How Your Credit Score is Used

Most of us need access to credit. Loans provide the means to buy a house, purchase reliable transportation, and pay for higher education. When you apply for credit, lenders use your credit score to determine the potential risk in lending to you: they want their money back with interest – the price you pay for borrowing the money.

Many people don’t realize credit scores are used for more than applying for credit cards and loans. Your number can be used in other ways, too:

  • Landlords may check your credit to decide whether to rent to you, or whether to require a higher security deposit. 
  • Cellular companies may use your credit to determine your payment plan and whether to require a security deposit.
  • Insurance companies check credit to decide how much risk you present. They can use your scores to determine whether to cover you and, in many states, to determine your premium.
  • Utility companies are interested in your credit score. If you have no credit or a low credit score, these companies may require a higher security deposit.
  • Credit card companies review your current scores to determine your interest rate.
  • Employers may check your credit to protect their customers, their other employees and their businesses. When a potential hire or an employee shows sign of financial distress, this could lead to fraud or theft. Employers don’t receive your credit score, however. Instead they can obtain a modified version of your credit report. They need your permission to do so.

The FICO® score, developed by Fair Isaac Corporation, is one commonly used credit scoring system. FICO scores range from 300 to 850. Many lenders consider a score in the 700s to be good. Your FICO score is comprised of five factors:

  • Payment history
  • Amounts owed
  • Length of credit history
  • New credit
  • Type of credit in use

It wasn’t that long ago when banks would review your full credit report and make an individual decision on whether to lend to you, how much, and at what interest rate. The use of credit scores makes extending credit quicker and easier. You can apply for a credit card online, and know within minutes whether you were approved.

Credit scores have automated the lending process and make it easier for companies to make decisions about you. They are used, not only by banks, but also by utility companies, cellular companies, insurers, and others who want to know the risk you present before offering you their service or product.

You can check your credit score for free at creditkarma.com.

This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.

Be Smart About Your Passwords

Recently, I went online to place a take-out order from a local restaurant. After I selected my dishes, I was prompted to set up an account with a user ID and password. Here it was again: a need to create and keep track of yet another password. There was no avoiding this step to place an online order.

As our lives revolve around computerized devices and the internet, we now need secure unique passwords for banks, online shopping, cell phones, social media, employee benefits, medical records, insurance, Social Security, phone apps, smart speakers, and the list goes on. Each of these accounts creates more online exposure, increasing our vulnerability to security breaches and identity theft. How do you protect yourself?

One line of defense is to be smart about your passwords.

Use a password manager.

Password managers store and organize your user IDs and passwords. You don’t need to remember each one! You memorize one password to access the manager. This password should be long and complex. LastPass, DashLane and KeePass are frequently recommended. Once you are using a password manager, you can shred the written list of passwords under your mouse pad or in the file folder next to your desk. If you can’t part with the paper, lock up the list away from the computer.

Use two-step verification. 

Whenever an online account offers two-step verification, set it up. With this, when you log into the account with a new device, a one-time code will be sent to you via text message or email. You have a few minutes to type in the code as part of the log-in process. Some financial institutions will send you a token or security key. You keep this small device in a secure place at home. When you log into that website, a one-time code will appear on the token. You enter that as you log in to your account.

Use Long, Complex Passwords. 

Let’s first consider what makes a weak, easy-to-crack password. It would be very convenient to use the same simple-to-remember password on every website. “Rover1,” for example, is short and easy to recall. Experts would point to this as an extremely weak password:

  • It has fewer than 10 characters.
  • It is predictable, meaning it is not complex. It has only one capital letter, one number, and no special characters.
  • It is the name of a pet. Passwords shouldn’t be our own names, or pet and family members’ names.

Passwords should also avoid information easily found on the internet such as birthdates, anniversaries, license plate numbers, street names, and schools we attended. Words from the dictionary don’t make good passwords. Passwords that use sequences of numbers, letters and keystrokes should also be avoided. A classic example of this is “qwerty1234.”

How do you create strong passwords? In the many articles I have read on this topic, all stress the importance of at least 10 characters that are complex, meaning they mix capital and lower case letters, numbers and symbols.

The common ideas I have found to create such passwords are:

  • Let your password manager generate passwords for you. 
  • Combine random words and turn them into a complex phrase: “frog city snore” can become “Fr0%S1t1snor5.”
  • Use a diceware website to generate a passphrase – string of random words. Human brains are not good at coming up with truly random words. Diceware websites will do this for you. You can find them with an internet search. The passphrase one such website generated for me is ReopenScramblerQuiltAmuckObligateSly.”
  • Make a phrase complex. “It was the best of times,” can become “1Twzth3b8stOFXs.”

