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2016 IRA distribution be counted as income if applying for VA in 2017?

We want to cash out my dad's IRA in 2016, then gift it, before we apply for VA benefits in 2017 for my dad.

If we take the full IRA tax hit in 2016 and apply for benefits in 2017, do we have to report the IRA income that my dad received in 2016, on the 2017 application since it's not "ongoing"?

Also, I've been told by my VA adviser (works for the VA), that there is an "informal" look back, but he can't provide documentation of this. If the VA only requires 1 month bank statement, then want other means would they have to do a look back?

Thanks!

Status: Open    Nov 18, 2016 - 08:44 AM

VA Benefits

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Nov 21, 2016 - 09:19 AM

The VA uses the federal tax information (FTI) provided by the IRS when administering the NSC Pension program. The current laws on the books do not mandate a look back like Medicaid's current 5 years, but the best guess is that next year the VA will implement their look back period. The rumor is that the VA will have a 3 year look back. When the VA receives the FTI from the IRS it may delay the application as the VA would be able to see the IRA and the amount and then it is gone with no explanation. The VA may then request information regarding that IRA and what happened to it. The way that this process is intended is to assist the veteran once their assets have been reduced due to their medical expenses. It is not meant to protect any inheiritance or build up their assets. I would be wary of any large shifts of funds because if a time would arise that Medicaid would be needed the transfer of assets may disqualify him from getting the help that he needs.
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By jerolyn on Nov 21, 2016 - 08:09 PM | Like (0)  |  Report

Matt, thanks for your advice. Do you know how the VA would calculate the IRA income? Since it would be a 1x distribution and not ongoing, if we made it in Dec 2016, would they divide the distributions by 12 and count it as monthly income for the next 12 mos, through the end of 2017...OR...Does the VA use a calendar year calculation i.e. as long as the distribution is in 2016, if we apply for benefits in 2017, then the "income" would not be included at all?

You said: "The way that this process is intended is to assist the veteran once their assets have been reduced due to their medical expenses. It is not meant to protect any inheiritance or build up their assets. I would be wary of any large shifts of funds because if a time would arise that Medicaid would be needed the transfer of assets may disqualify him from getting the help that he needs".

I agree, but we're currently having to go into my dad's IRA to meet his monthly expenses and it's dwindling rapidly. If he falls or needs special assistance (convalescent), it will be gone in a very short time and then we're on our own. We're really just trying to keep a bit of a back up if MediCal doesn't kick in. A personal IRA is not counted in the MediCal calculations when it comes to qualifying for benefits. Only the VA counts a personal IRA, which is why we need to deal with it (or not).

I appreciate your help!

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