Differences between VA Pension and VA Compensation
If you have assets including businesses, real estate, savings, and investments, and want to create an estate plan that will protect them and their families, our team can help. If you are a veteran, you may be interested in exploring a VA Pension or VA compensation as part of your estate plan. It is important to understand the pros and cons of a VA Pension versus utilizing VA Compensation and what the best choice is for part of your estate plan.
What is a VA Pension?
Some wartime veterans and their survivors are eligible for a VA Pension.
Requirements for Eligibility
You must be at least 65 years old, or have suffered a permanent and total disability, or are a patient in a nursing home for long-term care because of your disability, or you are receiving Social Security Disability Insurance or Supplemental Security Income.
You may not have been dishonorably discharged and your annual family income must meet Congressionally mandated limits.
Your service must meet certain criteria. Your service must have started on active duty before September 8, 1980, and you served at least 90 days on active duty with at least 1 day during wartime, or you started on active duty as an enlisted person after September 7, 1980, and served at least 24 months or the full period for which you were called or ordered to active duty (with some exceptions) with at least 1 day during wartime, or you were an officer and started on active duty after October 16, 1981, and you hadn't previously served on active duty for at least 24 months. Wartime periods include during the Mexican Border period from May 9, 1916, to April 5, 1917, World War I from April 6, 1917, to November 11, 1918, World War II from December 7, 1941, to December 31, 1946, the Korean War from June 27, 1950, to January 31, 1955, Vietnam War era from February 28, 1961, to May 7, 1975, for Veterans who served in the Republic of Vietnam during that period and from August 5, 1964, to May 7, 1975, for Veterans who served outside the Republic of Vietnam, and during the Gulf War from August 2, 1990, through a future date to be set by law or presidential proclamation.
Determining Countable Income and Maximum Annual Pension Rate (MAPR)
You should discuss with a knowledgeable attorney how to calculate your "countable income" and Maximum Annual Pension Rate. From December 1, 2020, to November 30, 2021, the net worth limit to be eligible for Veterans Pension benefits is $130,773. The government defines your countable income as to how much you earn and your Maximum Annual Pension Rate is the maximum amount of pension payable.
What is VA Compensation?
VA Compensation is a form of disability compensation that is paid to Veterans with disabilities from active military service or for diseases or injuries that were incurred or aggravated during active military service. Disability compensation is tax-free.
Forms of VA Compensation
There are a few forms of VA Compensation including Dependency and Indemnity Compensation (DIC) and Special Monthly Compensation (SMC). Both are tax-free monetary benefits.
Dependency and Indemnity Compensation is typically payable to a surviving spouse, child, or parent of a veteran who died on active duty, training for active duty, or death as a result of a service-related disability.
Special Monthly Compensation (SMC) paid to Veterans, their spouses, surviving spouses, and parents. This compensation is paid at a higher rate due to the circumstances including needing aid from an injury. If a spouse or surviving spouse receives this benefit is based on the need for aid.
VA compensation can also provide additional benefits including housing and insurance consisting of Adapted Housing grants, Service-Disable Veterans' Insurance, and Veterans' Mortgage Life Insurance.
What is the Difference Between a VA Pension and VA Compensation?
VA compensation and a VA pension are unique. The main difference the government explains is that "VA compensation is a benefit paid on the basis of the kind and severity of a disability that happened as a result of your active duty in military service." Conversely, "VA pension is a benefit paid on the basis of a disability that was not a result of active service in the military, or because of age and income."
VA Pension benefits are provided to veterans who have financial needs. However, VA Compensation typically doesn't look at income when providing benefits. For VA compensation, the benefits are provided based on the level of the disability.
Typically, monthly payments for VA Pensions are lower than VA Disability Compensation. This can cause veterans to select VA Disability Compensation over a VA Pension.
What are my next steps?
Every veteran's situation is unique. Keep in mind that you may not have both a VA Pension and VA Disability Compensation at the same time.
Reach out right away to discuss your estate plan and to make sure you are prepared for the future.