8.7. Net Worth requirement for Non-Service Connected Pension
Net Worth requirement for Non-Service Connected Pension
The other financial consideration for pension is "net worth." "Net Worth" limitations are based on the net worth of a Veteran. The test is whether or not the Veteran's "net worth" is able to provide adequate maintenance of the Veteran.
"Net worth" determination is also sometimes referred to as the "needs test". "Net worth or Needs test" is determined on a case-by-case basis. The VA uses the Veteran's and the Spouse's Social Security numbers to verify income and net worth information from all government sources. The VA's main source for financial information on Veterans is the IRS Income Tax Return(s).
The VA defines "net worth" or "corpus of estate" as the market value of the Veteran's home minus the mortgages or other legal liabilities on the property or personal property owned by the Veteran and/or Spouse.
The Veteran's single-family dwelling and reasonable personal effects are excluded. Unsecured debts are not a factor in determining VA "net worth".
We’ve recently changed the way we assess net worth to make the pension entitlement rules more clear. Net worth is the total of your or your beneficiary’s assets and annual income. Your net worth also includes the net worth of your spouse. You should report all of your net worth. The net worth limit to qualify for a Veterans Pension as of December 1, 2020, is $130,773.
Note: In the future, the net worth limit will increase by the same percentage as Social Security cost-of-living increases. We’ll update the limit here when there’s an increase.
When we receive a pension claim, we review the terms and conditions of any assets the Veteran may have transferred in the 3 years before filing the claim.
If you transfer assets for less than fair market value during the look-back period, and those assets would have pushed your net worth above the limit for a VA pension, you may be subject to a penalty period of up to 5 years. You won’t be eligible for pension benefits during this time.
A penalty period is a length of time when a Veteran isn’t eligible for pension benefits because they transferred assets for less than fair market value during the look-back period. We won’t pay pension benefits during a penalty period. The penalty period rate is $2,295.
Note: This new policy took effect on October 18, 2018. If you filed your claim before this date, the look-back period doesn’t apply. (A look-back period never includes a date before October 18, 2018.)
It is to the advantage of the Veteran to be prepared to document the market value of their home by submitting to the VA either: a real estate broker statement, appraisal, or bank loan officer statement. The Veterans should also be able to document their mortgage balance and any encumbrances on the property.
The following example will illustrate how the VA determines "net worth."
- The Veteran owns a home with a market value of $200,000. The mortgage on the property is $150,000 and there is a $5,000 lien on the property.
- The Veteran's personal effects values are: Clothing $2,000, car worth $10,000, furniture $2,000 and other belongings $800.
- The VA reduces the Real Property value to $45,000 ($200,000 market value reduced by the outstanding mortgage balance of $150,000 and the $5,000 property lien).
- The values of the personal effects are excluded.
- Thus, the Veteran's net worth is $45,000 (Real Property Value) for this illustration.
The VA is known not to deny "net worth" under $80,000. If the Veterans "net worth" is over $80,000, due to the high cost of living where the Veteran resides, the Veteran and/or Spouse should explain:
why their claim "should be approved by the VA" despite a net worth over $80,000
They should also detail the cost of living for the area,
They should document that if their net-worth assets were liquidated, given the area cost of living, the liquidated resources would be rapidly exhausted and the proceeds of the liquidated assets would be unable to sustain the Veteran for any period of time.