Paying a Fee for Help with Filing a Claim
Federal code and VA regulations prohibit an anyone from charging a fee to fill out an application prior to filing a notice of disagreement. Some practitioners or providers help their clients for free, sometimes in the context of solving other retirement issues or providing long term care services. Some practitioners may offer information for a fee but will send their clients to a veterans’ service organization to complete the application. Charging a fee for information is an acceptable practice allowed by VA. Charging a fee to prepare, present, and prosecute a claim is a punishable offense.
We believe it is critical for the advisor or the consultant to offer advice and constructive help prior to the filing of an application or even during the claims process in order to help increase the chance of a successful award. We feel this might include:
- educating clients on what information is required,
- recommending supportive forms or documents that might be effective in the claims process,
- providing guidance on VA’s asset test, making sure the client understands that evidence for recurring medical costs and for a rating is presented in the most favorable manner,
- providing advice on dovetailing VA benefits with Medicaid, and
- providing advice on the steps necessary to complete the application without giving specific instruction on what goes in each block or helping in any way with gathering information for the claims process.
Knowing how to submit a successful claim is 95% of the battle and filling out the form is a formality.
The actual process of obtaining documents and filling out forms should be done, free of charge, by the client, family members, a duly appointed power of attorney or a veterans service organization such as a state department of veteran affairs or local VFW. We have not had favorable reports from people who use a VA regional office for help with filing a claim.
Home care agencies, nursing homes and assisted living facilities that pay a specialist to file a claim on behalf of one of their residents or clients are in violation of the third-party fee provisions allowed by VA. This is an obvious intent to circumvent the regulation.
VA does allow disinterested third party organizations to pay someone to file an application on behalf of the veteran–based on 38 C.F.R. § 20.609(d) (1992). This regulation, addressing disinterested third-party fee payers, provides that “[a]n attorney-at-law or agent may receive a fee or salary from an organization, governmental entity, or other disinterested third party for representation of a claimant or appellant even though the conditions set forth in paragraph (c) (38 USC section 5904) [regarding fees for services after a final decision by the DVA] have not been met.”
VA amended its rules pertaining to this regulation on May 23, 2002. The following rules now apply:
- First, it prohibits an attorney or agent from charging a fee contingent, in whole or in part, upon whether the matter is resolved favorably to the claimant or appellant.
- Second, it establishes a rebuttable presumption that the spouse, child, or parent of the claimant, or a person residing with the claimant, is not a disinterested third party.
- Third, it requires that all agreements for payment by a third party be in writing, be filed with the Board, and include a certification by the attorney or agent that “no agreement, oral or otherwise, exists under which the claimant or appellant will provide anything of value to the third-party payer . . . in return for payment of [the attorney’s] fee or salary, including, but not limited to, reimbursement of any fees paid.” 38 C.F.R. § 20.609(d)(2); 67 Fed. Reg. at 36,104. (See enclosed addendum court decision for more detail.)
Situations Where a Consultant Should Be Used for Advice in Filing a Claim
Below are six situations where using a consultant, who understands the claims process for Pension, can be of great help or in some situations a necessity. There are undoubtedly more situations that may exist and as reports come in from consultants, we will add them to this list. We have described, with each situation below, the reason for needing a consultant as opposed to using our book or trying to do it on your own.
Using a Consultant Where Complexity or Time Constraints Justify Paying Someone for Advice
Attempting to gather up the necessary forms and researching what information is necessary for a successful claim can be a daunting task. This is especially true for busy family members who are employed full time and are trying to help a loved one obtain a VA benefit.
Busy care providers might find it easier to pay for information for filling out and presenting a claim. Many advisers will refer their clients to a capable veterans service organization that will file the claim for free.
Using a Consultant When Submitting Claims Applications for Nursing Homes
We discussed in a previous section that a Pension claim for a potential beneficiary in a nursing home is a straightforward task that by itself, would not require the help of a consultant. Unfortunately, the pension benefit is usually not sufficient to cover the difference between the beneficiary’s income and the cost of the nursing home. In many cases, the veteran or the surviving spouse in the nursing home is forced to apply for Medicaid.
Dovetailing Medicaid income with the Pension benefit could work in some cases but in other cases Medicaid and Pension don’t mix. In those cases where it fits, Pension can be a valuable additional resource for a nursing home patient. When trying to make Medicaid and Pension work together, a potential claimant should always seek out the advice of a knowledgeable consultant. Certain legal strategies relating to Medicaid eligibility could be applied in these special cases. Advisers, who understand Medicaid rules and VA eligibility, might be able to apply some of these strategies to produce more household income.
Using a Consultant with Applications Where a Single Claimant Will Be Abandoning the Principal Residence
When a single veteran or a single surviving spouse of a veteran leaves his or her principal residence to live in assisted living or in a nursing home, there could be a potential conflict with a Pension benefit award. VA will not count the principal residence against eligibility for Pension income even if it is not being occupied by the veteran or spouse.
On the other hand, the family or the beneficiary may wish to rent out the house or sell it. These activities must be reported to VA and could affect the amount of the Pension income or even disqualify the Pension income.
In these situations it is better to get the ownership of the home out of the name of the single veteran or spouse. There is no penalty from VA to do this but gifting the property will create a five-year look back penalty for Medicaid. If the VA recipient needs to apply for Medicaid within five years of making the gift, Medicaid will refuse to pay for long term care for a certain period of time based on the value of the gift.
A consultant should always be sought out in these cases as there are strategies that can be used to avoid the Medicaid penalty or make it less severe.
Using a Consultant with Applications Where Assets Are Gifted or Converted to Income to Qualify for Pension
VA does allow potential applicants to give away assets or convert those assets to income to remove the asset test that would block a Pension award. There are strategies that can be used to retain income from gifted assets and still have those assets out of the name of the veteran household.
There are also income strategies that must be utilized in case the Pension beneficiary will apply for Medicaid. Finally, all pension applicants must be certain that asset transfers that occur within the five-year look back period for Medicaid, don’t disqualify the Pension beneficiary for Medicaid benefits. When assets are to be gifted or converted to income, a knowledgeable consultant should always be used. Failure to do so could result in dire consequences.
Using a Consultant with Applications That Require Estate and Tax Planning
Gifting of assets many cause tax problems for unwary benefactors. This might include loss of the step-up in value for real estate or conversion of capital gains to ordinary income. Also, outright transfers to members of the family may not be a good idea in certain situations. Charitable gifting should also be considered as a way to create income tax credits and reduce costly capital gains taxes on appreciated real estate.
Tax planning and orderly distribution of assets should be part of the gifting process. This usually requires specific legal documents in order to achieve the desired outcomes. For those contemplating gifting to qualify for pension, a qualified consultant should always be retained.
Using a Consultant with Applications That Involve Business Ownership, Farms, Business and Investment Property and Assets That Are Difficult to Turn into Cash
Disposition of these types of assets is always more difficult than transferring a more liquid estate. It is an absolute necessity for business owners, farmers and those with substantial real estate holdings to consult with someone who can provide reliable advice on transferring these assets to family members, partners or other interested parties. In some cases, non-liquid assets can be retained and still not disqualify for a Pension income. Tax considerations are always paramount with gifting these types of properties.