Citation Nr: 19112706
Decision Date: 02/21/19 Archive Date: 02/21/19
DOCKET NO. 18-38 292
DATE: February 21, 2019
Entitlement to nonservice-connected pension benefits with a special monthly pension based on the need of regular aid and attendance is granted.
FINDINGS OF FACT
1. The Veteran has been in the need of regular aid and attendance since the date of his initial pension claim. 2. The Veteran’s excludable medical expenses exceed his annual income.
3. The Veteran does not retain an ownership interest in or control over assets that are held by the W. J. D. Trust, and its assets are not part of the corpus of his estate.
CONCLUSION OF LAW
The criteria for entitlement to nonservice-connected pension benefits with a special monthly pension based on the need of regular aid and attendance have been met. 38 U.S.C. §§ 1513, 1521, 1522, 5107 (2012); 38 C.F. R. §§ 3.3, 3.23, 3.102, 3.271, 3.272, 3.273, 3.274, 3.275, 3.276 (2016).
REASONS AND BASES FOR FINDING AND CONCLUSION
This matter comes before the Board of Veterans’ Appeals (Board) on appeal from a January 2018 decision of the Department of Veterans Affairs (VA) Pension Management Center in Milwaukee, Wisconsin, that denied the Veteran’s claim of entitlement to nonservice-connected pension benefits.
Pension is payable to veterans of a period of war because of nonservice-connected disability or age. Basic entitlement exists if the veteran: (1) served in the active military, naval or air service for ninety (90) days or more during the period of war; (2) is permanently and totally disabled from nonservice-connected disability not due to his own willful misconduct, or is 65 years of age or older; and (3) meets the specified net worth requirements and does not have an annual income in excess of the applicable maximum annual pension rate. 38 U.S.C. §§ 1513, 1521; 38 C.F.R. §§ 3.3, 3.23, 3.274. Special monthly pension is warranted if a veteran is in need of regular aid and attendance. 38 U.S.C. § 1521(d).
Here, the record establishes the Veteran meets the basic requirements for nonservice-connected pension benefits due to his wartime service and age. The record also establishes his excludable medical expenses exceed his annual income. The Agency of Original Jurisdiction (AOJ) has denied the Veteran’s claim on the basis that his net worth is a bar to entitlement to nonservice-connected pension benefits based on the assets that are held by the W. J. D. Trust.
Initially, the Board notes VA proposed a regulation change in January 2015 signaling its intent “to amend its regulations governing entitlement to VA pension to maintain the integrity of the pension program and to implement recent statutory changes.” Net Worth, Asset Transfers, and Income Exclusions for Needs-Based Benefits, 80 Fed. Reg. 3840-01 (Jan. 23, 2015). VA explained its “proposed regulations would establish new requirements pertaining to the evaluation of net worth and asset transfers for pension purposes and would identify those medical expenses that may be deducted from countable income for VA’s needs-based benefit programs.” Id. The proposed changes included, among other things, a three-year look back window for pre-application asset transfers, to include those made to trusts. Id. However, this regulation change was not finalized until September 2018, with an effective date of October 18, 2018. Net Worth, Asset Transfers, and Income Exclusions for Needs-Based Benefits, 83 Fed. Reg. 47246-01 (Sept. 18, 2018). As a result, VA must apply the regulations in effect at the time of the Veteran’s initial pension claim [hereinafter “prior regulations”].
Under the prior regulations, there is no specific dollar limitation on net worth that bars an otherwise eligible claimant from receiving pension benefits. Entitlement to pension is denied, however, when the corpus of a veteran’s estate is such that, under all circumstances, including consideration of the annual income of the veteran, his spouse, and any cohabitating children, it is reasonable that some part of the corpus of such estates be consumed for the veteran’s maintenance. 38 C.F.R. § 3.274(a). The terms “corpus of estate” and “net worth” are used interchangeably in VA regulations and mean the market value, less mortgages or other encumbrances, of all real and personal property owned by the claimant except the claimant’s dwelling and personal effects. 38 C.F.R. § 3.275(b).
