We have talked about the VA Aid & Attendance Pension benefits program in previous posts. Recently, there have been numerous clarification questions submitted to us by seminar (and webinar) attendees about other benefits offered by the VA.

There are indeed many types of VA benefits available to veterans through the Veterans Administration for things such as education, life insurance, health care, home loans, and burial benefits. The two major categories of benefits, however, are compensation and pension.

Service-Connected Disability Compensation.

Compensation is a benefit that veterans receive when he/she has a disability caused by, or exacerbated by, military service. Disability compensation is available to a qualified veteran regardless of their level of income. Once a veteran can show that they are disabled because of their military service, their level of disability is rated by the Veterans Administration (for example, 20% disabled) and the amount of compensation paid depends on the rating assigned.

A veteran can apply for increases in the percent rating if the condition worsens. A rating of 100% disabled will qualify the veteran for special monthly compensation that could be more than double the normal benefit. For 2010, monthly compensation payments ranged from $123 for a veteran with no dependents and a 10% disability rating, to $2,823 for a veteran with a spouse and a 100% disability rating.

Dependency and Indemnity Compensation (DIC).

DIC is a monthly benefit paid to eligible survivors of a:

a) Military service member who died while on active duty, or

b) Veteran whose death resulted from a service-related injury or disease, or

c) Veteran whose death resulted from a non service-related injury or disease, and who was receiving, or was entitled to receive, VA compensation for service-connected disability that was rated as 100% disabling.

The last provision will hold if it satisfies one of  following three conditions: (1) that the veteran was disabled at least ten years immediately before death, or (2) since the veteran’s release from active duty and for at least five years immediately preceding death, or (3) for at least one year  before death if the veteran was a former prisoner of war who died after September 30, 1999.

Eligible survivors include spouses who have not remarried, and unmarried children under 18 years of age.

In the previous post, we discussed sources of help that veterans and their spouses can turn to for filing benefits claims to the Veterans Administration.

One common source of information regarding the pension benefit comes from annuity salespeople who often offer to consult with veterans and their families for free. This “free” offer is based on the strategy of counseling the veteran to meet the asset and income limitations of the benefit by buying an annuity and giving away their assets to their children. The offer is that the annuity sales organization will assist the veteran in filing for the benefit claim. Some even promise to provide any necessary estate planning at no charge.

The real situation is that the annuity salesperson is being compensated by the annuity company for  selling a financial product to the veteran. This is not to say that an annuity per se is automatically the wrong decision for a senior to get involved in. It can be a beneficial decision, or an inappropriate one. It really depends on the actual facts and specific circumstances of the senior’s financial and life situation. The bottom line is that seeking independent professional advice is the most prudent way to approach a major decision like this.

There is another important factor that one must consider when trying to meet the VA asset limitation test. Giving away cash or other things of value can create big problems for the senior if and when they later need to apply for Medi-Cal (Medicaid in other states) for assistance in covering the cost of long term care such as skilled nursing home care. Giving away assets can create a long penalty period of ineligibility for Medi-Cal benefits. Any senior facing long-term care needs to seek capable legal advice from an attorney who is skilled in the areas of estate planning, financial planning options, Medi-Cal, Medicare, income tax, and gift tax — as well as having experience regarding VA rules.

The important question for many families will be, “What will it cost to seek professional advice in this area?” An attorney who chooses to file a claim for veterans benefits must do that portion of the work for free. However, the attorney may charge professional fees for specific work related to estate planning, financial planning options, Medi-Cal, Medicare, income tax, or gift tax work, as well as the determination of the financial suitability of filing for a veterans benefit claim.

One should really examine the costs versus benefits of the options available to the senior when seeking VA benefits: (a) doing the filing yourself, (b) asking a sales person for “free advice,” or (c) engaging the services of a competent and experienced professional and advocate who knows the issues and help you navigate the legal and bureaucratic landscape of long term care. Qualification for a VA benefit is only one of several concerns that must be considered in planning for a senior’s safety and well being.