Custom Federal Regulations Service™

**This is supplemental material**

**for Book B of your set of**

**Federal Regulations**

Title 38, Part 3

*Adjudication*

**Veterans Benefits Administration**

Supplement No. 61

Covering period of *Federal Register* issues

through ­­­­­­­­­­­­November 20, 2003

Copyright © 2003 Jonathan Publishing

**Need Assistance?**

Printing for all supplements is performed by the United States
Government

Printing Office. Distribution is the responsibility of the

VA Forms and Publications Depot. Accordingly:

Questions concerning **[missing supplements]{.smallcaps}**, need for
**[additional books]{.smallcaps}**, and other **[distribution
list]{.smallcaps}** issues for this loose-leaf service should be
directed to:

Department of Veterans Affairs

Veterans Benefits Administration

Directives, Forms and Records Staff

Mail Code: 20S5

810 Vermont Avenue, N.W.

Washington DC 20420

Telephone: 202/273-7080

Fax: 202/275-5947

Questions concerning the **[filing instructions]{.smallcaps}** for this
loose-leaf service,

or the reporting of **[substantive errors]{.smallcaps}** in the text,

may be directed to:

Jonathan Publishing

855 Yorks Crossing

Driftwood TX 78619

Telephone: 512/858-1225

Fax: 512/858-1230

E-mail: garyknight@ev1.net

**Internet: http://www.jonpub.com**

Copyright © 2003 Jonathan Publishing

> **GENERAL INSTRUCTIONS**

Custom Federal Regulations Service™

**Supplemental Materials for *Book B***

**Code of Federal Regulations**

**Title 38, Part 3**

***Adjudication***

**Veterans Benefits Administration**

**Supplement No. 61**

25 November 2003

Covering the period of Federal Register issues

through November 20, 2003

When **Book B** was originally prepared, it was current through final
regulations published in the *Federal Register* of 9 August 1991. These
supple­mental materials are designed to keep your regulations up to date.
You should file the attached pages immediately, and record the fact that
you did so on the *Supplement Filing Record* which begins on page B-5 of
Book B, *Adjudication*.

> **To ensure accuracy and timeliness of your materials,**
>
> **it is important that you follow these simple procedures:**
>
> 1\. Always file your supplemental materials immediately upon receipt.
>
> 2\. Before filing, always check the Supplement Filing Record (page
> B-5) to be sure that all prior supplements have been filed. If you are
> missing any supple­ments, contact the Veterans Benefits Administration
> at the address listed on page B-4.
>
> 3\. After filing, enter the relevant information on the Supplement
> Filing Record sheet (page B-5)---the date filed, name/initials of
> filer, and date through which the *Federal Register* is covered.
>
> 4\. If as a result of a failure to file, or an undelivered supplement,
> you have more than one supplement to file at a time, be certain to
> file them in chronological order, lower number first.
>
> 5\. Always retain the filing instructions (simply insert them at the
> back of the book) as a backup record of filing and for reference in
> case of a filing error.
>
> 6\. Be certain that you *permanently discard* any pages indicated for
> removal in the filing instructions in order to avoid confusion later.

To execute the filing instructions, simply remove *and throw away* the
pages listed under *Remove These Old Pages,* and replace them in each
case with the corres­pond­ing pages from this supplement listed under *Add
These New Pages*. Occasionally new pages will be added without removal
of any old material (reflecting new regulations), and occasionally old
pages will be removed with­out addition of any new material (reflecting
rescinded regulations)---in these cases the word *None* will appear in
the appropriate column.

> **FILING INSTRUCTIONS**

**Book B, Supplement No. 61**

**November 25, 2003**

*Remove these Add these Section(s)*

*[old pages]{.underline} [new pages]{.underline} [Affected]{.underline}*

**Do not file this supplement until you confirm that**

**all prior supplements have been filed**

3.261-1 to 3.270-1 3.261-1 to 3.270-1 §§3.261--3.263

3.272-1 to 3.272-6 3.272-1 to 3.272-6 §3.272

3.275-1 to 3.275-2 3.275-1 to 3.275-2 §3.275

**Be sure to complete the**

***Supplement Filing Record* (page B-5)**

**when you have finished filing this material.**

> **HIGHLIGHTS**

**Book B, Supplement No. 61**

**November 25, 2003**

***Note***: Where substantive changes are made in the text of
regulations, the paragraphs of *Highlights* sections are cited at the
end of the relevant section of text. Thus, if you are reading §3.263,
you will see a note at the end of that section which reads: "Supplement
*Highlights* references---6(2)." This means that paragraph 2 of the
*Highlights* section in Supplement No. 6 contains information about the
changes made in §3.263. By keeping and filing the *Highlights* sections,
you will have a reference source explaining all substantive changes in
the text of the regulations.

***Supplement frequency***: This Book B (*Adjudication*) was originally
supplemented four times a year, in February, May, August, and November.
Beginning 1 August 1995, supplements will be issued *every month* during
which a final rule addition or modification is made to the parts of
Title 38 covered by this book. Supplements will be numbered
consecutively as issued.

**Modifications in this supplement include the following:**

1\. On 24 October 2003, the VA published a final rule, effective that
same date, to exclude from income and net worth computations in the
pension and parents' dependency and indemnity compensation programs any
money received under the Victims of Crime Act of 1984. Changes:

• In §3.261, added a new entry (41) in paragraph (a);

• In §3.262, added a new paragraph (z);

• In §3.263, added a new paragraph (h);

• In §3.272, added a new paragraph (v); and

• In §3.275, added a new paragraph (j).

**§3.261 Character of income; exclusions and estates.**

The following factors will be considered in determining whether a
claimant meets the requirements of §§3.250, 3.251 and 3.252 with
reference to dependency, income limitations and corpus of estate:

*Pension; Pension;*

*Dependency old-law Section 306*

\(a\) *Income Dependency and indemnity (veterans, (veterans, See*

*(parents) compensation surviving surviving*

*spouses, and spouses, and*

*children) children)*

\(1\) Total income from employment,

business, investments, or rents Included Included Included Included
§3.262(a)

\(2\) Income of spouse Included Included Excluded Included §3.262(b)

\(3\) Earnings of members of family under legal age Included Excluded
Excluded Excluded §3.250(b)(2)

§3.252(e)(3)

\(4\) Earned income of child-claimant Included Excluded

\(5\) Gifts, including contributions from adult

members of family:

Property Included Included Included Excluded §3.262(k)

Money Included Included Included Included

\(6\) Value of maintenance by relative, friend,

or organization Excluded Excluded Excluded Excluded §3.262(c)

\(7\) Rental value of property owned by and Excluded Excluded Excluded
Excluded

resided in by claimant

\(8\) Charitable donations Excluded Excluded Included Excluded §3.262(d)

*Pension; Pension;*

*Dependency old-law Section 306*

\(a\) *Income Dependency and indemnity (veterans, (veterans, See*

*(parents) compensation surviving surviving*

*spouses, and spouses, and*

*children) children)*

\(9\) Family allowance authorized by service

personnel Included Included Included Included

\(10\) Reasonable value of allowances to

person in service in addition to base pay Included Included Included
Included except

as earned income

of child-claimant

\(11\) Mustering-out pay Excluded Included Excluded Included except

as earned income

of child-claimant

\(12\) Six-months' death gratuity Excluded Excluded Excluded Excluded

\(13\) Bonus or similar cash gratuity paid by any

State based on service in Armed Forces

of United States Excluded Excluded Excluded Excluded

\(14\) Retired Serviceman's Family Protection

Plan; Survivor Benefit Plan (10 U.S.C. ch. 73):

Retired Serviceman's Family Protection

Plan (Subch. I):

Annuities Excluded Excluded Excluded Excluded

Refund (10 U.S.C. 1446) Included Included Included Included

Survivor Benefit Plan (Subch. II)

(Pub. L. 92-425; 86 Stat. 706) Included Included Included Included
§3.262(e)

Annuity under §653, Pub. L. 100-456 Included Included Excluded Excluded
§3.262(r)

