Citation Nr: A20001283 Decision Date: 02/06/20 Archive Date: 02/06/20 DOCKET NO. 191125-46425 DATE: February 6, 2020 ORDER The S. B. S. Family Irrevocable Trust in the amount of $702,271.84 should not be counted as net worth; entitlement to Veterans pension benefits is granted. FINDING OF FACT The Veteran does not retain an ownership interest in or control over assets that are held by the S. B. S. 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 have been met. 3 8 U.S.C. §§ 1503, 5107 (2012); 38 C.F.R. §§ 3.3, 3.23, 3.102, 3.260, 3.261, 3.262, 3.271, 3.272, 3.274, 3.275 (2018). REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran served on active duty from July 1945 to August 1946. The decision on appeal was issued in September 2019. In November 2019, the Veteran elected the modernized review system. 84 Fed. Reg. 138, 177 (Jan. 18, 2019) (to be codified at 38 C.F.R. § 19.2(d)). He selected the Direct Review lane and did not submit any additional evidence with regards to his claim before the Board. 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). Specific to the net worth requirements, pension shall be denied or discontinued when the corpus of the estate such that under all the circumstances, including consideration of the surviving spouse’s income and the income of any child for whom the surviving spouse is receiving pension, it is reasonable that some part of the corpus of the estate be consumed for the surviving spouse’s maintenance. 38 U.S.C. § 1543; 38 C.F.R. § 3.274 (c). 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 be used for the appellant’s maintenance, factors to be considered include whether the 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 issue here turns on whether assets held in an irrevocable living trust that was established by the Veteran should be included in his net worth. The Board finds they should not, and that his net worth is not otherwise a bar to pension payments. In 2012, the appellant established an irrevocable trust. A copy of the trust is of record. The trust names the Veteran’s son-in-law, S. E., and daughter, J. E., as trustees. The beneficiaries of the trust are the Veteran’s three daughters. One provision of the trust states that the trustee “may not make any distributions of the Trust income or principle for me [the appellant] or for my benefit, even in the sole and absolute discretion of my Trustee.” The trust further provides that the trustees “may pay directly to, or apply for the benefit of, any or more of my beneficiaries [of the Trust] so much of the income of my Trust as my Trustee, in my Trustee’s sole and absolute discretion, deems proper, including the ability to spray income to one or more beneficiaries unequally, including the Trustees herself/himself.” The trust contains a similar provision with respect to principal. On the death of the Veteran, the trust provides that the trust income and principle are to be distributed in equal shares, outright and free of trust, to the beneficiaries. Bank statements and tax records submitted by the Veteran reflect that a bank account in the trust’s name contained $702,271.18 in trust account balances, which is higher than the net worth Bright-line limit of $123,600, effective October 18, 2018. The RO concluded that these trust assets, along with $30,000 in cash/bank accounts and $28,540 in stocks, were includable in the appellant’s net worth and found that the trust was available for the Veteran’s care. As such, the trust was considered as his net worth for VA pension purposes. Precedential opinions issued by VA’s Office of General Counsel (OGC) indicate that in determining pension entitlement, the litmus test for whether property transferred to a trust should be included in a claimant’s net worth is whether the claimant has relinquished all rights of ownership, including the right of control of the property, with respect to the assets held in the trust. Cf. VAOPGPREC 15-92 (1992)). As was stated in VAOPGPREC 15-92, “only property over which a claimant has some control for the claimant’s own benefit can reasonably be expected to be consumed for the claimant’s maintenance pursuant to the net-worth statute.” Accord VAOPGPREC 33-97 (1997 (“[O]nly property over which a claimant, or someone with legal authority to act on the claimant’s behalf, has some control to use for the claimant’s benefit can reasonably be expected to be consumed for a claimant’s maintenance and thus be includable in the claimant’s estate.”). In VAOPGPREC 72-90 (1990), the OGC stated that “opinions of this office have consistently held that property and income therefrom, including that held in trust, will not, in basic pension-entitlement and [net worth] limitation considerations, 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.” In VAOPGPREC 73-91 (1991), the OGC held that where a claimant placed assets into a valid irrevocable trust for the benefit of the claimant’s grandchildren, with the claimant named as trustee, and where the claimant, in an individual capacity, retained no right or interest in the property or the income from it and could not exert control over the trust assets for the claimant’s own benefit, the trust assets would not be counted in determining his net worth for improved-pension purposes, and trust income would not be considered income of the claimant. In VAOPGCPREC 33-97 (1997), OGC determined that the VA regulations in effect prior to October 18, 2018, do not establish specific criteria governing when trust assets are to be considered in net worth determinations. OGC also noted that 38 C.F.R. § 3.276 (b) (2018) dictates that certain gifts and transfers to relatives should not, for VA pension purposes, be considered to reduce the size of an estate. Although that regulation does not address the situation of transfer of assets to a trust, the regulation does reflect VA’s interpretation that the circumstances of a transfer of property may be considered in determining eligibility for pension. The fact that a claimant has transferred property to a trust, as opposed to a friend or relative, is not conclusive on the issue of whether the claimant has relinquished all rights of ownership in the property. OGC ultimately determined that VA should include trust assets in net-worth calculations if the claimant or someone with the legal authority to act on the claimant’s behalf can use the trust assets for the claimant’s benefit. OGC held that assets transferred to an irrevocable trust or another estate-planning vehicle of the same nature, designed to preserve estate assets by restricting trust expenditures to the claimant’s special needs while maximizing the use of governmental resources in the care and maintenance of the claimant, should be considered in calculating the claimant’s net worth for improved-pension purposes. VAOPGCPREC 33-97. The trust at issue here is similar to the trust addressed in VAOPGPREC 73-91. The Veteran retains no rights or control of assets held in the trust, as he is neither a beneficiary nor a trustee. The trust contains no provisions for distributing trust income or principle for her benefit, including “special needs” not covered by government resources. While it contains boilerplate concerning “special needs,” such special needs concern those of the beneficiaries of the trust, not the Veteran. The provision prohibiting the trustees from distributing trust income or principle for the Veteran’s benefit is superfluous for purposes of this determination. The determining factor is whether the Veteran made a complete transfer of the assets without retaining any rights of ownership of it, or control over it for her own benefit, which he did. The Board is aware that the trustees of the trust and its beneficiaries are the same. Thus, the trustees, once they have distributed any trust assets to themselves as beneficiaries of the trust, which the trust allows them to do in any amount, in any manner, and at any time they wish, may in their personal capacities as beneficiaries use such assets for the Veteran’s maintenance. But that would be entirely in their discretion, just as it is entirely their discretion to use any other property they own for that purpose. In that light, the arrangement amounts to a situation in substantive terms no different than if the Veteran had simply gifted the property outright to his children. His children are adults and do not live with him (he resides in an assisted living facility). Section 3.276(b) of the regulations indicates by negative implication that when it is clear that the grantor of a gift to someone other than a relative residing in the same household has relinquished all rights of ownership, including the right of control of the property, such property will not be included in the grantor’s estate for pension purposes. As noted above, the OGC cited this provision in finding that property transferred to an irrevocable trust for the benefit of the claimant’s grandchildren was not includable in the grantor’s estate. The Board sees no reason to distinguish that trust from the one at issue here, as the key factor regarding both trusts is that the terms of the trust do not provide for distribution of trust property to the claimant, who has relinquished all ownership rights to such property, including any control of it for the grantor’s own benefit. As the OCG noted in that opinion, it had held in the past that “the completeness, but not the intent or purpose, of a transfer of property would be considered for pension purposes.” VAOPGPREC 73-91 (citing VAOPGPREC 30-57). The transfer of the Veteran’s property to the trust at issue here was complete, as it is evident from the terms of the trust that he exercises no rights of ownership or control of the property held in the trust. Accordingly, property held in the trust, worth $702,271.18, are not includable in the appellant’s estate or net worth. The record shows that the appellant’s net worth has been approximately $58,540, the combined value of $30,000 in cash/bank accounts and $28,540 in stocks, since the December 3, 2018 date of claim, which is below the net worth Bright-line limit, effective October 18, 2018, of $123,600. Entitlement to pension is therefore granted. Michael J. Skaltsounis Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board A. Daniels, Associate Attorney The Board’s decision in this case is binding only with respect to the instant matter decided. This decision is not precedential, and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.