FRIDAY, FEBRUARY 16, 2018
JIM: Today’s show is going to go a little bit long as we dedicate it to the men and women who have served our country during various periods of war – our veterans – and we are being joined by Patty Servais, who is the founder of the Elder Resource Benefits Consulting, as she explains what I feel is one of the best-kept secrets available for veterans, and that’s the Veteran’s Aid and Attendance Pension that’s not only available to veterans but also their spouses. Welcome, Patty!
PATTY: Thanks for having me, Jim.
JIM: Yeah, it’s great having you back and I’ve got to just say, before we get into the subject matter, this is a subject that’s near and dear to my heart. I look at our veterans, and I believe they deserve all the benefits by putting their lives on the line for this country; whether they served on the front lines or whether or not they just had the possibility of doing it; just the fact that they’re willing to fight for their country and fight for the rights that we enjoy here and our way of life. I believe we can’t do too much for them. The reason we have you on is, there’s veteran benefits that are available to people that have served during different times of conflict. Many families, and I know my own family included; my father-in-law served in the Korean War. He has passed away, and my mother-in-law is in the need of assisted living. They were not aware of these types of benefits until we had you as a guest on our program. The way we found out about you is one of our clients was using your services. Can you please tell us, real quickly, what are the VA benefits that people might be eligible for and not know about that we’ll be talking about today?
PATTY: Okay. The primary one that we’re going to be talking about today is called the VA’s Basic Pension with Aid and Attendance, and the reason most people don’t know about it is because when the service man was discharged from the service, if he wasn’t injured in service, he was told about his benefits; usually the GI bill; they had to buy a home with VA benefits, etcetera, and they weren’t told about this benefit. This pension benefit is available to veterans who served at least one day during a period of war, were other than dishonorably discharged, served at least 90 days in total, and now need the assistance of another person and meet certain financial criteria; so when they were discharged, they were told, here’s your GI bill information, here’s your future home loan information and since you weren’t injured, that’s pretty much it. Then, in the 50s, this benefit came into existence where once you need that assistance of another person, you can get this benefit.
JIM: Can you talk a little bit about what those benefits are?
PATTY: Sure. This benefit is actually a cash payout to a veteran or his surviving spouse on a monthly basis, and they’re quite big sums that are paid out. A surviving spouse can get up to $1130 per month. A well veteran with an ill spouse can receive up to $1380 a month; a single veteran can receive up to $1758 a month, and a married veteran can receive up to $2085 a month, and this is cash that gets deposited into their bank account just like their social security or pension check would be.
JIM: I’ve worked with a lot of clients, and in our state – I happen to be in Wisconsin – there’s been a big shift where long-term care is being provided; a lot of it in assisted living facilities. For a lot of my clients, that’s the desirable place where they’d like to receive care, and that is not covered under Medicaid or other programs, and I’ve found a lot of times my clients, where they qualify for these benefits, when you add the social security, you add these benefits, they’re able to have a little bit of savings yet. They’re able to pay those bills over a long period of time and be in a comfortable setting.
PATTY: You’re absolutely right on that, Jim, and what we’re seeing is most people can extend the amount of time that they can afford to live in assisted living by about four to six years by getting this benefit, so it extends the amount of time that their assets will last.
JIM: Now, can you comment a little bit about, what are the dates for those periods of war where they can qualify for these benefits?
PATTY: So, as we said, you have to have at least one day during a period of war that you served on active duty, and for World War II, that’s December 7, 1941 through December 31, 1946, and I stress that because most people think that World War II ended on December 31, 1945, but that year of peacekeeping counts, and I’ve actually given speeches before; had a younger brother investigating the benefit for his older brother and find out he’s considered a World War II veteran in my speech, so that’s a really important year that most people don’t know about. The Korean Conflict was from June 27, 1950, through January 31, 1955, and the Vietnam Era; it’s the only one where a portion of it, you have to have served in country. For all other periods, it doesn’t matter whether you left the United States or not, but up until August 5, 1964; if you were in from February 28, 1961, through August 5, 1964, you have to have served in the country of Viet Nam or off the waters. After August 5, 1964 through May 7, 1975, there is no out-of-country requirements. Then, for the Gulf War, that started August 2, 1990, and goes through today. That war has not officially ended yet. Now, for the Gulf War, you have to have more than just the 90 days of active service. You have to have served two years or the full term of your tour of duty, meaning if you were National Guard and you were called up for six months and you served your six months, that’s good enough; but if you’re called up for two years, you have to do your two full years’ service in order to qualify.