The core advice for password safety is make them long, make them complex, store them safely, and use two-step verification where ever possible.

The night I tried to order my dinner online, I decided I didn’t need a password for a restaurant. I picked up the phone and called instead.

This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.

Sharpen Your Financial Acumen

Now is the time to sharpen your financial acumen. April is National Financial Literacy Month.

This month-long focus on money is an effort to help Americans of all ages understand the importance of handling money wisely and giving them the skills to do so.

Why is this important? Many Americans are heading towards financial crisis. About 40 percent of U.S. adults do not have the funds to cover an emergency expense of $400 or more. Many Americans do not have enough money to support themselves in retirement. For most of us, there will not be a generous company pension. Social Security benefits will not cover all our expenses. It is not designed to be our sole source of retirement income.

While there are plenty of Americans who can and do set money aside each month, there is a large percentage of adults at every age who have less than $1,000 in savings. A recent survey by GoBankingRates.com found a lack of money keeps people from saving. They are not making enough and are struggling to keep up with basic expenses.  

The adage says, to have more money you need to “either increase your income or decrease your expenses – or both.” Other than taking on second and third jobs, do people know how to do this?

This is where financial literacy comes in. When people understand the impact of the financial decisions they make, perhaps they would make educated choices that would help them be more financially secure.

Many people don’t understand:

  • The true cost of interest on auto loans, mortgages, and other loans. (Is it too easy see the shiny thing they want, and focus on monthly payment amounts or the maximum the lender is willing to loan – and not pay attention to what is realistically affordable?)
  • The impact an expensive mortgage has on monthly retirement income, including social security.
  • How much interest they really pay when they don’t pay their credit card bill in full each month.
  • How many years it will take to pay-off parent loans for their children’s education, and whether they will be able to make the payments once retired.
  • The impact of using money that could be designated for savings to support their adult children. (Are their children going to support them when they run out of money?)

It is never too late to improve money skills. One of the best resources is personal finance magazines. When hard copies arrive in your mail each month, it is an easy reminder to pay attention to your finances. Both Kiplinger’s Personal Finance and Money Magazine have easy-to-understand educational articles:

Online, you can find resources by searching on “Financial Literacy 2019.”  Pay attention to the source of the information. Two of my favorites are:

Meanwhile, you can test your financial literacy at the National Financial Capability Study (usfinancialcapability.org).

This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.

Know Your Rights When Planning a Funeral

When a loved one dies, grieving family and friends are often faced with having to make funeral decisions quickly. Not many of us have prior experience planning funerals. This, combined with the emotional duress of our loved one’s death, make it easy for consumers to purchase unnecessary or unwanted services, and pay more than necessary.

If you find yourself making funeral arrangements, keep in mind:

  • It is important to compare prices between funeral homes. The cost for the same items and services can vary significantly.
  • You have the right to know what the funeral home will charge before you agree to purchase any products or services.

In 1984, the Federal Trade Commission (FTC) published the Funeral Rule which regulates the information funeral providers must provide consumers.  Here are some basic provisions of the Funeral Rule:

Costs

  • You have the right to compare prices between funeral homes.
  • Many funeral homes sell funeral packages which combine several items in one price. You are not required to purchase a package. You can buy products and services separately.
  • You have the right to get prices over the telephone if you request them.
  • If you visit a funeral home in person, you must be given a “General Price List,” which lists everything the funeral home offers and the price of each item and service.
  • Some funeral homes may mail you a price list upon request or post them on line, but they are not required to do so.
  • You have the right to receive a written statement immediately after making arrangements. The statement should include a list of all the items and services you are purchasing, the cost of each, and the total cost.

Caskets

  • You can request a casket price list before you view caskets. This lets you know there may be less expensive models available in addition to what is on display.
  • You are not required to purchase a casket or urn from the funeral home. The funeral home cannot refuse or charge you a fee to handle a casket or urn you purchased elsewhere such as from a casket store or online.
  • Caskets are not required for cremation. Funeral providers offering cremation services are required to inform you about alternative containers made from materials such as card board or unfinished wood, and they must make the containers available.

Embalming

  • According to the FTC, “no state law requires routine embalming for every death.” State laws vary on whether embalming or refrigeration is required when a body won’t be buried or cremated within a certain amount of time.
  • If the body needs to be preserved for practical reasons, ask the funeral home whether refrigeration is an option.