*Pension; Pension;*

*Dependency old-law Section 306*

\(a\) *Income Dependency and indemnity (veterans, (veterans, See*

*(parents) compensation surviving surviving*

*spouses, and spouses, and*

*children) children)*

\(15\) Retirement pay received direct from

service department Included Included Included Included §3.262(e)

§3.262(h)

\(16\) Retirement benefits; general Included Included Included Included
§3.262(e)

\(17\) Social security benefits:

Old age and survivors', and

disability insurance Included Included Included Included §3.262(f)

Charitable programs Excluded Excluded Included Excluded

Lump-sum death payments Included Excluded Included Excluded

Supplemental security income Excluded Excluded Included Excluded

\(18\) Railroad Retirement benefits Excluded Included Disability
Included §3.262(g)

pension---

Excluded;

Death pension---Included

\(19\) Retirement pay waived under Federal

statute Excluded Excluded Excluded Included §3.262(h)

*Pension; Pension;*

*Dependency old-law Section 306*

\(a\) *Income Dependency and indemnity (veterans, (veterans, See*

*(parents) compensation surviving surviving*

*spouses, and spouses, and*

*children) children)*

\(20\) Department of Veterans Affairs payments:

Pension Excluded Excluded Excluded Excluded

Compensation and dependency and

indemnity compensation Excluded Excluded Excluded Excluded

World War I adjusted compensation Excluded Included Excluded Included

U.S. Government life insurance or national

service life insurance for disability or death,

maturity of endowment policies, and dividends,

including special and termination dividends Excluded Excluded Excluded
Excluded

Servicemembers' group life insurance Excluded Excluded Excluded Excluded

Veterans' group life insurance Excluded Excluded Excluded Excluded

Servicemembers' indemnity Excluded Excluded Excluded Excluded

Subsistence allowance (38 U.S.C. ch. 31) Included Included Included
Included

Veterans educational assistance in excess

of amounts expended for training

(38 U.S.C. ch. 34) Included Included Included Included

Educational assistance (38 U.S.C. ch. 35) \-\-- \-\-- Excluded Excluded

Special allowance under 38 U.S.C. 1312(a) Excluded Included Excluded
Included

Statutory burial allowance Excluded Excluded Excluded Excluded

Accrued Excluded Included, except Excluded Included, except

accrued as accrued as

reimbursement reimbursement

\(21\) Compensation (civilian) for injury or death Included Included
Included Included §3.262(i)

*Pension; Pension;*

*Dependency old-law Section 306*

\(a\) *Income Dependency and indemnity (veterans, (veterans, See*

*(parents) compensation surviving surviving*

*(parents) spouses, and spouses, and*

*children) children)*

\(22\) Contributions by a public or private employer to a:

Public or private health or hospitalization

plan for an active or retired employee Excluded Excluded Excluded
Excluded

Retired employee as reimbursement for

premiums for supplementary medical

insurance benefits under the Social

Security Program (Pub. L. 91-588;

84 Stat. 1580) Included Included Excluded Excluded

\(23\) Overtime pay; Government employees Included Included Disability
Included

pension---Excluded.

Death pension---

Included

\(24\) Commercial life insurance; disability, accident,

or health insurance, less payments of medical

or hospital expenses resulting from the accident

or disease for which payments are made. Included (as Included (as
Included, Included(as §3.262(j)

received) received) (special received)

provision)

\(25\) Commercial annuities or endowments Included (as Included
Included, Included §3.262(j)

received) (special (special (special

provision) provision) provision)

\(26\) Dividends from commercial insurance Excluded Excluded Excluded
Excluded

*Pension; Pension;*

*Dependency old-law Section 306*

\(a\) *Income Dependency and indemnity (veterans, (veterans, See*

*(parents) compensation surviving surviving*

*(parents) spouses, and spouses, and*

*children) children)*

\(27\) Insurance under Merchant Marine Act

of 1936, as amended Included Included Included Included

\(28\) Reimbursement for casualty loss

(Pub. L. 100-456). Included Excluded Included Included §3.262(t)

Other fire insurance Excluded Excluded Excluded Excluded §3.262(t)

\(29\) Bequests, devises and inheritances:

Property Included Excluded Included Excluded §3.262(k)

Money Included Included Included Included

Joint bank accounts Included Included Included Excluded §3.262(k)(1)

\(30\) Profit from sale of property Excluded Excluded Excluded Excluded
§3.262(k)

\(31\) Jury duty or obligatory civic duties Excluded Excluded Excluded
Excluded

\(32\) Relocation payments (Pub. L. 90-448;

Pub. L. 90-495) Excluded Excluded Excluded Excluded §3.262(c)

\(33\) The following programs administered by the ACTION agency:

Foster Grandparent Program and Older

Americans Community Service Programs

payments (Pub. L. 93-29; 87 Stat. 55) Excluded Excluded Excluded
Excluded §3.262(q)(1)

Volunteers in Service to America (VISTA),

University Year for ACTION (UYA),

Program for Local Services (PLS),

ACTION Cooperative Volunteers (ACV),

Foster Grandparent Program (FGP), and

Older American Community Service Programs,

Retired Senior Volunteer Program (RSVP),

Senior Companion Program (Pub. L. 93-113;

87 Stat. 394) Excluded Excluded Excluded Excluded §3.262(q)(2)

*Pension; Pension;*

*Dependency old-law Section 306*

\(a\) *Income Dependency and indemnity (veterans, (veterans, See*

*(parents) compensation surviving surviving*

*(parents) spouses, and spouses, and*

*children) children)*

\(34\) The Service Corps of Retired Executives (SCORE)

and Active Corps of Executives (ACE) administered

by the Small Business Administration.

(Pub. L. 93-113; 87 Stat. 394) Excluded Excluded Excluded Excluded
§3.262(q)(2)

\(35\) Agent Orange settlement payments

(Pub. L. 101-201) Excluded Excluded Excluded Excluded §3.262(s)

\(36\) Restitution to individuals of Japanese

ancestry (Pub. L. 100-383). Excluded Excluded Excluded Excluded
§3.262(u)

\(37\) Income received by American Indian

beneficiaries from Trust or

Restricted lands (Pub. L. 103-66) Excluded Excluded Excluded Excluded
§3.262(v)

\(38\) Income received under Section 6 of the

Radiation Exposure Compensation Act

(Pub. L. 101-426) Excluded Excluded Excluded Excluded §3.262(w)

\(39\) Cash, stock, land or other interests received

from a Native Corporation under the

Alaska Native Claims Settlement Act

(43 U.S.C. 1601, *et seq*.) Excluded Excluded Excluded Excluded
§3.262(x)

\(40\) Monetary allowance under 38 U.S.C.

chapter 18 for certain individuals

who are children of Vietnam veterans

(38 U.S.C. 1823(c)) Excluded Excluded Excluded Excluded §3.262(y)

*Pension; Pension;*

*Dependency old-law Section 306*

\(a\) *Income Dependency and indemnity (veterans, (veterans, See*

*(parents) compensation surviving surviving*

*(parents) spouses, and spouses, and*

*children) children)*

\(41\) Income received under the Victims of

Crime Act of 1984 (42 U.S.C. 10601-

10605). Excluded^1^ Excluded^1^ Excluded^1^ Excluded^1^ §3.262(z)

\(b\) *Deduction of Amounts Paid by Claimant*

\(1\) Unusual medical expenses Not authorized Authorized Not authorized
Authorized §§3.262(b)(1), & (l)

\(2\) Veteran: just debts, expenses of

last illness, and burial Not authorized Authorized, Not authorized
Authorized §§3.262(m) & (o)

except debts

\(3\) Veteran's spouse or child:

expenses of last illness and

burial Not authorized Not authorized Not authorized Authorized §3.262(n)

\(4\) Parent's spouse: just debts;

expenses of last illness

and burial Not authorized Authorized \-\-- \-\-- §3.262(o)

\(5\) Prepayments on real property

mortgage after death of

spouse (Pub. L. 91-588) Not authorized Not authorized Not authorized
Authorized §3.262(k)(6)

\(c\) *Corpus of estate* Considered Not considered Not considered
Considered §3.263

conditionally

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1\. The compensation received through a crime victim compensation
program will be excluded from income computations unless the total
amount of assistance received from all federally funded programs is
sufficient to fully compensate the claimant for losses suffered as a
result of the crime.

\[28 FR 31, Jan. 1, 1963, as amended at 29 FR 15205, Nov. 11, 1964; 31
FR 15632, Dec. 13, 1966; 33 FR 15286, Oct. 15, 1968; 36 FR 8446, May 6,
1971; 37 FR 6677, Apr. 1, 1972; 37 FR 7092, Apr. 8, 1972; 37 FR 21436,
Oct. 11, 1972; 38 FR 872, Jan. 5, 1973; 38 FR 26804, Sept. 26, 1973; 38
FR 28826, Oct. 17, 1973; 40 FR 13305, Mar. 26, 1975; 40 FR 57459, Dec.
10, 1975; 41 FR 17386, Apr. 26, 1976; 42 FR 43834, Aug. 31, 1977; 57 FR
59298, Dec. 15, 1992; 58 FR 12174, Mar. 3, 1993; 58 FR 31909, June 7,
1993; 58 FR 33766, June 21, 1993; 59 FR 37695, July 25, 1994; 60 FR
2522, Jan. 10, 1995; 60 FR 18355, Apr. 11, 1995; 62 FR 35970, July 3,
1997; 62 FR 51278, Sept. 30, 1997; 67 FR 49586, July 31, 2002; 68 FR
60852, Oct. 24, 2003\]

**Supplement *Highlights* references**: 6(2), 8(3), 12(7), 14(4), 15(3),
31(1), 54(2), 61(1).

Reserved

**§3.262 Evaluation of income.**

\(a\) *Total income*. All income from sources such as wages, salaries,
earnings, bonuses from employers, income from a business or profession
or from investments or rents as well as the fair value of personal
services, goods or room and board received in lieu thereof will be
included.

\(1\) Salary is not determined by "takehome" pay, but includes
deductions made under a retirement act or plan and amounts withheld by
virtue of income tax laws.

\(2\) The gross income from a business or profession may be reduced by
the necessary operating expenses, such as cost of goods sold, or
expenditures for rent, taxes, and upkeep. Depreciation is not a
deductible expense. The cost of repairs or replacement may be deducted.
The value of an increase in stock inventory of a business is not
considered income.

\(3\) A loss sustained in operating a business, profession, or farm or
from investments may not be deducted from income derived from any other
source.

\(b\) *Income of spouse*. Income of the spouse will be determined under
the rules applicable to income of the claimant.

\(1\) *Parents*. Where the mother and father or remarried parent and
spouse are living together, the total combined income will be considered
in determining dependency, or in determining the rate of dependency and
indemnity compensation payable to the parent. This rule is equally
applicable where both parents have remarried and each is living with his
or her spouse. If the remarriage of a parent has been terminated, or the
parent is separated from his or her spouse, income of the spouse will be
excluded.

\(2\) *Veterans*. The separate income of the spouse of a disabled
veteran who is entitled to pension under laws in effect on June 30,
1960, will not be considered. Where pension is payable under section
306(a) of Pub. L. 95-588, to a veteran who is living with a spouse there
will be included as income of the veteran all income of the spouse in
excess of whichever is the greater, the amount of the spouse income
exclusion specified in section 306(a)(2)(B) of Pub. L. 95-588 as
increased from time to time under section 306(a)(3) of Pub. L. 95-588 or
the total earned income of the spouse which is reasonably available to
or for the veteran, unless hardship to the veteran would result. Each
time there is an increase in the spouse income exclusion pursuant to
section 306(a)(3) of Pub. L. 95-588, the actual amount of the exclusion
will be published in the "Notices" section of the *Federal Register*.
The presumption that inclusion of such income is available to the
veteran and would not work a hardship on him or her may be rebutted by
evidence of unavailability or of expenses beyond the usual family
requirements. (Authority: 38 U.S.C. 1521(f); sec. 306(a)(2)(B) of Pub.
L. 95-588)

\(c\) *Maintenance*. The value of maintenance furnished by a relative,
friend, or a charitable organization (civic or governmental) will not be
considered income. Where the claimant is maintained in a rest home or
other community institution or facility, public or private, because of
impaired health or advanced age, money paid to the home or to the
claimant to cover the cost of maintenance will not be considered income,
regardless of whether it is furnished by a relative,

friend or charitable organization. The expense of maintenance is not
deductible if it is paid from the claimant's income, except as provided
in paragraph (1) of this section in claims for dependency and indemnity
compensation.

\(d\) *Charitable donations*. Charitable donations from public or
private relief or welfare organizations will not be considered income
except in claims for pension under laws in effect on June 30, 1960. In
the latter cases, additional charitable allowances received by a
claimant for members of his or her family may not be divided per capita
in determining the amount of the claimant's income.

\(e\) *Retirement benefits; general*. Retirement benefits, including an
annuity or endowment, paid under a Federal, State, municipal, or private
business or industrial plan are considered income as limited by this
paragraph. Where the payments received consist of part principal and
part interest, interest will not be counted separately.

\(1\) *Protected pension*. Except as provided in this paragraph (e)(1),
effective January 1, 1965, in determining income for pension purposes
under laws in effect on June 30, 1960, 10 percent of the retirement
payments received by a veteran, surviving spouse, or child will be
excluded. The remaining 90 percent will be considered income as
received. Where the retirement benefit is based on the claimant's own
employment, payments will not be considered income until the amount of
the claimant's personal contribution (as distinguished from amounts
contributed by the employer) has been received. Thereafter the 10
percent exclusion will apply.

\(2\) *Pension; Pub. L. 86-211*. Except as provided in this
subparagraph, effective January 1, 1965, in determining income for
pension purposes, under Pub. L. 86-211 (73 Stat. 432), 10 percent of the
retirement payments received by a veteran, the veteran's spouse,
surviving spouse, or child will be excluded. The remaining 90 percent
will be considered income as received. Where a person was receiving or
entitled to receive pension and retirement benefits based on his or her
own employment on December 31, 1964, the retirement payments will not be
considered income until the amount of the claimant personal contribution
(as distinguished from amounts contributed by the employer) has been
received. Thereafter the 10 percent exclusion will apply.

\(3\) *Compensation*. In determining dependency of a parent for
compensation purposes, all payments will be considered income as
received.

\(4\) *Dependency and indemnity compensation*. Except as provided in
this subparagraph, effective January 1, 1967, in determining income for
dependency and indemnity compensation purposes, 10 percent of the
retirement payments received by a deceased veteran's parent or by the
parent's spouse will be excluded. The remaining 90 percent will be
considered income as received. Where a parent was receiving or entitled
to receive dependency and indemnity compensation and retirement benefits
based on his or her own employment on December 31, 1966, the retirement
payments will not be considered income until the amount of the
claimant's personal contribution (as distinguished from amounts
contributed by the employer) has been received. Thereafter the 10
percent exclusion will apply. (Authority: 38 U.S.C. 1315(g), 1503(a)(6))

\(f\) *Social Security benefits*. Old age and survivor's insurance and
disability insurance under title II of the Social Security Act will be
considered income as a retirement benefit under the rules contained in
paragraph (e) of this section. Benefits received under noncontributory
programs, such as old age assistance, aid to dependent children, and
supplemental security income are subject to the rules contained in
paragraph (d) of this section applicable to charitable donations. The
lumpsum death payment under title II of the Social Security Act will be
considered as income except in claims for dependency and indemnity
compensation and for pension under Pub. L. 86-211 (73 Stat. 432).

\(g\) *Railroad retirement benefits*:

\(1\) *Parents, surviving spouses and children*. Retirement benefits
received from the Railroad Retirement Board will be considered as income
under the rules contained in paragraph (e) of this section. (See
paragraph (h) of this section as to waivers.)

