Citation Nr: 1550108 Decision Date: 11/30/15 Archive Date: 12/04/15 DOCKET NO. 14-18 748 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office and Insurance Center in Philadelphia, Pennsylvania THE ISSUE Whether the Veteran's nonservice-connected pension was terminated correctly on January 1, 2013. REPRESENTATION Veteran represented by: Dionysios C. Pappas, Attorney-at-Law WITNESS AT HEARING ON APPEAL R.L.M., Fiduciary ATTORNEY FOR THE BOARD V. Chiappetta, Counsel INTRODUCTION The Veteran served on active duty from December 1968 to December 1970. This matter is before the Board of Veterans' Appeals (the Board) on appeal of a November 2013 letter decision issued by the Department of Veterans Affairs (VA) Regional Office (RO) and Insurance Center in Philadelphia, PA. The Veteran was found incompetent to handle disbursement of funds in a January 2012 rating decision. As such, a fiduciary was appointed. This fiduciary, his sister, accordingly has authority to file claims and appeal unfavorable determinations made with respect to them on the Veteran's behalf. To the extent the Board refers to arguments made by the Veteran in its decision below, it should be understood that such are made through the Veteran's fiduciary or attorney. The Veteran's fiduciary testified before the undersigned at videoconference hearing in October 2014. A transcript of that hearing is associated with the Veteran's file. FINDINGS OF FACT 1. As of May 31, 2012, the corpus of the Veteran's estate consisted of at least $163,093.81. 2. The Veteran's yearly expenses exceed his yearly income by $3,156.00 per year. 3. It is estimated that at the rate of income and expenses identified, the Veteran's net worth, as it existed on May 31, 2012, would be exhausted well after his life expectancy. 4. It was reasonable for the Veteran to consume part of his total net worth following the sale of his home, which exceeded $160,000, for maintenance. CONCLUSION OF LAW Effective January 1, 2013, the corpus of the Veteran's estate precludes the payment of nonservice-connected pension benefits. 38 U.S.C.A. §§ 1503, 1513, 1521, 1522, 1541, 1542, 5103, 5112, 5103A (West 2014); 38 C.F.R. §§ 3.3, 3.23, 3.271, 3.272, 3.274, 3.275 (2015). REASONS AND BASES FOR FINDINGS AND CONCLUSION Duties to notify and assist The Veterans Claims Assistance Act of 2000 (VCAA) describes VA's duty to notify and assist claimants in substantiating a claim for VA benefits. 38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5107, 5126 (West 2014); Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012, Pub. L. No. 112-154, §§ 504, 505, 126 Stat. 1165, 1191-93; 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326(a) (2015). Concerning VA's duty to notify, the Board finds that a letter dated in September 2013 satisfied the notice requirements of the VCAA. The letter advised the Veteran and his fiduciary of how VA determines entitlement to nonservice-connected pension benefits. With regard to VA's duty to assist, the VA has obtained relevant financial documents from the Veteran's fiduciary and attorney, and has issued a Corpus of Estate Determination (VA Form 21-5427) prior to terminating pension benefits in November 2013. The Veteran and his fiduciary have not identified any outstanding records for VA to obtain. In Bryant v. Shinseki, 23 Vet. App. 488 (2010), the Court held that 38 C.F.R. § 3.103(c)(2) requires that the Veterans Law Judge who conducts a hearing fulfill two duties to comply with the above regulation. These duties consist of (1) the duty to fully explain the issues and (2) the duty to suggest the submission of evidence that may have been overlooked. The undersigned set forth the issue to be discussed at the hearing, and sought to identify any pertinent evidence not currently associated with the claims file that might have been overlooked or was outstanding that might substantiate the claim. The Veteran has not asserted that VA failed to comply with 38 C.F.R. § 3.103(c)(2), nor has he identified any prejudice in the conduct of the Board hearing. As such, the Board finds that consistent with Bryant, there is compliance with the duties set forth in 38 C.F.R. § 3.103(c)(2) and that the Board can adjudicate the Veteran's claim based on the current record. In short, the Board has carefully considered the provisions of the VCAA, in light of the record on appeal and, for the reasons expressed above, finds that the development of the Veteran's claim has been consistent with said provisions. Accordingly, the Board will address the issue on appeal below. Analysis Improved (nonservice-connected) pension is a benefit payable by VA to a veteran of a period of war who is permanently and totally disabled from nonservice-connected disability not the result of the veteran's willful misconduct. 38 U.S.C.A. § 1521(a) (West 2014). Basic entitlement exists, in relevant part, if the veteran meets the net worth requirements under § 3.274 and does not have an annual income in excess of the applicable maximum annual pension rate specified in § 3.23. 38 U.S.C.A. §§ 1513, 1521, 1522; 38 C.F.R. § 3.3(a)(3)(v). The issue on appeal in the case at hand centers on whether the Veteran's net worth following the sale of his house in May 2012 was excessive for purposes of qualifying for VA nonservice-connected pension benefits, warranting termination of those benefits effective January 1, 2013. Pension shall be denied or discontinued when the corpus of the estate of the veteran, and of the veteran's spouse, are such that under all the circumstances, including consideration of the annual income of the veteran, the veteran's spouse, and the veteran's children, it is reasonable that some part of the corpus of such estates be consumed for the veteran's maintenance. 