Department of Veterans Benefits PG 27-2

Veterans Administration

Washington, D.C. 20420

January 20, 1982

**ERRATUM**

Department of Veterans Benefits PG 27-2, \"Estate Analyst Program
Guide,\" dated September 10, 1981, is corrected as follows:

Page 4-4, paragraph 4.05b (2)(b), line 4: Delete \"rather an \... each
of the\" and insert \"normally will be listed so that market value of
the shares can be ascertained at any particular time.\"

Distribution: RPC: 2046

FD

Veterans

Administration

**- PG 27-2**

**- Estate Analyst Program Guide**

September 10, 1981 Department of Veterans Benefits

Washington DC 20420

PG 27-2 September 10, 1981

FOREWORD

The protection of estates of minors and adults rests largely on the
judgment and knowledge of Estate Analysts. They (and Field Examiners)
are the individuals in the Veterans Services Division who establish and
maintain rapport with the VA\'s incompetent wards and the trustees of
their estates. I believe this guide will play a large part in the
successful fulfillment of these duties.

This program guide is designed to assist Estate Analysts in the
performance of their jobs. It can be used as a training resource for
both the new trainee Estate Analyst as well as the fully trained
personnel.

RESCISSION: Program Guide PG 27-65-1

JAMES J. COX

Director, Veterans

Assistance Service

Approved:

DOROTHY L. STARBUCK

Benefits Director

Distribution: RPC: 2046 assigned

FD (ID based on VA Form 3-7225 and 3-7225a)

September 10, 1981 PG 27-2

**CONTENTS**

**CHAPTER** PAGE

I Introduction 1-1

2 Benefit Entitlement and Protection 2-1

3 Accountings 3-1

4 Fund Usage 4-1

5 38 U.S.C. 3203(b)(1) (The \$1,500 Limitation) 5-1

6 Potpourri 6-1

iii

September 10, 1981 PG 27-2

**CONTENTS**

**CHAPTER 1. INTRODUCTION**

**PARAGRAPH PAGE**

**1.01 Historical 1-1**

**1.02 Program Responsibilities and the Estate Analyst\'s Role 1-2**

September 10, 1981 PG 27-2

**CHAPTER 1. INTRODUCTION**

**1.01 HISTORICAL**

a\. The Fiduciary Program, as a concept, began long before the Veterans
Administration was created and its evolution continues.

b\. Until the early 1920\'s both the Bureau of War Risk and the United
States Veterans Bureau maintained sections in their Central Offices to
appoint guardians by mail. There was to be no choice; payments went to
court-appointed guardians. There were no followups.

c\. Reports of embezzlement and misuse of funds began to mount. Finally,
in 1923-1924, these accusations became the subject of a Congressional
investigation, the findings of which revealed not only instances of
unsatisfactory estate administration, but cases of fiduciary negligence
involving wards\' living conditions. Because of their limited resources,
the courts were forced to depend upon the guardian\'s own submissions
regarding a ward\'s estate, and simply did not have the machinery to
inquire into living conditions.

d\. Resulting legislation, effective June 7, 1924, and known as the
World War Veterans\' Act, established a guardianship activity to
supervise the estates of incompetent beneficiaries so that waste and
embezzlement might be eliminated and their interest and welfare might be
served. This new responsibility was given to the United States Veterans
Bureau\'s General Counsel and was carried out in the field by regional
attorneys located at each station. Over the next few years there were
amendments to broaden the limits of the original legislation, and later,
in 1930, Congress transferred the operation to the newly formed Veterans
Administration. The next year the office of Regional Attorney became
that of Chief Attorney.

e\. Central Office was reorganized in September 1953. In recognition of
the Agency\'s broad responsibility to its incompetent beneficiaries, the
activity was moved to DVB (Department of Veterans Benefits) where a
Guardianship Service was created. This arrangement was to last until
April 1, 1973, when, in yet another reorganization, the Guardianship
Service was abolished and the General Counsel\'s office assumed direct
organizational jurisdiction over Chief Attorney functions pertaining to
legal matters. The fiduciary activity and its personnel, however,
remained in DVB. Two months later, in June, a special task force
completed an intensive study that resulted in the transfer of Field
Examiners to the Veterans Services Division and Estate Analysts to
Finance. Both personnel transfers were effective August 1, 1973. Almost
a year later, on July 1, 1974, Estate Analysts and the audit function
were returned to the Veterans Services Division where they remain today.

f\. As the revised organization stabilized, it became apparent that
attention to the fiduciary program area in Central Office needed to be
strengthened. In January 1977, a separate organizational element known
as the Fiduciary and Field Examination Staff was established within the
Veterans Assistance Service in Central Office to give support and
guidance to the fiduciary activity in the field. With the creation of
this staff came a renewed emphasis upon the importance of protecting the
funds of those VA beneficiaries unable to manage their own monies.

**1.02 PROGRAM RESPONSIBILITIES AND THE ESTATE ANALYST\'S ROLE**

a\. Fiduciary Program Responsibilities (M27-1, pt. III, par. 1.01)

\(1\) To determine payee best suited to the needs and situation of the
beneficiary and, when required, to obtain or confirm a qualified
fiduciary.

\(2\) To arrange for the utilization of benefit funds for the
beneficiary and dependents, if any.

\(3\) To protect assets from loss or diversion.

\(4\) To assure that the fiduciary asserts and protects entitlement
rights of beneficiary and dependents to VA benefits, and that the
fiduciary or other appropriate persons are fully advised of all
potential Federal and State benefits.

1-1

PG 27-2 September 10, 1981

\(5\) To act on behalf of SDP (supervised direct payment) beneficiaries
by asserting and protecting their entitlement to VA and other Federal
and State benefits.

**b. Role of Estate Analyst**

\(1\) The Estate Analyst is responsible for and will perform quasi-legal
and administrative duties (other than stenographic) involved in the
administration of the estates of all types of beneficiaries and the
protection of their benefit rights. When professional advice or
assistance in purely legal matters is required, the matter will be
referred to the District Counsel, or when the division has attorneys
available in the office acting under delegation of authority from the
District Counsel, it will be referred to one of them.

\(2\) The Field Examiner has exclusive responsibility for the duties
mentioned in subparagraph a(l) above. The Estate Analyst has no voice in
the selection of a fiduciary. However, there will be cases when the
Estate Analyst must take some action, as when a PGF (principal
guardianship folder) shows or subsequent contact with the fiduciary
confirms that the fiduciary has minimal educational aptitude and
psychological qualification for estate handling. (For example, the
Estate Analyst must always prepare the accounting and each year it takes
days to sort out what happened to funds as the fiduciary has kept no
records or has made questionable expenditures.) A review of the PGF may
indicate that continuation of such a fiduciary is warranted because of
circumstances involved. Otherwise, the Estate Analyst should refer the
case to the supervisor.

\(3\) The Estate Analyst and Field Examiner must work as a team to
fulfill the mutual responsibilities listed in subparagraph a (2) through
(5) above. Estate Analyst responsibilities are not clearly defined, and
often overlap those of the Field Examiner in the areas of benefit
entitlement and protection (see ch. 2), funds utilization and asset
accountability.

1-2

September 10, 1981 PG 27-2

**CONTENTS**

**CHAPTER 2. BENEFIT ENTITLEMENT AND PROTECTION**

**PARAGRAPH PAGE**

2.01
General\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
2-1

2.02 DEA (Survivors\' and Dependents\' Educational Assistance) and
Benefits Beyond Age 18.. 2-2

2.03 Insurance Rights
Protection\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
2-3

2-i

September 10, 1981 PG 27-2

**CHAPTER 2. BENEFIT ENTITLEMENT AND PROTECTION**

**2.01 GENERAL**

a\. The Estate Analyst shares with the Field Examiner the responsibility
for assuring that the ward receives all benefits to which he or she is
entitled (M27-1, pt. 111, pars. 3.01 through 3.04).

b\. Situations requiring Estate Analyst intervention will be identified
during normal daily activities.

\(1\) There is no \"drop mail\" for a PGF. Every piece of
correspondence, award action, notice of change of address, etc., will be
reviewed by the Estate Analyst to insure correctness of or reply to the
item being reviewed as well as to consider the impact of the action on
the beneficiary\'s entitlement to benefits. (For example, should waiver
of retirement be withdrawn and reelection of retired pay made when the
veteran\'s pay is suspended due to 38 U.S.C. 3203(b)(1)? Was
compensation reduced making pension the higher paying benefit? Does the
incoming letter asking for authority to spend funds mention in passing
that the veteran\'s mother died (was she dependent?) or that the
beneficiary has been in an accident and needs funds to hire an attendant
(household or aid and attendance)?

\(2\) A review of an accounting can be even more revealing. Expenditures
for hospital costs can mean any number of things, like the birth of a
child or the death of a dependent or the need to pay aid and attendance
or a need for reevaluation of the percentage of service-connected
disability. Payment of pharmacy or medical bills might warrant advising
the fiduciary and/or beneficiary of fee-basis medical care, mail order
pharmacy procedures, CHAMPVA benefits, etc. Each expenditure in the
accounting must be evaluated for benefit entitlement purposes. If the
purpose of the expenditure is not clear, the Estate Analyst will contact
the fiduciary (or attorney) for clarification. (Clarification should be
annotated on the accounting.)

c\. If the Estate Analyst identifies a probable benefit entitlement (or
decrease therein) which he or she cannot adequately investigate by
telephone or correspondence, a field examination request will be
initiated.

d\. If the ward is entitled to additional VA or non-VA benefits but the
PGF or claims file does not show that the fiduciary has been informed,
the Estate Analyst will initiate the correspondence necessary to inform
the fiduciary.

**2.02 SDEA (SURVIVORS\' AND DEPENDENTS\' EDUCATIONAL ASSISTANCE) AND
BENEFITS BEYOND AGE 18**

The PGF should show that continuation of benefits beyond age 18 and
election of SDEA, if eligible, were explained in depth by the Field
Examiner at the last home contact before the child\'s 18th birthday. The
field examination report should show probability of plans for continuing
education. When the report shows these plans, the Estate Analyst should
diary the case for a copy of the award if the need was determined by the
Field Examiner. If the award is not received timely, the Estate Analyst
will verify whether application was received by the VA, and, if not,
will write the fiduciary or request a field examination. If the home
contact prior to the child\'s 18th birthday does not show that
continuation of benefits beyond age 18 and SDEA, if eligible, were
explained, the Estate Analyst should request a field examination for
this purpose. When the home contact, however, shows that education
beyond age 18 is highly improbable or that the fiduciary is
knowledgeable in VA benefits and is willing and able to assure
continuation of education, no further inquiry in this regard is required
by the Estate Analyst.

**2.03 INSURANCE RIGHTS PROTECTION**

a\. Is Insurance in Effect? For each incompetent veteran, the Estate
Analyst should determine if insurance administered by the VA is in
effect, and if so, whether there had been an application for a waiver of
premiums. When the status inquiry shows no insurance in force, the
Estate Analyst must then determine whether or not to submit an
application. In doubtful cases the claims folder should be pulled to
determine if the veteran had been competent for I year after his or her
rating of service connection for any disability. If so, the right to
insurance expired; if not, the veteran may be eligible. Unfortunately,
Target does not help because the date of the service-connected rating
does not appear on the master record, and the date of discharge from
military service cannot be substituted for date of rating.

