Citation Nr: 1706739 Decision Date: 03/06/17 Archive Date: 03/16/17 DOCKET NO. 15-23 806 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Denver, Colorado THE ISSUE Whether the discontinuance of improved death pension benefits effective January 1, 2015, was proper. REPRESENTATION Appellant represented by: The American Legion WITNESSES AT HEARING ON APPEAL Appellant and J.B.G. ATTORNEY FOR THE BOARD K. Gielow, Counsel INTRODUCTION The Veteran, who is deceased, had active service from November 1943 to December 1945. Notably, he was a Prisoner of War (POW) in Germany and, among his awards and decorations, was the recipient of the Combat Infantry Badge (CIB). The Veteran died in September 1993, and the Veteran's surviving spouse, whose appeal is being prosecuted by her legal guardian/son, seeks the reestablishment of death pension benefits. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a September 2014 rating decision by the Department of Veterans Affairs (VA) Regional Office (RO) Pension Management Center in St. Paul, Minnesota. The Board notes that the appellant's guardian testified before the Board at an April 2016 hearing held at the RO. However, the guardian was accompanied at the hearing by J.B.G., Esq., who is not an accredited attorney authorized to represent appellants before VA according to the VA Office of General Counsel (OGC). The appellant was advised of the non-VA-accreditation status of J.B.G., Esq., in an August 2016 letter and was also advised the legal requirements for possibly authorizing one-time of representation by J.B.G., Esq., as an "Individual Providing Representation under Section 14.630." Additionally, the letter outlined the appellant's alternative options for self-representation or to continue representation with the American Legion, the Veterans Service Organization (VSO) representative previously appointed pursuant to a duly authorized March 2013 VA Form 21-22, which remained in effect given the absence of any validly appointed new representative or express revocation of American Legion's representation. Significantly, the August 2016 the letter advised the appellant that "[i]f we haven't heard from you, or from your new representative, within 30 days of the date of this letter, we will assume that you want to continue with your previous VSO representative of American Legion (pursuant to your March 2013 VA Form 21-22) and will resume our review of your appeal." As the appellant did not respond, representation with the American Legion is thus continued. In order to provide all due process to the appellant, the Board also sent a November 2016 letter giving the appellant the right to request another optional Board hearing because the duly appointed accredited representative, the American Legion, had not been present at the April 2016 hearing. The November 2016 notice letter stated, "[i]f you do not respond within 30 days from the date of this letter, the Board will assume that you do not want another hearing and proceed accordingly." The appellant did not respond or otherwise request a new hearing, and the Board will now consider the appeal based on the evidence of record. This appeal has been advanced on the Board's docket pursuant to 38 C.F.R. § 20.900(c) (2016). 38 U.S.C.A. § 7107(a)(2) (West 2014). FINDINGS OF FACT 1. The appellant's countable income for time period from April 2013 to January 1, 2015, did not exceed the Maximum Annual Pension Rates for purposes of entitlement to nonservice-connected death pension. 2. The real property sold in April 2014 (and any proceeds from the sale thereof) was the property of an irrevocable trust made effective in December 2011, and the appellant was not the beneficiary of that trust. 3. For time period from April 2013 to January 1, 2015, the real property sold in April 2014 (and any proceeds from the sale thereof) was not actually owned by the appellant; she did not possess such control over the property that she may direct it to be used for her own benefit; and the funds from that property have not been actually allocated for her use. CONCLUSION OF LAW Discontinuance of the appellant's VA nonservice-connected improved death pension benefits effective January 1, 2015, was improper. 38 U.S.C.A. §§ 1503, 1521 (West 2014); 38 C.F.R. §§ 3.3, 3.23, 3.105, 3.271, 3.272, 3.273, 3.660 (2016). REASONS AND BASES FOR FINDINGS AND CONCLUSION I. Death Pension Laws and Regulations Death pension benefits are generally available for surviving spouses as a result of a veteran's nonservice-connected death. 38 U.S.C.A. § 1541(a). An appellant is entitled to these benefits if the Veteran served for 90 days or more, part of which was during a period of war; or, if the Veteran served during a period of war and was discharged from service due to a service-connected disability or had a disability determined to be service-connected, which would have justified a discharge for disability; and, if the appellant meets specific income and net worth requirements. 38 U.S.C.A. § 1541(a); 38 C.F.R. § 3.3(b)(4). A surviving spouse who meets these requirements will be paid the maximum rate of death pension, reduced by the amount of countable income. 38 U.S.C.A. § 1541; 38 C.F.R. § 3.23. An additional amount is paid to a surviving spouse who is in need of aid and attendance. 38 C.F.R. § 3.23(a)(6). Sections 3.271 to 3.300 of the Code of Federal Regulations "apply to income and estate determinations of entitlement to improved disability and death pension program which became effective January 1, 1979." 38 C.F.R. 3.270(b). Thus, death pension payments are set at a rate prescribed by law and reduced by the surviving spouse's annual income, offset by eligible deductions such as unreimbursed medical expenses. 38 U.S.C. §§ 1521(j), 1541(a); 38 C.F.R. §§ 3.3(b)(4), 3.23 (2011). If a surviving spouse's income, less eligible expenses, is greater than the pension rate, she is not entitled to pension payments. Id. Thus, determination of eligibility for death pension is a mechanical calculation, taking into account a surviving spouse's income and eligible expenses. Payments from any kind from any source are counted as income during the 12-month annualization period in which received, unless specifically excluded under 38 C.F.R. § 3.272. 38 C.F.R. § 3.271(a) (2016). Certain items are not countable for pension purposes, either because they are not considered to be income under 38 C.F.R. 3.271; they are deemed to fall under one of the specific exclusions in 38 C.F.R. 3.272; or the items are excluded by Federal statute, per M21-1, Part V, Subpart iii, 1.I.11. The Maximum Annual Pension Rates (MAPR) are specified in 38 U.S.C.A. §§ 1521 and 1542, as increased from time to time under 38 U.S.C.A. § 5312. The rates of death pension benefits are published in tabular form in Appendix B of Veterans Benefits Administration Manual M21-1 (M21-1), and are given the same force and effect as if published in Title 38 of the Code of Federal Regulations. 38 C.F.R. § 3.2. Under 38 C.F.R. § 3.274(c) (2016), pension payable to a surviving spouse shall be denied or discontinued when the "corpus of the estate" of the surviving spouse is such that under all the circumstances, including consideration of the surviving spouse's income, it is reasonable that some part of the corpus of the surviving spouse's estate be consumed for the surviving spouse's maintenance. 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. See 38 C.F.R. § 3.275(b) (2016); see also VA Form 6, Improved Pension Eligibility Verification Report (including as net worth real property and investments (stocks, bonds, mutual funds, etc.)). Where a reduction or discontinuance of benefits is warranted by reason of information received concerning income, net worth, dependency, or marital or other status, a proposal for the reduction or discontinuance will be prepared setting forth all material facts and reasons. The beneficiary will be notified at his or her latest address of record of the contemplated action and furnished detailed reasons therefor, and will be given 60 days for the presentation of additional evidence to show that the benefits should be continued at their present level. Unless a predetermination hearing is requested and held, if additional evidence is not received within that period, final adverse action will be taken and the award will be reduced or discontinued effective as specified under the provisions of §§ 3.500 through 3.503. 38 C.F.R. § 3.105(h). The effective date of a reduction or discontinuance of pension by reason of change in income shall (except as provided in section 5312 of this title) be the last day of the month in which the change occurred. See 38 U.S.C.A. § 5112(b)(4). Under 38 C.F.R. § 3.500, the effective date of a rating which results in the reduction or discontinuance of an award will be in accordance with the facts found except as provided in §3.105. The effective date of reduction or discontinuance of an award of pension or a payee or dependent will be the earliest of the date in accordance with the facts found. See 38 C.F.R. §§ 3.500(a), 3.502. Where reduction or discontinuance of a running award of improved pension or dependency and indemnity compensation is required because of an increase in income, the reduction or discontinuance shall be made effective the end of the month in which the increase occurred. 38 C.F.R. § 3.660(a)(2). Discontinuance of improved pension shall be effective the first day of the 12-month annualization period for which income (and net worth in an improved pension case) was to be reported or the effective date of the award, whichever is the later date. 38 C.F.R. § 3.661(b)(2). III. Analysis In a June 2013 decision, the appellant was awarded death pension benefits beginning April 1, 2013, at the monthly amount of $1,113.00 for a surviving spouse with no dependents. See June 2013 notification letter and rating decision. That same rating decision determined that the appellant was entitled to aid and attendance benefits. Id. The June 2013 decision considered the appellant's income from Social Security Administration (SSA) benefits in the amount of $1,234.90/month effective December 2012. Id. However, the