JIM: My first 20 years in being in business, I was under the assumption that there had to be an active-duty injury in order to get the benefits, so you touched on this before, but I think it’s an important point. Talk about the injury requirement or lack thereof.
PATTY: Okay. You do not have to have been injured in the service at all. You can have come out of the military absolutely, completely healthy and now, you’re in your 80s, and maybe you have some memory loss and can no longer live alone. You’re going to be able to get this benefit. Maybe you unfortunately had a stroke or maybe you have neuropathy in your legs. It doesn’t have to be in any way associated with your military service. It can just be old age and that you’re a frail elder and use a walker and need somebody to do a standby assist while you take a shower.
JIM: And then I think there’s also that misconception, you have to be a veteran, but this extends to spouses, so what does it mean to be a surviving spouse of a veteran?
PATTY: You have to have been married to a veteran who meets the criteria for having served during a period of war, having served the minimum amount of time and have been other than dishonorably discharged. You have to be married to somebody who met that criteria at the time of their death, and I stress that because unfortunately, if you divorced the veteran before they passed away, you are not considered a surviving spouse. You’re considered an ex-spouse, and this benefit won’t work for you. But, if you were married to a veteran at the time of his death and you were married to him for at least one year before he passed away or if less than one year you had a child with him, then you can get this benefit. Now if you remarry and you were in a marriage at any time after November 1, 1990, then you do need to use the service of that person of that second marriage, and that can get a little tricky. That’s where we always say, you know, just give us a call and we’ll walk you through it but basically, if you were married to a veteran in 1980, let’s say he passed away, you married someone in 1982, and they passed away on October 31, 1990, that would be before November 1, 1990, one day before, you could go back to your first husband’s service. If they passed away on November 1, 1990, you would have to use that second husband’s service, and if he didn’t serve, there wouldn’t be any benefit for you to receive.
JIM: We still have a lot to cover yet, and we’re going to go for a short break, but before we do that, as I was listening to your answer about whether or not a surviving spouse or a spouse gets benefits, it all sounded pretty doggone complicated. Really, this is something you shouldn’t go alone. I really want to emphasize that you can call Patty’s group. You should probably be working together with your financial advisor, because a lot of the things that they’ve got to put together – if you do qualify – is going to be relying on good, financial data, so it’s usually pretty much a team effort. Would you agree with that, Patty?
PATTY: Oh, absolutely.
JIM: So, we’re going to talk more about those benefits when we return, so please stay tuned.
JIM: Welcome back, as we continue to visit with Patty Servais, and she has a company, the Elder Resource Benefits Consulting. She’s the President of the Servais Consulting Group, and she’s been a past guest on our program talking about these veteran benefits that I think are probably the best-kept secret that there is when it comes to the VA. As you mentioned earlier in the program, it’s usually because a veteran wasn’t injured when they left the time of service; they usually didn’t get informed about these benefits; benefits that can extend to the spouse. We talked a little bit about that before the break. Now, let’s get into some more of, what does it mean to need the attendance of another person in order to qualify for these benefits?
