Citation Nr: 22046076
Decision Date: 08/15/22	Archive Date: 08/15/22

DOCKET NO. 16-38 380
DATE: August 15, 2022

ORDER

Entitlement to special monthly pension (SMP) is denied.

FINDING OF FACT

The appellant did not submit requested evidence to verify net worth and countable income and net worth is a bar to pension.

CONCLUSION OF LAW

The criteria for entitlement special monthly pension are not met. 38 U.S.C. § 1522; 38 C.F.R. §§ 3.23, 3.274, 3.275, 3.276.

REASONS AND BASES FOR FINDING AND CONCLUSION

The Veteran served on active from March 1944 to June 1946. He died in December 2015. The appellant is his surviving spouse. 

 

This matter is before the Board of Veterans' Appeals (Board) from a July 2015 decision by the Department of Veterans Affairs (VA) Pension Management Center (PMC). In a November 2016 Supplemental Statement of the Case, the appellant was substituted for the Veteran in the claim for SMP. 

In a January 2020 decision, the Board denied the claim for SMP. However, 

this denial was vacated in a December 2020 Board decision so that the appellant could be afforded a hearing. In February 2022, the appellant testified at a video conference before the undersigned Veterans Law Judge (VLJ). A transcript of that testimony is associated with the record. 

The Board remanded the appeal in April 2022 for additional development, 

to include a request for documentation for all payments made for claimed unreimbursed medical expenses for the appeal period from February 2014 to December 2015, and to request that the appellant provide total amounts of rental income received for both rental properties deemed to be included in her net worth. The Board finds that the Agency of Original Jurisdiction (AOJ) substantially complied with the Board's remand by requesting that the appellant submit the required evidence in May 2022 correspondence, and the Board may proceed with a decision.

 Entitlement to SMP

The appellant is seeking an SMP for accrued benefit purposes. In a May 2014 rating decision, a Regional Office (RO) granted entitlement to an SMP based on the need for aid and attendance. However, in the July 2015 decision on appeal, 

the PMC found that the Veteran's net worth was too high to qualify for SMP benefits based on the appellant's ownership of two rental properties. The appellant contends that the two rental properties should not have been included in the net worth calculation because they were owned by an irrevocable trust. 

A veteran who meets wartime service requirements and who is permanently and totally disabled due to disability not the result of willful misconduct is entitled to a rate of pension set by law, reduced by the amount of his countable income. 38 U.S.C. § 1521; 38 C.F.R. § 3.23. Additionally, the veteran must meet the net worth requirements found in 38 C.F.R. § 3.274. See 38 U.S.C. §§ 1522; 38 C.F.R. §§ 3.3(a), 3.23, 3.274. 

Basic entitlement to pension exists if, among other things, the claimant's income is not in excess of the maximum annual pension rate (MAPR) specified in 38 C.F.R. § 3.23. 38 U.S.C. § 1521; 38 C.F.R. § 3.3(a)(3). In determining annual income, 

all payments of any kind or from any source (including salary, retirement or annuity payments, or similar income, which has been waived) shall be included during the 12-month annualization period in which received, except for listed exclusions. 38 U.S.C. § 1503(a); 38 C.F.R. § 3.271(a). 

For purposes of calculating pension benefits, total income may be reduced by amounts equal to amounts paid by a claimant for unreimbursed medical expenses that were "in excess of 5 percent of the applicable maximum annual pension rate or rates... as in effect during the 12-month annualization period in which the medical expenses were paid."  38 C.F.R. § 3.272(g)(1)(iii). In order to be excluded from income, these medical expenses must be paid during the time period at issue, regardless of when they were incurred. 

The law, in effect at the time the Veteran submitted his claim and during the appeal period, provides that there is no specific dollar limitation on net worth (as opposed to income) that bars an otherwise eligible claimant from receiving pension benefits. Entitlement to pension will be denied however, when the corpus of a veteran's estate (and that of any spouse) is such that, under all circumstances, including consideration of the annual income of the veteran, his spouse, and any cohabitating children, it is reasonable that some part of the corpus of such estates be consumed for the veteran's maintenance. 38 C.F.R. § 3.274(a). 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 and personal effects. 38 C.F.R. § 3.275(b). 

