The Dangers Of Using Annuities and Trusts To Gain Pension Eligibility | Florida VA Lawyer Explains

Many veterans receive advice from attorneys or financial advisors suggesting they can buy an annuity or put their estate in an irrevocable trust to quickly qualify for VA benefits. Attorney Kellen Bryant warns that this outdated advice can be dangerous and costly for veterans seeking pension eligibility.

The rules have dramatically changed, and following old strategies can result in penalties rather than benefits.

The Major Rule Change: October 2018

Attorney and advisor techniques and strategies for becoming eligible for VA benefits vastly changed since October 2018. This represents a critical turning point that many professionals haven’t fully adjusted to in their advice.

What Used to Work

Prior to October 2018, attorneys and financial advisors routinely recommended:

• Immediate single premium annuities: Quick purchases to reduce countable assets
• Other types of annuities: Various annuity products for asset reduction
• Irrevocable trusts: Asset protection from both VA benefit creditors and Medicaid after five years

These strategies were legitimate and effective under the old rules, which is why many advisors continue to suggest them.

Why This Advice No Longer Works

The fundamental problem is that this advice does not hold true anymore. The VA has implemented new rules that specifically target these previously common strategies.

Current Restrictions Under New Law

Severe Limitations on Annuities

Currently, the use of annuities and annuitization of existing annuities is severely limited by the new law. Veterans can no longer simply purchase an annuity and expect immediate VA benefit eligibility.

The restrictions include:

• Limits on new annuity purchases
• Restrictions on converting existing assets to annuities
• Scrutiny of annuity terms and conditions
• Penalties for non-compliant annuity strategies

The Three-Year Look-Back Period

Perhaps most importantly, the VA penalizes veterans who have purchased annuities or transferred assets to irrevocable trusts within the three-year look-back period.

This means:

• Any annuity purchase within three years of applying can cause benefit denial
• Irrevocable trust transfers within three years trigger penalties
• Veterans may face waiting periods before becoming eligible
• Previously acceptable strategies now result in disqualification

The New Planning Timeline

Three-Year Pre-Planning Requirement

Under current rules, attorneys and others providing advice about VA benefits and irrevocable trusts and annuities should be doing so from the perspective of pre-planning for an application for three years or more.

This fundamental shift means:

• Long-term planning focus: Strategies must be implemented years before benefit need
• No immediate solutions: Quick fixes are no longer available
• Forward-thinking approach: Planning must anticipate future care needs
• Patience required: Benefits may not be available immediately after planning

Not for Immediate Planning

The new rules make it clear that annuities and irrevocable trusts are not forms of immediate planning for VA benefits. Veterans who need benefits soon cannot rely on these strategies.

Warning Signs of Outdated Advice

Red Flags to Watch For

Be very careful and aware of advice regarding the purchase of annuities or irrevocable trusts, especially if you encounter:

• Immediate benefit promises: Claims that annuities or trusts will quickly qualify you for VA benefits
• Pressure for quick decisions: Advisors pushing for immediate annuity purchases
• Outdated information: References to pre-2018 rules and strategies
• Simplified explanations: Lack of detailed discussion about current VA rules
• Commission motivation: Focus on product sales rather than comprehensive planning

The Need for Extended Discussion

Attorney Bryant emphasizes that advice regarding annuities or irrevocable trusts requires an extended explanation and discussion about how the trust will affect current and future eligibility for VA benefits.

Proper advice should include:

Comprehensive Impact Analysis

• How the strategy affects current VA benefit eligibility
• Impact on future benefit applications
• Interaction with other government benefits
• Tax implications of the proposed strategy
• Long-term consequences for the veteran and family

Alternative Strategy Discussion

• Other methods for achieving planning goals
• Comparison of different approaches
• Timeline considerations for various strategies
• Risk assessment of proposed actions

Protecting Yourself from Bad Advice

Questions to Ask Advisors

Before accepting advice about annuities or trusts for VA planning, ask:

• Are you familiar with the October 2018 VA rule changes?
• How will this strategy be affected by the three-year look-back period?
• What are the penalties if this approach doesn’t work?
• Can you provide detailed written information about current VA rules?
• What are my alternatives to this approach?

Seeking Current Expertise

Work with professionals who:

• Stay current with VA benefit rule changes
• Understand the 2018 regulatory updates
• Focus on long-term planning strategies
• Provide comprehensive explanations of risks and benefits
• Don’t pressure quick decisions on complex strategies

The Bottom Line

The landscape of VA benefit planning has fundamentally changed. What worked before October 2018 may now result in benefit denials and penalties. Veterans need current, accurate advice that acknowledges these changes and focuses on compliant, long-term planning strategies.

Get Updated VA Benefits Guidance

Don’t fall victim to outdated advice that could jeopardize your VA benefits. Work with attorneys who understand current VA rules and can provide the extended discussion and comprehensive planning that today’s regulations require. Your VA benefits are too important to risk on strategies that may no longer work.