In determining whether some part of an estate should be consumed for maintenance, consideration will be given to the amount of the claimant’s income together with the following: whether the property can be readily converted into cash at no substantial sacrifice; life expectancy; number of dependents who meet the definition of a member of the family; and potential rate of depletion, including unusual medical expenses for the claimant and the claimant’s dependents. 38 C.F.R. § 3.275(d). A gift of property to someone other than a relative residing in the grantor’s household will not be recognized as reducing the corpus of the grantor’s estate unless it is clear that the grantor has relinquished all rights of ownership, including the right of control of the property. 38 C.F.R. § 3.276(b).
The prior regulations do not specifically address the issue of trusts in the context of net worth determinations; however, several VA General Counsel Opinions have addressed questions involving trusts and whether the assets held therein should be considered as income or net worth to a claimant in the context of those regulations. See VAOPGCPREC 33-97, 73-91, 72-90; see also 38 U.S.C. § 7104(c); 38 C.F.R. § 14.507 (indicating VA General Counsel Opinions are binding on the Board).
In July 1990, the VA General Counsel addressed whether trust property should be considered part of a claimant’s countable income and net worth. The VA General Counsel held “the property held in a discretionary trust, and income therefrom, is not countable until it is actually allocated for the claimant’s use, unless the claimant possesses such control over the property that the claimant may direct it to be used for the claimant’s benefit.” In December 1991, the VA General Counsel issued another opinion specifically addressing assets held in a trust and determined that “generally where a veteran places assets into a valid irrevocable trust for the benefit of the veteran’s [family members], with the veteran named as trustee, and where the veteran, in an individual capacity, has retained no right or interest in the property or the income therefrom and cannot exert control over these assets for the veteran’s own benefit, the trust assets would not be counted in determining the veteran's net worth for improved-pension purposes, and trust income would not be considered income of the veteran.” The Board finds these two opinions, when read together, indicate that it was permissible under the prior regulations to transfer assets to a trust for the benefit of others to establish pension eligibility, so long as the claimant does not retain control over the assets for his or her benefit. Thus, the central question in this appeal is whether the Veteran retains an ownership interest in or control over the assets held by the W. J. D. Trust.
The Board finds the Veteran does not does not retain an ownership interest in or control over assets that are held by the W. J. D. Trust. First, the trust was established as an irrevocable non-grantor trust, which required the Veteran to give up his ownership interest in and control of the trust assets and established the trust as a taxable entity. This is clearly stated in Article 1, Section 1.04, of the trust agreement. The only asset that is not subject to the non-grantor provisions is the Veteran’s home, which is excludable from pension net worth determinations. See 38 C.F.R. § 3.275(b)(1). Second, the Veteran is not the trustee under the trust agreement; the Veteran’s daughter is named as trustee.
Third, Article 1, Section 1.04(b), indicates the trustee is not permitted to use the trust income or assets for the Veteran’s benefit, even in a discretionary manner. See VAOPGCPREC 33-97 (discussing discretionary “special needs” provisions in trust agreements). The Board notes it appears the AOJ misinterpreted “supplemental needs” provisions outlined in Article 6 of the trust agreement as relating to the Veteran; however, the plain language of Article 6 indicates the “supplemental needs” provisions relate to the trust beneficiaries. Overall, the trust agreement clearly establishes the trust assets are not available for the Veteran’s maintenance; therefore, the assets should not be considered part of the corpus of his estate.
In sum, the Board finds the basic requirements for nonservice-connected pension benefits have been met based on the Veteran’s wartime service, age, and countable annual income. The assets held by the W. J. D. Trust are not a bar to entitlement to nonservice-connected pension benefits because they are not part of the corpus of the Veteran’s estate. The Board acknowledges VA has recently amended its regulations to prevent pension claimants from being able to transfer assets to trusts to establish pension eligibility, but the amended regulations were not effective at the time of the establishment of the trust in question, the filing of the Veteran’s pension claim, or the AOJ’s January 2018 decision. VA cannot apply these regulations retroactively to the Veteran. As a result, entitlement nonservice-connected pension benefits with a special monthly pension based on the need of regular aid and attendance is warranted, and, to that extent, the Veteran’s appeal is granted.
Veterans Law Judge
Board of Veterans’ Appeals
ATTORNEY FOR THE BOARD L. S. Kyle, Counsel