The VA Look-Back and Net Worth Rules

Since October 18, 2018, the VA has used a clearer set of rules for the pension’s financial test: a single net worth limit, a 36-month look-back for asset transfers, and a penalty period of up to five years for transfers made to qualify. These rules are separate from Medicaid’s, and families who plan for both programs need to understand how they differ. This guide explains the VA rules in plain language.

Figures change periodically. Double-check current amounts before relying on them.

Net worth: assets plus income

The VA adds together:

the assets of the claimant (and spouse, for a veteran); and
the claimant’s (and spouse’s) annual income, after deductions for unreimbursed medical expenses.

If the total is at or below the net worth limit, the claimant passes the financial test (assuming countable income is also below the MAPR). From December 1, 2025, to November 30, 2026, the limit is $163,699. It rises each December 1 with the Social Security cost-of-living adjustment.

What counts as an asset

Generally counted:

checking, savings and money market accounts;
certificates of deposit;
stocks, bonds and mutual funds;
retirement accounts such as IRAs and 401(k)s;
real estate other than the primary residence;
business interests;
the cash value of some life insurance.

Generally not counted:

the primary residence, including the residential lot area (up to about two acres, unless the additional land is not marketable, such as because of zoning). A mortgage on the residence does not reduce countable assets;
a vehicle used for transportation;
household goods and personal effects;
certain payments excluded by law.

A veteran who moves into a nursing home or assisted living for care generally keeps the residence exclusion. If the residence is sold, the proceeds count as an asset unless the VA rules for reinvesting in a new residence apply. See Selling a home while on a VA pension.

How income is figured

The VA counts most income, then deducts unreimbursed medical expenses above 5 percent of the MAPR. Because long-term care costs are often high, many claimants paying for care have little countable income. That income figure is added to assets for the net worth test.

The 36-month look-back

When a claim is filed, the VA looks at the 36 months before the date of the claim for covered asset transfers. A covered asset transfer is one where:

the claimant (or spouse) gave away an asset, or sold it for less than fair market value; and
the transfer reduced net worth; and
the transfer would have caused net worth to exceed the limit if it had not been made.

Transfers to a trust, or the purchase of an annuity or similar product, can be covered transfers if they meet these tests, unless the claimant can show the product is not intended to qualify for pension. Transfers that would not have pushed net worth over the limit do not cause a penalty.

Exceptions

A transfer generally is not penalized if it was:

the result of fraud, misrepresentation or unfair business practice related to the sale of a financial product or service (and the claimant can show this);
to or for a child who is incapable of self-support, placed in a trust for that child;
made before October 18, 2018.

A penalty can also be “cured.” If some or all of the transferred assets are returned to the claimant before the date of the claim, or within 60 days after the date of the VA’s notice of its penalty decision, the VA will recalculate or remove the penalty. The VA must receive proof of the return no later than 90 days after the date of that notice.

The penalty period

If the VA finds a covered transfer, it imposes a penalty period during which no pension is paid. The penalty is calculated by dividing the penalty amount by the monthly penalty rate.

Penalty amount: the amount of the transfer that would have kept net worth over the limit (the lesser of the total transferred, or the amount by which net worth would have exceeded the limit).
Monthly penalty rate: set by the VA and updated each December 1. From December 1, 2025, it is $2,874 a month.
Maximum penalty: five years.

The penalty begins on the first day of the month after the last covered transfer.

Example. A veteran with $150,000 in savings applies in June 2026. Eighteen months earlier, he gave his son $40,000. Without the gift, his net worth would have been $190,000, which is $26,301 over the $163,699 limit. The penalty amount is $26,301 (the lesser of the $40,000 gift and the $26,301 excess). Dividing by $2,874 gives about 9 months. The penalty starts the month after the gift, which means much of it may have already run by the time he applies.

How the VA rules differ from Medicaid

Rule	VA pension	Long-Term Care Medicaid
Asset test	Net worth limit of $163,699 (assets plus income)	Often about $2,000 for a single person; higher in some states
Look-back	36 months	60 months in most states
Penalty start	Month after the transfer	When the person applies, is in care and is otherwise eligible
Penalty divisor	VA monthly penalty rate ($2,874)	State’s average private nursing home cost
Maximum penalty	5 years	No fixed maximum
Home	Excluded (lot up to about two acres)	Often excluded, subject to a home equity limit and intent to return

The biggest difference is the penalty start date. A VA penalty starts the month after the transfer, so by the end of the 36-month look-back, much of it may have run. A Medicaid penalty does not start until the person has applied, is receiving long-term care and is otherwise eligible, so it typically runs when the person is already in a nursing home and has no money to pay. A gift that causes only a short VA penalty can cause a long Medicaid penalty years later. See Penalty period.

Planning for both

Families sometimes move assets to qualify for the VA pension, only to discover that the same transfer causes a Medicaid penalty if a nursing home is needed within five years. Before transferring assets or buying an annuity or trust product:

consider the likelihood of needing Medicaid in the next five years;
understand that some products marketed for VA planning are designed in ways that do not work for Medicaid;
consider whether spending on exempt items (home repairs, a vehicle, prepaid funeral arrangements, medical equipment) achieves the goal without a transfer under either program.

See VA pension vs. Medicaid.

Documenting transfers for the VA

If the VA asks about a transfer, provide:

the date and amount of the transfer and who received it;
the reason for the transfer, with any supporting records (for example, a loan agreement, receipts showing the money was used for the veteran’s care, or a contract);
proof of fair market value if an asset was sold;
if the transfer was returned, proof of the return and the date.

A short, factual written statement signed by the claimant or their representative is usually helpful. As with Medicaid, a well-documented explanation can resolve a question that would otherwise lead to a penalty.

Net worth and medical expenses work together

Because annual income (after medical expenses) is part of net worth, a veteran with high care costs may have very little countable income, which leaves more room for assets under the limit. Conversely, a veteran with high income and few medical expenses has less room. Documenting every recurring medical expense, including assisted living or home care costs when the veteran needs the care, often makes the difference in both the income test and the net worth test.

Getting experienced help

The VA and Medicaid look-back rules are easy to confuse and costly to get wrong. A Certified Medicaid Planner can explain how a proposed step affects Medicaid, and a VA-accredited representative can handle the pension claim. As a rough guide, full planning ranges from about $2,500 to $15,000 or more and hourly help from about $150 to $600.

Key terms

Net worth: assets plus annual countable income, compared with the VA’s limit.
Covered asset transfer: a gift or below-value sale in the 36-month look-back that reduced net worth and would have kept it over the limit.
Penalty amount: the part of the transfer that would have kept net worth over the limit.
Monthly penalty rate: the VA’s divisor for the penalty, $2,874 from December 1, 2025.
Residential lot area: the land around the home that is excluded with it, generally up to about two acres.

Frequently asked questions

Are gifts made more than three years ago a problem for the VA? Generally no. But they may still be within Medicaid’s five-year look-back.

Does buying a home or car count as a transfer? Buying an excluded asset at fair value is generally not a covered transfer, because it is not for less than fair value.

Can paying a family caregiver be a transfer? Payments for care at fair value, ideally under a written agreement, are generally not gifts. Payments for care that is not needed or not provided can be. See Caregiver agreements.

Does the VA look at my children’s assets? No, except to decide whether a child counts as a dependent.

Last updated for 2026. General information only, not legal or financial advice. Medicaid Answers is a free educational resource published by Medicaid Answers Foundation.