In determining whether some part of a veteran's estate should be consumed for maintenance, consideration will be given to the amount of the claimant's income together with the following: Whether the property can be readily converted into cash at no substantial sacrifice; life expectancy; number of dependents who meet the definition of a member of the family; and potential rate of depletion, including unusual medical expenses for the claimant and the claimant's dependents.  38 C.F.R. § 3.275(d) (2014). 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. 38 C.F.R. § 3.276(b) (2014). 

In VAOPGPREC 72-90 (1990), VA Office of General Counsel 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 addition, VAOPGPREC 

73-91 (1991), provides that when the VA claimant, 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 claimant's own benefit, the trust assets would not be counted in determining the net worth for improved-pension purposes. 

The Board is bound by opinions of the General Counsel of VA. See 38 C.F.R. § 20.105 (2021).

The record shows that, in January 2014, the Veteran and appellant established two separate trusts, an irrevocable trust and a revocable trust. In an August 2014 statement, the Veteran reported that the two rental properties had been transferred into the appellant's name and, on January 31, 2014, they were transferred from the appellant's name into an irrevocable trust. 

The Board finds as an initial matter, that two rental properties are countable toward net worth, and the rental income generated by the properties is countable in calculating both net worth and countable income. 

In May 2015, the Veteran submitted two trust documents. One was for a trust titled The [REDACTED] [REDACTED] Living Trust (JLMT) dated January 31, 2014 and is signed and notarized. JMLT document shows that the appellant is the Grantor and that she may revoke the trust agreement at any time. It also shows that the trust is managed for the benefit of the Grantor during her lifetime and directs payment of all net income as the Grantor requests. The JLMT trust document specifically lists the two rental properties at issue as assets of that trust. The appellant possesses such control over the property held in the JLMT trust, to include the relevant properties, specifically named in the trust, and was able to allocate funds for her use. Therefore, the JLMT trust and assets held in the trust are countable toward net worth. The second trust document submitted by the Veteran is also dated January 31, 2014 and is for The [REDACTED] (BT), which is an irrevocable trust. This document lists as assets only "Ten Dollars Cash".

In a July 2015 correspondence, the Veteran reported each of the rental properties are worth $500,000 and that one had a mortgage with a balance of $400,000 and the other had a mortgage with a balance of $185,000. He also claimed that the rental properties are in BT. In October 2015, he submitted copies of homeowner's insurance showing that the insurer listed the properties as owned by BT.

In July 2016, the appellant submitted a statement asserting that the rental properties were owned by BT since January 31, 2014 and that this is shown by corrected deeds and tenant leases for the properties. In December 2016, the appellant submitted Grant Deeds for both properties recorded by the Official Records Recorder's Office, Los Angeles County in June 2016, indicating transfer of ownership from the appellant, as an individual, to BT. The Grant Deeds are dated and notarized on January 31, 2014. The Grant Deed for each property is stamped and dated as follows: "This conveyance confirms title to the grantee(s) who continue to hold the same interest acquired on Date, 09/21/2015, Document No..."

The appellant submitted lease agreements for both rental properties in July 2016. 

A lease agreement for the property on [REDACTED] lists rental dates from May 2014 to May 2015, identifies the lessor as The [REDACTED] Family Living Trust, and identified the landlord as the appellant and Trustee of the [REDACTED] Family Trust. The lease agreement for the property on [REDACTED] for the lease period from April 2014 to April 2016 also identified the lessor as The [REDACTED] Family Living Trust and the landlord as the appellant and The [REDACTED] Family Living Trust. Lease agreements dated in 2016 show the lessor as BT.

In December 2016, the appellant submitted a 2014 monthly statement for a checking account owned by BT. This account shows deposits in the amounts of $8,495 and $2,995 as well as electronic debits for payment of two mortgages. 

The Board finds that the two rental properties are properly included in the Veteran's net worth for SMP benefit eligibility purposes. Indeed, the Veteran stated that both rental properties were owned by his spouse prior to January 31, 2014. 

In addition, the file shows that two rental properties were not transferred to BT until after the Veteran submitted his February 2014 application for pension.

In this regard, two trust documents were signed and notarized on January 31, 2014. JLMT is effectively the property of the appellant as she is the Grantor of the revocable trust, it is managed for her benefit during her lifetime, and she is the recipient of all net income of the trust. JLMT document lists both of the rental properties as property of the trust. In contrast, while BT is an irrevocable trust, 

the evidence does not tend to show that this trust was the owner of the rental properties during the period on appeal. The BT document does not list the rental properties as property of the trust.

