New Rules Potentially Coming to Asset Transfer Penalties | Felinton Elder Law Estate Planning Asset Protection

New Rules Potentially Coming to Asset Transfer Penalties

The Department of Veterans Affairs (VA) recently presented a new proposal concerning the VA pension program, including the Aid and Attendance program, including:

• Asset transfer penalties (for asset transfers within a three-year period of a benefits application)

• Net worth limit adjustment to $117,240, to match Medicaid’s community spousal allowance for resources, to be adjusted each year for cost of living

• Applicant income to be included in the analysis of net worth

Importantly, veterans or their surviving spouses would be prevented from outright or in trust asset transfer at least three years prior to making an application for the VA pension program.

Look Back Period

The proposal states that the VA’s look back period would be 36 months before the date of the VA application or date of transfer, whichever is later. The VA may apply asset transfer penalties to any asset transfer from the veteran, his or her spouse, surviving spouse, or a dependent child over the look back period.

Calculation of the penalty will be made by dividing the transferred resource’s value by the monthly pension amount the claimant would have been entitled to receive prior to the new rules.

The penalty period may not be longer than three years. If the recipient of the transferred resources returns them to the claimant or if a discontinued/denied payment causes “undue hardship,” it is possible to revoke the penalty.

It is unclear how the rules would apply to previous transfers made prior to the implementation of the proposal’s final form. The proposal in current draft would place greater asset transfer penalties on the surviving spouse than on the veteran.

Asset Transfer Penalty

For instance, a veteran gave his daughter $25,000 as a down-payment on a house at the start of the New Year. In June, he becomes ill and another individual must provide regular care and supervision. He moves from his current home to an assisted living facility in August. He then applies for the VA pension benefit (with allowance of aid and attendance).

Before he transferred funds to his daughter, he would have received more than $1,700 per month. Unfortunately, the VA now looks back three years before the pension application was submitted. He gave the $25,000 gift to his daughter in January, so this is the start of the look back period. The VA then applies a penalty to his award.

The penalty is for 12 months and does not end until January of the following year. The VA provides no financial assistance to the veteran from the application date to the beginning of next year even though he is eligible to receive this payment with the exception of the asset transfer.


Legal practitioners are concerned about the proposed rules and see many problems with them.
Since the legislation takes effect one year after it is enacted and applies to pensions/redeterminations of payments made thereafter.