Citation Nr: A21017669 Decision Date: 11/02/21 Archive Date: 11/01/21 DOCKET NO. 210828-181264 DATE: November 2, 2021 ORDER The removal of S.V. as the Veteran's Department of Veterans Affairs (VA) appointed fiduciary was proper; the appeal is denied. FINDING OF FACT The Veteran's VA appointed fiduciary, S.V. did not comply with the responsibilities of a VA fiduciary. CONCLUSION OF LAW The termination of S.V. as the Veteran's VA appointed fiduciary was proper. 38 U.S.C. § 5502; 38 C.F.R. §§ 13.100, 13.140, 13.200. REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran served on active duty from February 1952 to January 1956. In an October 2020 rating decision, VA determined that the Veteran was not competent to handle disbursement of funds. It is undisputed that the Veteran is incompetent and in need of a fiduciary to manager his VA funds. In October 2020, S.V., the Veteran's daughter, was recognized by VA as the Veteran's fiduciary. At that time, S.V. signed the statement of understanding in the October 2020 fiduciary agreement. Applicable VA law expressly provides for the appointment of fiduciaries where in the best interest of veterans who are in receipt of VA compensation, pension, and other benefits. 38 U.S.C. § 5506 defines the term "fiduciary," for purposes of 38 U.S.C. Chapter 55 (Minors, Incompetents, and Other Wards) as: (1) a person who is a guardian, curator, conservator, committee, or person legally vested with the responsibility or care of a claimant (or a claimant's estate) or of a beneficiary (or a beneficiary's estate); or (2) any other person having been appointed in a representative capacity to receive money paid under any of the laws administered by the Secretary for the use and benefit of a minor, incompetent, or other beneficiary. The Federal Register in 78 FR 63139-01, clarifies the definition of fiduciary provided in 38 U.S.C. § 5506 as follows: The term 'fiduciary' is different than the term 'guardian' as the latter term refers to a guardian or conservator appointed by a state court after such court makes a determination that a Veteran is incompetent. VA benefits may be paid to a duly recognized fiduciary on behalf of a person who is mentally incompetent. 38 U.S.C. § 5502; 38 C.F.R. § 13.10. Under the provisions of 38 C.F.R. Part 13, VA has the authority to conduct field examinations and otherwise supervise the fiduciary. See 38 C.F.R. § 13.20, 13.110, 13.120, 13.140, 13.280, 13.300, 13.400. In any case where a fiduciary fails to render a satisfactory account or has failed to use VA funds for the benefit of the beneficiary, the case will be referred to the Regional Counsel. In such cases, all VA benefits may be suspended. 38 C.F.R. §§ 13.100, 13.130, 13.140, 13.400, 13.500. Any individual or entity appointed by VA as a fiduciary to receive VA benefit payments on behalf of a beneficiary in the fiduciary program must fulfill certain responsibilities associated with the services of a fiduciary, including, but not limited to financial responsibilities. In this regard, the fiduciary must only use the beneficiary's VA benefit funds under management for the care, support, education, health, and welfare of the beneficiary and his or her dependents. Except as authorized under 38 C.F.R. § 13.220 regarding fiduciary fees, a fiduciary may not derive a personal financial benefit from management or use of the beneficiary's funds. In addition, the fiduciary must protect the beneficiary's VA benefits from loss or diversion. In addition, except as prescribed in 38 C.F.R. § 13.220 regarding fiduciary accounts, maintenance of separate financial accounts is required to prevent commingling of the beneficiary's funds with the fiduciary's own funds or the funds of any other beneficiary for whom the fiduciary has funds under management. 38 C.F.R. § 13.140(b). The process for fiduciary appointment provides that any certification of a person for payment of benefits of a beneficiary to that person as such beneficiary's fiduciary under 38 U.S.C. § 5502 shall be made on the basis of: (1) an inquiry or investigation by the Secretary of the fitness of that person to serve as fiduciary for that beneficiary, such inquiry or investigation,(a) to be conducted in advance of such certification;(b) to the extent practicable, to include a face-to-face interview with such person; and(c) to the extent practicable, to include a copy of a credit report for such person issued within one year of the date of the proposed appointment and; (2) adequate evidence that certification of that person as fiduciary for that beneficiary is in the interest of such beneficiary (as determined by the Secretary under regulations), and; (3) the furnishing of any bond that may be required by the Secretary. 38 U.S.C. § 5507. Per 38 C.F.R. § 13.220 Fiduciary fees, The Hub Manager with jurisdiction over a fiduciary appointment may determine whether a fee is necessary to obtain the services of a fiduciary. A fee is necessary only if no other person or entity is qualified and willing to serve without a fee and the beneficiary's interests would be served by the appointment of a qualified paid fiduciary. The Hub Manager will not authorize a fee if the fiduciary: (1) Is a spouse, dependent, or other relative of the beneficiary; or (2) Will receive any other form of payment in connection with providing fiduciary services for the beneficiary. Under 38 U.S.C. § 6101 Misappropriation by fiduciaries, it provides that(a) Whoever, being a fiduciary for the benefit of a minor, incompetent, or other beneficiary under laws administered by the Secretary, shall lend, borrow, pledge, hypothecate, use, or exchange for other funds or property, except as authorized by law, or embezzle or in any manner misappropriate any such money or property derived therefrom in whole or in part and coming into such fiduciary's control in any manner whatever in the execution of such fiduciary's trust, or under color of such fiduciary's office or service as such fiduciary, shall be fined in accordance with title 18, or imprisoned not more than five years, or both. It also provides that(b) Any willful neglect or refusal to make and file proper accountings or reports concerning such money or property as required by law shall be taken to be sufficient evidence prima facie of such embezzlement or misappropriation. Per 38 C.F.R. § 13.400, misuse of benefits by a fiduciary occurs in any case in which the fiduciary receives payment of benefits for the use and benefit of a beneficiary and the beneficiary's dependents, if any, and uses any part of such payment for a use other than the use and benefit of the beneficiary or the beneficiary's dependents. For the purpose of this section, use and benefit means any expenditure reasonably intended for the care, support, or maintenance of the beneficiary or the beneficiary's dependents. Such expenditures may include the fiduciary's efforts to improve the beneficiary's standard of living under rules prescribed in this part. In March 2021, S.V. was notified that as the Veteran's VA appointed fiduciary, she was required to provide financial statements for the previous three months as part of a fund usage review. In response, S.V. submitted the requested financial statements. In April 2021 correspondence, S.V. included a budget and stated that the Veteran's bills exceed his income, so she pitches in to help him. She stated that he tries to pay her back but that she just makes sure that he has whatever he needs and wants. She stated that even after splitting the bills, the Veteran's expenses still exceed his monthly income because of his hobbies. She stated that in the past he has struggled with his finances, but that they have come a long way. She explained that his finances are still not great after he pays his main bills, and that before she became his fiduciary, they had an account where they would pay his leftover bills. In an April 9, 2021 letter, accompanying S.V.'s correspondence, the Veteran stated that he allowed S.V. to give money to his step granddaughter for personal use and for providing care for him. He stated that he will provide for her until further notice until school is out. He also stated that he makes payments for S.V.'s vehicle, even though she asks him not to, because she takes him to his appointments, errands, and shopping. He indicated that his son-in-law does maintenance and work around the house. The Veteran noted that due to his finances and debts, his daughter and son-in-law have bills in their names where he gives them the money from his account to pay the bills. The Veteran asserted that he does not have a problem with whatever S.V. is doing and that his granddaughters help him, so he gives them gifts/money. He added that he has S.V. withdraw money so that he can have cash in his wallet if he is out with the family, and that he always has money to give his grandchildren if they visit him. He wrote that, overall, his daughter makes sure that his bills are paid first and that after that he can enjoy his money. An April 2021 field examination request provides specific allegations of misuse against S.V., as former fiduciary. It provides that over a 4-month period, based on a review of the bank statements from November 24, 2020 to March 25, 2021, S.V. made 17 cash withdrawals, major undocumented purchases, and transferred funds to another account. The April 13, 2021 record shows that during fund usage review of bank statements it was discovered that S.V. was taking cash withdrawals from the fiduciary account and transferring to another account. It also notes that a statement submitted with an updated budget was "clearly not written by the Veteran" shows that he says that he has made payments for S.V.'s car loan, that he pays bills that are not in his name, and he gives money to his granddaughters (S.V.'s daughters). In the May 21, 2021 misuse investigation report, the field examiner (FE) noted that S.V. explained that payments in question were related to their mortgage payments and that the Veteran insisted on making some of her car payments because he wanted to compensate her for her assistance. Regarding deposits to the custodial account outside of the SSA and VA benefits, S.V. explained that the deposits were because she pays rent to the Veteran and has deposited funds to his account to help pay bills and afford him the lifestyle he wants. The FE reported that during the interview with S.V., she made references to going to a gambling boat and moving money around to gamble, then putting it back into various accounts she controls in addition to the custodial account. S.V. also explained that the current financial arrangement in her home is that she and her husband pay $400 a month in rent to the Veteran, and they contribute as necessary toward other expenses, but that if they need something, it is not unusual for them to use the Veteran's funds and pay him back later. The May 2021 investigation report shows that S.V. reported that she had not been keeping receipts or accurate records of transactions so far but promised to do so going forward. She explained, regarding cash withdrawals, that the Veteran wanted to give money to his daughter. She stated that he insisted and that because the funds ultimately belong to the Veteran, she felt obligated to comply because he should be allowed to choose how to spend his money. Regarding transfer of funds to other accounts, she stated that it was to pay her back for items she purchased on the Veteran's behalf. The FE noted that the Veteran independently corroborated that he approved of all the transactions and wanted to give his daughters money for helping him. He stated he was very happy to have his daughter as his fiduciary and was aware of, and had no issues with, how she managed his funds. In the May 2021 report, the FE concluded that while this situation does not comply with VA requirements, there is no misuse of funds. However, the FE determined that S.V. should no longer serve as VA fiduciary as there is a risk of misuse of funds in the future. The FE stated that S.V. is clearly not able to comply with VA requirements (no cash withdrawals, no transfers between accounts, no borrowing money from the custodial account and paying it back, keep receipts, etc...) and does not seem to tightly manage the Veteran's funds. S.V. admitted to gambling and moving money in and out of the custodial account for that purpose. The FE found a clear pattern of very loose control of funds under her management and no clear record keeping. The FE noted that S.V. has made deposits to the account and appears to repay anything she has used for her own purposes but that it is impossible to determine from her management of the custodial account how much has been used for the Veteran and how much has been used for others. Thus, the FE recommended that, while no misuse was found, a successor fiduciary be appointed. In the July 2021 Misuse Determination, the RO explained that in April 2021, the Fiduciary Hub received a completed budget update form from the S.V., and subsequently established a misuse investigation after discovering cash withdrawals, transfers to another account from the VA custodial account, as well as expenses found in bank statements that are not listed in the budget agreement. The RO noted that the May 2021 FE stated that S.V. failed to comply with VA fiduciary requirements by making cash withdrawals, making transfers between accounts, borrowing funds from the custodial account, and failing to retain receipts. He stated although the fiduciary repaid the beneficiary by making deposits to the custodial account, misuse was found for the period November 2020 to March 2021 with no loss to the beneficiary. The FE stated the fiduciary is not considered suitable to serve as VA Fiduciary and a field examination request to appoint a successor fiduciary was established. Thus, the RO determined that S.V. misused VA benefits received on behalf of the Veteran with no loss to the beneficiary, during the period November 2020 through March 2021. Of note, in the June 2021 successor initial appointment field examination, the successor fiduciary information lists the Veteran's VA appointed fiduciary as G.C.B. (a bank), non-family member. On June 28, 2021, in the fiduciary agreement, the point of contact for G.C.B. signed the statement of understanding. In a separate July 2021 letter, the Veteran was advised of this appointment, and review of the record shows that he has not expressed specific disagreement with the appointment of G.C.B. as his current fiduciary. Rather, the Veteran has appealed only the reasons for removal of his previous fiduciary, S.V. In the August 2021, the Veteran submitted a VA Form 10182 Notice of Disagreement (NOD), selecting Direct Review by a Veterans Law Judge, and disagreeing with removal of his daughter, S.V. as his fiduciary. The Veteran stated that he disagreed with the allegation on his daughter and that he gave her permission to pay for the car and that he has no car. He stated "cash [he] approves for grandkids." He also stated that she pays his bills correctly before appointments and that he approved and trusts her. He listed the dates of decision as April 12, 2021 and as February 21, 2021. Based on the above, despite being aware of the responsibilities of a fiduciary, as outlined in the fiduciary agreement signed by S.V., she failed to maintain complete and accurate records and receipts pertaining to the use of the Veteran's funds. In addition, while misuse was found at no financial loss to the Veteran, the record shows clear mismanagement of the Veteran's funds, including commingling of his VA benefits with other funds. VA appoints fiduciaries to veterans who have been found not competent to handle the disbursement of VA funds; that is, in fact, the reason S.V. was originally appointed as the Veteran's fiduciary. Despite that fact, it is clear from the record that the Veteran has been allowed to exert control over his finances, even though, as fiduciary, S.V. was responsible for making financial decisions in the best interest of the Veteran, and for ensuring that records and receipts were maintained in an organized manner. As noted above, S.V. admitted to using the funds for gambling and for paying for her expenses, while later returning the money to the Veteran's account. In addition, S.V. allowed for withdrawing of cash from the Veteran's account to give to others as gifts. These financial actions, resulting in commingling of funds as well as a lack of financial receipts, are prohibited under the requirements of a VA appointed fiduciary. Even assuming that the Veteran did write and submit the April 2021 letter discussed above, in addition to his reports to the FE, his agreement with the actions of S.V. as his fiduciary do not negate the responsibilities of a VA appointed fiduciary. In addition, in an August 2020 statement, S.V. stated that she spent 8 hours a day, 7 days a week, providing care to the Veteran with various tasks of daily living, such as medications, showering, transportation, and paying bills, and that she feels that she should be paid since September 2019. However, as noted above, under 38 C.F.R. § 13.220, the Hub Manager will not authorize a fee if the fiduciary is a relative of the beneficiary. Thus, as S.V. is the Veteran's daughter, she was, and is, prohibited from receiving a fee for serving as the Veteran's VA appointed fiduciary. The August 2020 letter from S.V., while submitted prior to her appointment as the Veterans fiduciary in October 2020, shows that she might not have been in full understanding of the responsibilities and limitations of a VA appointed fiduciary. Thus, while review of the record shows that S.V. has provided care and support to the Veteran, and continues to do so, it also shows that S.V. has been unable to properly manage the Veteran's finances (separate from other accounts) and perform the regulatory responsibilities required of a fiduciary. 38 C.F.R. §13.140. In sum, S.V. has been properly removed as the Veteran's fiduciary. As fiduciary, she did not maintain complete and accurate records and receipts pertaining to the use of the Veteran's funds, and mismanaged the Veteran's VA benefits, resulting in commingling of funds. While the misuse found did not result in financial loss to the Veteran, the actions taken by S.V. as fiduciary were not in line with the responsibilities and requirements of a VA appointed fiduciary. As such, and pursuant to 38 U.S.C. § 5502 and 38 C.F.R. §§ 13.100, 13.143, 13.140, 13.200, S.V., as the fiduciary, failed to abide by VA fiduciary responsibilities. Thus, the termination was proper. L. B. CRYAN Veterans Law Judge Board of Veterans' Appeals Attorney for the Board A. Labi, Counsel 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.