Outer Burial Containers

  • According to the FTC, outer burial containers “are not required by state law anywhere in the U.S., but many cemeteries require them to prevent the grave from caving in.”
  • If you need to purchase an outer burial container, you have the right to see a price list before you view them.

Required Purchases

  • If you are told you must purchase certain items or services to meet any legal cemetery or crematory requirements, you can get an explanation of that requirement included in the funeral home’s written price statement.

Funerals can quickly become expensive. It is easy to spend more than we intend. You do not need to buy the most expensive things to honor a loved one.  Contact at least two funeral homes to learn what they offer and their prices. Give yourself some time to think through the options and to research any required purchases.

Consider planning your own funeral and remove this burden from your loved ones. You can take the time you need to compare prices and make decisions.

For more detailed information on your rights under the FTC Funeral Rule, click here.  Another great resource is the Funeral Consumer Alliance which has a wealth of information for consumers and links to its state chapters.

This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate. 

Three types of Fraud 2

The following article is from the American Association of Daily Money Managers (AADMM)

Fraud takes an enormous financial, as well as emotional, toll on victims. It can destroy businesses and ruin financial lives.

According to the Insurance Information Institute,following the introduction of microchip equipped credit cards in 2015 in the United States, which make the cards difficult to counterfeit, criminals focused on new account fraud. New account fraud occurs when a thief opens a credit card or other financial account using a victim’s name and other stolen personal information. According to the Javelin study, account takeovers tripled in 2017 from 2016, and losses totaled $5.1 billion.

To assist with recognizing and avoiding fraud, the American Association of Daily Money Managers (AADMM) has developed a list of common scams that are becoming more prevalent each year. Three of these scams were discussed in my January post, How to Protect Yourself and Your Loved Ones from Three Common Types of Scams. Click here to read this post.  Following is information on three additional types of scams.

STOLEN MAIL

That box in front of your home, your mailbox – is it safe enough to protect you from identity theft or other possible financial violations? Thieves are looking for items in that box that can provide them with information to steal your identity or monies that belong to you. This information can be found on most types of mail we all receive each day – bank statements, utility bills, credit card offers, checks or tax documents. Checks can be cashed or washed and rewritten for larger amounts.

The information found inside your mailbox is enough for a criminal to open a new credit card in your name or gain access to an existing one. Filling in any missing information is not difficult for these individuals who make a living at identity theft. Click here to learn more ways you can protect yourself.

INTERNET FRAUD

There are several popular methods by which scam artists take advantage of internet users. Here are some common examples of internet fraud:

  • Malware: software designed to disable computers and computer systems once downloaded. Often, they are disguised with familiar names.
  • Internet auctions: advertised products are misrepresented, or merchandise is never delivered.
  • Data breaches: sensitive personal or financial information is leaked from a secure location.
  • Ransomware: A form of malware that targets network weaknesses to access the critical data and/or systems and hold it hostage. Ransomware is frequently delivered through phishing emails. In order to gain access to your files/systems, the cyber-criminal demands a “ransom” payment or order for you to regain access to your data.

There is good news! We can take steps to protect ourselves by paying close attention to how we install and use software applications and online services. For more information Click here .

 EMAIL/PHISHING SCAMS

Phishing is defined as an attempt to obtain financial or other confidential information from Internet users, typically by sending an email that looks as if it is from a legitimate organization, often a financial institution, but the email contains a link to a fake website that replicates the real one. Once the user has entered their information on the fake website, the scammer has the user’s information and can use it as they desire. Click here to see more strategies to keep your information safe.

Here are some additional tips and resources to prevent fraud and identity theft. Click here to download a full copy of this article.

Daily Money Managers (DMMs) can help protect their clients by acting as a first line of defense against fraud. Using their experience in financial matters to monitor and recognize suspicious activity, they help prevent their clients from falling victim to various scams. In the event that fraud is detected, DMMs can also work with clients toward resolving the issue. To find a DMM, please visit AADMM.com.

 

The American Association of Daily Money Managers (AADMM) is a national membership organization representing individuals and businesses in the growing profession of daily money management. These professionals provide financial services to seniors and older adults, people with disabilities, busy professionals, high net worth individuals, small businesses and others. AADMM’s mission is to support daily money management services in an ethical manner, to provide information and education to members and the public, and to develop a network of dedicated professionals. Click here to learn more about AADMM.

 

This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.