\(2\) *Veterans*. Effective July 1, 1959, retirement benefits received
from the Railroad Retirement Board were excluded from consideration as
income in determining eligibility for disability pension. (45 U.S.C.
228s-1) This exclusion continues to be applicable to claims under laws
in effect on June 30, 1960. For purposes of section 306 pension, such
retirement benefits will be considered as income under the rules
contained in paragraph (e) of this section.

\(h\) *Retirement benefits waived*. Except as provided in this
paragraph, retirement benefits (pension or retirement payments) which
have been waived will be included as income. For the purpose of
determining dependency of a parent, or eligibility of a parent for
dependency and indemnity compensation or eligibility of a veteran,
surviving spouse, or child for pension under laws in effect on June 30,
1960, retirement benefits from the following sources which have been
waived pursuant to Federal statute will not be considered as income:

\(1\) Civil Service Retirement and Disability Fund;

\(2\) Railroad Retirement Board (see paragraph (g)(2) of this section);

\(3\) District of Columbia, firemen, policemen, or public school
teachers;

\(4\) Former lighthouse service.

\(i\) *Compensation (civilian) for injury or death*.

\(1\) Compensation paid by the Bureau of Employees' Compensation,
Department of Labor (of the United States), or by Social Security
Administration, or by Railroad Retirement Board, or pursuant to any
workmen's compensation or employer's liability statute, or damages
collected because of personal injury or death, less medical, legal, or
other expenses incident to the injury or death, or the collection or
recovery of such moneys will be considered income as received, except as
provided in paragraph (i)(2) of this section. The criteria of paragraph
(i)(1) of this section are for application as to all medical
expenditures after such award or settlement. (Authority: Pub. L. 92-198,
85 Stat. 663)

\(2\) For pension, effective October 7, 1966, and for dependency and
indemnity compensation effective January 1, 1967, if payments based on
permanent and total disability or

death are received from the Bureau of Employees' Compensation, Social
Security Administration or Railroad Retirement Board, or pursuant to any
workmen's compensation or employer's liability statute, there will be
excluded 10 percent of the payments received after deduction of medical,
legal, and other expenses as authorized by paragraph (i)(1) of this
section. The 10 percent exclusion does not apply to damages collected
incident to a tort suit under other than an employer's liability law of
the United States or a political subdivision of the United States, or to
determinations of dependency for compensation purposes.

\(j\) *Commercial insurance*:

\(1\) *Annuity or endowment insurance*. For pension, effective January
1, 1965, or for dependency and indemnity compensation, effective January
1, 1967, the provisions of paragraph (e) of this section apply. In such
cases, 10 percent of the payments received will be excluded. In
dependency and indemnity compensation claims, where the parent is
receiving or entitled to receive dependency and indemnity compensation
on December 31, 1966, and is also receiving or entitled to receive
annuity payments on that date, or endowment insurance matures on or
before that date, no part of the payments received will be considered
income until the full amount of the consideration has been received,
after which 10 percent of the amount received will be excluded. For
compensation, the full amount of each payment is considered income as
received.

\(2\) *Life insurance; general*. In determining dependency, or
eligibility for dependency and indemnity compensation, or for section
306 pension, the full amount of payments is considered income as
received. For section 306 pension, effective October 7, 1966, and for
dependency and indemnity compensation, effective January 1, 1967, 10
percent of the payments received will be excluded.

\(3\) *Life insurance; old-law pension*. For pension under laws in
effect on June 30, 1960, 10 percent of the payments received will be
excluded. Where it is considered that life insurance was received in a
lump sum in the calendar year in which the veteran died and payments are
actually received in succeeding years, no part of the payments received
in succeeding years will be considered income until an amount equal to
the lump-sum face value of the policy has been received, after which 10
percent of the payments received will be excluded. The 10 percent
exclusion is authorized effective October 7, 1966.

\(4\) *Disability, accident or health insurance*. For pension, effective
October 7, 1966, and for dependency and indemnity compensation,
effective January 1, 1967, there will be excluded 10 percent of the
payments received for disability after deduction of medical, legal, or
other expenses incident to the disability. For compensation, after
deduction of such expenses, the full amount of payments is considered
income as received.

\(k\) *Property*:

\(1\) *Ownership*. The terms of the recorded deed or other evidence of
title will constitute evidence of ownership of real or personal
property. This includes property acquired through purchase, bequest or
inheritance except that, effective January 1, 1971, amounts in joint
accounts in banks and similar institutions acquired by reason of the
death of another joint owner shall not be considered income of a
survivor for section 306 pension purposes. With the

foregoing exception, if property is owned jointly each person will be
considered as owning a proportionate share. The claimant's share of
property held in partnership will be determined on the facts found. In
the absence of evidence to the contrary, the claimant's statement as to
the terms of ownership will be accepted. (Authority: Sec. 306, Public
Law 95-588; 92 Stat. 2508)

\(2\) *Income-producing property*. Income received from real or personal
property owned by the claimant will be counted. The claimant's share
will be determined in proportion to his right according to the rules of
ownership.

\(3\) *Sale of property*. Except as provided in paragraphs (k)(4) and
(5) of this section, net profit from the sale of real or personal
property will be counted. In determining net profit from the sale of
property owned prior to the date of entitlement, the value at the date
of entitlement will be considered in relation to the selling price.
Where payments are received in installments, payments will not be
considered income until the claimant has received amounts equal to the
value of the property at the date of entitlement. Principal and interest
will not be counted separately.

\(4\) *Homes*. Net profit from the sale of the claimant's residence
which is received during the calendar year of sale will not be
considered as income under the following conditions:

\(i\) To the extent that it is applied within the calendar year of the
sale, or the succeeding calendar year, to the purchase price of another
residence as his principal dwelling;

\(ii\) Such application of the net profit is reported within 1 year
following the date so applied, and

\(iii\) The net profit is so applied after January 10, 1962, to a
purchase made after said date.

This exclusion will not apply where the net profit is applied to the
price of a home purchased earlier than the calendar year preceding the
calendar year of sale of the old residence.

\(5\) *Sale of property; section 306 pension* *and dependency and
indemnity compensation*. For pension under section 306 pension and for
dependency and indemnity compensation, profit from the sale of real or
personal property other than in the course of a business will not be
considered income. This applies to property acquired either before or
after the date of entitlement. Any amounts received in excess of the
sales price will be counted as income. Where payments are received in
installments, principal and interest will not be counted separately. For
pension, this provision is effective January 1, 1965; for dependency and
indemnity compensation, January 1, 1967. (Authority: 38 U.S.C.
1503(a)(10): 38 U.S.C. 1315(g))

\(6\) *Payments on mortgages on real property; section 306 pension*.
Effective January 1, 1971, for the purposes of section 306 pension, an
amount equaling any prepayments made by a veteran or surviving spouse on
a mortgage or similar type security instrument in existence at the death
of veteran or spouse on real property which prior to the death was the

principal residence of the veteran and spouse will be excluded from
consideration as income if such payment was made after the death and
prior to the close of the year succeeding the year of death. (Authority:
38 U.S.C. 1503(a)(14))

\(l\) *Unusual medical expenses*. Within the provisions of paragraphs
(l)(1) through (4) of this section there will be excluded from the
amount of the claimant's annual income any unreimbursed amounts which
have been paid within the calendar year for unusual medical expenses
regardless of the year the indebtedness was incurred. The term "unusual"
means "excessive." It does not describe the nature of a medical
condition but rather the amount expended for medical treatment in
relationship to the claimant's resources available for sustaining a
reasonable mode of life. Unreimbursed expenditures which exceed 5
percent of the claimant's reported annual income will be considered
unusual. Health, accident, sickness and hospitalization insurance
premiums will be included as medical expenses in determining whether the
claimant's unreimbursed medical expenses meet the criterion for
"unusual." A claimant's statement as to amounts expended for medical
expenses ordinarily will be accepted unless the circumstances create
doubt as to its credibility. An estimate based on a clear and reasonable
expectation that unusual medical expenditure will be realized may be
accepted for the purpose of authorizing prospective payments of benefits
subject to necessary adjustment in the award upon receipt of an amended
estimate or after the end of the calendar year upon receipt of an income
questionnaire.

