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Sell The Home

What to do before you sell the home?

Read this article carefully before you sell the veteran’s or surviving spouse’s primary residence. Selling or transferring the home without the proper advice could cost your family over $80,000 in lost Aid and Attendance benefits or even over $100,000 in capital gains tax.

The Problem

The VA has a net worth limitation of $127,061. If assets plus income are $127,061 or less, then your net worth is low enough to qualify for Aid and Attendance pension benefits.

Importantly, the VA considers the home (i.e. the primary residence) to be an exempt asset. The value of the home is not considered when determining if net worth is more than $127,061. So, if the veteran or surviving spouse has $50,000 in a bank account and owns a home worth $200,000, their net worth is less than the VA’s net worth limitation.

However, if the claimant sells the primary residence, the money from the sale is not an exempt asset. It is now money in a bank account and is part of the net worth calculation. The veteran that had $50,000 in a bank account and owned a $200,000 home, now has $250,000 in a bank account after the home sells.

The Veteran or Surviving Spouse now has excessive net worth and they are no longer eligible for Aid and Attendance pension.

It may take years for the claimant to spend-down to $127,061. Over this time, they will lose tens of thousands of dollars in VA benefits.

What is the solution?

Even though the VA has a 36 month look back period, the VA allows claimants to transfer their primary residence without incurring a penalty period. Before selling their house, a claimant can transfer the home into an irrevocable trust without the VA issuing a penalty period.

What is the benefit of transferring the house before it is sold?

If the home is transferred before it’s sold, the VA will not count the money from the sale of the home as part of the net worth calculation. So long as the veteran or surviving spouse does not have direct access to the money from the home sale, VA regulations provide that the VA cannot count the money as part of their net worth.

This planning strategy means the claimant won’t lose the VA benefit and can start or continue to receive monthly Aid and Attendance payments.

What should you do?

We recommend speaking with one of our trusted attorney partners before you sell your home. The decision to sell your home before applying for VA benefits or while receiving VA benefits is too important to make without appropriate guidance. Speaking with a professional about transferring the primary residence, if such a strategy is appropriate, will give your family peace of mind.

Our partners offer an initial no-cost consultation to Eazy-App members.