This article discusses how veterans benefits complicate not only the receipt of SSI/Medi-Cal benefits but the drafting of the special needs trust to preserve such benefits should the veteran receive an inheritance or other windfall.
Receipt of VA compensation and pension benefits each reduce SSI benefits dollar for dollar; but SSI does not reduce such government VA benefits.
Accordingly, if SSI is relied upon as the basis for Medi-Cal eligibility then eliminating SSI benefits due to VA benefits may be counterproductive.
Veterans who receive Medi-Cal to pay for their long term care at a skilled nursing home can also receive any VA Pension benefits as income exempt from share of cost requirements, unless otherwise allocated to their stay-at-home spouse’s needs allowance.
Such VA pension money, therefore, increases Medi-Cal’s meager $30 a month spending allowance, i.e., money which the veteran does not have to spend on his or her nursing home care.
But, if the institutionalized veteran’s VA pension benefits are instead allocated to his or her stay-at-home spouse to meet her income needs allowance, then such VA benefits do count towards satisfying the spouse’s needs allowance.
A special needs trust that satisfy only SSI/Medi-Cal requirements will not suffice to preserve VA pension benefits because VA pension benefits are determined based on different criteria.
To qualify for VA pension benefits, a veteran must have served during wartime, be totally and permanently disabled have limited income, and meet a “net worth” test.
The “net worth” test examines whether the veteran’s income and non-exempt assets alone are sufficient to meet his or her basic needs.
Unfortunately, unlike federal SSI and Medi-Cal regulations, there are no federal rules regarding the VA treatment of trust assets.
It appears, however, that a discretionary special needs trust that further limits the trustee to the trust income to buy goods and services for the beneficiary would work to allow the veteran to continue receiving VA pension benefits in addition to SSI/Medi-Cal benefits.
Accordingly, if relevant, any family with a veteran should examine the connections between eligibility for the VA benefits and the SSI/Medi-Cal requirements.
If a special needs trust is being used, it must be drafted more carefully to preserve the VA pension.
Dennis A. Fordham, attorney (LL.M. tax studies), is a State Bar Certified Specialist in Estate Planning, Probate and Trust Law. His office is at 55 First St., Lakeport, California. Dennis can be reached by e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it. or by phone at 707-263-3235.
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