2-1

PG 27-2 September 10, 1981

b\. **Application by Guardian.** With one exception, only a guardian (or
other court-appointed fiduciary) can apply for insurance on behalf of an
incompetent, and may require the express approval or ratification by the
court. The exception is that the veteran, even though adjudged or rated
incompetent, may nevertheless apply for insurance without a court
appointed fiduciary if, at the time of the signing, the veteran is lucid
and has the testamentary capacity to understand the nature and
consequence of his or her act. Evidence of this capacity at the time of
the signing should be in the form of a written statement from a
physician, and must be submitted with the application.

c\. **If Rerated Competent**. Care should be taken to assure payment of
future premiums, as otherwise the veteran may lose his or her investment
if the policy should lapse. If information is received showing the
veteran has been rerated competent, the appropriate regional office and
insurance center should be informed and given the veteran\'s last
address of record and the veteran should also be notified. When a
veteran is rerated competent but remains hospitalized, at a VA facility,
the VBC (Veterans Benefits Counselor) at the medical center is promptly
advised so that he or she may protect the veteran\'s rights.

d\. **When There is a Possible Waiver**. The application for insurance
(and waiver of payments) should be forwarded immediately by the
court-appointed fiduciary, especially when the period of eligibility is
about to expire. The applicant should be told to request that the
insurance be effective on the date the application is filed. Although a
waiver of premiums has been applied for, fiduciaries should be told to
remit the premiums until a waiver is granted, whereupon the premiums
will be refunded. If the veteran is not hospitalized, a medical
examination may be required for the waiver. Often there is sufficient
information in the veteran\'s claims folder. If there is not, the
appropriate regional office and insurance center will notify the
fiduciary to make necessary arrangements with a private physician or a
VA medical center, if one is located in the community.

e\. **Time Limits for NSLI (National Service Life Insurance)**. The
following are time limitations in which application for NSLI should be
filed:

\(1\) If discharged after April 25, 1951, and subsequently rated zero
percent or more for a service-connected disability, the veteran has I
year from the date notice of determination of service connection is sent
(NSLI-RH under 38 U.S.C. 722(a)).

\(2\) If a veteran is shown to have been mentally incompetent during any
part of the 1-year period, application for insurance may be filed within
I year after a guardian is appointed or within I year after the
disability is removed, whichever is earlier.

\(3\) It should be noted that if the court-appointed fiduciary does not
apply for NSLI and the veteran is rerated competent within the 1-year
period, the veteran\'s eligibility for insurance runs from the date of
appointment of the fiduciary.

f\. **Deemed To Have Applied**. A court-appointed fiduciary should not
automatically be sought for the sole purpose of applying for insurance
administered by the VA. In many instances a veteran is -considered to
have applied for and been granted up to \$10,000 in insurance even
though a formal application has never been made. To be granted this
gratuitous insurance, certain conditions must be met. (See M29-1, pt. 1,
ch. 15, and M29-1, pt. VI, ch. 23.) The veteran must have:

\(1\) Been qualified for RH insurance (i.e., discharged from military
service on or after April 25, 195 1, under other than dishonorable
conditions and subsequently rated for a service-connected disability);

\(2\) Been mentally incompetent from a service-connected disability:

\(a\) At the time of release from active service; or

\(b\) During any part of the 1-year period from the date the service
connection of a disability is first determined by the Veterans
Administration; or

2-2

September 10, 1981 PG 27.2

\(c\) After release from active service, but is not rated
service-connected disabled by the Veterans Administration until after
death; and

\(3\) Remained continuously so mentally incompetent until date of death;
and

\(4\) Died before the appointment of a guardian, or within I year after
the appointment of a guardian.

**g. Conversion to a Permanent Plan**

\(1\) When a veteran\'s prognosis and age suggest a conversion of term
insurance to a permanent plan, the information is furnished the
court-appointed fiduciary for his or her decision.

\(2\) Veterans who have continued their term insurance without
converting to a permanent plan find their premiums increasing each
successive term while their policies acquire no loan or cash surrender
value and no potential for extended or paid-up insurance. Conversion to
a permanent plan is frequently in the veteran\'s best interest. Such a
conversion, however, is irrevocable and may be accomplished only by the
veteran if he or she has no court-appointed fiduciary and has sufficient
mental capacity, or by the court-appointed fiduciary with court
approval, when necessary.

h\. **Dividend.** A dividend is a distributable surplus derived from
favorable mortality experiences and excess interest not needed to cover
risks. There are six options for disposition of dividends: (See M29-1,
pt. 1, par. 5.06.)

\(1\) **Credit.** This option provides for retention of dividends as a
credit, with interest, to pay premiums to prevent a lapse if the insured
fails to pay. This option is used in all cases where a different option
has not been selected.

\(2\) **Cash**. A U.S. Treasury check is mailed to the current address
of record.

\(3\) **Deposit**. On written request, dividends (on permanent plans
only) may be left to accumulate on deposit, with interest. If the policy
lapses or is surrendered for paid-up insurance, the deposit and interest
are used in calculating the amount and period of extended insurance or
the amount of paid-up insurance.

\(4\) **Premium**. The dividends are applied for payment of advance
premiums.

\(5\) **Loan/Lien.** The dividend is applied to reduce a loan or lien on
the policy.

\(6\) **Paid-Up Additions**. This option is available only to
policyholders with V, RS, W, J, JR or JS insurance. The dividend is
applied as a single premium at the attained age of the insured to
purchase paid-up insurance. The paid-up additions have loan and cash
surrender values.

i\. **Loan**. A loan may be granted on any permanent policy that is at
least I year old and not lapsed. If the basic policy is a term policy, a
loan may be granted on the paid-up additions only. The loan cannot
exceed 94 percent of the cash value of the policy. A loan may be
obtained only by a competent insured or by a court-appointed fiduciary
with a court order, when necessary. The loan carries interest at 4
percent per annum if it were made prior to January 11, 1971; 5 percent
if made on January 11, 1971, through July 28, 1981. After that time the
interest rate became flexible and now deviates based on factors in the
economy. (Current interest rates can be found in VAR 3428.) A loan may
be repaid at any time, in part or full, and deductions from compensation
or pension can be authorized for repayment. Annual interest, if not
paid, is added to the principal, and, if the principal and interest of
the loan exceed the cash value of the policy, some payment must be made
or the insurance is canceled. If the loan and interest are not repaid
when the policy matures (the insured dies or reaches endowment age) or
lapses for nonpayment of premium, the amount of the debt is deducted
from face amount or the cash value of the policy, whichever is
applicable.

2-3

September 10, 1981 PG 27-2

**CONTENTS**

**CHAPTER 3. ACCOUNTINGS**

PARAGRAPH PAGE

3.01 General 3-1

3.02 Requesting an Accounting 3-2

3.03 Approval of Accounts 3-3

3.04 Auditing 3-4

3.05 Auditing Techniques 3-5

3-i

September 10, 1981 PG 27-2

**CHAPTER 3. ACCOUNTINGS**

**3.01 GENERAL**

a\. Basic information regarding the Estate Analyst\'s responsibilities
in relationship to accountings is contained in M27-1, part III, section
1, paragraphs 8.02 through 8.29. This guide will not attempt to repeat
all information contained in the manual but will serve only to
supplement certain portions.

b\. A court-appointed fiduciary is charged with all funds received or
which should have been received from all sources. However, like the VA,
the Social Security Administration need not release benefits to a
court-appointed fiduciary. It may release payments to a representative
payee in a fiduciary capacity who reports, when required, to the Social
Security Administration. Consequently, court-appointed fiduciaries\'
accountings will not always include these payments even though the
person actually receives and disburses them. (In some jurisdictions
there is a disposition on the part of courts to require fiduciaries to
account for these funds received by them.) Even though income and
expenditure of all funds accounted for are monitored, questions of VA
supervision of non-VA funds are not basically involved, but a complete
picture of the entire estate is necessary for full protection of the
estate and the VA. The principal interest of the VA with respect to such
monies is how they affect the economic and entitlement status of the
beneficiary.

**3.02 REQUESTING AN ACCOUNTING**

Sending a letter, placing a telephone call or initiating a field
examination for the purpose of obtaining a currently due or delinquent
accounting is commonly referred to as \"calling the account,\" or
\"account call.\" (Initial and first followup account call letters for
individual fiduciaries normally come from ADIS (Automated Diary and
Index System)). ADIS procedures are outlined in M27-1, part IV. (Manila
regional office does not have ADIS capability, but has its own automated
diary system.)

a\. **The Initial Account Call Letter**. ADIS generates previously
diaried account call letters once a month on a cyclic routine. Letters
are generated at the beginning of a month for accounts due in the
following month; e.g., letters for accountings due in January are
received the first part of December. Thus, the initial call letter is
received for immediate mailing 35 to 65 calendar days prior to the due
date of the accounting. This is intended to alert fiduciaries that their
accounting will soon be due so that they can begin putting the necessary
information together. Because corporate fiduciaries normally keep
diaries and accurate, up-to-date ledgers and do not require this lead
time or a reminder that the account is due, account call letters are not
usually forwarded to them. If individual fiduciaries have good ledgers
and diary systems, they do not need to receive account call letters
either. This is important to remember when a fiduciary objects to
receiving these letters. On the other hand, if a corporate fiduciary
does need the reminder, an account call letter can be initiated. Lines
18 and 19 of VA Form 27-8545a, Automated Diary and Index Code Sheet
(Veterans Services-Fiduciary), are independent of line 21. Line 19 can
be coded either I I (Call Account) or 20 (Account Due Only) regardless
of the type of fiduciary coded on line 21.

b\. **The First Followup**. When a previous diary has been entered, ADIS
generates a followup letter 35 to 65 calendar days after the due date of
the accounting. This letter is brief, and is intended -as a gentle
reminder that the accounting is now past due. This letter is
intentionally not strongly worded as most individual fiduciaries are not
accountants, many hold down a full-time job and some serve
gratuitously-they need a little time to get organized.

c\. **The Third Letter**. If necessary, a third, strongly worded letter
should be sent 90 days after the due date. This letter might indicate
that if the fiduciary does not contact the Estate Analyst or submit the
accounting within 15 days, it will be necessary to initiate action to
remove the fiduciary.

*NOTE: A letter should not threaten action that cannot or will not be
taken. If there is simply no one else to serve as fiduciary (an
unfortunate situation that sometimes occurs) and a recent field
examination report indicates that monies are used properly, do not warn
of removal. Similarly, if the District Counsel is unwilling to cite a
particular court-appointed fiduciary into court, do not threaten court
action. (It is for this contingency that this type letter should be
signed by the District Counsel or someone delegated authority to sign
for him or her. If the District Counsel is unwilling to take the action
indicated, he or she most likely will not sign the letter.)*

3-1

PG 27-2 September 10, 1981

d\. **Telephone Calls and Field Examinations**. After the first followup
account call letter has been sent, informal attempts via telephone may
be made in an effort to obtain the accounting. These efforts should be
documented in the PGF (Principal Guardianship Folder) on a VA Form 119,
Report of Contact, or briefly on the VA Form 27-3045, Estate Action
Record. In cases where call letters and telephone calls do not produce
an accounting or a valid reason for delay in submission, a field
examination may be requested.

e\. **Suspending Payments.** Payment to the fiduciary will not
automatically be suspended because of a failure to account. (When pay is
suspended the person most likely to be hurt is the beneficiary. VA
efforts to obtain an accounting, therefore, should not, if it can
possibly be avoided, cause hardship or discomfort to the beneficiary.)
There may be many reasons for a fiduciary not presenting an accounting
on a timely basis. A distinction may be drawn between willful neglect or
refusal to account in the sense of subparagraph g below and some other
acceptable inability to account timely.

f\. **Referral to the District Counsel**. In court-appointed cases when
the call letters, followup telephone calls and/or field examinations do
not produce the account, or the file clearly discloses that such action
will prove unproductive, the case will be referred to the District
Counsel for necessary court action. Any information of record pertaining
to the reason for delinquency should be brought to the attention of the
District Counsel.

g\. **Prosecution of Defaulting Fiduciaries**. If embezzlement or
misappropriation of funds by a court-appointed fiduciary or legal
custodian of a VA beneficiary is indicated, the VSO (Veterans Services
Officer) will gather and report the facts to the District Counsel for
necessary action in accordance with section 3501 of title 38, United
States Codes, quoted as follows:

\(a\) Whoever, being \... legally vested with the responsibility or care
of a claimant or his estate, or any other person having charge and
custody in a fiduciary capacity of money heretofore or hereafter paid
under any of the laws administered by the Veterans\' Administration for
the benefit of any minor, incompetent, or other beneficiary, shall \...
in any manner misappropriate any such money or property derived
therefrom in \... service as such fiduciary, shall be fined not more
than \$2,000 or imprisoned not more than 5 years, or both.

\(b\) 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.