PATTY: Basically, this particular level of the pension benefit, and the reason that people qualify for it once they start living in assisted living or needing a lot of home care or even, I can get it for folks who are in independent living or nursing home, is once you need the assistance of another person – maybe you need redirection or queueing – we have folks who can no longer live alone and they might get dressed for the winter instead of for the spring weather or they may forget to take a shower; they may forget to come down for their meals, forget to take their medication, or they might be totally fine memory-wise but have some leg weakness or they can’t work the fingers quite right to do their buttons anymore and they just really wouldn’t be safe totally on their own. That would be called needing the assistance of another person with activities of daily living, and daily living doesn’t mean that you need it every day. It means that something that an average person would be able to do and would need to do to live a safe, normal life, you can no longer do, and it requires another person to help you. The reason they emphasize person is if you just need a walker, it’s not a person. Other than having that walker, you’re absolutely fine. Well, the VA’s going to say you’re not quite ready for this benefit yet, but once you need the assistance of another person, then the VA will start treating your assisted living fee, potentially your independent living fee, as medical expenses, and that’s what makes you eligible for this pension.
JIM: So, let’s talk about the financial requirements.
PATTY: It’s a two-pronged financial test; an income test and an asset test. The income test is what trips most people up, and this is the most important thing you’re going to hear today. If I were to ask you, what is income; what if I were to ask you, Jim, what’s income? What would you say types of income are?
JIM: Well, normally, you’re looking at wages, maybe some interest income, maybe some dividend income. I think that’s what a lot of people think of.
PATTY: Sure. Absolutely. So if we were to list out; now this pension is actually for folks who can no longer work, so we wouldn’t really want to see wages in there. We could see a spouse’s wage in there, but we wouldn’t want to see the person who’s trying to get the benefit have a wage, but social security, pensions, interest, dividends, rental income on a home, oil well royalties, mineral rights, IRA distributions – which get a lot of people in trouble – basically, everything that you would think of as income except welfare programs and VA disability payments count as income for VA purposes, so we’re all feeling pretty good. We know what income is, but that is not income for VA purposes, and that’s the rub. Income, for VA purposes, which is called IVAP – that’s an acronym, IVAP, so you know it’s true; it’s the VA throwing that acronym around – it’s all those things we just listed as income minus certain regularly-occurring unreimbursed medical expenses; regularly occurring, unreimbursed medical expenses. It’s just a complicated way of saying those medical expenses that are predictable that no one, other than you, is going to be paying for or reimbursing you for. That’s why I said once you need the assistance of another person, they’re going to count the assisted living as a medical expense, and that’s what gets you in the program, so let’s do the math. A person with $25,000 in assets, income of $2000; if they didn’t have an assisted living fee, their income for VA purposes would be $2000, and they would have more - $2000 would be more – than the pension for a veteran at 1785, so their income would be too high; but if they met all the criteria and they had an assisted living expense, we’d be able to minus that out; so for our example, let’s say you have 2000 in income, 4000 in your assisted living fee; we minus that out. Now our income for VA purposes is negative $2000, and when you have negative $2000 – when you have a zero for your income for VA purposes or a negative, you’re looking at getting the full pension amount from the VA; so in our example, a person with 25,000 in assets, 2000 in income, and 4000 in assisted living, to your point, Jim, you’re going to be out of funds for paying for your assisted living pretty quickly. You’d be out of funds in 12 months. As a surviving spouse of a veteran, once you start receiving that $1130 a month, it changes that one year until your funds run out to almost 2-1/2 years. For a couple where the veteran is well and his spouse is ill, that changes to 3.26 years. If you were a veteran yourself, that changes to 7.8 years, and if we’re talking about a married veteran, because we were negative $2000 a month, and the married veteran benefit is $2085 a month, theoretically we’re looking at the assets lasting indefinitely and this couple being able to stay in assisted living for the remainder of their lives.
JIM: You mentioned IRAs sometimes can trip people up, and I’ve got to ask you, are we just talking about traditional IRAs or both Roth and Traditional when you’re looking at that income test?
PATTY: You’re just thinking about traditional, because what happens is if you are receiving income that has never been taxed before and our Roth IRAs, you’ve already paid the tax on it, so when it’s distributed, you’re only going to have to pay the income on the Growth. Correct. With an IRA – a traditional IRA – all of the money is in their tax deferred, so when you draw down $1000 out of an IRA, that entire $1000 counts as income for VA purposes. Let’s take someone who takes $6000 a year out of their IRA. That would increase their income number each month by $500, so if you were in a situation where your regular monthly income was 2000 and your assisted living fee was only – let’s say - $2200, so you’ve just got a slight negative – your negative $200 a month – the VA would say, Oh, that’s great! Here’s your full benefit, and you forgot to tell them that you were going to draw this $6000 out of your IRA. Well, they’re going to interface with the IRS, and in a year or two, they’re going to come back and say, hey, you actually had positive income each month, for VA purposes, of $300, and we’d like that $300 back for every month. So, when folks are working with us, that’s one of the things that we would take a look at and say, okay, how are we going to draw down this IRA, making sure that you maximize your tax deduction on your assisted living fee? Most folks don’t realize if you qualify for the VA benefit, you also qualify to deduct your entire assisted living fee on your tax return and therefore, we can do a big drawdown from the IRA knowing that we’re not going to have to pay taxes at the end of the year, and we take it out of the mix for inclusion in the income for IVAP purposes.
JIM: Boy, and this really goes back to what we were talking about before the break; how important it is to work with a team of advisors. I’ve been keeping records – since we visited the last time – of when clients have years of service or if they had a deceased spouse that served, I’m writing down the dates of service and everything, being prepared, in case they ever get to this position. Well now, as you’re talking, it’s another reason that I should be considering Roth conversions for my clients, because most people, I would imagine, that need this help are over 701-/2, so you might be in a position with your IRAs where you’re forced to take money out, and you could be tripping over these benefits.
PATTY: Absolutely. Most government programs treat distribution of deferred tax income as income, so it’s not just the VA benefit that it can keep you out of.
JIM: A lot of this stuff has been pretty complicated, and it’s hard to follow, and I can see why your whole business is just based on helping people with this, because it’s just kind of a maze that you’ve got to kind of follow through a flowchart to determine whether or not someone is eligible. Is there a point where someone should not even bother looking into it, where they’ve got so much income that they never would really benefit from this? Is there a kind of a threshold that you think people should say, well, it’s probably not going through the exercise?
PATTY: If the exercise you’re talking about is giving us a call, generally it’s a 15-minute phone call, and we can give you a lot of advice at no charge in that 15 minutes. Our motto is, this is not a yes or no award. This is if and when; and by the end of that 15-minute call, you’re going to know your if and when, so we believe that you really should be armed with the information. Another way that it makes it really clear that there isn’t a top income limit is we actually have an assisted living in Boston where the penthouse is $13,000 per month. If a veteran living in that penthouse has $11,000 per month in income, what’s his income before VA purposes? It’s that same negative $2000 as the example we used earlier in our discussion, so it really comes down to is your income significantly offset with medical expenses.
JIM: So people should just look at it if they need help, and they’re a veteran that served during those times, and even if you’re not sure if you are eligible or not, a phone call certainly could be worthwhile. Now, let’s talk about the asset test, because I know when we help clients with Title 19 planning and helping people become eligible for those benefits, they’re a lot stricter that what the VA is, so what type of assets do people have to spend down, or what can they keep safely and still be eligible for this benefit?
PATTY: A lot more variables involved with the VA benefit asset test. They look at your age, and your illness, and your income, and your medical expenses, so nobody is going to have the same number as somebody else. The largest amount of assets we’ve had somebody have in their own name and get the benefit was $248,000. It was a single surviving spouse of a veteran, and she was in a nursing home, so she had quite large medical expenses. She had that benefit for six years, and it actually helped her family meet the Title 19 planning that they had done, but generally, we see that people can have between like 100,000 and 120,000; anything over $80,000 in assets is considered a high net worth filing, and the VA has to do further development so it can take a little longer. Our average time to award is four months, and it does include our clients who file with more than $80,000 in assets, so we get a lot of folks with under 80,000 who’s get it in significantly less time than four months.
JIM: So it all goes back, again; working together with a team that’s competent and knows what’s going on your end with the VA and then making sure those assets are titled properly working with your financial advisor can really speed that up.