38 U.S.C.A. § 1522(a); 38 C.F.R. § 3.274(a). The terms "corpus of estate" and "net worth" mean the market value, less mortgages or other encumbrances, of all real and personal property owned by the claimant, except the claimant's dwelling (single family unit), including a reasonable lot area, and personal effects suitable to and consistent with the claimant's reasonable mode of life. 38 C.F.R. § 3.275(b). In determining whether the estate should have been used for a veteran's maintenance, factors to be considered include: whether property can be readily converted into cash at no substantial sacrifice; life expectancy; number of dependents; and potential rate of depletion, including unusual medical expenses. 38 C.F.R. § 3.275(d). The Board notes that VA's pension program is intended to give beneficiaries a minimum level of financial security; it is not intended to protect substantial assets or build up the beneficiary's estate for the benefit of heirs. Pension entitlement is based on need and that need does not exist if a claimant's estate is of such size that he/she could use it for living expenses. The basic issue in evaluating net worth is to determine whether or not the claimant's financial resources are sufficient to meet the claimant's basic needs without assistance from VA. Thus, if net worth is a factor for the benefit claimed, VA should consider if it is reasonable, under all the circumstances, for the claimant to consume some of his/her estate for maintenance. If a claimant's assets are sufficiently large that the claimant could live off of these assets for a reasonable period of time, pension should be denied for excessive net worth. If net worth is later depleted, the claimant can reopen the pension claim. There are no precise guidelines, however, which establish what size estate would preclude the payment of pension. What constitutes excessive net worth is a question of fact for resolution after considering the facts and circumstances in each case. See VA Adjudication Procedure Manual, M21-1, Part V, Subpart iii, Chapter 1, Section J, Topic 1, Blocks g, h (Apr. 22, 2015); see also M21-1, Part V, Subpart iii, Chapter 1, Section J, Topic 4, Block a. The facts in this case are not in dispute. The RO awarded the Veteran nonservice-connected pension in a January 2012 rating decision. He was informed in a January 15, 2012 letter, that any increases to his income (e.g., earnings, Social Security benefits), or his net worth (e.g., bank accounts, investments, real estate) should be reported right away. In a letter dated in August 2012, the Veteran's attorney informed VA that the Veteran had sold his house for $163,093.81 on May 31, 2012. He informed VA that the Veteran placed $95,000 of the sale in an irrevocable trust, and that he placed the remainder ($68,093.81) in a bank account that is jointly owned by the Veteran and two of his siblings. He asserted that the Veteran's net worth calculation should not include consideration of the money placed in the trust, and should only include 1/3 the quantity in the joint bank account, based on proportional ownership. In November 2013, VA notified the Veteran that his net worth became too high for purposes of pension benefits based on the sale of his house in May 2012, and terminated entitlement as of January 1, 2013. The Veteran disagreed and perfected this appeal. Initially, the Board notes that the proceeds from the sale of the Veteran's house in May 2012 are not countable income, as the evidence does not show that the property was sold in the course of operating a business or was an installment sale. 38 U.S.C.A. § 1503(a)(6); 38 C.F.R. § 3.272(e). Instead, the sale is viewed as a conversion of assets. See M21-1, Part V, Subpart iii, Chapter 1, Section I, Topic 9, Block a. Thus, of concern is the Veteran's net worth in light of the May 2012 house sale. As noted above, in calculating net worth, the value of a claimant's single-family dwelling is not included in the value. The primary residence of a claimant is not countable as net worth for pension when the claimant is not residing in the home due to the beneficiary residing in a nursing home, assisted living, or independent living facility, as the Veteran is in this case. See M21-1, Part V, Subpart iii, Chapter 1, Section J, Topic 5, Block c. However, upon sale of the residence, the asset converts, and become part of the Veteran's net worth calculation. The Veteran's attorney agrees. See the October 2014 hearing transcript, at 6 (indicating that sale of the Veteran's principle residence represents $163,000 of net worth). The Veteran, through his fiduciary and attorney, asserts that the transfer of this $163,000 in part into an irrevocable trust, and in part into a joint bank account shortly after the sale should take all but approximately $22,000 out of the Veteran's net worth calculation. Indeed, VA calculated the Veteran's net worth to be $156.722.79, which included what remained in the trust as of July 2012, as well as the amounts of money in the Veteran's single and joint bank accounts. See an October 21, 2013 Corpus of Estate Determination (VA Form 21-5427). The Board notes that the Veteran has not called into question any calculation made by VA other than its assessment of the Veteran's total net worth following sale of the Veteran's house. As such, VA's calculations of monthly income ($3521.51) and monthly expenses ($3,784.58) are deemed valid for the purposes of this decision. The Board finds that, irrespective of what the Veteran and his fiduciary chose to do with the money obtained from the sale of his house in May 2012, his net worth increased