VA Annuity Scam – Beware Seniors

One question asked of all seniors entering a residential care facility is “did you or your spouse ever serve in the military?”  If the applicant responds “yes,” then the facility may be eligible for up to $2,837.00 per month from the Department of Veterans Affairs towards the cost of his or her care.  The benefit is called the Veterans Affairs Aid & Attendance Pension Benefit.  Sounds great right…veteran wins and the facility wins.  But beware of this situation if you are approached to become eligible for this pension when you would otherwise be ineligible because of wealth or income.

To receive the pension, a veteran must have served on active duty for 90 days or more during a period of war and the veteran must have received an honorable discharge.  Those veterans serving in the following periods of war may be eligible:   (1) WW II December 7, 1941 – December 31, 1946; (2) Korean Conflict June 27, 1950 – January 31, 1955; (3) Vietnam August 5, 1964 – May 7, 1975 (for those serving “in country” before August 5, 1964 it is February 28, 1961 – May 7, 1975; and (4) Gulf War August 2, 1990 – through a date to be established by law or Presidential Proclamation.

If the veteran is deceased, his or her single, surviving spouse would be eligible for the pension.  If the veteran is younger than 65, her or she must be totally disabled.  If age 65 and older, there is no requirement for disability.  The single surviving spouse of a veteran is not required to be disabled.

The veteran household cannot have income; to that end, no income as adjusted for unreimbursed medical expenses and exceeding the Maximum Allowable Pension Rate MAPR for that veteran’s pension income category. If the adjusted income exceeds MAPR, no pension benefits are paid. If adjusted income is less than the MAPR, the veteran receives a pension income that is equal to the difference between MAPR and the household income adjusted for unreimbursed medical expenses. The pension income is calculated, based on 12 months of future household income, but paid monthly.

Now, some scammers heavily market to veterans entering assisted living facilities with the promise of manipulating their income through annuities so that pension benefits will be paid.  Some residential care facilities have been known to go so far as to facilitate these encounters between insurance agents and veterans to fill beds.  Still others call themselves “Veterans Benefits Experts” and advertise in newspapers, often offering free seminars or no-charge meetings with veterans and surviving spouses.  Their companies include patriotic words and logos that may you want to stand and salute.

The scam goes like this…these unscrupulous or uninformed insurance agents offer to transfer assets to a third party, often hiding them in an irrevocable trust and transferring them to another family member as beneficiary.  Since the Department of Veterans Affairs does not look back at asset transfers, the annuity filled irrevocable trust can be created immediately before admission into a residential care facility and it will allow an otherwise unqualified veteran or widow to achieve instant eligibility for benefits to help cover the cost of home care, assisted living, or a nursing home.  But the transfer also creates a large issue for the majority of veterans who will soon require Medicaid (a/k/a Missouri HealthNet) as they require intensive help later in life.

The scammer wins because he is paid a commission on the sale of one or more annuities.  The veteran loses because he or she is now ineligible for Medicaid.  What works for the VA because of their no look-back period, does not work for Medicaid, which employs a five-year look-back period.

A bigger concern of irrevocable trusts that make a veteran ineligible for Medicaid is that the new trust will almost certainly contain annuities.  Tying up money in an unauthorized annuity is almost never a good idea for seniors who may need the resources sooner than later. If the cash is ever needed, the senior may face huge penalties when he or she withdraws the money.  Finally, some of these long-term investments are considered inappropriate for older retirees because some must be held for a decade or longer before they pay out a monthly income.

Nevertheless, some scammers recommend them because they generate high sales commissions.  A $500,000 annuity, for instance, could pay a commission of $75,000, says Neil Granger, a California consultant on investment scams.

Todd Miller is the Senior Partner with the Law Office of Todd Miller, LLC in Jefferson City, Missouri www.toddmillerlaw.com (573) 634-2838.  Mr. Miller earned his juris doctorate from the University of Missouri School of Law in 1999.  He is recognized as a Superb Attorney with a “10” rating by AVVO and annually receives the Client Distinction Award by Lawyers.com. He was recognized as Golf Tax Consultant of the Year by Boardroom Magazine three times and candidate for the “10 Best” attorneys for the State of Missouri by the American Institute of Family Law Attorneys and “10 Best” attorneys for the State of Missouri by the American Institute of Criminal Law Attorneys.  He writes and lectures on various legal topics and you may find him on Facebook, Google+, LinkedIn, and Twitter.

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