*NOTE.- The above outline is general in nature. State law may require
that the procedures be modified, or the District Counsel may request
additional (or different) efforts in court-appointed cases. Because the
District Counsel is the legal representative for the VA and he or she
will be responsible for taking court action in any case, written
guidelines provided by him or her will be followed.*

**3.03 APPROVAL OF ACCOUNTS**

The Estate Analyst may give a final approval to all accounts, except the
following, which require referral to the District Counsel or DVB
attorney under appropriate delegation of authority (M27-1, pt. III par.
8.02c).

a\. A major accounting deficiency not capable of being remedied by
correspondence. Generally, every effort should be made to adjust
discrepancies in accountings by use of correspondence or telephone. The
questions of whether such contacts should be initiated and when they
become unsuccessful are within the discretion of the Estate Analyst.
Major accounting deficiencies include but are not limited to: illegal or
questionable investments, failure to provide proof of assets, and
improper disbursements.

b\. Accounts where there is the possibility of embezzlement or other
criminal offenses wherein referral to the U.S. attorney may be necessary
(examples: fiduciary\'s \"borrowing\" of estate funds, claiming
disbursements in excess of actual expenditures, and concealment of
estate assets received).

c\. Accounts in which excessive fiduciary commissions have been charged
when an adjustment cannot be effected by communication with the
fiduciary.

3-2

September 10, 1981 PG 27-2

d\. Accounts in which excessive attorney fees have been charged. The
District Counsel\'s guidelines on what is a reasonable fee for different
services should be used in determining whether referral is in order.

**3.04 AUDITING**

a\. **Being Timely**. Accounts are analyzed and reviewed in order of
receipt unless special circumstances intervene. (For example, the
attorney of record is able to set the date for a court hearing (on the
accounting) to a day on which he or she has to be in court on other
matters; however, a hearing on that date would not allow for a proper
length of time to have passed. In such a case the attorney could request
a waiver of notice of hearing. If the case were then audited immediately
and found proper, a waiver could be given.) Timeliness is important.
There are often State statutory deadlines to be met, such as periods
during which exceptions can be filed. Objections or exceptions to
accounts, proposed commissions, or allowances will be taken within 10
days of receipt in VSD (Veterans Services Division) or the time allowed
by State law (M27-1, pt. III, par. 8.14). A practice of deferring action
on seemingly difficult accounts in favor of simpler ones is discouraged.
This often leads to complicating an otherwise relatively simple
situation. Any remedial action requested should be diaried and followed
up until clarified or corrected.

b\. **When an Audit Is Completed.** The account audit must be
satisfactory before it can be considered as completed for AMIS purposes;
that is, it must be approved by the Estate Analyst or by a court order
over the objections of the analyst/District Counsel. An account will be
considered unsatisfactory if it has a deficiency. The following are
examples of deficiencies that might cause an account to be considered
unsatisfactory:

\(1\) Lack of a true copy (unless the VSO (Estate Analyst) is otherwise
satisfied that the copy supplied is a true copy of the account filed),

\(2\) Lack of certificates of deposit or securities,

\(3\) Excessive fiduciary or attorney fees, or

\(4\) Major errors of omissions or commissions.

**3.05 AUDITING TECHNIQUES**

a\. **Each Estate Analyst will need to develop her or his own system for
auditing accountings.** Normally a methodical approach is preferable. If
an orderly approach is not used it is more likely that deficiencies will
go undetected. This does not mean that all accountings are alike. On the
contrary, there is no such thing as a \"routine\" accounting. The
contents of each accounting (every receipt, expenditure and investment
entry) must be analyzed comparing the entries with other available data
in the PGF (or claims file/Target) and considering the individual\'s
status, relationships and entitlements. Each account should be
considered unique. Only the approach will be routine.

b\. **The format of the account should be checked for:**

\(1\) **Completion of the Appropriate Accounting Form**. In
court-appointed cases the format will vary from State to State. If there
is any question as to legal format, the District Counsel should be asked
for advice. Legal custodians and institutional award payees will use VA
Form 274706b, Federal Fiduciary\'s Account.

\(2\) **The Period Covered**. Is the day following the ending date of
the previous accounting (or the date of appointment if this is the first
accounting) the beginning date of the current accounting? In
court-appointed cases operations are simplified if the anniversary date
of appointment can be maintained as the initial date of each accounting
period. However, this matter is sometimes governed by State statutes
which must be followed. In Federal fiduciary cases the due date of the
first accounting should be scheduled at least 30 days before the first
scheduled \"fid-ben.\" Subsequent accountings should normally be
scheduled on the same date of the year as the original call date,
although this date may be altered if circumstances dictate.

3-3

PG 27-2 September 10, 1981

3.  **Correct Execution of All Pertinent Supporting Documents, Such as
    Certificate of Balance on Deposit, Securities, etc.**

\(a\) If there is cash remaining at the end of the accounting period it
will most likely be in a bank or other savings institution. Unless the
account indicates that the cash is in the hands of the fiduciary there
should be a certificate of balance on deposit showing the amount of
money in the checking account. Any savings in a savings account should
also be documented on a certificate of balance on deposit.

\(b\) Court-appointed fiduciary accounts must contain certificates
specifying the securities exhibited to the court, or the accounts must
be supplemented by certificates as to securities which have been
exhibited to the court or equivalent certification. Legal custodians
must complete the Certification of U.S. savings bonds on the reverse
side of VA Form 27-4706b when bonds form a part of the estate.

\(c\) Insure that the date of the certificate is the same as the ending
date of the accounting (Banks serving as fiduciaries are not required to
provide certificates if the statement of account reflects the deposit
and earnings or the securities.) (Institutional award payees should have
no VA money invested and, hence, no certificates.)

\(d\) If any variation exists between the amount of cash as shown by
certificates and the account or if there is any question as to the
existence of assets which cannot be resolved except by court action, the
case must be referred to the District Counsel.

*NOTE.- It is not necessary that the certifications be on VA forms. A
letter from the bank or savings institution or another format that
provides the same information requested on VA Forms 27-47\]8a,
Certificate of Balance on Deposit, or 27-4709, Certificate as to
Securities, will serve the same purpose.*

\(4\) **Necessary Signatures, Sea\[ or Certification**. Insure that the
fiduciary has signed the accounting and that bank or savings institution
personnel have signed the certificate(s) of balance on deposit. When
necessary to ensure that the account received is the same as the one
filed with the court, insure that it has been certified as a true copy
by the proper court official.

\(5\) **Segregation of Entries**. If more than one beneficiary\'s estate
is included in the accounting there should be a separate statement of
receipts, expenditures and remaining estate for each beneficiary, either
on the same form or on separate forms.

\(6\) **Separation and Proper Identification of Disbursements**. Unless
there is a court order authorizing a specific amount per month (e.g.,
\$150 per month spending money or \$500 per month room and board),
disbursements should be itemized and explained. For example, an entry of
\"Mr. Jones, \$40\" is insufficient. The entry should describe the
purpose of the expenditure; e.g., \"Mr. Jones, lawn and garden work,
W.\"

c\. Arithmetic should be checked to insure that the account figures
balance. Any discrepancy will be investigated and the reason for it
identified. (Simple accounting errors, such as errors in addition or
transposition of numbers, will be noted and the fiduciary informed. No
objection will be made if the fiduciary wishes to correct these small
deficiencies on the next accounting.)

d\. Opening entries should be checked against corresponding items of the
last account. Any variation requires full explanation and
reconciliation. If any assets have been liquidated, audit and
verification as appropriate must disclose whether the proceeds are in
cash or in new investments.

e\. Income should be verified. If copies of current awards are not in
the PGF, Target or the claims folder will be accessed and reported VA
payments verified. (Special attention should be paid to any retroactive
payments that may have been paid.) If the previous accounting showed
investments in interest bearing accounts, insure that interest is
reflected. (In individual fiduciary accountings the amount of interest
should be verified by comparing the entry with the certificate of
balance on deposit.) The last Summary Sheet may contain facts about
suspension of payments, award termination dates,

3-4

September 10, 1981 PG 27-2

changes in status (marriage of minor, death of spouse or dependent
parent or child, etc.). The PGF should be examined to locate possible
correspondence about social security, inheritance, etc. When securities
are disposed of during the period covered by the account, an examination
should be made to determine if pro rata earnings have been correctly
computed. If a type of income previously reported is not shown in the
current accounting, the reason therefore should be obtained primarily to
determine if entitlement is affected and to determine if demands on VA
funds are necessary and reasonable. All items of income will be
carefully checked. When clarifying information is required in connection
with the audit, a letter or telephone call should be initiated. (The
clarification should be noted in the PGF by writing on the account, the
VA Form 27-3045, or by use of a VA Form 119 or memorandum to the record
when received verbally.)

*NOTE.- Double entry accounting procedures require that two entries be
made to balance out every transaction,, e.g., in order to spend money,
the money must first be reflected as income or asset somewhere in the
account ledger. This may be confusing particularly when reviewing a bank
accounting with three running balances: income, principal and assets. In
order to put income into investments, the funds may have to be shown as
expended from the income category, credited to the principal category,
then expended (normally at a later date) from the principal category and
credited to the asset column. In a similar fashion, when money is needed
in the income cash column (checking account), an expenditure may be
required from either the principal column (savings account) or asset
column (investment) and will appear as a credit in the income cash
column. Paper entries of this type must be watched carefully to insure
that commissions are paid only on actual income annual disbursements.
The estate summary also should reflect only true income and
expenditures.*

f\. Expenditures will be carefully analyzed

\(1\) It is the duty of the court-appointed fiduciary to justify all
claims for credit appearing in the account. The basis for all
disbursements (VA authorization or court order) should be documented in
the file on VA Form 27-4707, Estate Summary, in the field examination
report, copy of a letter of authorization or copy of court order.
(Recurring expenditures authorized should be annotated on the VA Form
27-4707.) Check the file for copies of court orders when the account
states \"per court order dated xx/xx, so much spent for xxxx.\" Make
sure the quoted court order did in fact authorize that expenditure and
the PGF contains a copy of the order. If there is no record of the court
order, obtain a copy prior to approval of the accounting. The account
will be compared to the latest field examination report to determine
whether expenses are consistently reported, and are appropriate. This is
particularly important when the VA has authorized the expenditures;
e.g., in a Federal fiduciary case. Should an agreement have been reached
with the fiduciary about a schedule of allowances, any variation should
be explained.

\(2\) Question seemingly inappropriate expenditures; e.g., automobile
purchased for unlicensed beneficiary, lawn mower purchased for apartment
dweller. Charges for gasoline, auto repairs, etc., may indicate
unauthorized purchase or operation of an automobile with possible
personal liability.

\(3\) Payment of old debts, loans, judgments, etc., should be called to
the attention of the District Counsel or DVB attorney under delegation
of authority. In some instances incompetent veterans and minors are
inclined to borrow money at excessive rates of interest. No legal
liability may exist for repayment from the estate, and claimed
disbursements for such purposes must be justified on the basis of
advantage to the ward. Primarily a court-appointed fiduciary was
appointed because the ward could not legally contract. All cases
involving litigation affecting the estate of a beneficiary under legal
disability should be brought to the attention of the District Counsel or
VSD attorney under a proper delegation of authority.

*NOTE.- It has been the policy of Congress to exempt veterans\' benefits
from claims of creditors as well as taxation. This policy is expressed
in 38 U. S. C. 3101. The Internal Revenue Service is the only statutory
exception to the rule. The Estate Analyst should be alert to
expenditures for payment of judgments against the veteran, for
creditors\' claims or as a result of invalid contracts entered into by
the ward prior to, or after, the appointment of the court-appointed
fiduciary. Funds which are derived from appropriated taxes and paid to
beneficiaries by the Veterans Administration are intended for their
current support and maintenance and are not subject to seizure, levy, or
execution. Such funds are protected by Federal and most State laws.*

3-5

PG 27-2 September 10, 1981

\(4\) Verify appropriateness of support payments. If the account
reflects payments in support of someone other than the beneficiary,
determine whether that individual is recognized as a dependent. If not,
determine if their relationship is such that additional benefits may be
paid for them as dependents and solicit an application for same.
Cessation of payments to a dependent may indicate the dependent is
deceased.

\(5\) Burial expenses for which the ward is not legally liable are
subject to objection. Even where such liability exists, attention is
required to the amount charged to the estate (contributory liability,
State or local grants, excessive total charges).

\(6\) Check expenditures for unnecessary payments - in particular when
the veteran may be eligible for \"fee basis\" and the estate is paying
for hospitalization, doctor bills or medications. Where payments to a
hospital and to someone else for maintenance of the veteran are going
simultaneously, duplicate payments may be involved. Advise the fiduciary
of procedures to make full use to benefit entitlement and preservation.

\(7\) Abrupt changes in amounts of disbursements should be viewed for
possible:

\(a\) Change in status of beneficiary,

\(b\) Inadequate provision for needs of beneficiary, or

\(c\) Improper disbursements.