by $163,093.81 on the date of the sale. That money could have been reasonably consumed in whole or in part for the Veteran's maintenance. The fact that the Veteran subsequently transferred those assets into a trust and a joint bank account does not negate the fact that for purposes of pension the Veteran's assets increased by the amount of the sale of the home on May 31, 2012. VA has calculated, and the Veteran has not challenged, that the Veteran's yearly expenses exceed his yearly income by $3,156.00 per year ((monthly income - monthly expenses) x 12) VA also indicated on its October 2013 Corpus of Estate Determination that the Veteran had a life expectancy of 17.1 years. See M21-1, Part V, Subpart iii, Chapter 1, Section J, Topic 6, Block a. By dividing the Veteran's net worth (calculated at the time to be $156.722.79) by the total yearly debt ($3,156.00), the corpus of the Veteran's estate is projected to exceed his lifespan by 32.5 years. As indicated above, size and liquidity of net worth, family income, life expectancy, and the potential rate of depletion are considered in a net worth determination. At the time of sale, the Veteran's assets were most liquid, and could have reasonably been allotted for ongoing care of the Veteran. Indeed, at his rate of spending, the projected rate of depletion of the Veteran's net worth exceeds his life expectancy by 32.5 years. The Board accordingly finds that termination of the Veteran's pension award based on excess net worth following the sale of his home, effective January 1, 2013 was appropriate. See 38 U.S.C.A. § 5112(b)(4)(B) (indicating that the effective date of a reduction or discontinuance of pension based by reasons of a change in the corpus of estate shall be the last day of the calendar year in which the change occurred). The Board recognizes that if it is determined that net worth is no longer excessive, VA may resume an award that was discontinued because of excessive net worth from the date that net worth ceased to be excessive. See M21-1, Part V, Subpart iii, Chapter 1, Section J, Topic 2, Block e. In this case however, even if the Board were to concede that all money ($95,000) placed in the irrevocable trust in June 2012 should not be counted in the Veteran's net worth following the sale of his house, the Board finds that all the remaining sales money placed in the joint bank account (and not just 1/3 of it) must be included in the Veteran's net worth calculation, and that such amount (over $60,000 at the time of calculation) would in and of itself constitute excess net worth warranting termination of the Veteran's pension benefit. As noted above, the Veteran's attorney indicated that $68,093.81 of the sale was placed in a joint bank account with two of his siblings. The Veteran's attorney points to 38 C.F.R. § 3.275(c), and in turn § 3.271(d) and former M21-1MR, Part V, Subpart iii, Chapter 1, Section I, Topic 65, Block c (currently found at M21-1, Part V, Subpart iii, Chapter 1, Section I, Topic 10, Block c) for the proposition that if a claimant transfers a partial interest in property to a person who is outside the claimant's household, the claimant's net worth and income are reduced in proportion to the percentage of the asset transferred. Importantly however, by simply placing his own money in a joint bank account, the Veteran has not transferred 2/3 of the assets deposited such that it is clear that he has relinquished all rights of ownership over those 2/3, including the right to take control of the property, as is required to be recognized as reducing the corpus of an estate by transfer under 38 C.F.R. § 3.276(b). Moreover, 38 C.F.R. § 3.271(d) pertains to income from jointly owned property, and not net worth. While it is true that if property is owned jointly, income derived from the property of the various owners shall be determined in proportion to the shares of the ownership of the property, nothing in 38 C.F.R. § 3.271(d) or in the M21 suggests that money itself placed in a joint bank account, which is accessible in its entirety to all account owners equally, must be proportioned out for purposes of calculating net worth. Assuming net worth of only $68,093.81-which constitutes only the money from the sale of the Veteran's house deposited in a joint bank account with two siblings-it is clear that the Veteran's net worth following sale of the Veteran's house in May 2012 would still exceed his life expectancy. The assets are liquid, and are accessible in their entirety to the Veteran. As such, the Board finds that even if the all assets transferred to the irrevocable trust reduced the Veteran's net worth by $95,000, his joint bank account assets following sale of his house in May 2012 include financial resources sufficient to meet the claimant's basic needs without assistance from VA. In sum, the Board finds that termination of the Veteran's pension benefits as of January 1, 2013 based on an increased net worth occurring in May 2012 was proper, as the increase created an excess that could have reasonably been consumed for the Veteran's maintenance. The Board emphasizes that, if the Veteran's net worth becomes significantly depleted in the future, or there is a substantial increase in necessary out-of-pocket medical expenses, the Veteran is encouraged to again file a claim for pension benefits and submit the appropriate financial documentation in support of that claim. ORDER The termination of the Veteran's nonservice-connected VA disability pension benefits effective January 1, 2013, based on excessive net worth, was proper. ____________________________________________ Nathan Kroes Acting Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs