VA Pension, also known as Veterans Pension with aid and attendance, is a program from the VA that pays monthly cash to veterans and surviving spouses of veterans to help pay for the cost of long term care. This program can pay upwards of $1,149 a month towards the care of a surviving spouse of a veteran, and $1,788 towards the care of a veteran. There is more in-depth information on this benefit under the “Veterans Pension” tab on http://www.naborstrustlaw.com. As with many programs that cover long term care, there are asset and income requirements to receive VA Pension. Those seeking VA pension should seek the advice of an experienced elder law attorney before making transfers, as such transfers can carry significant tax consequences.
The first tax consequences is whether the home of the person seeking VA Pension will produce taxable gain. Upon the sale of a residence, the first $250,000 of gain ($500,000 for a married couple), if the home was the seller’s primary residence for two of the past five years. Many times in an attempt to qualify for the VA pension and therefore transfer assets, seniors often lose this exclusion. An experienced elder lawyer can structure transfers to qualify for VA pension while preserving the exclusion of tax on the sale of a primary residence.
There are also significant tax consequences for withdrawals from tax deferred retirement accounts, such as 401K, traditional IRA’s, and 403’s. The transfer of money out of a tax deferred retirement account incurs ordinary income tax on the money withdrawn. This income tax can be substantial. An experienced elder law attorney can advise on the appropriate transfers from tax deferred accounts to minimize taxes and can provide guidance on whether the receipt of VA pension benefits is worth paying 1tax on the transfer.