\(1\) *Veterans*. For the purpose of section 306 pension, there will be
excluded unreimbursed amounts paid by the veteran for unusual medical
expenses of self, spouse, and other relatives of the veteran in the
ascending as well as descending class who are members or constructive
members of the veteran's household and whom the veteran has a moral or
legal obligation to support.

\(2\) *Surviving spouses*. For the purpose of section 306 pension, there
will be excluded unreimbursed amounts paid by the surviving spouse for
the unusual medical expenses of self, the veteran's children, and other
relatives of the surviving spouse in the ascending as well as descending
class who are members or constructive members of the surviving spouse's
household and whom the surviving spouse has a moral or legal obligation
to support.

\(3\) *Children*. For the purpose of section 306 pension, there will be
excluded unreimbursed amounts paid by a child for the unusual medical
expenses of self, parent, and brothers and sisters of the child.

\(4\) *Parents*. For dependency and indemnity compensation purposes
there will be excluded unreimbursed amounts paid by the parent for the
unusual medical expenses of self, spouse, and other relatives of the
parent in the ascending as well as descending class who are members or
constructive members of the parent's household and whom the parent has a
moral or legal obligation to support. If the combined annual income of
the parent and the parent's spouse is the basis for dependency and
indemnity compensation, the exclusion is applicable to the combined
annual income and extends to the unusual unreimbursed medical expenses
of the spouse's relatives in the ascending as well as descending class
who are members or constructive members of the household and whom the
parent's spouse has a moral or legal obligation to support. (Authority:
38 U.S.C. 1315(f)(3); Sec. 306, Pub. L. 95-588; 92 Stat. 2508)

\(m\) *Veteran's final expenses; pension*. In claims for pension under
section 306, there will be excluded, as provided in paragraph (p) of
this section:

\(1\) From the income of a surviving spouse, amounts equal to amounts
paid for the expenses of the veteran's last illness;

\(2\) From the income of a surviving spouse, or of a child of a deceased
veteran where there is no surviving spouse, amounts equal to amounts
paid by the surviving spouse or child for the veteran's just debts, the
veteran's last illness, and the veteran's burial to the extent such
expenses are not reimbursed by the Department of Veterans Affairs. The
term "just debts" does not include any debt that is secured by real or
personal property. (Authority: Sec. 306, Pub. L. 95-588; 92 Stat. 2508)

\(n\) *Final expenses of veteran's spouse or child; pension*. In claims
for pension under section 306, there will be excluded, as provided in
paragraph (p) of this section:

\(1\) From the income of a veteran. amounts equal to amounts paid by the
veteran for the last illness and burial of the veteran's deceased spouse
or child; and

\(2\) From the income of a spouse or surviving spouse, amounts equal to
amounts paid by the spouse or surviving spouse of the deceased veteran
for the last illness and burial of a child of such veteran. (Authority:
Sec. 306, Pub. L. 95-588; 92 Stat. 2508)

\(o\) *Final expenses of veteran or parent's spouse; dependency and
indemnity compensation*. In claims for dependency and indemnity
compensation there will be excluded from the income of a parent, as
provided in paragraph (p) of this section, amounts equal to amounts paid
by the parent for:

\(1\) The expenses of the veteran's last illness and burial to the
extent that such expenses are not reimbursed under 38 U.S.C. ch. 23.

\(2\) The parent's deceased spouse's just debts, the expenses of the
spouse's last illness to the extent such expenses are not reimbursed
under 38 U.S.C. ch. 51 and the expenses of the spouse's burial to the
extent that such expenses are not reimbursed under 38 U.S.C. ch. 23 or
51. The term "just debts" does not include any debt that is secured by
real or personal property. (Authority: 38 U.S.C. 1315(f))

\(p\) *Final expenses; year of exclusion*. For the purpose of paragraphs
(m), (n) and (o) of this section, in the absence of contradictory
information, the claimant's statement will be accepted as to the nature,
amount and date of payment, and identity of the creditor. Except as
provided in this paragraph, payments will be deducted from annual income
for the year in which such payments are made. Payments made by a
veteran, spouse or surviving spouse of a veteran, child or, in
dependency and indemnity compensation claims, by a parent during the
calendar year following the year in which the veteran, spouse or child
died may be deducted from the claimant's income for the year of last
illness or burial if this deduction is advantageous to the claimant.

\(q\) *Volunteer programs*:

\(1\) *Payments under Foster Grandparent Program and Older Americans
Community Service Programs*. Effective May 3, 1973, compensation
received under the Foster Grandparent Program and the Older Americans
Community Service Programs will be excluded from income in claims for
compensation, pension and dependency and indemnity compensation.
(Authority: Pub. L. 93-29; 87 Stat. 55)

\(2\) *Payments under domestic volunteer service act programs*.
Effective October 1, 1973, compensation or reimbursement received under
a Domestic Volunteer Service Act Program (including Volunteers in
Service to America (VISTA), University Year for ACTION (UYA), Program
for Local Services (PLS), ACTION Cooperative Volunteers (ACV), Foster
Grandparent Program (FGP) and Older American Community Service Program,
Retired Senior Volunteer Program (RSVP), Senior Companion Program
Service Corps of Retired Executives (SCORE) and Active Corps of
Executives (ACE), will be excluded from income in claims for
compensation pension and dependency and indemnity compensation.
(Authority: Pub. L 93-113; 87 Stat. 394)

\(r\) *Survivor benefit annuity*. For the purposes of old law pension
and section 306 pension, there shall be excluded from computation of
income annuity paid by the Department of Defense under the authority of
section 653, Public Law 100-456 to qualified surviving spouses of
veterans who died prior to November 1, 1953. (September 29, 1988)
(Authority: Sec. 653, Pub. L. 100-456; 102 Stat. 1991)

\(s\) *Agent Orange settlement payments*. In claims for pension and
parents' dependency and indemnity income, there shall be excluded from
computation of income payments received by any person in the case of *In
re Agent Orange Product Liability Litigation* in the United States
District Court for the Eastern District of New York (MDL No. 381).
(January 1, 1989) (Authority: Pub. L. 101-201, 103 Stat. 1795)

\(t\) *Reimbursement for casualty loss*. The following sources of
reimbursements for casualty loss will not be considered as income in
determining entitlement to benefits under the programs specified.
Amounts to be excluded from computation in parents' dependency and
indemnity compensation claims are limited to amounts of reimbursement
which do not exceed the greater of the fair market value or the
reasonable replacement cost of the property involved at the time
immediately preceding the loss.

\(1\) Reimbursement for casualty loss of any kind in determining
entitlement to parents' dependency and indemnity compensation benefits.
For purposes of paragraph (t) of this section, the term "casualty loss'"
means the complete or partial destruction of property resulting from an
identifiable event of a sudden, unexpected or unusual nature.

\(2\) Proceeds from fire insurance in determining dependency of a parent
for compensation purposes or in determining entitlement to old-law and
section 306 pension benefits. (Authority: 38 U.S.C. 1315(f))

\(u\) *Restitution to individuals of Japanese ancestry*. Effective
August 10, 1988, for the purposes of old law pension, section 306
pension, parents' death compensation, and parents' dependency and
indemnity compensation, there shall be excluded from income computation
any payment made as restitution under Public Law 100-383 to individuals
of Japanese ancestry who were interned, evacuated, or relocated during
the period December 7, 1941, through June 30, 1946, pursuant to any law,
Executive Order, Presidential proclamation, directive, or other official
action respecting these individuals. (Authority: Sec. 105, Pub. L.
100-383; 102 Stat. 905; Sec. 6, Pub. L. 102-371; 106 Stat. 1167, 1168)

\(v\) *Income received by American Indian beneficiaries from trust or
restricted lands*. There shall be excluded from income computation
payments of up to \$2,000 per calendar year to an individual Indian from
trust lands or restricted lands as defined in 25 CFR 151.2. (January 1,
1994) (Authority: Sec. 13736, Pub. L. 103-66; 107 Stat. 663)

\(w\) *Radiation Exposure Compensation Act*. For the purposes of
parents' dependency and indemnity compensation, there shall be excluded
from income computation payments under Section 6 of the Radiation
Exposure Compensation Act of 1990. (Authority: 42 U.S.C. 2210 note)

\(x\) *Alaska Native Claims Settlement Act*. There shall be excluded
from income computation any cash (including cash dividends on stock
received from a Native Corporation) to the extent that it does not, in
the aggregate, exceed \$2,000 per individual per annum; stock (including
stock issued or distributed by a Native Corporation as a dividend or
distribution on stock); a partnership interest; land or an interest in
land (including land or an interest in land received from a Native
Corporation as a dividend or distribution on stock); and an interest in
a settlement trust.