\(8\) Transactions between fiduciary and beneficiary should always be
carefully reviewed and called to the District Counsel\'s attention when
self-dealing by the fiduciary may be involved. For example, purchase for
the beneficiary of a piece of property belonging to the fiduciary must
be checked to insure the cost was not excessive to the value.

\(9\) Unusual charges for clothing, medical attention, travel,
television, etc., may indicate the need for further examination, either
immediately or at the time of the next field examination. If there is no
indication that immediate action is warranted, all sizable special
purchases appearing on the accounting will be flagged and a request for
verification of the purchase will be made when the next field
examination is requested.

\(10\) Disbursements are checked to determine if any items have been
paid from corpus of estate. In some jurisdictions invasion of
accumulated assets is only authorized when approved by a prior court
order. The fiduciary may incur personal liability if corpus is disbursed
without following the law. In any case where the fiduciary follows a
course of action which might cause personal financial loss, he or she
should be so informed by the Estate Analyst. When such an illegal
expenditure is identified, it must be referred to the District Counsel
for possible legal action.

g\. **The account should be reviewed for indication of change in benefit
entitlement**. Determine the type of benefit the ward is receiving. If
it is pension, check the size of the estate and the income for possible
reporting to Adjudication if excessive. Also, in pension cases, report
sale of a home to Adjudication. Check the accounting for change in
dependency status of the beneficiary. Entries may not reflect the actual
change in dependency status, but will often be subtle. For example, the
birth of a child may only be evident through payments for diaper
service, a divorce through payment of attorney fees, or the death of a
dependent through payment to a funeral home. Determine whether the
veteran is hospitalized and if so, if she or he comes under 38 U.S.C.
3203(b)(1) (\$1,500 limitation). If there is ANYTHING in the account
that you do not understand, CHECK IT OUT before you approve the account.
If you object to anything, or request items such as certificates of
balance, follow up on them. If it\'s worth asking for, insure it (or an
explanation) is received. Be careful not to become so involved in
attempting to have the accounting corrected through informal means that
the time passes in which formal objection to the court can be made.

h\. **If indicated, a review of receipts and check stubs should be made
to verify the account**. Examples of when this might be indicated would
be when the field examination report lists expenses which conflict with
those claimed on the accounting, or when persons have claimed the
fiduciary is misusing the beneficiary\'s funds. (In Federal fiduciary
cases it will generally not be necessary to make such a review.)

3-6

September 10, 1981 PG 27-2

i\. **Check to see if there is an excessive amount of money in the
checking account AFTER requested fees have been paid**. If there is,
request the fiduciary to invest funds surplus to the beneficiary\'s
immediate needs. Normally no more than I month\'s average expenditures
should be held in a checking account unless a large expenditure is
planned.

j\. **Review investments**. Determine prudence and legality of any
investments. Refer questionable items to District Counsel. (See par.
4.05.)

\(1\) Suggest investment when there are surplus funds in the estate
(i.e., funds that will not be needed in the immediate future for the
expenses of the beneficiary or dependents, if any).

\(2\) In court-appointed cases make certain that certified copies of
court orders are in the file if required by State law for investment
purposes. Funds should be invested in conformity with the State law, and
for the highest yield consonant with safety.

\(3\) Be sure that Government bonds are correctly registered and, if
maturity date has passed, the bonds are still earning interest. If bonds
or notes no longer earn interest, the fiduciary should be asked to cash
the bonds and reinvest the funds. (Series E bonds issued in 1941-52 are
now reaching final maturity. The Department of the Treasury has
announced that no further extensions will be given to these bonds.)

\(4\) Check to see that the bank account is properly described.

\(5\) See that all assets are fully identified and described.

\(6\) Make sure that funds invested in real estate or mortgages comply
with State law and that the file is properly documented (identification
of property and parties; adequacy of security; assessed, appraised and
reasonable value; title recordation, etc.).

\(7\) Advise fiduciaries to split VA assets between two or more
financial institutions when total VA assets held in one financial
institution exceed the maximum amount insurable by State or Federal
insuring agencies.

k\. **Review commissions and allowances for court-appointed
fiduciaries**

\(1\) Federal fiduciaries are not authorized commissions. Rate of
commission payable to a court-appointed fiduciary is governed by State
law and must be computed in accordance with the type of income.
Sometimes a difference exists between commissions which may be collected
on VA income and non-VA income. If the fiduciary requests an excessive
fee, the Estate Analyst will informally (by letter or telephone) request
that he or she reduce the fee or show extraordinary services which
justify the claim. If the commission cannot be reduced informally refer
the case to the District Counsel (or VSD attorney with proper delegation
of authority) for formal objection.

\(2\) **Extraordinary Services**. The scope of a court-appointed
fiduciary\'s ordinary duty differs from State to State. Extraordinary
services must be specifically alleged and proved by the fiduciary. When
compensation for such services is claimed, determination will be made
whether the services performed actually exceed the ordinary duty for
which commissions are allowed. If so, objection will not be made to
reasonable compensation. If not, the Estate Analyst will request that
the claim for extraordinary fees be denied. If the fiduciary persists in
the claim, the matter should be referred to the District Counsel or VSD
attorney with proper delegation of authority. Doubtful cases of such
claims should also be referred.

1\. **Review attorney fees**. Review fees for legality and/or
excessiveness. Refer questionable items to the District Counsel.

\(1\) There is wide variation in law among States relative to paying an
attorney for preparation and/or presentation of accountings. The
District Counsel can advise the Estate Analyst of the law in any
particular State.

\(a\) In some States the preparation and presentation of an accounting
is a part of the ordinary duty of a court-appointed fiduciary. If the
fiduciary employs an attorney, he or she cannot get additional
compensation as attorney.

3-7

PG 27-2 September 10, 1981

\(b\) In other jurisdictions the court-appointed fiduciary must be
represented by an attorney in all proceedings. His or her reasonable fee
is a proper charge against the estate.

\(c\) A further disparity exists in some States in that a fiduciary who
is an attorney may receive a separate fee for preparing and presenting
the account.

\(2\) A fiduciary who is also an attorney is entitled to fees at the
rate allowed attorneys for legal services performed; e.g., presentation
of the accounting. She or he is not entitled to charge at that rate for
performing duties that are provided as a layperson; e.g., finding living
quarters for the ward, or other duties any fiduciary may be called on to
perform.

\(3\) The Estate Analyst will have been advised by the District Counsel
as to what constitutes reasonable fees for particular services. The
Estate Analyst will not refer cases with such fees to the District
Counsel for objection; however, he or she should be alert to detect and
refer to the District Counsel (or VSD attorney with proper delegation of
authority) requests for excessive fees and practices which unnecessarily
burden the estates of beneficiaries. These include:

\(a\) Applying for numerous expenditure orders when a comprehensive
maintenance order obtained at initial appointment or approval of annual
account would suffice.

\(b\) Proceedings unnecessary because of statutory authorization; e.g.,
allowance for maintenance or authorized investments.

\(c\) Existing orders containing authority for proposed expenditures.

\(d\) Proceedings to authorize payment or compromise claims for which
beneficiary is not legally liable; e.g., payment of old bills.

\(4\) A court-appointed fiduciary may employ an attorney to handle any
civil or criminal litigation which may arise not connected directly with
the fiduciary ship.

m\. **Review surety bonds**. All surety bonds should be reviewed for the
following:

\(1\) Surety bond is required of every individual court-appointed
fiduciary and of every corporate fiduciary unless the latter is exempt
by State law from furnishing bond. Surety bonds should be executed in an
amount not less than accumulated estate derived from VA benefits plus
anticipated net income from VA benefits during the ensuing accounting
period. When funds are in an account and cannot be withdrawn without
court order (blocked account), or when estate is in savings bonds
registered per VA Regulation 5103(B), bond may be waived on amounts so
protected.

\(2\) Where the amount of the surety bond required under State law is
less than stated above or is discretionary (and adequate protection is
not afforded by statute for deposit of assets in a security depository),
the Estate Analyst should resolve the issue by correspondence (increase
the bond) unless VA legal action is required, in which event the case
will be referred to the District Counsel.

\(3\) For procedure when reduction of surety bond is necessary, see
M27-1, part 111, paragraph 8.27.

\(4\) Although corporate surety is normally preferred, personal surety
bonds must meet requirements as to Federal resources of sureties. (See
M27-1, pt. III, par. 8.25.) When each account is called, the Estate
Analyst will send a letter to the fiduciary for completion by each
personal surety outlining the penal sum of the bond and providing the
following oath:

I certify that I am obligated as surety on the bond of (name of
beneficiary) guardian/conservator in the estate of (name of
beneficiary). I further certify that I own property described below, and
that my interest in such property

3-8

September 10, 1981 PG 27-2

is worth no less than the penal sum of said bond over and above all my
debts, liabilities and exemptions, and the aggregate of other bonds in
which I am principal or surety.

[.]{.underline} [.]{.underline}

DATE SIGNATURE OF SURETY

**Description of Property:**

\(5\) Corporate surety bonds are acceptable only when the surety company
is authorized to do business in the State. If personal sureties fail to
meet legal requirements or corporate sureties discontinue business or go
into receivership, a new bond is obtained.

n\. **Review overall estate administration**

\(1\) Adjust fund allowances as necessary.

\(2\) Protect insurance and other VA benefit rights.

\(3\) Advise fiduciaries of other Federal and State benefits, if
appropriate.

o\. **Approve or disapprove the accounting**. If the account is proper,
no objection will be made. If necessary, a waiver of notice of hearing
or a letter to the fiduciary, attorney and/or court will be initiated
indicating that the accounting is satisfactory. If the account is not
proper and discrepancies cannot be corrected informally, refer the case
to the District Counsel (or DVB attorney with delegation of authority)
for court action.

3-9

September 10, 1981 PG 27-2

**CONTENTS**

**CHAPTER 4. FUND USAGE**

**PARAGRAPH PAGE**

4.01 VA
Policy\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
4-1

4.02 Evaluation of Request for
Funds\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
4-1

4.03 Charitable
Gifts\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
4-2

4.04 Insurance
Premiums\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
4-2

4.05
Investments\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
4-3

4.06 Investment
Advice\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
4-5

4-i

September 10, 1981 PG 27-2

**CHAPTER 4. FUND USAGE**

**4.01 VA POLICY**

a\. **Adults**. VA policy is to use VA benefits generously for the
current needs and comforts of incompetent adults and their dependents to
the extent funds can be effectively applied. The primary responsibility
is to assure that funds are provided for the beneficiary\'s shelter,
food, clothing, care, personal needs and recreation. Secondary
responsibility extends to assurance that dependents are cared for within
the limits of funds available. Full consideration should be given to the
standard of living, environment, and the practicability of fund usage in
each case. Whenever possible the adult beneficiary should be allowed to
handle some funds directly.

b\. **Minors**

\(1\) VA policy is to urge the conservation of VA benefits for future
education needs. Fiduciaries who are not legally obligated to support
the minor(s), however, will be authorized to use VA funds for the care
and maintenance of the minor(s).

\(2\) When persons legally liable are unable to make financial
provisions for minors\' needs, funds in the minors\' estates may be
used. Files, however, should show who is responsible, according to law,
for the needs and efforts should be made to protect minors\' estates
from financial burdens which other persons are legally required to bear.

\(3\) Court orders for support, adoption proceedings, maintenance
agreements, in loco parentis relationships, etc., may entitle the minor
to money from sources outside the estate, and should be considered in
determining the extent to which VA funds might be needed for support or
could be saved.

**4.02 EVALUATION OF REQUEST FOR FUNDS**

**a. Fund Allowances**. When a request is made concerning an increase or
decrease in fund allowances or for a lump sum for a nonrecurrent
expenditure, the Estate Analyst has discretionary authority to grant,
deny, or modify the request without limitation as to amount, provided no
court action is required.

**b. Adult Beneficiaries**

\(1\) A complete picture of the financial situation is necessary prior
to the allowing or disallowing of any request for funds. (A well
documented field examination report is an excellent source of this
information.) This picture includes:

\(a\) Income from all sources.

\(b\) Contributions to family expenses made by members of the household.

\(c\) Itemized monthly maintenance expenses.

\(d\) Outstanding unsecured debts and any payment schedules that have
been agreed to.

