply. Under the
rules in §25.2505-2T, a surviving spouse may use the DSUE amount of a
predeceased spouse as long as, for each transfer, such DSUE amount is from the
surviving spouse’s last deceased spouse at the time of that transfer. Thus, a spouse who has survived multiple
spouses may use each last deceased spouse’s DSUE amount before the death of
that spouse’s next spouse, and thereby may apply the DSUE amount of multiple
deceased spouses in succession.
· In general the Portability Rules are not
applicable to nonresidents who are not citizens. Regulation §20.2010-2T(a)(5) provides
that an executor of the estate of a nonresident decedent who was not a citizen
of the United States at the time of death may not make a portability election
on behalf of that decedent. Regulations §§20.2010-3T(e)
and 25.2505-2T(f) provide that a nonresident surviving spouse who was not a
citizen of the United States at the time of such surviving spouse’s death may
not take into account the DSUE amount of any deceased spouse of such surviving
spouse, except to the extent allowed under a treaty obligation of the United
States. The regulations also provide some guidance as to portability when a
qualified domestic trust (QDOT) is created for the benefit of a surviving
spouse who is a not a citizen of the United States. Generally, the decedent’s
DSUE amount will be available for transfers occurring by reason of the
surviving spouse’s death, but generally will not be available to the surviving spouse
during life. Thus, in most cases a
noncitizen spouse cannot use a DSUEA to shelter lifetime gifts. For further information see:
The Temporary Regulations and
Notice of Rulemaking: Federal
Register Vol. 77, No.117, June 18, 2012 (Scroll down to “Documents in
Context” and select “Internal Revenue Service”). Estate
Portability Provision of Estate Tax law may be "Wolf in
Medical Expense Deduction Threshold Set to Increase on January 1, 2013
Section 9013 of the Health Care Reform law modifies the tax
treatment of medical expenses. The threshold for the itemized deduction for
unreimbursed medical expenses is currently 7.5% of the taxpayer’s Adjusted
Gross Income (AGI). Section 9013 raises that threshold from 7.5% of AGI to 10%
of AGI effective for tax years beginning after Dec. 31, 2012. However, in the
years 2013–2016, if either the taxpayer or the taxpayer’s spouse has turned 65
before the close of the tax year, the increased threshold does not apply and
the threshold remains at 7.5% of AGI. In 2017 the 10% threshold will apply to
all taxpayers.
The deduction of medical expenses can be particularly
valuable for older taxpayers who incur large expenses meeting their long term
care needs. For example, care in a skilled nursing facility in Pennsylvania can
easily cost $90,000 a year or more. There are limits on Medicare and Medicaid
coverage of nursing home costs and most private insurance policies do not pay
for long term care. Seniors may end up paying privately for most of the cost of
their nursing home care stay. To raise the
funds needed they frequently must cash in their IRA or other tax deferred
retirement accounts. Fortunately, the negative income tax effects of cashing in
a retirement account can be mitigated by the medical deduction. Care received in a skilled nursing facility will normally be
deductible as a medical expense on a taxpayer’s income tax return. (Amounts
paid for qualified long-term care services are deductible as medical expenses
under IRC Sections 213(d)(1)(C)
and 7702B). For a
taxpayer receiving long term care the income tax liability generated by the
distribution of a retirement account can be offset by the medical deduction.
This reduces the care recipient’s income tax liability and thus frees up more
money to pay for their care needs. The scheduled increase in the deduction
threshold will reduce the money available to pay for care and thus more quickly
shift the burden of the cost of care to the Medicaid program, the safety net
program that pays nursing home costs for seniors who no longer have the
resources to pay privately. The taxpayer is not the only one who will be hurt by this
increase in the deduction threshold. States will be hurt because Medicaid is
partly funded by each state. The sooner the taxpayer goes on Medicaid, the
sooner the state has to pay. Nursing homes and other care providers will be
hurt by this change, because Medicaid payment rates are almost always lower
than private payment rates. In some situations, a child who pays for a parent’s care can
deduct the parent’s medical expenses on the child’s return. See my blog post Hidden
Financial Breaks for Caregiver Children. The change in the law will reduce the benefit of the tax deduction for
those children effective in 2013. Further Information:
213 of the Internal Revenue Code (currently allows for the deduction of
medical expenses paid by a taxpayer for himself, spouse, and dependents to the extent
that the expenses exceed 7.5% of the taxpayer’s adjusted gross income).