\(y\) *Monetary allowance under 38 U.S.C. chapter 18 for certain
individuals who are children of Vietnam veterans*. There shall be
excluded from income computation any allowance paid under the provisions
of 38 U.S.C. chapter 18 to or for an individual who is the child of a
Vietnam veteran. (Authority: 38 U.S.C. 1823(c))

\(z\) *Victims of Crime Act*. For purposes of old law pension, section
306 pension, and parents' dependency and indemnity compensation, amounts
received as compensation under the Victims of Crime Act of 1984 will not
be considered income unless the total amount of assistance received from
all federally funded programs is sufficient to fully compensate the
claimant for losses suffered as a result of the crime. (Authority: 42
U.S.C. 10602(c))

\[28 FR 32, Jan. 1, 1963; 57 FR 59298, Dec. 15, 1992; 58 FR 33767, June
21, 1993; 59 FR 35266, July 11, 1994; 59 FR 37696, July 25, 1994; 60 FR
2522, Jan. 10, 1995; 60 FR 18355, Apr. 11, 1995; 62 FR 5529, Feb. 6,
1997; 62 FR 51278, Sept. 30, 1997; 67 FR 49587, July 31, 2002; 68 FR
60852, Oct. 24, 2003\]

**Supplement *Highlights* references**: 6(2), 8(3), 12(4, 7), 14(4),
15(3), 27(2), 31(1), 54(2), 61(1).

Reserved

**§3.263 Corpus of estate; net worth.**

\(a\) *General*. The following rules are for application in determining
the corpus of estate of a parent where dependency is a factor under
§3.250, and the net worth of a veteran, surviving spouse or child where
pension is subject to Pub. L. 86-211 (73 Stat. 432) under §3.252(b).
Only the estate of the parent, in claims based on dependency, or the
estate of the veteran, surviving spouse or child-claimant in claims for
pension, will be considered. In the absence of contradictory
information, the claimant's statement as to ownership and estimate of
value will be accepted.

\(b\) *Definition*. "Corpus of estate" and "net worth" mean the market
value, less mortgages or other encumbrances, of all real and personal
property owned by the claimant except the claimant's dwelling
(single-family unit) including a reasonable lot area, and personal
effects suitable to and consistent with the claimant's reasonable mode
of life.

\(c\) *Ownership*. See §3.262(k).

\(d\) *Evaluation*. In determining whether some part of the claimant's
estate should be consumed for his or her maintenance, consideration will
be given to the amount of the claimant's income, together with the
following factors: whether the property can be readily converted into
cash at no substantial sacrifice; ability to dispose of property as
limited by community property laws; life expectancy; number of
dependents who meet the requirements of §3.250(b)(2); potential rate of
depletion, including unusual medical expenses under the principles
outlined in §3.262(l) for the claimant and his or her dependents.

\(e\) *Agent Orange settlement payments*. There shall be excluded from
the corpus of estate or net worth of a claimant any payment made from
the Agent Orange Settlement Fund or any other fund established pursuant
to the settlement in the In re Agent Orange product liability
litigation, M.D.L. No. 381 (E.D.N.Y.). (January 1, 1989). (Authority:
Pub. L. 101-201, 103 Stat. 1795)

\(f\) *Restitution to individuals of Japanese ancestry*. Effective
August 10, 1988, for the purposes of section 306 pension and parents'
death compensation, there shall be excluded from the corpus of estate or
net worth of a claimant any payment made as restitution under Public Law
100-383 to individuals of Japanese ancestry who were interned,
evacuated, or relocated during the period December 7, 1941, through June
30, 1946, pursuant to any law, Executive order, Presidential
proclamation, directive, or other official action respecting these
individuals. (Authority: Sec. 105, Pub. L. 100-383; 102 Stat. 905; Sec.
6, Pub. L. 102-371; 106 Stat. 1167, 1168)

\(g\) *Monetary allowance under 38 U.S.C. chapter 18 for certain
individuals who are children of Vietnam veterans*. There shall be
excluded from the corpus of estate or net worth of a claimant any
allowance paid under the provisions of 38 U.S.C. chapter 18 to or for an
individual who is a child of a Vietnam veteran. (Authority: 38 U.S.C.
1823(c))

\(h\) *Victims of Crime Act*. There shall be excluded from the corpus of
estate or net worth of a claimant any amounts received as compensation
under the Victims of Crime Act of 1984 unless the total amount of
assistance received from all federally funded programs is sufficient to
fully compensate the claimant for losses suffered as a result of the
crime. (Authority: 42 U.S.C. 10602(c))

\[28 FR 33, Jan. 1, 1963, as amended at 39 FR 28527, Aug. 8, 1974; 44 FR
45936, Aug. 6, 1979; 57 FR 59299, Dec. 15, 1992; 58 FR 33767, June 21,
1993; 62 FR 51279, Sept. 30, 1997; 67 FR 49587, July 31, 2002; 68 FR
60852, Oct. 24, 2003\]

**Cross references:** Reductions and discontinuances; dependency. See
§3.500(h). Material change in income, net worth or change in status. See
§3.660. Income and net worth questionnaires. See §3.661.

**Supplement *Highlights* references**: 6(2), 8(3), 31(1), 54(2), 61(1).

*Next Section is §3.270*

Reserved

**§3.270 Applicability of various dependency, income and estate
regulations.**

\(a\) *Sections 3.250 to 3.270*. These sections are applicable to
dependency, income and estate determinations needed to determine
entitlement or continued entitlement for the following programs:

\(1\) Parents' death compensation.

\(2\) Old-law pension.

\(3\) Section 306 pension.

\(4\) Parents' dependency and indemnity compensation.

**Note:** Citations to Title 38, United States Code in §§3.250 to 3.270
referring to section 306 or old-law pension generally refer to
provisions of law in effect on December 31, 1978.

\(b\) *Sections 3.271 to 3.300*. These sections apply to income and
estate determinations of entitlement to the improved disability and
death pension program which became effective January 1, 1979.

\[44 FR 45936, Aug. 6, 1979\]

**§3.272 Exclusions from income.**

The following shall be excluded from countable income for the purpose of
determining entitlement to improved pension. Unless otherwise provided,
expenses deductible under this section are deductible only during the
12-month annualization period in which they were paid. (Authority: 38
U.S.C. 501(a))

\(a\) *Welfare*. Donations from public or private relief, welfare, or
charitable organizations. (Authority: 38 U.S.C. 1503(a)(1))

\(b\) *Maintenance*. The value of maintenance furnished by a relative,
friend, or a charitable organization (civic or governmental ) will not
be considered income. Where the individual is maintained in a rest home
or other community institution or facility, public or private, because
of impaired health or advanced age, money paid to the home or the
individual to cover the cost of maintenance will not be considered
income, regardless of whether it is furnished by a relative, friend, or
charitable organization. The expense of maintenance is not deductible if
it is paid from the individual's income. (Authority: 38 U.S.C. 501(a),
1503(a)(1))

\(c\) *Department of Veterans Affairs pension benefits*. Payments under
chapter 15 of title 38, United States Code, including accrued pension
benefits payable under 38 U.S.C. 5121. (Authority: 38 U.S.C. 1503(a)(2))