\(e\) Property values less any encumbrances.

\(f\) List of dependents (age, any unusual features such as ill health,
etc.).

\(g\) Probable changes in income or expense areas.

\(2\) Expenditure for hobby development is often justified, particularly
when the activity will give the adult beneficiary something to do and
help focus his or her attention on constructive endeavors and away from
his or her disability. Interest in a program that utilizes physical or
mental efforts tends to generate self-confidence and assist the
adjustment process.

4-1

PG 27-2 September 10, 1981

c\. **Minor Beneficiaries**. VA benefits payable in behalf of minors
should be used for their benefit. If the request for funds would benefit
the minor and not unduly burden the estate, it should be granted. (See
par. 4.Olb.) The Estate Analyst should not substitute his or her
judgment for that of the fiduciary especially when the minor is in a
parent\'s (or person standing in loco parentis) custody. A liberal
approach is adopted toward disbursements for educational, cultural,
medical and recreational needs. During the late teens minors often want
money for other than ordinary purposes (such as an automobile). Usually
the minor will benefit from waiting until reaching majority, at which
time he or she can be expected to exercise more balanced judgment. The
following factors are always for consideration but not necessarily
controlling:

\(1\) What are the monthly family expenses and income?

\(2\) Does proposed allowance bear a reasonable relation to
beneficiary\'s fair share of family expenditures?

\(3\) Is proposed allowance or expenditure consistent with the minor\'s
social and economic circumstances and those of his or her family?

d\. **Request of Doubtful Prudence or for Unusual Purposes.** If the
Estate Analyst doubts the prudence of an expenditure, the request is for
an item unusual to the ward\'s situation, and involves a substantial sum
in relation to available estate, the matter may be referred to a field
examiner by field examination request. The field examiner, then, will
make the decision through his or her report.

e\. **Refusal of Funds**. It must always be recognized that the funds
involved are those of the veteran or other beneficiary. A refusal of a
proposed use of funds, therefore, must be fully documented to show that
it would have been detrimental to the beneficiary\'s best interests.
Reasonable doubt will be resolved in favor of approving the request.

**4.03 CHARITABLE GIFTS**

The general rule is that neither a guardian nor a court has the power to
dispose of a ward\'s property by way of a gift. This rigid principle has
its exception, however, and while gifts from the estates of incompetent
veterans are not to be recommended or encouraged, they may be allowed,
subject to the following (Op.G.C. 28-79):

\(1\) The needs of the beneficiary and the beneficiary\'s dependents
have been met.

\(2\) The gift is one that the beneficiary had been in the habit of
giving or is one that he or she probably would have given had he or she
been competent.

\(3\) The gift is made from the surplus income (i.e., surplus from
monthly payments being made to the fiduciary or surplus from estate
earnings).

\(4\) The amount is reasonable considering his or her circumstances.

\(5\) A court order is obtained if:

\(a\) Required under State law,

\(b\) The gift is for something other than that which he or she had been
giving to, or

\(c\) The amount is other than \"nominal.\"

**4.04 INSURANCE PREMIUMS**

a\. Legality of payment of commercial life insurance premiums by
court-appointed fiduciaries is governed by State law. Hospitalization
coverage is now generally regarded as necessary protection, and premiums
are considered as an allowable

4-2

September 10, 1981 PG 27-2

expense instead of an investment. No objection should be made to premium
payments for Government insurance pending waiver of such premiums.
However, when insurance has been issued under the Veterans Reopened
Insurance program (policy numbers prefixed with \"J,\" \"JR\" and
\"JS\") and the Estate Analyst ascertains from an account or other
sources that the payment of premiums is depriving the veteran and his or
her dependents of funds necessary for their support and maintenance (or
education where pertinent), the matter will be referred to District
Counsel or VSD attorney acting under proper delegation of authority.

b\. It should be noted that many fiduciaries (including banks and trust
companies) invest a ward\'s funds in commercial life insurance when the
ward will leave no heirs at law and in hospital insurance when the ward
will always be eligible for such care at Government expense. The Estate
Analyst should invite attention to such wasteful practices and seek to
resolve them.

c\. Expenditures for new educational policies for minors are prohibited.
For such policies in existence, see M27-1, part III, paragraph 8.22.

**4.05 INVESTMENTS**

a\. **Legal Custodians** may invest VA benefits only in U.S. savings
bonds or in interest or dividend paying accounts protected by State or
Federal insurance (VAR 5103). This might include credit union or similar
type savings institutions when these accounts are State or Federally
insured. It does not include burial trust accounts. All investments must
be registered in accordance with VAR 5103 (B) and (C).

b\. **Court-Appointed Fiduciary** investments of VA benefits must be
both legal under State law and prudent under VA standards (VAR 5106).
Legality may usually be determined by reference to the controlling State
statute. The District Counsel should be asked for assistance in this
regard. However, the prudence of an investment will often require
careful analysis of all factors as they relate to the short- and
long-term financial needs of the beneficiary. As a general rule
concerning surplus VA funds, safety, assured income, stability of
principal, and ready convertibility for emergencies are more desirable
than long-term yield. The following are some of the most commonly
questioned investments made by court-appointed fiduciaries:

\(1\) **Common Trust Funds**

\(a\) A common trust fund is a collective investment fund made up of
smaller amounts of money usually from several investors. The funds are
combined because larger sums are able to secure a higher rate of return
than the smaller amounts each individual investor has to invest. In
addition, it is easier to administer one large fund than it is to
monitor many small funds.

\(b\) Common trust funds properly managed have a definite place in the
investment field. There is, of course, no objection to investment in
them, per se. The problem is that for this kind of investment to be
advantageous it must usually continue over a considerable period of
time. This is so because of market fluctuations and management costs.
Early liquidation of these funds for emergency needs can result in not
only a loss of earnings, but also of principal. Common trust funds are
not likely to afford an advantageous investment in most VA cases.

\(c\) Another factor involved is the incentive on the part of the bank
operating the common trust fund to create surpluses for the additional
return they will realize by investment in the fund, rather than
assuring, on a continuing basis, that the beneficiary is receiving the
maximum practicable benefit from amounts paid. This potential problem
can be minimized where the investments require court authorization and
the VSO, through the District Counsel, will have an opportunity to
interpose objections.

\(d\) When the investments in common trust funds do not require prior
court authorization and notice to the VA, the VSO should bring to the
attention of corporate (bank) fiduciaries who invest in such common
trust funds the disadvantages of using the fund for short-term
investments. Consideration should be given to petitioning the court,
through the District Counsel, to surcharge the guardian when a loss
occurs and the exercise of reasonable prudence would have dictated a
more appropriate form of investment.

4-3

PG 27-2 September 10, 1981

**(2) Mutual Funds**

\(a\) Mutual funds are investment companies that accept savings of
individuals and, under professional investment management, channel them
into a wide variety of securities. Money market funds, equity funds,
bond funds and municipal bond funds are some of the numerous types of
mutual funds. Mutual funds have no fixed number of shares, but rather an
infinite number of individuals may own part of the company. Each share
represents a part share in each of the many securities (stocks and
bonds) that the company has purchased. This investment is not insured by
State or Federal deposit insurance.

\(b\) A major difference between mutual funds and common trust funds is
that the fiduciary normally has no interest in the management of the
mutual fund and derives no benefit by way of fee, commission or expenses
for making such investments. Such an investment is also more easily
supervised than a common trust fund since reputable mutual funds
normally will be listed so that market value of the shares can be
ascertained at any particular time.

\(c\) Advantage of mutual funds over other investments such as real
estate and certain stocks is that there is always a market for the
shares. The company contracts with the investor at the time of purchase
to buy the shares back at their net asset value (total net assets of the
company divided by the number of outstanding shares) any time desired.

\(d\) Mutual funds are divided into \"load\" and \"no load\" funds. A
load fund charges a sales commission on purchase of the shares in
addition to the management fee assessed, while the no load fund charges
only a management fee. There has been no demonstrated link between the
size of the sales commission in load funds and any increased performance
of the investments. Because of this extra charge with no extra benefit,
investments in load funds are considered less prudent investments for
fiduciaries to make for incompetent beneficiaries. Due to the relatively
high fees charged by load funds they generally must be maintained for
several years to realize an equitable profit.

**(3) Money Market Certificates**

\(a\) These are Federally insured certificates of deposit (time
accounts). They have a prespecified interest rate and maturity date.

\(b\) The fiduciary normally has no interest in the management of the
money market certificate and derives no benefit by way of fee,
commission or expenses for making such investments.

\(c\) Certificates of deposit can mature in as little time as 30 days or
as long as 10 years. However, the maturity date is preselected and once
the certificate is purchased the date cannot be changed. If investment
is made in money market certificates it would be most acceptable to
purchase several small certificates maturing at different times rather
than one large certificate. Forced liquidation prior to the maturity
date will result in a considerable loss (penalty for early withdrawal).

**(4) Stock**. Investments in stock tire more closely analogous to
investments in mutual funds. Here the major problem frequently is the
soundness of the stocks purchased. High-risk investments cannot be
condoned and usually the more stable stocks must be held for the
long-term to be profitable.

c\. **NOW (Negotiable Order of Withdrawal) Accounts**. NOW accounts are
not considered investments. They are checking accounts. Most
beneficiaries will not benefit from \"investments\" in NOW accounts
because of the rules imposed. For example, many financial institutions
require very high minimum balances figured in different ways (average
balance vs. lowest balance); the interest received is compounded in
different ways (daily, monthly, quarterly); and interest is paid on
different figures (average balance vs. lowest balance for the period).
Unless the minimum deposit can be kept in the account at all times, it
will probably not pay to open a NOW account. And if the minimum deposit
is a relatively large amount, it will be more productive in a savings
account or other investment.

d\. **Individual Case Analysis.** The facts in each case must be
considered for the purpose of determining whether any investment is
prudent and appropriate. For example, the probability of loss from the
investment for a preteenage minor

4-4

September 10, 1981 PG 27-2

for whom there is no foreseeable need to use the funds prior to
enrollment in college is much less than the same type investment for a
high school senior who will soon require the funds for college.
Likewise, an investment in a common trust fund, mutual fund, money
market certificate or stocks of a portion of a fairly large estate of a
single veteran, without dependents, who does not have any foreseeable
need to use that portion of his or her estate, would be much more
prudent than a similar investment for a veteran with dependents when the
funds may be required for educational, medical or other needs.

**4.06 INVESTMENT ADVICE**

Situations will arise in connection with auditing an account and on
other occasions in which it will be necessary to:

a\. Advise individual nonattorney court-appointed fiduciaries of State
law relative to investments (care must be taken to not recommend any
specific investment broker or investment, other than U.S. Government
bonds). All fiduciaries, especially corporate fiduciaries, should be
urged to exercise independent judgment in each case, rather than
establish a routine policy of investing funds surplus to the immediate
maintenance requirements of the beneficiaries in one particular type of
investment.

b\. Advise legal custodians that authorized investments are properly
registered U.S. savings bonds and State or Federally insured accounts in
banking, savings and loan, and building and loan institutions, whichever
is to the beneficiary\'s advantage. Savings bonds should not be
suggested when there is a probable need for liquidation either during
the prohibited redemption period, before any interest will accrue or
within the period when the interest rate is substantially lower than
paid by banks or savings and loan institutions.

c\. The Estate Analyst will not recommend investment in a burial fund,
particularly a prepaid fund at a funeral home. However, such investments
will not be objected to unless a legal custodian uses VA funds for the
purchase. In addition, beneficiaries often move from the town in which
the prepaid fund has been established, and when the fiduciary changes,
such investments may be forgotten and never collected. Revocable trusts
are estate assets for purposes of 38 U.S.C. 3203(b)(1).