Accountable Care Organizations: promoting quality and cost effective health care for Medicare beneficiaries
Under the health reform law Medicare is moving away from the
fee-for-service payment model that tends to encourage delivery of a high volume
of health services rather than quality and efficiency. Medicare is adopting new
payment methods that reward medical providers for keeping patients healthy
while curbing excessive spending. This is a positive trend that hopefully will
not be derailed by the U.S. Supreme Court’s decision on health reform which is due later this month. A notable example of the trend toward quality and efficiency
over volume is the development of Accountable Care Organizations (ACOs). ACOs are based to a large extent on models of
care developed at systems including Geisinger
Health System in Pennsylvania, where hospitals and doctors
coordinate their efforts within the same organization. ACOs are a key provision
in the health reform law and are intended to slow rising health costs while
delivering high-quality care to Medicare beneficiaries. They are designed to
change the incentives that influence how doctors and hospitals operate. Section 3022 of the Affordable Care Act (the health reform
law) requires the Centers for Medicare & Medicaid Services (CMS) to
establish a Medicare Shared Savings program “by Jan. 1, 2012 that promotes
accountability for a patient population, coordinates items and services under
Medicare Parts A and B, and encourages investment in infrastructure and
redesigned care processes for high quality and efficient service delivery.”
Participating entities, referred to as Medicare Accountable Care Organizations
(ACOs), that meet quality and performance standards are eligible to receive
payments that allow them to share in the savings they achieve. At present most hospitals and doctors are paid by the amount
of services they provide. This means they receive higher payment for delivering
more, but not necessarily better, care. ACOs are intended to reverse the
incentives and reward providers for holding down costs and meeting certain
quality measures, such as reducing hospital readmissions or emergency room visits. To maximize their reward, ACO’s must closely monitor patients' needs and work
to coordinate the services provided by hospitals, nursing homes and other
medical providers across our currently fragmented health care system. If an ACO
succeeds at managing its pool of patients effectively from both a cost and
quality standpoint, Medicare allows them to share in the savings and boost
Last Fall CMS released its final
rule on ACOs. In conjunction with the final rule, the Department of
Health and Human Services Office of Inspector General, the Department of
Justice, the Federal Trade Commission, and the Internal Revenue Service issued
separate notices addressing a variety of legal issues applicable to the Shared
Savings Program. These included the
interaction of the Shared Savings Program with the federal anti-kickback,
physician self-referral, civil monetary penalty (fraud and abuse) and antitrust
laws, as well as the tax implications for nonprofit entities seeking to
participate in ACOs. The final rule and related regulatory guidance was published in the Nov. 2, 2011 Federal Register. CMS says that it
envisions the final rule will help create as many as 270 Medicare ACOs.
Under the CMS rule an ACO is a network of doctors and
hospitals that shares responsibility for providing care to patients. ACOs must agree
to manage all of the health care needs of a minimum of 5,000 Medicare
beneficiaries for at least three years. Those ACOs that succeed in providing
high quality care – as measured by performance on 33 quality measures – while
reducing the costs of care may share in the savings to Medicare. A version of the program allows providers to
earn a higher share of any savings if they have agreed to be
held accountable for a share of any losses incurred if the costs of care for the
beneficiaries assigned to them increase. Participation in an ACO is purely voluntary for providers,
and people with Medicare retain their ability to seek treatment from any
provider they wish. Many hospitals, physician practices and insurers across the
country have been preparing and implementing plans to form ACOs, not only for
Medicare beneficiaries but for patients with private insurance as well. As of
May 2012 CMS had approved 65 ACOs of various variations, and was reviewing more
than 150 applications from ACOs that are seeking to participate in the Shared
Savings Program beginning July 1. (The
final rule offered ACOs the option of starting on either April 1 or July 1,
2012). CMS will announce the date for
submission of applications to participate in the Shared Savings Program
beginning in 2013 later this year.
Further information on the Medicare Shared Savings Program
including links is available on the CMS website under “Shared Savings Program”
at http://tinyurl.com/88ysyxc.
Portions of this posting were based on articles posted by
Kaiser Health News, www.kaiserhealthnews.org
and by Policy and Medicine, http://www.policymed.com.
GAO recommends changes to VA Pension Eligibility Rules
Nearly two years ago this author warned veterans to be wary of veteran’s benefits planning companies. In my blog post of September 14,
2102 entitled Beware
the Boondogglers selling Trusts for VA Pension Benefits, I noted that “[s]ome
are operating in a manner similar to a living trust mill – for a couple of
thousand dollars they will set up a trust for you (whether you need one or not)…
As with many living trust mills, these outfits may sell high commission and
inappropriate financial products (such as high commission annuities) in
conjunction with the trust "planning"… A contemplated transfer to obtain VA
Pension must be also evaluated for its impact on eligibility for Medicaid. VA
and Medicaid rules differ markedly in their treatment of transfers of assets.”
