What Is the New VA Transfer Penalty for Needs Based Benefits?

As mentioned in our previous blog post, the Department of Veterans Affairs has formally finalized new rules that establish asset transfer penalties, a three year lookback period, and new asset limits for those individuals applying for VA needs-based benefits. In this blog post, we’ll address those asset transfer penalties and how they interact with the lookback period.

penaltyAll three of the above-mentioned aspects of VA benefits have undergone changes from previous regulations. Under the new rules, the VA has established a lookback period of 36 months and a penalty period of up to five years for people who transfer assets for lower than market value. Such a transfer may be identified in situations where the claimant has transferred assets for less than market value in what may seem as an attempt to qualify for the VA pension. Some common examples of such transfers may involve gifts, such as helping out a child with a mortgage payment, helping grandchildren pay for college, or selling your granddaughter your car for $1. All of these examples can be seen as gifts which may cause you to be denied certain VA benefits under the new rules.

There are exceptions to the transfer penalties for transfers made as a result of misrepresentation, fraud or unfair business practices or transfers made to a trust for a child who is unable to support themselves. The penalty period in those situations is calculated based on the total amount of the assets transferred during the look back, if those assets would have tipped the applicant over the scale for the net worth limit. The transfer penalty period is then calculated based on the amount that the applicant transferred, putting his or her assets over the net worth limit.

Under the new rules, a penalty period begins the first day of the month that follows the final asset transfer, and the penalty period cannot exceed five years. This means that if you give something away on March 5, 2019 the penalty period begins on April 1, 2019 and can last until April 30, 2024. To gain a more detailed understanding of the issues involved in this complex process, schedule a consultation with Michigan estate planning lawyers today.


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