appellant demonstrated a continuing deduction from April 1, 2013, for medical expenses paid for Medicare premiums and assisted living expenses in the amount of $32,683. Thus, this reduced her countable income to $0.00, thereby establishing entitlement to death pension benefits. Id. However, in April 2014, the agency of original jurisdiction (AOJ) sent a letter to the appellant proposing to stop her pension payments effective January 1, 2015, because "[w]e have received information from Washington County, UT showing that [the appellant] sold her home on April 9, 2014." The Board will first discuss the countable income requirement. Beginning December 1, 2012, the MAPR for a surviving spouse in need of aid and attendance with no dependents was $13,362. See Survivors Pension Rate Tables - Effective 12/1/12, available at http://www.benefits.va.gov/PENSION/rates_survivor_pen12.asp (last visited Feb. 9, 2017). Beginning December 1, 2013, MAPR for a surviving spouse in need of aid and attendance with no dependents was $13,563. See Survivors Pension Rate Tables - Effective 12/1/13, available at http://www.benefits.va.gov/PENSION/rates_survivor_pen13.asp (last visited Feb. 9, 2017). Beginning December 1, 2014, MAPR for a surviving spouse in need of aid and attendance with no dependents was $13,794. See Survivors Pension Rate Tables - Effective 12/1/14, available at http://www.benefits.va.gov/PENSION/rates_survivor_pen14.asp (last visited Feb. 9, 2017). The appellant's income and expenses reported for the period in question prior to January 1, 2015, did not exceed the countable income threshold set by the MARP. Her income/expense reports for this time period did not reveal any major change from those reported at the time of her application for pension in April 2013. See also May 2015 Statement of the Case (acknowledging that the appellant's "monthly expenses exceed her monthly income by over $500.00."). As the AOJ recognized, the sale of the home was not "countable income" because even though it appears that the property was held initially in a revocable trust created in 2006 for the appellant's benefit (see August 2006 Revocable Trust), there is an exclusion to countable income for living/home income derived from the sale of that real or personal property. 38 C.F.R. § 2.272(e); M21-1 Adjudication Procedural Manual (M21-1), V.iii.1.4. Unless a claimant sells property as part of a regular business, "[i]f a claimant enters into an occasional sale of property, do not count the income unless it is an installment sale, even if the amount received exceeds the value of the property." M21-1MR, V.iii.1.I.4.a (emphasis added). Thus, even had the property remained part of the revocable trust throughout the appeal period in question from April 2013 to January 1, 2015-which, as will be explained below, it did not-the sale of the house would not be counted as "income" for purposes of establishing eligibility for death pension. The evidence of record establishes that the real property in question did not belong to the appellant at any time during the annualization periods at issue here. Significantly, a December 2011 Irrevocable Trust Agreement was submitted that converted the property in the 2006 trust (including the real property sold in April 2014) into an irrevocable trust, by which the appellant "shall have not right or ownership or benefit to the principal or interest of the Trust property." Rather, the "Trustee may, in Trustees' sole discretion, make gives or loans from time to time for charitable purposes, religious purposes, or to maintenance or health needs to [the appellant] from the income or principal of the Trust." See December 2011 Irrevocable Trust (with a Schedule A listing the home in question as property of the trust). The beneficiaries of the irrevocable trust are the appellant's "children, per stirpes and in equal shares, and their descendants." Id. Moreover, the family estate planning lawyer submitted statements on behalf of the appellant that the property was not, in fact, ever owned by the appellant during the period pertinent to the appeal. The lawyer stated that the property had been an asset of an irrevocable trust since 2010, to which the appellant had no ownership or rights. See October 2011 letter from J.B.G., Esq. ("The home is being rented to provide coverage of expenses and some income to the Trust. Neither the home nor any income derived therefrom are the property of the [Veteran's surviving spouse]."); June 2016 Board hearing transcript at p. 5 ("the proceeds from the sale of the house [] were held in the irrevocable trust for the benefit of the children"). In a precedent opinion VA's Office of the General Counsel determined: As a general rule, this office has held that property and income therefrom, including that held in trust, will not, in basic pension-entitlement determinations, be countable as belonging to the claimant unless--(1) it is actually owned by the claimant; (2) the claimant possesses such control over the property that the claimant may direct it to be used for the claimant's benefit; or (3) funds have actually been allocated for the claimant's use. O.G.C. Prec. 72-90. This principle, as set out in O.G.C. 72-90, is based on several General Counsel opinions, including Op. G.C. 5-62 (3- 2-62) (income from trust established by veteran for veteran's child, with veteran and spouse as trustees, not attributable to veteran for pension purposes); Op. G.C. 30-57 (10-9-57); and several unpublished opinions, all of which preceded enactment of the improved-pension law. We consider that principle legally sound on the basis that, as explained by the Assistant General Counsel in Undigested Opinion, 2-5-63 (Veteran), only property over which the veteran has some control to use for the veteran's own benefit can reasonably be expected to be consumed for the veteran's maintenance per 38 U.S.C. § 1522." VA Gen. Coun. Prec 73-91. That precedent opinion also stated: The possible impact of section 3.276(b) would have to be considered if the veteran's grandchildren reside in the veteran's household. Trust principles would be controlling in determining whether Section 3.276(b) would require the property to be counted as part of the veteran's estate.... [describing the terms of the trust in the case addressed by the OGC opinion].... In O.G.C. Prec. 72-90, we concluded that the beneficiary of a discretionary trust had only an expectancy in the trust assets and that, despite the existence of an equitable interest, the beneficiary would not be considered to have a property interest in the trust assets for purposes of estate computation under 38 U.S.C. § 5503(b)(1) (formerly § 3203(b)(1)) ($1,500 estate limitation applicable to certain institutionalized veterans). The legal principles upon which that conclusion was reached would be equally applicable in estate valuation under the improved-pension program. Id. (emphasis added). It is clear that the first two elements of the General Counsel's opinion have been met. With regard to the third element, the Board recognizes that the children have been making gifts from their trust to make sure there mother is taken care of but are not required to do so under the terms of the trust. Importantly, despite these arbitrary gifts, there has been no indication that the income or proceeds from the sale of the property were "actually allocated for the claimant's use." To the contrary, the irrevocable trust expressly lists her children as the sole beneficiaries to the trust property, and any gifts subsequently given to the appellant by her children have not been shown to be regular periodic payments exclusively allocated for her actual use. The Board thus concludes that the third element has also been met. In fact, given the income of $2,180/month and expenses of $4,387/month (see Transcript at p. 3) reported at the April 2016 Board hearing , it appears that her income still falls short of her maintenance costs notwithstanding any previous gifts from her children. Being that the appellant has no control over assets of the irrevocable trust or any property interest in the trust assets for purposes of estate computation, the Board finds it unreasonable to expect that the real property sold in April 2014 and any proceeds therefrom would be used for the appellant's maintenance. As such, the proceeds of the April 2014 sale are not considered part of the appellant's net worth/corpus of the estate. To the extent that the May 2015 statement of the case purported that the appellant had a "net worth of $154,790.00 consisting of cash from the sale of your mother's home[,] considered to be liquid and available for her immediate use," the evidence of record discussed above fully disputes this assumption. As explained above, here, the appellant did not merely "transfer [her] assets into an irrevocable trust," as stated in the May 2015 statement of the case-she fully and effectually transferred all rights and ownership in the property that she had under the previous 2006 revocable trust. Under 38 C.F.R. § 3.276(b), which was cited to in the General Counsel Opinion quoted above, "For pension purposes, . . . [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." This regulation suggests that, when rights of ownership and control of the property are clearly relinquished, such as is the case here, the corpus of the estate/net worth should be correspondingly reduced. The Board concludes that the cash received from the sale of a home in April 2014, was not part of the appellant's net worth. Rather, the appellant had fully relinquished all rights/ownership to that property effective December 2011; when the real property was converted to an asset of an irrevocable trust expressly listing her children as beneficiaries. For these reasons, the Board finds that the discontinuance of the appellant's improved death pension benefits effective January 1, 2015, was improper. ORDER The discontinuance of improved death pension benefits effective January 1, 2015, was not proper, restoration of the benefits is granted ____________________________________________ Mark D. Hindin Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs