Citation Nr: A21010590 Decision Date: 06/15/21 Archive Date: 06/15/21 DOCKET NO. 200521-158724 DATE: June 15, 2021 ORDER The S. Family Irrevocable Grantor's Trust should not be counted as net worth; to this extent, the Veteran's appeal is granted. FINDING OF FACT The Veteran retains no right or interest in trust assets, and he cannot exert control over trust assets for his own benefit; therefore, trust assets cannot be counted in determining the Veteran's net worth for pension purposes. CONCLUSION OF LAW The criteria for entitlement to nonservice-connected pension benefits have been met. 38 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 (2020). REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran served on active duty from February 1944 to May 1946. This matter was previously before the Board in March 2020 and was remanded to correct a duty-to-assist error. The Agency of Original Jurisdiction (AOJ) readjudicated the matter in an April 2020 decision. In April 2020, the Veteran submitted a VA Form 20-0996, Decision Review Request: Higher-Level Review (HLR), and requested review of the April 2020 decision. In May 2020, the AOJ issued the HLR decision on appeal, which considered the evidence of record at the time of the April 2020 decision. In the May 2020 VA Form 10182, Decision Review Request: Board Appeal, the Veteran elected the Direct Review docket. Therefore, the Board may only consider the evidence of record at the time of the April 2020 decision. 38 C.F.R. § 20.301. Whether assets in the S. Family Irrevocable Grantor's Trust should be counted as net worth. The Veteran contends that his net worth is not excessive for VA pension purposes. Specifically, he contends that assets contained within a trust should not be considered in calculating his net worth. In the May 2020 HLR decision, the AOJ indicated that assets contained in the S. Family Irrevocable Grantor's Trust were included in the Veteran's net worth, as the Veteran had the right to acquire any of the trust assets by substituting equivalent value and because he had the power to name and/or change designated beneficiary(ies) and/or trustee(s). As a result, the AOJ found that the Veteran's net worth was excessive and a bar to VA pension benefits. In July 1990, the VA General Counsel addressed whether trust property should be considered part of a claimant's countable income and net worth. The VA General Counsel held "the property held in a discretionary trust, and income therefrom, is not countable until it is actually allocated for the claimant's use, unless the claimant possesses such control over the property that the claimant may direct it to be used for the claimant's benefit." In December 1991, the VA General Counsel issued another opinion specifically addressing assets held in a trust and determined that "generally where a veteran places assets into a valid irrevocable trust for the benefit of the veteran's [family members], with the veteran named as trustee, and where the veteran, in an individual capacity, has retained no right or interest in the property or the income therefrom and cannot exert control over these assets for the veteran's own benefit, the trust assets would not be counted in determining the veteran's net worth for improved-pension purposes, and trust income would not be considered income of the veteran." The Board finds these two opinions, when read together, indicate that it is permissible for a veteran to be the trustee of a trust and that those assets would not be counted in determining net worth for VA purposes so long as the veteran cannot exert control over those assets for the veteran's own benefit. The question then becomes whether the Veteran maintains control over the assets in the S. Family Irrevocable Grantor's Trust such that he can direct those assets to be used for his own benefit. While the AOJ found that the Veteran had access to the assets within the trust such that he could exert control over them for his own benefit, the Board comes to a different conclusion and finds that he cannot exert control over those assets such that they can be used for his own benefit. Trust documents show that the S. Family Irrevocable Grantor's Trust cannot be altered, amended, revoked, or terminated by the Grantor. While the Grantor retains the power to name and/or change designated beneficiary(ies) and/or trustee(s), the Grantor is not allowed to designate the Grantor, the Grantor's estate, or the Grantor's creditors as a beneficiary or trustee. Additionally, while the Grantor has the right to acquire any of the trust assets, the Grantor must substitute assets of equivalent value. Finally, trust income or principal may not be used wholly or partly to discharge any legal obligation of the Grantor. Upon review, the Board finds that while the Veteran maintains some control over the trust assets, he does not have the ability to direct that those assets be used for his own benefit. The trust contains no provisions for distributing trust income or principle for the Veteran's benefit and explicitly states that income and principle of the trust may not be used to discharge any of the Veteran's legal obligations. Furthermore, while there is a provision for the Veteran to add beneficiaries to the trust, the trust states that the Veteran, the Veteran's estate, or the Veteran's creditors may not be designated a beneficiary or trustee. Thus, the Veteran cannot direct that assets be used for his benefit and he cannot add himself as a beneficiary such that he could receive distributions of income or principle from the trust. Finally, while the Veteran may acquire any of the trust assets, he must substitute assets of equivalent value, resulting in a net zero benefit. As such, the Veteran, in an individual capacity, has retained no right or interest in the trust property and income such that he can exert control over these assets for his own benefit. Therefore, the Board finds that the trust assets should not be counted in determining the Veteran's net worth. The Board notes that on October 18, 2018, significant revisions to the regulations governing the calculation of net worth for the purposes of determining entitlement to VA needs-based benefits, such as pension, took effect. 83 Fed. Reg. 47,246 (Sept. 18, 2018). These revisions included specific provisions pertaining to the use of asset transfers to reduce net worth for the purposes of qualifying for VA pension benefits, including through the creation of trusts. Among the reasons for these revisions was the fact that the existing regulation governing asset transfers, 38 C.F.R. § 3.276(b), was not effective at proscribing transfers of significant assets for the purpose of creating pension entitlement. 80 Fed. Reg. 3,839 (Jan. 23, 2015). However, the revised regulations do not apply to any asset transfer that took place prior to October 18, 2018. The S. Family Irrevocable Grantor's Trust was established October 3, 2018 and the Veteran's pension claim was received November 29, 2018. Thus, the revised regulations apply. While a schedule of trust assets is not associated with the record, and the Veteran contends one is not required, a November 2018 bank statement documents transfers into the trust both prior to October 18, 2018 and on and after October 18, 2018. Although VA will disregard transfers made prior to October 18, 2018, transfers made on or after this date are subject to the a 36-month look-back period. However, as the AOJ denied the Veteran's claim on the basis that he maintained control over trust assets such that he could direct those assets to be used for his own benefit, the AOJ did not reach the question of whether any transfers to the trust were subject to the 36-month look-back period. For that reason, the Board will defer initial adjudication to the AOJ. In sum, the Board finds that the Veteran and his spouse retained no right or interest in trust assets such that they can exert control over trust assets for their own benefit. Therefore, trust assets cannot be counted in determining the Veteran's net worth for pension purposes. To this extent, the Veteran's appeal is granted. K. Parakkal Veterans Law Judge Board of Veterans' Appeals Attorney for the Board S. Owen, 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.