4-5

September 10, 1981 PG 27-2

**CONTENTS\
CHAPTER 5. 38 U.S.C. 3203(b)(1) (THE \$1,500 LIMITATION)**

**PARAGRAPH PAGE**

5.01 Elements 5-1

5.02 History 5-1

5.03 Identification and Reporting of Cases 5-1

5.04 Determining the Value of the Estate 5-3

5.05 Apportionment to Dependent Parents 5-5

5.06 Payment for Cost of Maintenance 5-5

5.07 Payment from Personal Funds of Patients-DPC Hines 5-6

5.08 Payment of Withheld Benefits 5-6

**FIGURE**

5 1 Guideline Chart (VAR
5074)\...\...\...\...\...\...\...\...\...\...\...\...\... 5-8

5-i

September 10, 1981 PG 27-2

**CHAPTER 5. 38 U.S.C. 3203(b)(1) (THE \$1,500 LIMITATION)**

**5.01 ELEMENTS**

a\. Title 38 U.S.C. 3203(b)(1) provides that:

In any case in which a veteran having neither wife nor child is being
furnished hospital treatment, institutional or domiciliary care without
charge or otherwise by the United States, or any political subdivision
thereof, is rated by the Veterans\' Administration in accordance with
regulations as being incompetent by reason of mental illness, and his
estate from any source equals or exceeds \$1,500, further payments of
pension, compensation, or emergency officers\' retirement pay shall not
be made until the estate is reduced to \$500.

b\. This provision is unequivocal in that when a veteran, who is rated
mentally incompetent by the Veterans Administration, comes into the
category mentioned, no further payment may be made on behalf of him or
her. The Administrator cannot change nor waive the law. Regardless of
the hardship caused, no further payments may be made.

*NOTE. One exception exists to the above. Title 38 U.S.C. 3203(d) allows
that no reduction will be made in the pension of any veteran during the
time he or she is institutionalized for Hansen\'s disease.*

**5.02 HISTORY**

a\. This type of limitation began with an amendment to section 202(7) of
the World War Veterans Act, 1924, made by section 14 of Public Law
71-522 (July 3, 1930). It provided, in effect, that the disability
benefits of a mentally ill veteran without dependents, institutionalized
by the Federal Government, whose estate from veterans\' benefits reached
\$3,000, would be discontinued until the estate was reduced. The
limitation was changed to \$1,500 by Veterans Regulation No. 6,
promulgated under the \"Economy Act of March 20, 1933\" (Public Law
73-2). Another significant change was made by Public Law 78-144 (July
13, 1943). That law provided that the estate derived from any source
would subsequently be counted in imposing the \$1,500 limitation. The
most recent change came as Public Law 86-146, approved August 7, 1959
(effective December 1, 1959). That law in part provided that:

\(1\) Veterans institutionalized by the United States or a political
subdivision thereof would come under the discontinuance provision
(previously only those in VA hospitals or at VA expense were included);

\(2\) Only spouse and/or children would cause the award to continue if
an incompetent veteran were institutionalized at public expense
(previously a dependent parent caused the award to continue as well);

\(3\) On the death of the incompetent veteran the distribution of funds
paid into PFOP (personal funds of patients) would be made only to the
surviving spouse, children, and dependent parents (previously PFOP was
treated as any other estate).

b\. These and other refinements were made in the law from its inception
until the present, but basically the purpose has remained the same: When
a mentally ill veteran without dependents is being maintained at
taxpayers\' expense, gratuitous veterans\' benefits will not be allowed
to \"swell\" an estate to the point that sizable amounts of such funds
will be inherited by collateral heirs or be absorbed by a State under
its escheat laws.

**5.03 IDENTIFICATION AND REPORTING OF CASES**

a\. The Field Examiner will often identify cases involving 38 U.S.C.
3203(b)(1) during the course of a field examination; however, it is the
Estate Analyst\'s responsibility to monitor these cases and to make
factual determinations of eligibility for suspension and/or resumption
of benefit payments in connection with the \$1,500 estate limitation.

b\. The Estate Analyst must first identify those institutions that are
publicly owned. At one time it was simple to identify these facilities,
as they were called \"XX\" State Hospital or \"XX\" County Nursing Home;
however, a trend toward

5-1

PG 27-2 September 10, 1981

renaming these facilities has begun and the name alone does not identify
it as a Government operation. Estate Analysts must sufficiently research
each institution in which a veteran, without spouse or dependent child,
is residing to determine whether or not it comes under 38 U.S.C.
3203(b)(1) guidelines. The fact that the veteran is paying maintenance
charges in such a facility is not controlling; payments are subject to
suspension based on the facts that he or she is in a facility at
Government expense, has no spouse or dependent child, and has an
excessive estate.

*NOTE.- The provisions of 38 U.S.C 3203(b)(1) are applicable during a
veteran\'s confinement in any penal institution whether awaiting trial,
sentence or after conviction. (VAR 5075(B) and Op. G. C. 16-60)*

c\. Whenever a PGF for a living veteran is reviewed by an Estate
Analyst, a quick analysis will be made to determine if the veteran is in
a facility at Government expense and if so, whether he or she has a
spouse or dependent child. If there is no spouse or dependent child, the
size of the estate will be determined. When a veteran\'s estate from any
source (including real estate) equals or exceeds \$1,500, the
Adjudication Division should be notified of the value of the estate so
that VA payments (other than insurance) may be suspended. When the
estate is reduced to \$500 or less or the veteran is released from the
institution, the Adjudication Division should be advised so that the
award may be resumed if otherwise in order.

d\. When the Estate Analyst identifies a case in which a veteran, rated
incompetent, without spouse or dependent child is in a qualifying
institution but benefits continue to be payable because the estate is
less than \$1,500, the case should be closely monitored. Local or ADIS
diaries should be established for followup. Using data such as amount of
income and expenses, any known special purchases to be made, and
payments to a dependent parent (if any), determine the approximate date
the estate might reach \$1,500. For example:

VA Benefit \$ 600

SSA Benefit + 230

Total Monthly Income \$ 830

Maintenance 500

Personal Use + 75

Total Monthly Expenses \$ 575

830

\- 575

Expected Monthly Increase in Estate \$ 255

Estate Limitation \$ 1,500

Estate as of September I - 500

Amount That Can Accumulate Prior to Suspension \$ 1,000

Monthly Increase 255

\$1,000 .\-- 255 3.9 months

In this instance the diary should be established for 3 months to
determine if the projected estate buildup had occurred or if the
situation changed and another diary is necessary. Notify the
Adjudication Division as soon as it is known that the estate will exceed
\$1,500 in a particular month.

e\. The Estate Analyst must act as an advocate for veterans. The VA is
in existence to serve veterans, their dependents and beneficiaries. An
important function of the fiduciary program is to insure that
beneficiaries who lack the mental capability to act on their own behalf
in financial matters receive all benefits to which they are legally
entitled. In this regard

5-2

September 10, 1981 PG 27-2

it is important that suspension of benefits under 38 U.S.C. 3203(b)(1)
not be requested without a thorough review of each individual situation.
Our function is not to cut off benefits whenever possible, but rather to
insure that benefits are afforded each entitled beneficiary.

\(1\) Each case in which there is not a clearly obvious excessive estate
will be thoroughly analyzed. For example, if under State law the
veteran\'s automobile must be considered part of his or her estate, it
is not automatically worth \$1,500 and is not automatically capable of
being liquidated (reduced to a cash form). The condition of the car will
be determined and a current market value obtained (a source of this
information might be the credit union (loan value)). From this, and
perhaps with the assistance of the District Counsel, the amount the car
will bring at a forced sale can be estimated. The PGF must contain the
basis for determining the size of the estate.

\(2\) Current status of the veteran\'s mental condition and VA rating of
incompetency are factors to be considered. The law provides that the
veteran \"is rated by the Veterans Administration in accordance with
regulations as being incompetent by reason of mental illness.\" It is
only when such rating is in effect that the statute is applicable. A
court determination, standing alone, is not enough. It may well be that
a veteran, even though he or she has been rated incompetent for many
years, may have improved to the extent that the matter of his or her
present incompetency should be reevaluated.

\(3\) The VSO (Veterans Services Officer) should be on guard when the
veteran\'s disability includes inability to speak. It has been found in
some instances that the veteran\'s mental condition has greatly improved
and he or she should be rated competent. For example, in one case
involving a veteran unable to speak, the last rating made upon a
complete mental examination took place many years before. Later
examinations in the folder, which were not conducted to determine the
veteran\'s mental condition, nevertheless showed considerable
improvement in his mental abilities. This cast doubt as to whether the
veteran was incompetent due to a mental condition. It was recommended
that the veteran be given a complete neuro-psychiatric examination and
the rating agency reconsider the case for determination as to whether
the veteran was incompetent due to his mental condition. If he were not,
the report correctly concluded, then section 3203(b)(1) would not be for
application and the size of his estate would be immaterial.

f\. **Effective Date**. When suspension of benefits is otherwise in
order (no spouse or child, institutionalized at Government expense and
rated incompetent), the date of suspension will be the date of admission
or the first day of the month in which payment was actually received
which causes the estate to equal or exceed \$1,500, whichever is later.
(VAR 1501(l)(3))

\(1\) If the estate in recent years has continuously exceeded \$1,500 in
the form of bank accounts, bonds, or other liquid, easily appraised
investments and a telephone call or other verification confirms the
estate continues to be excessive, determination of when to suspend
payments is simple-date of suspension is the date the veteran entered
the facility.

\(2\) When the veteran\'s estate exceeds \$1,500 after entering a
qualifying facility, the date of suspension is not as easily
ascertainable. When a Form Letter 27-439, Request for Estate
Information, is used to solicit estate information, a sentence should be
added to the, effect that if the estate exceeds \$1,500, the date it
exceeded that amount must be provided. If a current accounting is used
in determining estate value, the date the estate exceeded \$1,500 will
be arrived at by mathematical computation. Starting with the beginning
balance, add income and subtract disbursement by date of transaction.
The date the estate first reaches or exceeds \$1,500 and the veteran was
otherwise subject to reduction will be used.

**5.04 DETERMINING THE VALUE OF THE ESTATE**

a\. The institution, fiduciary and other persons receiving payments or
holding assets in the veteran\'s behalf are contacted to determine the
total value of the estate. Form Letter 27-439 may be used for
solicitation of this information.

b\. Except as stated in subparagraph c below, all funds, including
accumulated social security and amounts on deposit in Funds Due
Incompetent Beneficiaries and PFOP at VA data processing centers;
regional offices; medical centers; hospitals; or institutions of any
nature whatsoever; any chose in action as well as other property, both
personal and real (which is capable of being liquidated), and interest
therein owned by the veteran, will be included in arriving at the value
of the veteran\'s estate.

5-3

PG 27-2 September 10, 1981

\(1\) **Personal Property**. The value of such property, including
interests therein, will be established at the estimated net price the
veteran\'s equity in the property will bring at forced sale (not the
estimated market value) after payment of all costs incident to the
liquidation. Depending upon the laws of the individual States, the costs
to be considered may include the expense of appointing a guardian; the
appointment of a guardian ad litem; the costs of a possible partition
proceeding when the veteran does not own the entire title (e.g., an
automobile); guardians\' commission; fees of appraisers if required;
repayment of valid advances for taxes, interest, insurance, etc.

\(2\) **U.S. Savings Bonds, War Bonds, Adjusted Service Bonds, and Other
Appreciation Bonds**. The current value including accrued interest will
be used.

\(3\) **Bonds and Stocks**. The current price listed on a recognized
stock exchange or by over-the-counter dealers will be the value to be
used. In the absence of either, other reliable evidence of value may be
used.

\(4\) **Cash in the Estate**. This will be included for valuation
purposes although it came from one of the excluded items in subparagraph
c below.

\(5\) **Chose in Action (VAR 1559)**

\(a\) A chose in action is a right to property (a right to receive or
recover a debt, demand or damages) which the owner must recover by a law
suit. The fiduciary\'s estimate of what the claim or chose in action
would sell for in the open market will be used.

\(b\) When the claim is settled or litigation terminated, the Veterans
Services Officer will again review the case and, if the estate is then
\$1,500 or more, will forward an appropriate certification to
Adjudication.

\(6\) **Real Property**. Real estate must be capable of being liquidated
in order to be considered. The value of the real estate for these
purposes is the estimated net price that the veteran\'s equity in the
property will bring at a forced sale after payment of all costs incident
to liquidation. In these situations, it is not the normal case which
creates a hardship situation, but the few where the veteran owns a part
interest in the land or a life interest, or a case where the veteran has
inherited the equity-payments have been cut off and all of his or her
funds have been exhausted. These are admittedly difficult cases. It
often takes ingenuity and a little innovation to work them out. In every
case unless the facts unequivocally support a finding that the statute
applies, the Estate Analyst should not hesitate to seek assistance from
the District Counsel and together resolve all doubt in favor of the
veteran. (The file must be documented as to the basis of the finding.)

\(a\) Is the property capable of being liquidated? Many times it is, but
not always. For example, sometimes it is reasonably apparent that the
property cannot be sold or rented at any figure because of its condition
and the current local market. This real estate might be located in a
ghetto of a large city. The house has no furnace, sink or toilet. It is
not difficult under these circumstances to estimate that the property
has no value on the current market and therefore would not be considered
in determining the value of the veteran\'s estate.

\(b\) One of the most vexing problems is what the real estate will bring
when it is sold on the courthouse steps. This is a judicial sale for
cash and is not to be confused with the normal situation when the
property is put on the market through a broker and financing is
available. Often the judicial sale is of an adversary nature. When the
veteran has cointerest in a property, a partition suit is necessary in
order to sell the veteran\'s share. Such suits are expensive, even when
the title is uncomplicated. When other owners are minors or incompetents
or their whereabouts unknown, there can be the necessity for a guardian
ad litem, service by publication and other items which will run up the
costs. If the veteran does not already have a court-appointed fiduciary,
then guardianship proceedings must also be initiated to perfect a
judicial sale. These are just some of the instances of major costs being
involved. It would be impossible to list all the expenses which may
occur in the individual case. These are areas in which the VA may not
furnish free legal services. Litigation costs now reflect the inflation
of the times and must be calculated with that in mind. One thing is
certain, the net price obtained at a sale from the courthouse steps will
be far less than that which would be obtained in the normal course of
trade, and adequate allowance must be made for the difference.

5-4

September 10, 1981 PG 27-2

\(c\) The matter of contributions by other holders of an interest in the
property is sometimes overlooked because it is not apparent from the
title of record. In a particular case, the veteran and his brother each
held an undivided one-half interest in the real estate. Although the
property had been valued at \$8,000, the veteran\'s interest could not
be appraised at \$4,000 because of contributions made by his brother.
Investigation disclosed the brother had paid off a \$6,000 first
mortgage and had paid taxes and upkeep on the property during the many
years the veteran was hospitalized. When the veteran\'s share of these
contributions was deducted from his equity, it wiped out his interest in
the property.

\(d\) The District Counsel should be consulted concerning cases where
the value of the veteran\'s interest in real property requires
application of the statute and creates hardship. The District Counsel
might be able to discover circumstances which could alleviate the
hardship. Many times, when a problem appears insoluble, a fresh look at
it by different personnel familiar with the general issue may help find
a solution.

\(e\) Again, it should be noted that the discussion here has dealt with
problem cases where the facts seem unfavorable. In this area, the Estate
Analyst must look into every aspect of the situation, in detail, in
order to avoid the hardship which would otherwise arise from the
application of the statute.

c\. The following items will not be included as assets: (VAR 5109(D))

\(1\) Adjusted service certificate.

\(2\) Government or private insurance policy having cash surrender or
loan value.

\(3\) Dividend credits on National Service Life Insurance and United
States Government Life Insurance policies.

\(4\) Personal property, such as furniture and household equipment,
working tools, livestock, and jewelry, which are included under State
exemption statutes.

**5.05 APPORTIONMENT TO DEPENDENT PARENTS**

The Adjudication Division has the responsibility of determining
dependency of parents. The VSO has the responsibility to determine the
monetary needs. A need may exist when there is no claim for dependency,
in which case the VSO (Estate Analyst or Field Examiner) should assist
with necessary advice and filing of a claim. When the financial needs of
a parent (who has been determined a dependent by Adjudication) are of
record, the Estate Analyst may (depending on the size of the veteran\'s
estate) authorize payment, from withheld funds, of the amount of monthly
expenses not met by other sources of income up to the amount to which
the veteran would be entitled. When the parent\'s needs are unknown, a
field examination will be requested. If the parent\'s needs exceed the
amount payable from appropriated funds, PFOP (if available) may be used
to supplement the apportionment. (See fig. I for guidelines on
payments.)

*NOTE.- The amount to be paid must be based on established needs. Under
no circumstances will the total award automatically be paid. The PGF
must be documented to reflect the basis for the amount recommended.*

**5.06 PAYMENT FOR COST OF MAINTENANCE**

Where the veteran is charged maintenance by the political subdivision
furnishing the hospitalization, the balance of the award after
apportionment to the dependent parent(s) may be utilized for that
purpose (depending on the size of the estate), and will be paid as a
care and maintenance award. However, the amount to be paid must be
scrutinized to determine whether the charge is proper and is not in
excess of charges for other incompetents maintained in the institution.
Only so much of the veteran\'s entitlement will be paid as a care and
maintenance award as is properly payable. Guidelines have been furnished
for use in making this determination. (See fig. 1.) (VAR 5108 and M27-1,
pt. 111, par. 4.05)

5-5

PG 27-2 September 10, 1981

**5.07 PAYMENT FROM PERSONAL FUNDS OF PATIENTS-DPC HINES**

Money held by a fiduciary will normally be used to support the veteran
and dependent parent before funds held in PFOP are expended. When
withdrawals from Hines DPC are made for support of a dependent parent or
institutional maintenance charges for a veteran, the value of the
veteran\'s estate is generally known. The ending date of such
withdrawals will be computed by subtracting the next effective guideline
figure from the estate and dividing the remaining balance by the total
monthly withdrawals to obtain the number of months it will be effective.
Then a calendar will be consulted for the ending date. (This assumes
there is no income. If there is income from a non-VA source, it must be
computed in.)

Example: Veteran\'s estate equals \$4,700 on September 1. The dependent
mother needs \$160 per month. Institutional maintenance is established
at \$80 per month.

a\. **Guideline 1**: Mother is to be supported from appropriated funds
when the estate is reduced to \$4,000.

b\. **Guideline 2**: Maintenance of veteran is to be paid from
appropriated funds when the estate is reduced to \$2,500.

c\. **Computation:**

\(1\) Estate \$4,700

Guideline 1 [4,000]{.underline}

To be expended 700

Total monthly expenditures 240

700 \-- 240 = 2.91 = use 3 months

\(2\) Remaining Estate \$3,980

Guideline 2 [2,500]{.underline}

To be expended 1,480

Maintenance expenditures 80

1,480 \-- 80 = 18.5 = use 19 months

d\. **Consequent Memo to Adjudication**: Pay from PFOP-DPC Hines

\(1\) To mother: \$160 from 9/1/(year) to 11/30/(year)

\(2\) To institution: \$80 from 9/1/(year) to 6/30/(year)

e\. Any change in circumstances may require amendment.

**5.08 PAYMENT OF WITHHELD BENEFITS**

a\. The amount which would have been payable but for 38 U.S.C.
3203(b)(1) shall be paid: (VAR 1558)

\(1\) To a veteran who is currently rated competent by the VA after
release from hospitalization and after the expiration

of 6 months following the effective date of the rating of competency by
the VA.

\(2\) For a veteran rated incompetent by the VA who had met the
provisions of subparagraph (1) above and who was again rated incompetent
by the VA before award action could be taken thereunder, if he or she
has a spouse or child and there was no error in the intervening rating
of competency.

b\. In the event of the veteran\'s death before payment of such lump
sum, no part thereof shall be payable.

5-6

September 10, 1981 PG 27-2

c\. The determination of when and if to pay withheld funds is an
adjudicative function. The Estate Analyst must be careful not to advise
individuals that funds will be paid, but that funds may be paid,
depending on facts in individual cases. In addition, funds will not be
paid automatically at the expiration of 6 months. The regulation reads
\"after the expiration of 6 months\" (which is literally any time after
that period) and only if the rating was not in error. It is possible
that facts will come in from a field examiner or other person indicating
that the veteran has not remained competent throughout the 6-month
period. In that event, the rating board will reevaluate competency and
may rate the person incompetent retroactively.

5-7

+-------+----------+--------+-------------+---+-----------+------------+
| **VE  |          |        |             |   | **VETERAN |            |
| TERAN |          |        |             |   | IN**      |            |
| IN**  |          |        |             |   |           |            |
|       |          |        |             |   | **VA      |            |
| **P   |          |        |             |   | INST      |            |
| UBLIC |          |        |             |   | ITUTION** |            |
| I     |          |        |             |   |           |            |
| NSTIT |          |        |             |   |           |            |
| UTION |          |        |             |   |           |            |
| (NON- |          |        |             |   |           |            |
| VA)** |          |        |             |   |           |            |
+-------+----------+--------+-------------+---+-----------+------------+
| *     |          |        | **WITHOUT   |   | **WITH OR |            |
| *WITH |          |        | DEPENDENT   |   | WITHOUT** |            |
| DEPE  |          |        | PARENT**    |   |           |            |
| NDENT |          |        |             |   | **        |            |
| PAR   |          |        |             |   | DEPENDENT |            |
| ENT** |          |        |             |   | PARENT**  |            |
+-------+----------+--------+-------------+---+-----------+------------+
|       | **TO**   | **TO** | **TO**      |   | **TO**    | **TO**     |
|       |          |        |             |   |           |            |
|       | **       | **I    | **IN        |   | *         | **INS      |
|       | PARENT** | NSTITU | STITUTION** |   | *PARENT** | TITUTION** |
|       |          | TION** |             |   |           |            |
+-------+----------+--------+-------------+---+-----------+------------+
| 1,500 | Award    | After  | Award from  |   | Award     |            |
|       | from     | ded    | a           |   | from      |            |
| to    | appr     | ucting | ppropriated |   | app       |            |
|       | opriated | appor  | funds for   |   | ropriated |            |
| 2,499 | funds    | tioned | current     |   | funds     |            |
|       | (which   | award  | m           |   | (amount   |            |
|       | would    | p      | aintenance. |   | otherwise |            |
|       | ot       | ayable |             |   | payable   |            |
|       | her-wise | to     |             |   | as        |            |
|       | be       | pa     |             |   | veteran's |            |
|       | payable  | rents, |             |   | award).   |            |
|       | as       | the    |             |   |           |            |
|       | v        | b      |             |   |           |            |
|       | eteran's | alance |             |   |           |            |
|       | award).  | may be |             |   |           |            |
|       |          | a      |             |   |           |            |
|       |          | warded |             |   |           |            |
|       |          | for    |             |   |           |            |
|       |          | c      |             |   |           |            |
|       |          | urrent |             |   |           |            |
|       |          | care   |             |   |           |            |
|       |          | and    |             |   |           |            |
|       |          | maint  |             |   |           |            |
|       |          | enance |             |   |           |            |
|       |          | of the |             |   |           |            |
|       |          | ve     |             |   |           |            |
|       |          | teran. |             |   |           |            |
|       |          | (B     |             |   |           |            |
|       |          | alance |             |   |           |            |
|       |          | from   |             |   |           |            |
|       |          | funds  |             |   |           |            |
|       |          | oth    |             |   |           |            |
|       |          | erwise |             |   |           |            |
|       |          | p      |             |   |           |            |
|       |          | ayable |             |   |           |            |
|       |          | as     |             |   |           |            |
|       |          | vet    |             |   |           |            |
|       |          | eran's |             |   |           |            |
|       |          | a      |             |   |           |            |
|       |          | ward.) |             |   |           |            |
+-------+----------+--------+-------------+---+-----------+------------+
| 2,500 |          | Pa     | Payments    |   |           | NO         |
|       |          | yments | from PFOP   |   |           |            |
| to    |          | from   | or other    |   |           | AWARD      |
|       |          | PFOP   | assets of   |   |           |            |
| 3,999 |          | or     | the         |   |           | OR         |
|       |          | other  | veteran.    |   |           |            |
|       |          | assets |             |   |           | PAYMENT    |
|       |          | of the |             |   |           |            |
|       |          | ve     |             |   |           |            |
|       |          | teran. |             |   |           |            |
+-------+----------+--------+-------------+---+-----------+------------+
| 4,000 | Payments |        |             |   | Payments  |            |
|       | from     |        |             |   | from PFOP |            |
| or    | PFOP or  |        |             |   | or other  |            |
|       | other    |        |             |   | assets of |            |
| More  | assets   |        |             |   | the       |            |
|       | of the   |        |             |   | veteran.  |            |
|       | veteran. |        |             |   |           |            |
+-------+----------+--------+-------------+---+-----------+------------+

*NOTE: To avoid hardship, Veterans Services Officers are authorized, in
exceptional cases, to deviate from the criteria guidelines of this
chart.*

5-8

September 10, 1981

PG 27-2

**CONTENTS**

**CHAPTER 6. POTPOURRI**

**PARAGRAPH PAGE**

6.01 Correspondence\...\...\..... 6-1

6.02
Interviews\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
6-1

6.03 Release of
Information\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
6-2

6.04 Maintenance of
PGF\'s\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
6-2

6.05 VA Form 27-4707, Estate
Summary\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
6-3

6.06 VA Form 27-3045, Estate Action
Record\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
6-3

6.07 ADIS (Automated Diary and Index
System)\...\...\...\...\...\...\...\...\...\...\....
\...\...\...\...\.... 6-3

6-i

September 10, 1981 PG 27-2

**CHAPTER 6. POTPOURRI**

**6.01 CORRESPONDENCE**

a\. Guidelines for preparation of correspondence are contained in MP-1,
part 11, chapter 10. Original correspondence not returned to the sender
and a copy of the outgoing correspondence should be filed in the PGF
(Principal Guardianship Folder) when one is known to exist (either on
station or at another field station). When there is no PGF, the original
correspondence and a copy of the reply should be forwarded to the
appropriate file activity (Administrative or Adjudication activity).

b\. Correspondence of other than a legal nature should be prepared for
release over the signature of the VSO and should be signed by him or her
unless authority has been delegated in writing to the Chief, Field
Section, F&FE (Fiduciary and Field Examination) activity supervisor,
Estate Analyst, or Field Examiner.