\(d\) *Reimbursement for casualty loss*. Reimbursement of any kind for
any casualty loss. The amount to be excluded is not to exceed the
greater of the fair market value or the reasonable replacement cost of
the property involved at the time immediately preceding the loss. For
purposes of this paragraph, the term *casualty loss* means the complete
or partial destruction of property resulting from an identifiable event
of a sudden, unexpected or unusual nature. (Authority: 38 U.S.C.
1503(a)(5))

\(e\) *Profit from sale of property*. Profit realized from the
disposition of real or personal property other than in the course of
business, except amounts received in excess of the sales price, for
example, interest on deferred sales is included as income. In
installment sales, any payments received until the sales price is
recovered are not included as income, but any amounts received which
exceed the sales price are included, regardless of whether they
represent principal or interest. (Authority: 38 U.S.C. 1503(a)(6))

\(f\) *Joint accounts*. Amounts in joint accounts in banks and similar
institutions acquired by reason of death of the other joint owner.
(Authority: 38 U.S.C. 1503(a)(7))

\(g\) *Medical expenses*. Within the provisions of the following
paragraphs, there will be excluded from the amount of an individual's
annual income any unreimbursed amounts which have been paid within the
12-month annualization period for medical expenses regardless of when
the indebtedness was incurred. An estimate based on a clear and
reasonable expectation that unusual medical expenditure will be realized
may be accepted for the purpose of authorizing prospective payments of
benefits subject to necessary adjustment in the award upon receipt of an
amended estimate, or after the end of the 12-month annualization period
upon receipt of an eligibility verification report. (Authority: 38
U.S.C. 501(a))

\(1\) *Veteran's income*. Unreimbursed medical expenses will be excluded
when all of the following requirements are met:

\(i\) They were or will be paid by a veteran or spouse for medical
expenses of the veteran, spouse, children, parents and other relatives
for whom there is a moral or legal obligation of support;

\(ii\) They were or will be incurred on behalf of a person who is a
member or a constructive member of the veteran's or spouse's household;
and

\(iii\) They were or will be in excess of 5 percent of the applicable
maximum annual pension rate or rates for the veteran (including
increased pension for family members but excluding increased pension
because of need for aid and attendance or being housebound) as in effect
during the 12-month annualization period in which the medical expenses
were paid.

\(2\) *Surviving spouse's income*. Unreimbursed medical expenses will be
excluded when all of the following requirements are met:

\(i\) They were or will be paid by a surviving spouse for medical
expenses of the spouse, veteran's children, parents and other relatives
for whom there is a moral or legal obligation of support;

\(ii\) They were or will be incurred on behalf of a person who is a
member or a constructive member of the spouse's household; and

\(iii\) They were or will be in excess of 5 percent of the applicable
maximum annual pension rate or rates for the spouse (including increased
pension for family members but excluding increased pension because of
need for a}d and attendance or being housebound) as in effect during the
12-month annualization period in which the medical expenses were paid.
(Authority: 38 U.S.C. 501(a))

\(3\) *Children's income*. Unreimbursed amounts paid by a child for
medical expenses of self, parent, brothers and sisters, to the extent
that such amounts exceed 5 percent of the maximum annual pension rate or
rates payable to the child during the 12-month annualization period in
which the medical expenses were paid. (Authority: 38 U.S.C. 501(a))

\(h\) *Expenses of last illnesses, burials, and just debts*. Expenses
specified in paragraphs (h)(1) and (h)(2) of this section which are paid
during the calendar year following that in which death occurred may be
deducted from annual income for the 12-month annualization period in
which they were paid or from annual income for any 12-month
annualization period which begins during the calendar year of death,
whichever is to the claimant's advantage. Otherwise, such expenses are
deductible only for the 12-month annualization period in which they were
paid. (Authority: 38 U.S.C. 501(a))

\(1\) *Veteran's final expenses*.

\(i\) Amounts paid by a spouse before a veteran's death for expenses of
the veteran's last illness will be deducted from the income of the
surviving spouse. (Authority: 38 U.S.C. 1503(a)(3))

\(ii\) Amounts paid by a surviving spouse or child of a veteran for the
veteran's just debts, expenses of last illness and burial (to the extent
such burial expenses are not reimbursed under Chapter 23 of Title 38,
United States Code) will be deducted from the income of the surviving
spouse or child. The term "just debts" does not include any debt that is
secured by real or personal property. (Authority: 38 U.S.C. 1503(a)(3))

\(2\) *Spouse or child's final expenses*.

\(i\) Amounts paid by a veteran for the expenses of the last illness and
burial of the veteran's deceased spouse or child will be deducted from
the veteran's income.

\(ii\) Amounts paid by a veteran's spouse or surviving spouse for
expenses of the last illness and burial of the veteran's child will be
deducted from the spouse's or surviving spouse's income. (Authority: 38
U.S.C. 1503(a)(4))

\(i\) *Educational expenses*. Amounts equal to expenses paid by a
veteran or surviving spouse pursuing a course of education or vocational
rehabilitation or training, to include amounts paid for tuition, fees,
books, and materials, and in the case of a veteran or surviving spouse
in need of regular aid and attendance, unreimbursed amounts paid for
unusual transportation expenses in connection with the pursuit of such
course. Unusual transportation expenses are those exceeding the
reasonable expenses which would have been incurred by a nondisabled
person using an appropriate means of transportation (public
transportation, if reasonably available). (Authority: 38 U.S.C.
1503(a)(9))

\(j\) *Child's income*. In the case of a child, any current work income
received during the year, to the extent that the total amount of such
income does not exceed an amount equal to the sum of the following:

\(1\) The lowest amount of gross income for which a Federal income tax
return must be filed, as specified in section 6012(a) of the Internal
Revenue Code of 1954, by an individual who is not married (as determined
under section 143 of such Code), and is not a surviving spouse (as
defined in section 2(a) of such Code), and is not a head of household
(as defined in section 2(b) of such Code); and

\(2\) If the child is pursuing a course of postsecondary education or
vocational rehabilitation or training, the amount paid by the child for
those educational expenses including the amount paid for tuition, fees,
books, and materials. (Authority: 38 U.S.C. 1503(a)(10))

\(k\) *Domestic Volunteer Service Act Programs*. Payments received under
a Domestic Volunteer Service Act (DVSA) Program (including Volunteers in
Service to America (VISTA), University Year for ACTION (UYA), Foster
Grandparent Program (FGP), Retired Senior Volunteer Program (RSVP),
Senior Companion Program) shall be excluded as provided in paragraphs
(k)(1) and (2) of this section:

\(1\) All DVSA payments received before December 13, 1979, shall be
excluded from determining entitlement to improved pension. (Authority:
42 U.S.C. 5044(g) (1973))

\(2\) DVSA payments received after December 12, 1979, shall be excluded
from determining entitlement to improved pension unless the Director of
the ACTION Agency has determined that the value of all DVSA payments,
adjusted to reflect the number of hours served by the volunteer, equals
or exceeds the minimum wage then in effect under the Fair Labor
Standards Act of 1938 or the minimum wage of the State where the
volunteer served, whichever is the greater. (Authority: 42 U.S.C.
5044(g) (1979))

\(l\) *Distributions of funds under 38 U.S.C. 1718*. Distributions from
the Department of Veterans Affairs Special Therapeutic and
Rehabilitation Activities Fund as a result of participation in a
therapeutic or rehabilitation activity under 38 U.S.C. 1718 and payments
from participation in a program of rehabilitative services provided as
part of the care furnished by a State home and which is approved by VA
as conforming to standards for activities under 38 U.S.C. 1718 shall be
considered donations from a public or private relief or welfare
organization and shall not be countable as income for pension purposes.
(Authority: 38 U.S.C. 1718(f))