Lease agreements submitted for both properties during the appeal period did not list BT as the lessor of the property and the deeds submitted by the appellant show that title was not stamped as conveyed to the grantee trust until September 21, 2015, with the titled recorded in June 2016.

While the appellant contends in an August 2016 statement that under California law, a deed takes effect when delivered, and that delivery occurs if and only if the grantor, in parting with possession of the deed, intends to presently convey title to the grantee. Based on her own argument, and the dates shown on grant deeds, conveyance, or delivery of the deed, did not occur until September 21, 2015, 

the date conveyance was stamped as confirmed. Thus, BT's ownership of the properties took effect on September 21, 2015, after submission of the February 2014 claim. Prior to that, the property was in the appellant's control, with her name listed on lease agreements as both the landlord and the trustee of The [REDACTED] Family Living Trust. Grant deeds also confirm that she owned the properties prior to their transfer to BT. Therefore, the rental properties are properly included in the Veteran's net worth for SMP benefit purposes because they were owned by the appellant as they were either deeded in her name or were her property as part of a trust where she acted as trustee. See 38 C.F.R. § 3.274(c); see also VAOPGPREC 72-90 (1990).

The record indicates that the appellant did attempt to transfer the rental properties to an irrevocable trust on January 31, 2014, one month prior to the submission of the Veteran's claim. VA guidance has specifically acknowledged situations where estate planning preserves assets for heirs 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. Thus, where the record indicates that the rental properties were transferred to BT for the purpose of preserving assets for heirs, they are considered as a part of his family net worth. 

In a July 2015 correspondence, the Veteran identified the rental properties as being worth $415,000.00 after subtracting mortgage balances. 

In determining whether the corpus of the Veteran's estate is excessive for pension purposes, in addition to consideration of the value of his assets, the Board must also consider the annual income of the Veteran, the Veteran's spouse, life expectancy, and the potential rate of depletion of the estate, to include medical expenses. See 38 C.F.R. § 3.274(a) (2014). Income and unreimbursed medical expenses are also considered in assessing countable income. 

The Board remanded the appeal in April 2022, in part to obtain the total amount of rental income for both of the rental properties for the appeal period from February 2014. Lease agreements indicate that the appellant was receiving income from both properties for leases starting 2014, in the amounts of $2,750.00 a month and $2,995.00 month. The Veteran did not report rental income in conjunction with his appeal. The Board requested confirmation of rental income received for the entire appeal period as lease agreements indicate the receipt of approximately $68,940.00 a year in rental income. However, the appellant did not submit the complete rental income information requested on remand in the May 2022 letter. 

 

The record shows that the Veteran and appellant submitted inconsistent information regarding the Veteran's care expenses. The Veteran reported in his February 2014 Application for Pension that he and the appellant each paid $3,000.00 a month for assisted living costs at [REDACTED] Senior Living. However, when the RO requested to verification of the [REDACTED] Senior Living expenses, he reported in an August 2014 statement that they were not able to move to [REDACTED] Senior Living, and that he, instead, had $48,960 in annual care giver costs paid to K.H. The Veteran reported, however, that they were behind on payments to K.H. The Board emphasizes that in order to be excluded from income, medical expenses must have been be paid during the time period at issue. Thus, payments which had not yet been made to K.H. cannot be counted to reduce income. In a second statement received on the same date, the Veteran, instead, reported that care expenses totaled $111,690.00 annually, and reported that this included room and board. However, payments made for maintenance of general health, meals, and lodgings are not considered a medical expense. See 38 C.F.R. § 3.278(c). Thereafter, in a July 2018 statement, 

the appellant reported in 2015 that the Veteran and appellant's caregiver expenses alone totaled $57,964. The April 2022 Board remand and a subsequent May 2022 letter asked the appellant to provide documentation of all payments made for claimed medical expenses for the appeal period. To date, the appellant has not submitted the information requested on remand, to include rental income and verification of claimed medical expenses. See Wood v. Derwinski, 1 Vet. App. 190, 193 (1991) (stating that VA's duty to assist is not a one-way street).

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The Board finds that the appellant has not submitted requested evidence needed to verify countable income and net worth. As the appellant has failed to submit the requested information and evidence to support her claim, there is insufficient evidence upon which to determine her entitlement to payment of VA pension benefits. As such, the appeal is denied. 

 

 

Paul Sorisio

Veterans Law Judge

Board of Veterans' Appeals

Attorney for the Board	Christine C. Kung

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.