*NOTE.- In some instances the Estate Analyst has been delegated
authority to sign her or his own name to correspondence. In these cases
letters should be signed as delegated. (Such delegations must be in
writing.)*

c\. Correspondence to the courts, legal documents, or letters suggesting
or threatening legal action should be prepared for release over the
signature of the District Counsel and should be signed by him or her
unless signature authority has been delegated to Veterans Services
Division personnel.

d\. Incoming letters should be read carefully, especially if written by
an incompetent beneficiary, so that all questions asked or issues raised
are fully understood. When responding, care should be taken to explain
all matters under discussion using the 4-S principles of writing (i.e.,
short, simple, strong and sincere). Correspondence from an incompetent
beneficiary should not be taken lightly, but should be given the same
courtesy and attention as all other correspondence, even when the
individual is a frequent writer. While on occasion there may be
justification for not responding to a letter, there is never a
justification for not reading one thoroughly. Rarely should a letter not
be answered; however, when such a situation does occur, the PGF should
be documented as to the reason.

**6.02 INTERVIEWS**

a\. The Estate Analyst is responsible for interviewing visitors who come
into the office or who telephone for assistance or information on
Fiduciary program matters. Legal matters requiring the assistance of an
attorney, however, should be referred to the District Counsel or DVB
attorney who has proper delegation of authority from the District
Counsel. When the interviewee is \"out of control\" or refuses to accept
the Estate Analyst\'s answers, he or she should be referred to the
supervisor of the F&FE activity.

b\. All visitors/callers should be given prompt, courteous attention. If
there is a question on an individual case, the PGF should be pulled to
insure that correct information is given. If an answer cannot be given
or a request acted upon favorably, a full explanation of the reasons
should be given. Special attention should be paid to the incompetent
individual, and care taken to insure that the person is not \"talked
down\" to, treated as a child, or caused to suffer humiliation or loss
of dignity.

c\. When the interviewee makes a personal visit to the office, the
Estate Analyst should interview him or her in a location with some
privacy rather than in a crowded area where other individuals are
talking, moving about and are able to overhear and view the session at
close range. An ideal location might well be a vacant VBC\'s (Veterans
Benefits Counselor\'s) desk in the personal Interview Unit. An area that
is partitioned off from other desks, yet not isolated, so that
assistance is readily available is desirable.

d\. A memorandum to the file, a VA Form 119, Report of Contact or a
brief note on VA Form 27-3045, Estate Action Record, should be prepared
to reflect the date of contact, person or persons interviewed, and
substance of the discussion, agreement or authorization.

6-1

PG 27-2 September 10, 1981

3.  **RELEASE OF INFORMATION**

a\. F&FE activity personnel are often entrusted with very sensitive
information and receive inquiries from unstable individuals. The Estate
Analyst should keep in mind that improper disclosure of information to
the beneficiary or a third party can have harmful effects. Giving
gratuitous and voluntary information to or about the beneficiary or his
or her circumstances should be avoided.

b\. Release of information contained in a PGF or claims folder is
governed by the Privacy Act and the Freedom of Information Act.
Basically, anything in either file may be released to the beneficiary on
request unless the information would be injurious to the physical or
mental health of that individual. (The General Counsel has determined
that a fiduciary may receive information as though he or she were the
beneficiary since the fiduciary is responsible for acting on behalf of
that beneficiary.) The Privacy Act prevents the release of this
information to a third party without written authority from the
beneficiary (or fiduciary) unless the disclosure has been published as a
routine use. The list of routine uses for PGF\'s can be found in MP-1,
part II, chapter 21, appendix B, system of records 37VA27 (Veterans and
Beneficiaries Guardianship Records-VA).

c\. Every Estate Analyst is responsible for protecting the privacy of
supervised beneficiaries. Any employee who, knowing that disclosure of
the specific material is prohibited, willfully discloses the material in
any manner to any person or agency not entitled to receive it, shall be
guilty of a misdemeanor and fined up to \$5,000. For this reason it is
important to know that the caller, visitor or correspondent is who he or
she claims to be. When the interviewee is unknown, Estate Analysts
should ask for identification from individuals who are interviewed in
the office, or ask specific questions about the person who is
telephoning for identification purposes in order to be sure that release
of requested information is appropriate. Answers to questions asked
(e.g., full names, veteran\'s file number, address) should be verified
by information in the PGF. Unless the person telephoning is known, it is
usually helpful to call him or her back or request a written inquiry.

d\. The above information is general in nature. Each field station has a
Privacy Act/Freedom of Information Act Officer assigned and any
questions about release of information which cannot be resolved on
review of cited guidelines should be referred to the local expert.

**Example 1**: If the incompetent veteran\'s nonfiduciary mother
(father, sister, uncle, person who lent the veteran money, etc.) writes,
telephones, or comes into the office seeking information as to the
amount of the estate, expenses, health, address, etc., that information
may not be given without the written permission of the veteran or
fiduciary.

**Example 2**: If the incompetent veteran\'s nonfiduciary granddaughter
(cousin, nephew, etc.) writes, telephones, or comes into the office
seeking genealogical information from the PGF or claims folder; e.g.,
names and/or birthdates of all children of the veteran, the information
may not be provided without the written permission of the veteran or
fiduciary.

**Example 3**: A field examination report has been referred to the
Estate Analyst instructing the analyst to insure that an identified
deficiency in the beneficiary\'s living situation is corrected. When
contacting the fiduciary the analyst must be careful to release only
information necessary to get the job done. A copy of the field
examination report should never be forwarded \"so the fiduciary can see
how the beneficiary is doing.\" Information will be released on a
need-to-know basis only. (If a fiduciary wants a copy of field
examination reports, he or she may request copies in writing. The copies
may then be released following Privacy Act procedures.)

**6.04 MAINTENANCE OF PGF\'S**

a\. The Estate Analyst, in conjunction with control personnel, is
responsible for proper maintenance of the PGF. Files should be
maintained in chronological order within each flap, and should be free
of nonrecord material (e.g., VA Forms 3230, Reference Slip, transmitting
copies of field examinations; duplicate copies of documents) or obsolete
material (see Records Control Schedule VB-1, part 1, item No. 6-016).
When a folder becomes worn or torn, it should be referred to clerical
personnel for replacement.

6-2

September 10, 1981 PG 27-2

b\. PGF\'s should be prominently annotated with the veteran\'s name and
file number in large dark letters/numbers across the top of the file.
The type of payee should be stamped on the front of the file in 1/4-inch
block style letters, along with the words PRINCIPAL GUARDIANSHIP FILE in
1-inch block style letters., (Rubber stamps should be used.)

**6.05 VA FORM 27-4707, ESTATE SUMMARY**

a\. The VA Form 27-4707, Estate Summary, is intended to be a timesaver
for personnel when responding to inquiries, auditing an accounting,
preparing fiduciary-beneficiary field examinations, or reviewing the
folder for any other purpose. It will serve this function only if kept
current.

b\. The VA Form 27-4707 should be completed at the time the PGF is
established in cases when an accounting will be required. The form as
prepared initially should be updated (as appropriate) each time the
Estate Analyst reviews the folder for any reason. All applicable blocks
must be completed. The blocks for addresses, telephone numbers and
monthly payments may be completed in pencil due to frequency of change;
however, other entries should be made in ink.

c\. A space has been provided for verification of competency status. A
check mark and effective date should be placed in the top half of the
block when the beneficiary has been placed under a legal disability by a
court of competent jurisdiction. A check mark and effective date should
be placed in the bottom half of the block when the beneficiary has been
rated incompetent by the VA. Both portions of the block should be
completed if the beneficiary is under a legal disability and rated
incompetent by the VA. (The VA must pay benefits directly to the
beneficiary unless there is either a rating of incompetency or a
determination of legal disability by a court.)

d\. The format provides space for other monthly sources of income and
the name of the payee receiving such payments, if other than the VA
fiduciary.

e\. The spaces under Surety Bonds entitled \"Date Posted or Changed\"
and \"Total Amount\" should indicate the date any bond was obtained,
increased, or reduced and the cumulative total bond on file.

f\. Entries in the block entitled \"Record of Public
Institutionalization\'s\" should be made only when the veteran is
without spouse or dependent child.

**6.06 VA FORM 27-3045, ESTATE ACTION RECORD**

VA Form 27-3045 should form a part of each PGF. It serves as a running
account of actions taken on a case. All diaries should be permanently
posted in chronological order, along with a brief explanation of the
action to be taken when the diary comes due. In addition, short notes of
interviews, SQC review, research, or explanations of actions taken;
e.g., \"VA Form 4716a forwarded to FE,\" or \"account call letter
sent,\" may be made on the form. The date the data are posted on the
form should be entered in the \"Date\" column, and the initials of the
person making the entry should be posted in the \"Initial\" column. Both
sides of each form should be used and additional forms added to the PGF
as necessary.

**6.07 ADIS (AUTOMATED DIARY AND INDEX SYSTEM)**

a\. ADIS was created to automate the indexing and diarying of future
actions, the calling of accounts, and the tabulating of beneficiaries
for the Fiduciary program. General information and operation procedures
for ADIS are contained in M27-1, part IV.

b\. The ADIS is a valuable tool when used properly. When a new case is
entered, a carbon copy of the code sheet should be retained and checked
against returned beneficiary-veteran index cards or the Current Monthly
Activity List to insure the case was accepted into the master file. Once
in the master file, use of the Accounts Due Report and the Semiannual
Edit List will insure that the actions diaried have been completed. The
Accounts Due Report should be reviewed and followup on delinquent
accounts completed each month. On receipt of the Semiannual Edit List,
each case listed thereon should be reviewed and appropriate action taken
(e.g., a field examination requested or the case rediaried). Notes
should be made on these reports as to action taken. They are worksheets
and should be used accordingly.

6-3

PG 27-2 September 10, 1981

*NOTE.- ADIS will accept either a 30 action or a 40 action for each
beneficiary. Both actions cannot be in the master record at the same
time. When a 40 action is entered, any existing 30 action for that
beneficiary is purged and vice versa. Care must be taken to enter a 30
action after a 40 action has come due, as appropriate.*

c\. The Estate Analyst should maintain VA Forms 27-8546a, Diary and
Action Card, received monthly for currently due accounts. The cards may
be kept alphabetically by veteran\'s name or in terminal-digit order,
separated by month or grouped as a whole. There is an advantage in
maintaining these cards by month as this provides an extra element of
control. For example, if the current month is December and there are
cards remaining for September or earlier, the analyst has a general idea
of how delinquent some accounts have become. This method of control
should not be substituted for use of the Accounts Due Report, but should
supplement its use. Diary and Action Cards should not be stapled, paper
clipped or written on as these cards are run through the computer on
return to the data processing center. Marks or bends on the cards cause
rejects to occur. The Accounts Due Report can and should be written on
and updated each month to reflect the current status of each account
over 90 days delinquent. Thus the Accounts Due Report becomes the
formal, more detailed control method, reviewed on a once-a-month basis,
while the cards serve as an immediate fingertip control.

6-4