BILL ANALYSIS Ó
SENATE COMMITTEE ON VETERANS AFFAIRS
LOU CORREA, CHAIRMAN
Bill No: SB 180
Author: Corbett
Version: As Introduced
Hearing Date: April 12, 2011
Fiscal: No
Consultant: Donald E. Wilson
SUBJECT OF BILL
Consumer transactions and veterans' assets
PROPOSED LAW
1. Prohibit the charging of unreasonable fees for
assisting veterans in qualifying for federal pension
benefit program.
2. According to the author, "SB 180 is an important senior
consumer bill that protects both the interest of seniors
and the state."
EXISTING LAW AND BACKGROUND
1. The United States Department of Veterans Affairs
(USDVA) offers an "Aid and Attendance Program" to help
low-income veterans with such things as medical supplies
and in-home healthcare.
2. The Aid and Attendance Program is needs based and
determined by both assets and income.
3. A subset of "financial advisers" has started preying on
veterans with promises of attaining financial federal
help in a veteran's old age.
4. Current federal law prevents anyone from charging a fee
to help a veteran apply for benefits.
5. There is an exception to the rule of charging veterans
a fee if the fee is associated with an appeal before the
Board of Veterans' Appeals.
6. Apart from veteran specific issues, California State
Law prohibits charging an unreasonable fee for assisting
with public social services -Civil Code 1770 (a) (24).
7. The maximum benefit allowed for a veteran in the
program is $1,644. If a veteran presently has an income
of $300 per month, then the benefit would pay out $1,344
per month. If a veteran is already making or receiving
$1,644 or more per month then there is no benefit.
COMMENT
1. The group of financial advisors now preying on aged
veterans gets around the law prohibiting charging for help
with veterans' benefits by taking advantage of veterans
before the process of filing with USDVA.
2. Financial predators may charge $10,000 plus to hide the
veteran's assets to qualify him or her for the poverty
benefit of $1,644 per month in addition to charging large
percentage penalties for a veteran to ever access assets.
E.g. - An 82 year old veteran has $500,000, which
disqualifies the veteran for the Aid and Assistance
Benefit. A financial predator then charges up to $10,000
fee for service for his or her knowledge about how to move
assets or "protect" to qualify for the benefit. The
predator then may recommend a trust or other financial
arrangement.
The veteran then spends a few thousand dollars for a lawyer
to draft an irrevocable trust. Once the trust is filed,
the predator returns to sell a 20-year annuity to the
veteran and will waive the advice fee with an annuity
purchase. The predator now makes 10%-15% on the movement
of the assets. So for a few days' work the veteran has now
paid between $50,000 and $75,000. Since the veteran no
longer has access to the assets in the trust or annuity, he
or she can now file with VA for the Aid and Attendance
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benefit.
So over a three-year time period with minimal work an
unscrupulous "advisor" can realistically make $75,000 while
defrauding the American taxpayer.
As a kicker, if the veteran dies at the age of 85, the
inheritors cannot access the money in the annuity, which
does not mature for another 17 years unless they want to
pay a surrender penalty that may be 10-20%.
3. Committee staff believes the intent of the author's
bill would be strengthened with an amendment that specifies
that public social services includes "activities and
functions administered or supervised" by the California
Department of Veterans Affairs (CDVA). California is in
the midst of completing a veterans home system that will
have eight homes, which also can use needs-based as a
criteria for entry into the home. This bill presently
specifies facilities of USDVA.
SUPPORT
California Advocates for Nursing Home Reform (Sponsor)
(No opposition has been received)
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