\(m\) *Hardship exclusion of child's available income*. When hardship is
established under the provisions of §3.23(d)(6) of this part, there
shall be excluded from the available income of any child or children an
amount equal to the amount by which annual expenses necessary for
reasonable family maintenance exceed the sum of countable annual income
plus VA pension entitlement computed without consideration of this
exclusion. The amount of this exclusion shall not exceed the available
income of any child or children, and annual expenses necessary for
reasonable family maintenance shall not include any expenses which were
considered in determining the available income of the child or children
or the countable annual income of the veteran or surviving spouse.
(Authority: 38 U.S.C. 1521(h), 1541(g))

\(n\) *Survivor benefit annuity*. Annuity paid by the Department of
Defense under the authority of section 653, Public Law 100-456 to
qualified surviving spouses of veterans who died prior to November 1,
1953. (September 29, 1988) (Authority: Sec. 653, Pub. L. 100-456; 102
Stat. 1991)

\(o\) *Agent Orange settlement payments*. Payments received by any
person in settlement of the case of *In re Agent Orange product
liability litigation* in the United States District Court for the
Eastern District of New York (M.D.L. No. 381). (January 1, 1989)
(Authority: Pub. L. 101-201, 103 Stat. 1795)

\(p\) *Restitution to individuals of Japanese ancestry*. Any payment
made as restitution under Public Law 100-383 to individuals of Japanese
ancestry who were interned, evacuated, or relocated during the period
December 7, 1941, through June 30, 1946, pursuant to any law, Executive
order, Presidential proclamation, directive, or other official action
respecting these individuals. (August 10, 1988) (Authority: Sec. 105,
Pub. L. 100-383; 102 Stat. 905)

\(q\) *Cash surrender value of life insurance*. That portion of proceeds
from the cash surrender of a life insurance policy which represents a
return of insurance premiums. (Authority: 38 U.S.C. 501(a))

\(r\) *Income received by American Indian beneficiaries from trust or
restricted lands*. Income of up to \$2,000 per calendar year to an
individual Indian from trust lands or restricted lands as defined in 25
CFR 151.2. (January 1, 1994) (Authority: Sec. 13736, Pub. L. 103-66; 107
Stat. 633)

\(s\) *Radiation Exposure Compensation Act*. Any payment made under
Section 6 of the Radiation Exposure Compensation Act of 1990.
(Authority: 42 U.S.C. 2210 note)

\(t\) *Alaska Native Claims Settlement Act*. Any receipt by an
individual of cash (including cash dividends on stock received from a
Native Corporation) to the extent that it does not, in the aggregate,
exceed \$2,000 per individual per annum; stock (including stock issued
or distributed by a Native Corporation as a dividend or distribution on
stock); a partnership interest; land or an interest in land (including
land or an interest in land received from a Native Corporation as a
dividend or distribution on stock); and an interest in a settlement
trust. (November 2, 1994) (Authority: §506, Pub. L. 103-446)

\(u\) *Monetary allowance under 38 U.S.C. chapter 18 for certain
individuals who are children of Vietnam veterans*. Any allowance paid
under the provisions of 38 U.S.C. chapter 18 to or for an individual who
is a child of a Vietnam veteran. (Authority: 38 U.S.C. 1823(c))

\(v\) *Victims of Crime Act*. Amounts received as compensation under the
Victims of Crime Act of 1984 unless the total amount of assistance
received from all federally funded programs is sufficient to fully
compensate the claimant for losses suffered as a result of the crime.
(Authority: 42 U.S.C. 10602(c))

\[44 FR 45936, Aug. 6, 1979, as amended at 46 FR 9580, Jan. 29, 1981; 53
FR 23235, June 21, 1988; 53 PR 24831, June 30, 1988; 56 FR 65846, Dec.
19, 1991; 57 FR 59300, Dec. 15, 1992; 58 FR 25563, Apr. 27, 1993; 59 FR
35266, July 11, 1994; 59 FR 37696, July 25, 1994; 59 FR 45976, Sept. 6,
1994; 60 FR 2523, Jan. 10, 1995; 60 FR 18355, Apr. 11, 1995; 62 FR 5528,
Feb. 6, 1997; 62 FR 51279, Sept. 30, 1997; 67 FR 9209, Feb. 28, 2002; 67
FR 49587, July 31, 2002; 68 FR 60852, Oct. 24, 2003\]

**Supplement *Highlights* references**: 6(2), 7(5), 12(4, 7), 13(2),
14(4), 15(3),

27(1), 31(1), 51(1), 54(2), 61(1).

Reserved

**§3.275 Criteria for evaluating net worth.**

\(a\) *General*. The following rules are for application in determining
the corpus of estate or net worth of a veteran, surviving spouse or
child under §3.274.

\(b\) *Definition*. The terms "corpus of estate" and "net worth" mean
the market value, less mortgages or other encumbrances, of all real and
personal property owned by the claimant, except the claimant's dwelling
(single family unit), including a reasonable lot area, and personal
effects suitable to and consistent with the claimant's reasonable mode
of life.

\(c\) *Ownership*. See §3.271(d).

\(d\) *Evaluation*. In determining whether some part of the claimant's
estate (or combined estates under §3.274(a) and (e)) should be consumed
for the claimant's maintenance, consideration will be given to the
amount of the claimant's income together with the following: Whether the
property can be readily converted into cash at no substantial sacrifice;
life expectancy; number of dependents who meet the definition of "member
of the family" (the definition contained in §3.250(b)(2) is applicable
to the improved pension program); potential rate of depletion, including
unusual medical expenses under the principles outlined in §3.272(g) for
the claimant and the claimant's dependents.

\(e\) *Educational expenses*. There shall be excluded from the corpus of
estate or net worth of a child reasonable amounts for actual or
prospective educational or vocational expenses. The amount so excluded
shall not be such as to provide for education or training beyond age 23.
(Authority: 38 U.S.C. 501(a))

\(f\) *Agent Orange settlement payments*. There shall be excluded from
the corpus of the estate or net worth of a claimant any payment made
from the Agent Orange Settlement Fund or any other fund established
pursuant to the settlement in the *In re Agent Orange product liability
litigation*, M.D.L. No. 381 (E.D.N.Y.). (January 1, 1989) (Authority:
Pub. L. 101-201, 103 Stat. 1795)

\(g\) *Restitution to individuals of Japanese ancestry*. There shall be
excluded from the corpus of estate or net worth of a claimant any
payment made as restitution under Public Law 100-383 to individuals of
Japanese ancestry who were interned, evacuated, or relocated during the
period December 7, 1941, through June 30, 1946, pursuant to any law,
Executive order, Presidential proclamation, directive, or other official
action respecting these individuals. (August 10, 1988) (Authority: Sec.
105, Pub. L. 100-383; 102 Stat. 905)

\(h\) *Radiation Exposure Compensation Act*. There shall be excluded
from the corpus of estate or net worth of a claimant any payment made
under Section 6 of the Radiation Exposure Compensation Act of 1990.
(Authority: 42 U.S.C. 2210 note)

\(i\) *Monetary allowance under 38 U.S.C. chapter 18 for certain
individuals who are children of Vietnam veterans*. There shall be
excluded from the corpus of estate or net worth of a claimant any
allowance paid under the provisions of 38 U.S.C. chapter 18 to or for an
individual who is a child of a Vietnam veteran. (Authority: 38 U.S.C.
1823(c))

\(j\) *Victims of Crime Act*. There shall be excluded from the corpus of
estate or net worth of a claimant any amounts received as compensation
under the Victims of Crime Act of 1984 unless the total amount of
assistance received from all federally funded programs is sufficient to
fully compensate the claimant for losses suffered as a result of the
crime. (Authority: 42 U.S.C. 10602(c))

\[44 FR 45936, Aug. 6, 1979, as amended at 57 FR 59300, Dec. 15, 1992;
60 FR 2523, Jan. 10, 1995; 62 FR 51279, Sept. 30, 1997; 67 FR 49587,
July 31, 2002; 68 FR 60852, Oct. 24, 2003\]

**Supplement *Highlights* references**: 6(2), 14(4), 31(1), 54(2),
61(1).