Veterans' Pensions: Protect Your Money from Poachers
All text below reproduced from the Federal Trade Commission website:
Veterans and their families are a target for some dishonest advisers who are claiming to offer free help with paperwork for pension claims. The scheme involves attorneys, financial planners, and insurance agents trying to persuade veterans over 65 to make decisions about their pensions without giving them the whole truth about the long-term consequences.
Specifically, these unscrupulous brokers try to convince veterans to transfer their assets to a trust or to invest in insurance products so they can qualify for Aid and Attendance benefits. What they don’t reveal is that these transactions could mean that the veteran loses eligibility for Medicaid services or loses the use of their money for a long time. Adding insult to injury, the advisers are charging fees that range from hundreds to thousands of dollars for their services.
Your best defense against someone who wants to poach your pension to get you a better deal? A firm “no, thanks.”
If you’re a veteran over 65, you may be approached by people with convincing come-ons offering to help you apply for supplemental pension benefits. Whether it’s through an ad or a website, the offer usually involves a free seminar and claims that:
“We’ll show you – for free how to qualify for your benefits and stay in your home.”
“We guarantee you’ll get your Aid and Attendance pension.”
“As a veteran, you’re entitled to these benefits.”
The people behind these pitches, who may claim to be veterans’ advocates, also show up at assisted living facilities, senior centers, or other places in your community to help you submit your application for A&A benefits to the Department of Veterans Affairs (VA). But often, they’re unscrupulous lawyers, financial planners, or insurance agents who merely rent the space to deliver a lunch or some snacks along with a high-pressure sales pitch for their products and services. These so-called advisers may claim to be veterans to gain your trust and they appeal to your emotions to create anxiety and apprehension about your future. As a rule, they leave out important details; the truth is that if you follow their advice, you’re likely to end up without the supplemental pension benefits they promise, disqualified from other government benefits, and stuck in a financial investment that’s not in your or your family’s best interest for the long term.
The offers almost always involve the Enhanced Pension with Aid and Attendance (also called A&A), which supplements a military pension but is only available in limited circumstances. The qualifications for A&A are specific and strict: You must be over 65; be eligible for a military pension; fall under an income threshold; and need help with daily living tasks (bathing, feeding, dressing, and toileting), be incapacitated physically or mentally, have severely limited eyesight, or be confined to bed or in a nursing home. A&A is never granted automatically either to veterans of a certain age or those with particular disabilities.
The so-called advisers offer to help you complete the paperwork to file your benefits claims. If your assets are above the required threshold, their goal is to convince you to restructure your finances so you can qualify for A&A. That’s how they earn their money: by selling you an annuity or creating a trust. For instance, the more money you put into certain insurance products, the more money the insurance adviser gets paid.
Here’s what you need to know:
- Transferring assets. Under current rules, it is not illegal to shift your assets to family members or to a trust to make you appear needy and qualify for A&A benefits. But transferring assets can have serious consequences: it can disqualify you for A&A benefits rather than qualify you. If disqualified, you would be required to return any A&A benefits already paid to you. Also, A&A benefits may not be enough to fund your long-term care expenses, and you may need to apply for Medicaid, the government’s program for people who cannot afford medical care. But Medicaid has a 60-month look-back period: If you’ve moved substantial assets at less than market value during the previous five years, you may be ineligible for Medicaid services.
- Annuities. If you buy an annuity, you pay a premium and then you get regular payments over time from an insurance company. People often use annuities to provide a steady stream of income. But depending on the annuity, if you need money early and have to withdraw it, you may have to pay very high fees. Annuities aren’t right for everyone: their suitability depends on your age, needs, and particular situation. For more information about deciding whether an annuity is right for you, visit the National Association of Insurance Commissioners.