At the request of Congress, the Government Accountability
Office (GAO) has now conducted a study of veteran’s benefit planning companies and
issued a report recommending substantial changes in the rules and procedures governing
eligibility for VA Pension benefits. The GAO report, VETERANS’ PENSION BENEFITS: Improvements
Needed to Ensure Only Qualified Veterans and Survivors Receive Benefits,
was released to the public in conjunction with a June 6th U.S. Senate hearing. The VA pension program is intended to provide economic
benefits to “wartime” veterans and survivors with financial need. In fiscal 2011,
VA provided about $ 4.3 billion in pension benefits for about 517,000 recipients.
These benefits are available to low-income wartime veterans who are age 65 and
older, or who are under age 65 but are permanently and totally disabled as a
result of conditions unrelated to their military service. Surviving
spouses and dependent children may also be eligible for these benefits. As part
of the pension program, VA provides enhanced pension benefit amounts to
veterans and surviving family members who demonstrate the need for aid and
attendance, or who are considered permanently housebound.
The GAO was asked to examine (1) how the design and
management of VA’s pension program ensure that only those with financial need
receive pension benefits and (2) what is known about organizations that are
marketing financial products and services to enable veterans and survivors to
qualify for VA pension benefits. GAO’s study included online research and
interviews of organizations that market financial and estate planning services
to help veterans and survivors qualify for VA pension benefits.
The GAO found that while the pension program is means
tested, there is currently no prohibition on transferring assets prior to
applying for benefits. It identified over 200 organizations located throughout
the country that market their services to help veterans and surviving spouses
qualify for VA pension benefits by transferring or preserving excess assets. These
organizations consist primarily of financial planners and attorneys offering
products and services such as annuities and the establishment of trusts, to enable
potential VA pension claimants with excess assets to meet financial eligibility
criteria for VA pension benefits. Between July 2011 and May 2012, GAO
investigators spoke with representatives of 19 of the companies by telephone.
Transcripts of several of these interviews are including in the report. The GAO found that some of these companies were providing
products and services like certain annuities that were potentially unsuitable for an elderly
veteran and carried high withdrawal fees. It also appeared that many companies were
unaware of or indifferent to the fact that their planning recommendations might result in an ineligibility penalty period for Medicaid benefits and create other problems
for the veteran. The report notes that although planning
techniques used by the companies doing VA benefits planning
may be legal, they undermine the perceived goal of the VA pension system of
aiding poor veterans while adding to the burden of federal spending at a time
of deep budget cuts. The GAO concluded that “Congress should consider
establishing a look-back and penalty period for pension claimants who transfer
assets for less than fair market value prior to applying, similar to other
federally supported means-tested programs. VA should (1) request information
about asset transfers and other assets and income sources on application forms,
(2) verify financial information during the initial claims process, (3)
strengthen coordination with VA’s fiduciary program, and (4) provide clearer
guidance to claims processors assessing claimants’ eligibility. In its comments
on this report, VA concurred with three of GAO’s recommendations and concurred
in principle with one, citing concerns about the potential burden on claimants
and recipients of verifying reported financial information.” As a result of the report and related Senate hearing, we can
expect the VA to revise its procedures manual to better define the concept of
ownership and control and to specify when assets such as annuities and trusts
should be counted as part of claimant’s net worth. In addition, Congress and the VA are likely to establish look-back
and penalty periods for claimants who transfer assets for less than fair market
value prior to applying for VA Pension (similar to those imposed by other
means-tested programs like Medicaid and SSI). Hopefully these changes will be made in a manner that does not
make it harder for truly qualified veterans to qualify for benefits or delay
the payment of critically needed financial assistance. Update June 13, 2102: After the release of the GAO report US Senator Ron Wyden introduced a bill (S3720) to require the Secretary of Veterans Affairs to consider the resources of individuals applying for pension that were recently disposed of for less than fair market value, and for other purposes. S3720 would establish a look-back period of 3 years and impose a period of ineligibility of up to 3 years for asset dispositions by the veteran or spouse. For Further Information
GAO report, VETERANS’
PENSION BENEFITS: Improvements Needed to Ensure Only Qualified Veterans and
Survivors Receive Benefits
Senate Hearing of June 6, 2012 - Pension Poachers: Preventing Fraud and Protecting America's Veterans. Marshall Elder and Estate Planning Blog post: Beware
the Boondogglers selling Trusts for VA Pension Benefits
New York Times article: Veterans
Pension Program Is Being Abused, Report Says
S3720: http://www.govtrack.us/congress/bills/112/s3270/text
For more information on current requirements for
qualification for VA Pension see the Marshall Elder and Estate Planning Blog post
age 65 and a Veteran? Don't miss out on VA Pension Benefits Posted by
VA pension,