The VA has an unfortunate history of erecting barriers in all their claims processes so they can deny claims filed by veterans. The 3 Year Look-back is a new barrier for Pension claims (long term care reimbursement benefits) so that veterans who transfer property in order to satisfy their “asset test” can be denied if the application is submitted within 3 years of the transfer. This barrier was instituted by the VA on its own without any Congressional mandate or legislation passed to require it. The asset test is one of three major tests for eligibility—the veteran must have served on active duty during a period of war (this is an easy test to prove), and there is an income test; the income test is actually the trickiest test to overcome unless the veteran or spouse or widow is in a facility that costs more than the combined incomes of the veteran and spouse.
On October 18, 2018, the VA Improved Pension program instituted this 3-year look-back period for their asset test on “pension claims.” Please remember that this “Pension program” is not a pension—it is a long term care reimbursement program. According to the M21-1 (VA Pension Manual), Look-back period “means the 36-month period immediately preceding the date on which VA receives either an original pension claim or a new pension claim after a period of non-entitlement.”
We’ll begin with when the Look-back starts. The look-back date depends on the date one submits an application or an “intent to file” to the VA. An “intent to file” is a form submitted to the VA to lock in an application date for retroactive payments upon a claim being approved. The beginning of the look-back date starts on that date three years ago. For example, if an application is submitted on 6/21/20, the look-back starts as of 6/1/17. Since this new rule began on 10/18/18, they can only look-back to that date until 10/18/2021.
This means that VA wants to see anything you have given away in that period. The VA works with the IRS to discover potential assets and transfers. A transfer is giving away an asset for less than fair market value. A sanction is assessed for transferring assets.
If an asset was transferred before 10/18/18, there is no sanction. However, if an asset is transferred after 10/17/18, there is a sanction assessed. The transfers (since 10/18/18) are totaled to determine the sanction (total amount of transfers divided by 2,266 – the maximum monthly pension amount for a veteran with one dependent). That number translates into months that the VA will not award you the monthly benefit. The sanction starts the month after the final transfer. The maximum penalty is 5 years.
The timing of an application is key. As established above, if the application or intent to file is submitted on 6/21/20, the look-back starts as of 6/1/17. A transfer of assets took place on 7/1/17 in the amount of $36,000.00, a second transfer of assets took place on 4/12/18 in the amount of $12,000.00, and a third transfer of assets took place on 10/1/19 in the amount of $40,000.00. The transfers on 7/1/17 and 4/12/18 need to be reported to the VA along with the application but will not result in a sanction. The transfer on 10/1/19 will result in a 17-month sanction (40,000 divided by 2,266). The sanction will begin on 11/1/19 (the first of the month following the final transfer) and will expire 3/31/21. The good news is that an elder law attorney can determine the best time to apply for VA and help your family undo a VA sanction created by transfers during the 3-year look-back period.
It is important to know that there are exceptions to the sanction rules for transfers. The VA does not count your primary residence (they may count acreage if the home is situated on more than a normal building lot), one vehicle, and up to $127,000 of other assets, such as bank accounts, investments, retirement accounts, life insurance cash values, and the like. A veteran can transfer these non-countable assets without a sanction. As you might suspect, this can be very tricky and professional help would be advised.
Our office provides Eligibility analyses for the Improved Pension Program. To schedule your appointment to discuss potential eligibility, call 919-256-7000.