PATTY: It can, yes.
JIM: One other thing I’d like to bring up, and I think a lot of people just say well, I’ll just go to the VA and it gets taken care of. I’m sure they’ve been rattled a little bit recently with the problems with the VA. What would be your suggestion because surely they can go directly to VA and get the stuff done, but talk a little bit about how important it is to have this stuff ready the first time and how that helps the whole process go a lot quicker?
PATTY: Let’s say that you were to call us, and I thought that a good filing number for you was $92,000. We would make sure that everything looked good, was all in place, but if you didn’t know me and you filed and your assets were at $100,000, it might take the VA 12 months to tell you that your net worth was sufficient to meet your living needs and deny your claim, where what I would have said, is oh; you’re at $100,000. Looks like $92,000 is your good filing number, have you prepaid your funeral? I’d do the math. If you were calling me today in June, and you had some significant assisted living fees, I might say hey, you know what? This looks like it’s going to be a good benefit for you in August-September, so right away, we have taken out that month delay while the VA is looking at your filing and then, because we haven’t had a denial, we would have had an approval. There’s actually an opportunity after you’re approved – only for veterans – after you’re approved to go back and get a whole extra 12 months from before you filed, but at first you a denial letter. That’s taken away from you, so you can see how just taking that extra step of taking a look at it, really making sure that you understand it and that it is filed correctly. Can result in lot more funds for the veteran.
JIM: Now, I’m going to finish with; I know I’ve had clients that have worked with you and have been quite satisfied. The thing that scares me; I was just on a weekend with a good friend, and he was talking about somebody in his area that was taken advantage of by someone posing as a VA expert, helping to qualify for VA benefits, and they had ulterior motives, and I know that you were recently featured in a three-part New York Times series on the VA pension, and you’ve also successfully lobbied with Congress and the VA to improve the access to the pension. What can you tell us about that?
PATTY: The big differentiator between us and most – I won’t tell you all – of people who are out there doing this, is we are not interested in moving the client’s assets. We’re not interested in selling them annuities. We’re interested in having them understand that this benefit is part of your retirement toolbox, and it’s just one component of your retirement plan. It can be an important part, so because we don’t have our hands in the veteran’s pockets, if you will, we’re able to give them, really, an unbiased view of their cash flow in the coming years if they do have financial advisors or attorneys involved. We can have an honest discussion about it. We always say, if you’re talking to somebody, and they want you to put all of your assets in a trust or put all of your assets in an annuity, then they probably have their commission in mind over your parent’s interest or your best interest, because it’s really about you being able to age in place and your assets lasting your lifetime.
JIM: And I can echo that. There’s a lot of tools in the toolbox, and I know when we do this type of planning, some of those tools are appropriate to a degree, but I’ve seen a lot of people where it all goes into one basket, and then you see the plans blow up later on because of what you said; they’re not putting the client’s interest first, so that’s why you’re on today. I know you’ve always taken our client’s interest first, and why don’t we just finish with, if someone would like to get a hold of you for more information or to see if they might be eligible for some of these benefits, how do they get a hold of you?
PATTY: They call our scheduling company. There’s an 800 number, and they’ll schedule an intake call. Usually that’s with Jeannie, Wayne, or Mike. Then, after their intake call, they forward on the process, eventually ending up with me reviewing their application, and if at any time they want to get a little bit more in depth, they can ask to speak with me directly.
JIM: That’s great. Thanks again for joining us, Patty. Your service, I think, is invaluable to the people who have served us so well and really appreciate what you’re doing for our veterans.
PATTY: Oh, thank you, Jim. I appreciate being invited to speak here.
JIM: Thanks for joining us this week, and tune in again next week as we explore another phase of the Real Wealth process; and remember, if anything you’ve heard in today’s show, you’d like to get more information about, contact your Prism Insurance Agency Advisor. Also, if you feel that any of this information would be helpful to a friend or family member, just click the forward to a friend button.
Posted 1:06 PM