Two Ways to Express your Love

Valentine’s Day is a time when we express our love with flowers, chocolate, dinner, and cards. We continue to express our love every day through many ordinary tasks: making and sharing meals, offering to run an errand, shoveling the front walk, listening when someone needs to talk. The list is endless. When it comes to money, here are two ways you can express your love. 

Prepare your loved one for when you can no longer manage your finances.

In many families, one person manages the day-to-day financial tasks: paying the bills, pricing insurance, storing online account logins and passwords, understanding all sources of income, knowing where the life insurance policy is stored, etc.

  • Perhaps your spouse or partner handles all these details.
  • Perhaps you have adult children or other family members who will need to take over these tasks if you are no longer able.
  • Perhaps you are in your twenties just starting your career. What happens if you become ill or have an accident and can’t manage on your own?

When our spouses, partners or other key family members don’t have access to vital information when they need it, they face an extremely challenging task to recreate it. The task is more daunting when much of this information is stored in your password protected computer or in the cloud. Eventually they will figure out all or most of the pieces of your financial picture, but it could take months. Why send your loved ones on a frustrating treasure hunt? This hunt is especially painful if your loved one is grieving your death.

If you can, show the key person or people in your life the details of your finances. If they resist or are likely to forget the details, write it down and store it in a safe place. It may take you several weeks to record all the information, but your loved ones will someday thank you.

If you don’t know where to start or are concerned you will miss something important, you can purchase a workbook which serves as a guide and provides space to record information. One guide I like is MemoryBanc: Your Workbook for Organizing Life by Kay H. Bransford. MemoryBanc is available in both paper and electronic editions.

Teach Your Child How to Be Financially Independent

In my practice as a daily money manager, I have seen many young adults struggle financially. Many have never learned solid money skills and don’t know how to live within their means.  Without these core proficiencies, they may have a hard time with all types of financial matters. Consider:

  • When your children don’t understand how loans work, can they find the best financing when buying a car?
  • If they hope to purchase a house someday, will they be able to postpone unnecessary expenses and purchases to save enough for a down payment?
  • If your child faces a time of hardship such as job loss or an illness, will he have enough money saved to carry him through that hard time?
  • Does your child understand what impacts her credit score, and how that score influences the interest rates she receives on credit cards and other loans?

When we see our adult children struggling, parents want to help. It is our natural instinct. Handing over money, however, is not always the best solution. Financially enabling our children can lead to adult children becoming dependent on their parents and being less motivated to become independent. Not all parents can afford to give money without putting their own financial security at risk.

Whether your child is six or sixty, it is never too late to teach money skills. It may be emotionally difficult, and there may be hurt feelings. Overall, however, teaching another person life-long financial skills is a wonderful gift.

There are many resources avaible for you and your children: books, online resources and articles, banks and credit unions, financial coaches, financial therapists, even the Federal Trade Commission.

For ideas and resources to teach financial skills to minor children, see my blog: Teach Your Kids About Money

The US News and World Report article, “How to Help Adult Children Become Financially Independent”, offers strategies to help grown children.

When you think of ways to show your love this Valentines’ season, I encourage you to think beyond traditional gifts. Taking steps to prepare your loved ones for both their own and your financial future is a priceless gift.

 

This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.

 

How to Protect Yourself and Your Loved Ones from Three Common Types of Scams

The following article is from the American Association of Daily Money Managers (AADMM).

Fraud takes an enormous financial, as well as emotional, toll on victims. It can destroy businesses and ruin financial lives. Many individuals, businesses, and organizations are affected by scams and other fraudulent activity on a daily basis. A report in the American Journal of Public Health estimates that 1 in every 18 older adults experience some form of fraud or scam each year. Often, they are too embarrassed to report it or don’t know where to go to do so. With the complexity of ongoing identity schemes, the number of victims impacted are on the rise. According to the Insurance Information Institute , the amount stolen was $16.8 billion last year alone, an increase of 12 percent from 2016.

To assist with recognizing and avoiding fraud, the American Association of Daily Money Managers (AADMM) has developed a list of common scams that are becoming more prevalent each year. Here is information on three of these scams.

FUNERAL/CEMETERY SCAMS

Some funeral homes may try to take advantage of a grieving family by trying to sell them products they do not need or by adding fees for additional services that they don’t really want. Examples may be attempts to sell them an expensive fancy casket, convincing them to get embalming prior to cremation (almost never required) or selling a rubber gasket to preserve a body (they do not work).

