Amidst all the rumblings of the Veterans Administration proposing to change the laws making it harder to qualify for the wartime pension, there is a secret weapon that shouldn’t be affected by the changes at all. Life care funding is an emerging concept wherein a person owns a life insurance policy and sells it to pay for health care. The traditional model, life settlements, paid a person who had a terminal illness a nominal sum to do whatever they needed or wanted to do with the funds. The new concept, Life Care Funding, is different.
With Life Care Funding, the life insurance owner does not need to have a terminal illness. They must, however, need immediate assistance with activities of daily living or regular supervision due to cognitive decline. These are the same standards as when a person makes a claim against traditional long term care insurance. Another difference is that once the policy owner sells the policy to create the life care fund, the proceeds are set up in an irrevocable custodial account that can only be distributed to third-party caregivers. A certain percentage is also allocated toward burial, cremation and funeral expenses. The custodial beneficiary (prior policy owner), directs how much and to whom the life care fund is paid to each month. The payment structure is flexible and can change with the changing circumstances of the patient in need.
How does this help with VA Benefits planning?
Qualification for the wartime pension with aid and attendance is dependent on having low assets and low income. The cash value of any life insurance policy counts against the net worth standard to qualify for the wartime pension. Once the policy has been converted to a life care fund, the insured is no longer the owner of the policy, the policy was sold for fair market value, and the funds are placed into an irrevocable custodial account which cannot be converted to cash and wherein the claimant has no access and virtually no direct control over the assets. Thus, as a life insurance policy, it harms VA eligibility, but as a life care fund, it should be exempt.
A complete, 19 page, legal analysis of why life care funds should be exempt under the current laws and the new proposed laws is available by request 888-670-7773 or firstname.lastname@example.org.