Citation Nr: 18152231 Decision Date: 11/21/18 Archive Date: 11/21/18 DOCKET NO. 14-41 582 DATE: November 21, 2018 ORDER Whether the creation of an overpayment debt of $56,956.40 was proper, and if so, whether waiver of any portion is warranted is denied. FINDINGS OF FACT 1. The Veteran was receiving additional non service-connected pension benefits based on his reports of no income from January 1, 2009 to August 31, 2013. As per income verification match (IVM) evidence discovered in July 2009 for a time period going back to January 1, 2009 showing that he had significant investment assets and annual dividend and capital gains income, he was no longer eligible for those additional benefits for that time period. 2. The Veteran was at fault in the creation of the debt and the evidence fails to demonstrate undue hardship or detriment from the collection of the debt. CONCLUSIONS OF LAW 1. The creation of the overpayment due to a termination of pension benefits effective January 1, 2009 based upon the revelation of significant investment assets and annual dividend and capital gains income was proper. 38 U.S.C. § 5302; 38 C.F.R. § 1.962. 2. The criteria for waiver of recovery of the $56,956.40 overpayment have not been met. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963, 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Veteran served on active duty from January 1964 to January 1966. This matter comes before the Board of Veterans’ Appeals (Board) on appeal from a March 2014 administrative decision issued by the Department of Veterans Affairs (VA) Regional Office (RO). Legal Criteria Disability pension is paid to a veteran of a period of war who meets statutorily-defined service, net worth, and annual income requirements, and who is permanently and totally disabled from nonservice-connected disability not the result of willful misconduct. 38 U.S.C. §§ 1502, 1503, 1521. The Veteran here was found to be permanently and totally disabled due to nonservice-connected disabilities. The purpose of VA pension benefits is to provide a subsistence income for veterans of a period of war who are totally disabled and who are otherwise unable to maintain a basic, minimal income level. Pension benefits are based upon total family income and the amount of pension benefits is adjusted based upon the number of dependents the veteran supports. 38 U.S.C. §§ 1521, 1522. The rate of pension payable to an entitled payee is based on the amount of countable income received. The maximum annual rate of pension (MAPR) is established by statute every year and is reduced by the veteran's countable annual income. "Annual income" includes the veteran's own annual income, and, where applicable, the annual income of a dependent spouse and, with certain exceptions, the annual incomes of each child of the veteran in his or her custody or to whose support he or she is reasonably contributing. 38 C.F.R. § 3.23 (d)(4). Under 38 C.F.R. § 3.272, the following shall be excluded from countable income for the purpose of determining entitlement to improved pension: welfare; maintenance; VA pension benefits; payments under Chapter 15, including accrued pension benefits; reimbursement for casualty loss; profit from sale of property; joint accounts (accounts in joint accounts in banks and similar institutions acquired by reason of death of the other joint owner); and medical expenses in excess of five percent of the MAPR, which have been paid. Medical insurance premiums, as well as the Medicare deduction, may be applied to reduce countable income. For purposes of calculating the five percent deduction for medical expenses, the MAPR is calculated using the rate for a veteran and any dependents, without regard for special monthly pension (SMP) status. 38 C.F.R. § 3.272 (g)(1)(iii). An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. See 38 U.S.C. § 5302; 38 C.F.R. § 1.962. A claimant has the right to dispute the existence and amount of the debt. 38 U.S.C. § 501; 38 C.F.R. § 1.911 (c). A waiver of indebtedness may be authorized in a case in which collection of the debt would be against equity and good conscience. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963. However, recovery of any payment or collection of indebtedness may not be waived if there exists, in connection with the claim for waiver, an indication of fraud, misrepresentation, or bad faith on the part of the person having an interested in obtaining the waiver. 38 U.S.C. § 5302 (c). “Bad faith” is defined in VA regulations as unfair or deceptive dealing by one who seeks to gain thereby at another’s expense or actions taken with intent to seek an unfair advantage at a loss to the government. 38 C.F.R. § 1.965 (b)(2). The controlling legal criteria provide that the standard of “equity and good conscience” will be applied when the facts and circumstances in a particular case indicate the need for reasonableness and moderation in the exercise of the Government’s rights. 38 C.F.R. § 1.965 (a). The decision reached should not be unduly favorable or adverse to either side. Id. The phrase equity and good conscience means arriving at a fair decision between the obligor and the U.S. Government. Id. In making a determination of equity and good conscience, consideration is given to: (1) fault of the debtor, where actions of the debtor contribute to the creation of debt; (2) balancing of faults between the debtor and VA; (3) undue hardship, whether collection would deprive the debtor or his family of basic necessities; (4) defeat of the purpose, whether withholding benefits or recovery would nullify the objective for which benefits were intended; (5) unjust enrichment, failure to make restitution would result in an unfair gain to the debtor; and (6) changing position to one’s detriment, reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation. See 38 U.S.C. § 5301 (c); 38 C.F.R. § 1.965 (a). Analysis By way of history, in an August 2000 rating decision, the RO granted a permanent and total nonservice-connected disability evaluation for pension purposes. This award was based, in part, on the fact that the Veteran had no reported income. Subsequently, the RO received information via IVM in July 2009 that showed that the Veteran had been in receipt of significant amounts of countable income that had been previously provided for the period beginning in January 1, 2009. In March 2013, the RO received correspondence from the Veteran’s investment management firm and confirmed that, beginning in January 1, 2009, the Veteran’s initial investment portfolio was worth $97,756.16 and that he had received dividends worth $2,508.99 in 2009; $2,794.15 in 2010; and $1,415.25 in 2011. The Veteran was notified in an initial March 2013 letter that these amounts would put the Veteran’s annual net worth above the threshold for receipt of pension benefits and that such benefits were proposed to be terminated from January 1, 2009. In October 2013, the Veteran was informed that he had been overpaid by VA in the amount of $56,956.40. The Veteran disagreed with this decision and perfected an appeal. Based on the record, the Board finds that the creation of the overpayment debt was proper and the criteria for waiver of the overpayment debt have not been met. Initially, the Board notes that Veteran contends that he should not be responsible for the overpayment debt because he asserts that he was notified by VA in its May 2013 letter that his ex-spouse’s income was used in calculating his countable income for the periods from January 1, 2009 to August 31, 2013. At the outset, however, the Board, in reviewing the May 2013 letter along with the Veteran’s claims file, notes that there is no indication that such evidence was utilized at all. Rather, it appears that the sole basis for the Veteran’s increased countable income for the time period in question was found to be due to the revelation of significant investment assets and annual dividend and capital gains income during that time. The Board presumes that the Veteran misunderstood a paragraph in the May 2013 letter that indicated that only if the Veteran was married, then his spouse’s income would be considered. This paragraph was merely generalized boilerplate that is sent out to all veterans and was not construed as applicable to the Veteran’s situation, particularly because it was documented that he was divorced, as he had been throughout the entirety of the period for which he had received his pension benefits. As such, the Board finds that the Veteran’s original contention is without merit and shall not be discussed any further. Nonetheless, the analysis that follows shall focus instead on the revelation of significant investment assets and annual dividend and capital gains income during the period in question, which appears to have served as the actual basis for terminating the Veteran’s pension benefits, thereby creating the debt currently in dispute. Initially, the Board finds that the overpayment debt in the amount of $56,956.40 was properly created. This amount was calculated by assessing the amount of monies paid to the Veteran from January 1, 2009 to August 31, 2013 based upon his claimed entitlement to pension. Once it was determined that the Veteran’s net worth was in excess of the MAPR threshold for the years in question, his benefits for that time period were, thus, terminated and any monies received were found to be an overpayment. As far as the Veteran's countable income, the Board notes that the Veteran was not shown to be married at any time during the period of appeals. However, he had a dependent daughter who turned 18 in March 2009. Thus, the Veteran was paid benefits at the rate including one dependent from January 2009 to March 2009. The MAPR for 2009 with one child was $15,493.00. The MAPR for 2009 with no child or spouse was $11,830.00. The Veteran’s countable income for 2009 was shown to be $2,508.99. Therefore, the Veteran would have met the countable income requirement for 2009. The MAPR for 2010 and 2011 with no child or spouse was $11,830.00. The Veteran’s countable income was shown to be $2,794.15 in 2010 and $1,415.25 in 2011. As these amounts were below the respective MAPR thresholds, the Veteran would have also met the countable income requirements for those periods. There is no indication of countable income for 2012 or 2013, so it is presumed that the Veteran would also have met such requirements for those periods as well. However, as the agency of original jurisdiction did not deny the claim on the grounds of excessive countable income in the first instance, the Board must conclude that countable income is not prohibitive and will proceed to the next step of the inquiry; that is, whether the Veteran's net worth is excessive for VA pension purposes. (see M21-1, Part V, Subpart iii, Chapter 1, Section A.1.f.; and M21-1, Part V, Subpart iii, Chapter 1, Section A.41.b. and c.). In this respect, the Board finds that the Veteran does not meet the criteria. As discussed above, the Veteran was confirmed to have begun the appeals period with a net worth of at least $97,756.16. There is no indication that any monies were withdrawn from that account during the period of appeals. However, dividends were paid out annually that were reinvested, so presumably the Veteran’s net worth has either increased or at least remained the same. The Veteran noted in a September 2009 letter that the investment account was the result of an inheritance, with a stipulation to set it aside for his daughter. VA has specifically acknowledged situations where estate planning preserves assets for heirs (in this case, his daughter) while taking advantage of governmental assistance programs and has instructed that where those assets are available for the claimant’s benefit they are to be considered as part of net worth. See M21-1, V.iii.1.J.4.f (August 23, 2018). However, 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 (or “family members”). See M21-1, V.iii.1.J. Pension entitlement is based on need and that need does not exist if a claimant’s estate is of such size that he or she could use it for living expenses. In this case, the Veteran has expressed a desire not to use the investment account because his daughter will need it in the future, meaning he does not wish to use his net worth to support himself, but rather maintain it for a future date. There is no indication in the evidence of record that the Veteran is actually prohibited from accessing the funds in the investment account. VA regulations require the Board to consider all assets, including those for the benefit of a dependent. However, the Veteran’s daughter is no longer a dependent as of March 2009 and there is no indication in the evidence of record, other than the Veteran’s statements, that the investment account is set up for her sole benefit. In this case, the evidence suggests that the Veteran has a limited life expectancy, as evidenced by the fact that this case is advanced on the Board’s docket due to age, and significant investment assets. The investment fund, when coupled with his dividend payments, together with Social Security Administration retirement benefits, to which he has been presumably entitlement and in receipt for some time, would more than provide above the respective threshold amounts for the MAPR throughout the appeals period. This is more than the minimum level of support intended by the law which provides for VA pension benefits. The purpose of VA pension benefits, as authorized by Congress, is to provide a minimum level of financial security to those who served their country and find themselves without any other means of basic support. It is not intended to protect substantial assets, subsidize discretionary spending, or build up a beneficiary's estate. In light of this, the Board finds that the Veteran has not met the net worth requirements under 39 C.F.R. §3.274 throughout the period of appeals, and therefore, the Veteran was not entitled to pension benefits for the period from January 1, 2009 to August 31, 2013 and such monies are an overpayment creating a valid debt in the amount of $56,956.40. Turning to the issue of waiver, it must first be determined if the Veteran was at fault in creating the debt in question. In this regard, it was noted that the Veteran had informed VA in September 2009 that he was aware of the investment fund, that it was an inheritance he received many years ago that was set up for the benefit of his child, and that, due to a history of drug use and family problems, he did not have access to the funds. However, the RO indicated that it had not received any confirmation from the Veteran or the investment management firm that the Veteran did not have access to the funds. The Veteran was further informed that he could submit such information or any other information to dispute these findings, to include submission of a VA Form 21-8049, Request for Details of Expenses in a March 2013 letter. The record of evidence does not reveal that the Veteran ever submitted such information or form. There is no reason to believe the Veteran did not receive his notice letters. On the contrary, rather, as discussed above, it appears that the Veteran did received the notice letters, as he mistakenly believed that the termination of his benefits was due to his ex-wife’s income being included with his based upon such letters. The Veteran had from March 2013 to September 2013, over 6 months, to submit the requested information. However, he did not and, further, despite filing an appeal over 4 years ago, he has still not provided any such information showing that the investment income should not be included in his countable income, that he has no access to it, or why he failed to disclose it. This lack of response is despite the fact that he had been on continual notice that such income would be subject to countable income for pension purposes via letters sent in July 2008, November 2008, December 2008, December 2009, December 2010, December 2011, and December 2012, which explicitly made reference to the category of “inheritance.” Additionally, as evidenced by his September 2009 correspondence, the Veteran showed that he was on notice that the investment income could be at least perceived as countable income if he did not provide some proof of its inaccessibility to himself. Therefore, the Board finds that the Veteran should have known that he had a duty to report information relating to the investment assets and income, at the very least to dispute their inclusion as countable income for VA pension benefits purposes. As he did not and continued to receive enrichment via pension benefits, to which he should have at least been on notice that he may not be entitled, the eventual determination that the Veteran had been overpaid when it was revealed that he was not actually entitled to such benefits was due to the fault of the Veteran. Nevertheless, the record establishes that he had notice and acted on this notice multiple times over the years. Last, the Veteran has not presented any evidence of an undue hardship as a result of repaying the debt. Rather, he has only focused on the issue of whether the debt was valid. As the Veteran was at fault in creating the overpayment and he has not presented evidence of any undue hardship or detriment upon which to grant a waiver of the debt created, the Board finds that entitlement to a waiver should be denied. Determinations on a waiver of indebtedness are made with the standard of equity and good conscience, which includes a variety of considerations such as fault of the debtor, balancing of fault with VA, defeating the original purpose of the benefit award, and undue hardship or detriment. See 38 C.F.R. § 1.965 (a). The Veteran had a legal duty to notify VA of changes in income and/or net worth. See 38 C.F.R. § 3.401 (b). He received notice informing him of this duty in the aforementioned notification letters. He failed to timely notify VA of his increased income and net worth, and the resulting overpayment was his fault. There appears to be very little fault on the part of VA as it notified him multiple times of his non service-connected pension compensation and related responsibilities. The purpose of the award of pension benefits was to assist the Veteran in providing income despite his lack of independent income or substantial assets. As he was shown to have significant investment assets and income, without any indication that he did not have direct access to such, the purpose of the benefit was no longer applicable. Finally, the Veteran has presented little to no evidence of hardship or detriment from collection of the $56,956.40 debt. The Veteran has not identified any specific way he would face undue hardship, like missing mortgage or rent payments or not being able to afford other necessities. Without such information, the Board is unable to find that the Veteran would face undue hardship if required to repay the debt. Additionally, due to the fact that the Veteran’s assets are well in excess of the debt, the Board also finds that there is no indication that the Veteran would not be able to procure monies to repay the debt. As such, repayment of the $56,956.40 overpayment is within the standard of equity and good conscience and a waiver is not appropriate. See 38 C.F.R. §§ 1.962, 1.963, 1.965(a). APRIL MADDOX Acting Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD R. Dodd, Counsel