The “Funeral Rule,” passed in 1984 and which is overseen by the Federal Trade Commission, sets forth certain guidelines that funeral homes must abide by. These include rules that the funeral home must itemize their prices, offer products individually (although they may offer package deals), and allow a family to bring in caskets from third party vendors (such as Walmart or Costco). Even with these rules, some funeral homes are unscrupulous and violate them. Read more.

TELEMARKETING/PHONE SCAMS

Many older adults enjoy talking on the phone. It’s a great opportunity to communicate with family members, friends and acquaintances. However, the telephone is also widely used by scammers to prey on unsuspecting individuals, especially seniors, who are often the victim of these fake telemarketing calls.

Scammers will say anything to cheat people out of their money. Some may appear to be very friendly — using your first name, making small talk, or asking about your family. If you receive a call from someone saying that you’ve won money in a sweepstakes or contest you haven’t entered, but you just need to send money to claim your prize, be aware this is probably a scam. Contests and prize scams are on the rise. These fraudsters are difficult to catch because there is no paper trail and the calls cannot be traced. Read More.

INVESTMENT/PONZI SCHEMES

Seniors and other vulnerable populations are often targeted by investment fraudsters. Common scams include:

  • Ponzi schemes in which early investors are paid with the assets of later investors
  • Bogus promissory notes
  • Offshore market instruments
  • Oil and gas investments
  • “Risk free” investments

If you encounter any of these situations, first and foremost, talk with trusted advisors or family members before making any investment decisions. Take time making investment decisions and verify that sellers are licensed and registered to sell products by visiting investor.gov or your state securities regulator. If you do not know the state securities regulator, visit nasaa.org or call 202-737-0900. Read more. 

Here are some additional tips and resources to prevent fraud and identity theft. Click here to download a full copy of this article.

Daily Money Managers (DMMs) can help protect their clients by acting as a first line of defense against fraud. Using their experience in financial matters to monitor and recognize suspicious activity, they help prevent their clients from falling victim to various scams. In the event that fraud is detected, DMMs can also work with clients toward resolving the issue. To find a DMM, please visit AADMM.com.

 

The American Association of Daily Money Managers (AADMM) is a national membership organization representing individuals and businesses in the growing profession of daily money management. These professionals provide financial services to seniors and older adults, people with disabilities, busy professionals, high net worth individuals, small businesses and others. AADMM’s mission is to support daily money management services in an ethical manner, to provide information and education to members and the public, and to develop a network of dedicated professionals. Click here to learn more about AADMM.

This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.

Three Ways to Streamline Your Bill Paying

Welcome to the New Year, a time for fresh starts. For many people, keeping track of bills and paying them on time can be a hassle. Here are three daily money management techniques you can use to make a fresh start and streamline your bill paying.

1. Create and use a financial calendar

A financial calendar keeps track of payment due dates. This helps you avoid late payments and their associated penalties and fees, which can be costly. You can also have your financial calendar keep track of regular income deposits, remind you to review your account statements, and to reconcile your accounts.

There are many ways to keep a financial calendar. The method isn’t important; choosing one that you will actually use is. Those who like pen and paper can dedicate a 12 month calendar for this use, keep track in a notebook – one page for each month, or create a chart on a single piece of paper. Those who prefer electronics can use financial software, calendar reminders, apps, bill payment services, and spreadsheets.

To create a financial calendar, comb through your bank statements, bills and checkbook register to find all the bills you pay and their due dates. Locate your regular income and deposit dates. Transfer this information to your calendar.  When noting when to pay bills, leave sufficient time for the payments to reach the vendor.

2. Automate your bill payments

Automated bill payments save significant amounts of time. You don’t need to handwrite or print checks, or spend time making online bill payments. You save money on stamps. Electronic payments are also considered more secure than mailing checks. When payments are set up to arrive before their due dates, you don’t need to worry about forgetting to pay a bill and incurring late fees.

There are two basic ways to pay bills automatically:

  • Automatic or direct debit is where service providers take the funds directly from your bank account or charge them to your credit card. The exact amount due will be paid each time.
  • Online bill payments are where you log on to the bank’s website and instruct the bank to send payments to vendors. You can automate payments to be sent regularly on the dates you predetermine. If there are variations in the amount due, you will need to make adjustments.

Many banks will gather bills that can be sent electronically. You can then view the bills on the bank’s website.

There are also independent online bill paying services. These sites help you aggregate your electronic bills and set up automated payments from one or more bank accounts.

Some of my clients express concern about losing control over their bill payments or not knowing how much money is being deducted from their checking accounts. When companies debit your account, you will receive a bill before the money is deducted. This gives you time to review the bill and call the company with any concerns.

If you hesitate to have vendors automatically draft your primary checking account, you can reduce your exposure by charging bill payments to your credit card or by setting up an auxiliary “bill-pay” bank account from which they withdraw the funds. With an auxiliary account, you can keep the balance to just a little more than what is needed to cover the bills. You will need to monitor the account balance and regularly transfer funds into the account to cover the bill payments. Transfers can be automated from your bank’s online banking feature.

3. Prepare for large lump sum payments

I have frequently seen people struggle to pay large bills that are due once or twice a year, or irregularly.  These bills include property taxes, insurance premiums, heating fuel pre-buy programs, and estimated income taxes. You may have others. When people don’t plan for these bills, they have cash flow problems. The trick is to set aside money each month so you have it in-hand when these payments are due.

To figure out how much you need to save each month, determine the annual amount due and divide that amount by 12 months.

Many people struggle to keep these reserves in their checking or savings accounts. If the money is there, they see it as available to spend. One technique is to remove it from your primary account and store it in an account dedicated only for this purpose. Set up an automatic transfer from your primary account to the “storage” account. If your employer can do this, have money from each paycheck direct deposited to the storage account. (To determine how much to save, divide the total amount you need to save each year by the number of pay periods in a year.)

If you do not trust yourself to not raid this account for purposes other than the bills that this money will pay, make it hard to reach. Open it at a different bank. Skip setting up online access. Do what you need to do to keep this money available to pay those infrequent big bills.

By employing these techniques, you can make a fresh start this year and reduce a lot of stress around paying your bills.

 

This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.

 

 

 

New VA Rules for A&A

The Veterans Administration recently updated its rules for veterans to qualify for needs based pension benefits. My November blog post, “Know the Rules When Applying for VA Pension Benefits” included information which is now outdated. This post discussed Aid & Attendance and Housebound Benefits, supplemental benefits available to low income veterans and their survivors under the Veterans Administration (VA) pension program.

On September 18, 2018 the Veterans Administration issued new rules regarding veterans and their survivors’ eligibility for the needs based Aid & Attendance program. The new rules went into effect on October 18, 2018.

The previous rules were not well-defined, making it both difficult for Veterans and their advisors to plan, and simpler for high net worth claimants to qualify. The rules are now more straightforward.

For need based programs, the VA has established a maximum net worth in order to qualify, and implemented a 36-month look-back period for the transfer of assets.

Veterans cannot have assets totaling more than $123,600.

  • This amount is also the maximum “Community Spouse Resource Allowance” allowed by Medicaid. It will increase when Social Security raises the cost of living allowance.
  • Net worth includes the veterans and certain dependents’ monthly income. Monthly income is multiplied by 12 months and added to the applicant’s assets.
  • Qualifying medical expenses can be deducted from income. The VA has clarified which medical expenses qualify.
  • The claimant’s primary residence and two-acres are exempt from the net worth limit. If the veteran or the surviving dependents own more than two-acres of land, other rules apply.
  • Vehicles used for personal transportation, personal items, household furnishings, and pre-paid burial plans are excluded from assets.

There is now a three year “look-back” period.

  • There may be a penalty assessed when a claimant transfers assets during the 36 months immediately prior to submitting an application. The penalty is a specified amount of time, based on the transferred assets, a claimant must wait before receiving benefits. Asset transfers include making gifts, setting up trusts and purchasing certain financial products.
  • The penalty period applies only to transfers of assets over the $123,600 asset limit. If a veteran’s net worth is less than $123,600 and he or she transfers some assets, there is no penalty. If the veteran’s assets total more than $123,600, he or she will be penalized for amounts transferred over the asset limit.
  • There are exceptions to the new transfer penalty rule such as when the claimant sets up a trust for a disabled child, or was a victim of fraud or unfair business practices related to the sale of financial products.
  • The penalty period cannot exceed five years.

This is a very general overview of the Veterans Administration’s changes to its Aid & Attendance program qualification rules. The VA has made many new points of clarification. If you or your loved one would like to explore or apply for VA pension benefits, I recommend consulting a Veterans Administration accredited claims preparer. For a searchable list of accredited preparers, which includes veterans’ service organization representatives, independent claims agents and attorneys, visit va.gov/ogc/apps/accreditation/index.asp 

 

This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.

 A special thank you to Attorney Glenn Jarrett of Jarrett & Luitjens Estate & Elder Law in South Burlington, Vermont.