32716 Federal Register / Vol. 83, No. 135 / Friday, July 13, 2018 / Rules and Regulations 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Parts 3 and 13 

RIN 2900–AO53 

Fiduciary Activities 

AGENCY: Department of Veterans Affairs. 

ACTION: Final rule. 

SUMMARY: The Department of Veterans 

Affairs (VA) amends its fiduciary 

program regulations, which govern the 

oversight of beneficiaries, who because 

of injury, disease, or age, are unable to 

manage their VA benefits, and the 

appointment and oversight of 

fiduciaries for these vulnerable 

beneficiaries. The amendments will 

update and reorganize regulations 

consistent with current law, VA policies 

and procedures, and VA’s 

reorganization of its fiduciary activities. 

They will also clarify the rights of 

beneficiaries in the program, and the 

roles of VA and fiduciaries in ensuring 

that VA benefits are managed in the best 

interest of beneficiaries and their 

dependents. The amendments to this 

rulemaking are mostly mandatory to 

comply with the law. They are also in 

line with the law’s goals to streamline 

and modernize the fiduciary program 

and process. These amendments by 

Congress, reduce unnecessary 

regulations, streamline and modernize 

processes, and improve services for 

Veterans. Furthermore, VA is unable to 

alter proposed amendments that directly 

implement mandatory statutory 

provisions. 

DATES: Effective Date: The final rule is 

effective August 13, 2018. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Savitri Persaud, Analyst, Pension and 

Fiduciary Service, Department of 

Veterans Affairs, 810 Vermont Ave., 

NW, Washington, DC 20420; (202) 632– 

8863 (this is not a toll-free number). 

SUPPLEMENTARY INFORMATION: In a 

document published in the Federal 

Register on January 3, 2014, (79 FR 

430), VA proposed to amend, via a 

comprehensive rewrite and 

reorganization, its fiduciary program 

regulations, which govern the oversight 

of beneficiaries who, because of injury, 

disease, or age, are unable to manage 

their VA benefits, and the appointment 

and oversight of fiduciaries for these 

vulnerable beneficiaries. The 60-day 

public comment period ended on March 

4, 2014. VA received 26 comments from 

interested individuals and 

organizations. The comments are 

discussed below under the appropriate 

section headings. VA made a number of 

revisions based on the comments 

received. Those revisions, which are 

primarily technical, are discussed in the 

final rule. Based on the rationale 

described in this document and in the 

notice of proposed rulemaking (NPRM), 

VA adopts the proposed rule, as revised 

in this document, as a final rule. 

Section 13.10—Purpose and 

Applicability of Other Regulations 

This regulation will provide general 

notice regarding the statutory authority 

for and purpose of VA’s fiduciary 

program. It will also distinguish 

fiduciary matters from benefit claims 

and clarify that the VA regulations in 38 

CFR part 3 are not for application in 

fiduciary matters, unless VA has 

prescribed applicability in its part 13 

fiduciary regulations. We did not 

receive any comments on this section, 

but in order to clarify the scope of these 

regulations and the fact that they pertain 

to the oversight of VA-derived monetary 

benefits by persons who previously 

have been adjudicated incompetent to 

manage their VA-derived funds, we 

have revised the text of the regulation 

by adding the word ‘‘monetary’’ 

between the words ‘‘VA’’ and ‘‘benefits’’ 

in the first sentence of § 13.10(b). 

Section 13.20—Definitions 

We received one comment regarding 

the definitions in proposed § 13.20. The 

commenter recommended that VA 

recognize all legal marriages, domestic 

partnerships and civil unions for the 

purposes of fiduciary activities, thereby 

adding a definition of ‘‘domestic 

partner’’ to proposed § 13.20. The 

commenter noted that the broad 

authority granted by Congress in 38 

U.S.C. 5502 allows VA to add classes of 

appropriate fiduciaries, to include 

legally married partners and domestic 

partners to serve as fiduciaries. The 

commenter noted that a place-ofcelebration rule would be consistent 

with other definitions adopted by other 

agencies following the Supreme Court’s 

decision in United States v. Windsor, 

133 S. Ct. 2675 (2013). 

On June 26, 2015, the U.S. Supreme 

Court held that the Fourteenth 

Amendment of the U.S. Constitution 

requires a state to license a marriage 

between two people of the same sex and 

to recognize a marriage between two 

people of the same sex when their 

marriage was lawfully licensed and 

performed out-of-state. See Obergefell v. 

Hodges, 135 S. Ct. 2584 (2015). As a 

result of this decision, VA now 

recognizes the same-sex marriage of any 

veteran, where the veteran or the 

veteran’s spouse resided anywhere in 

the United States or its territories at the 

time of the marriage or at the time of 

application for benefits. VA has always 

determined a marriage to be valid, for 

the purposes of all laws administered by 

VA, according to the law of the place 

where the parties resided at the time of 

the marriage or the law of the place 

where the parties resided when the right 

to the benefits accrued. See 38 U.S.C. 

103(c). Consistent with the Supreme 

Court decisions in Obergefell and 

Windsor, VA recognizes the validity of 

same-sex marriages. Accordingly, this 

rule defines the term ‘‘spouse’’ in 

§ 13.20 to mean a husband or wife of 

any marriage, including common law 

marriages and same-sex marriages, that 

meets the requirements of 38 U.S.C. 

103(c). 

The separate question of how to 

address domestic partnerships and civil 

unions (which are not considered legal 

marriages), within the scope of VA’s 

fiduciary program, is a policy matter 

that was not considered during the 

development of the proposed regulation. 

As a result, expanding the definition of 

spouse, for purposes of VA’s fiduciary 

program, to include domestic partners 

and/or civil union partners or defining 

those terms in this final rule would be 

premature. VA is sensitive to this issue 

and plans to consider whether to 

expand the ‘‘beneficiary’s spouse’’ class 

of fiduciaries listed in § 13.20(e)(2) to 

explicitly include domestic partners and 

civil union partners. If VA decides to 

make changes, VA will promulgate a 

separate rulemaking to addresss this 

issue. 

We made non-substantive changes to 

the proposed definitions for ‘‘Hub 

Manager’’ and ‘‘spouse’’ and added a 

definition for ‘‘written notice,’’ which 

we discuss below. 

Section 13.30—Beneficiary Rights 

We received two comments regarding 

proposed § 13.30, ‘‘Beneficiary rights.’’ 

The first commenter stated that the 

proposed rule imposed ‘‘unnecessary 

restrictions’’ on the rights of 

beneficiaries. The commenter stated, 

‘‘We see no reason or legal requirement 

that beneficiaries under this program 

should have fewer rights or protections 

than any other VA beneficiary.’’ The 

commenter questions whether ‘‘the 

fundamental right to control one’s own 

property’’ should be based on the view 

of a single examiner and makes other 

general assertions that VA’s procedures 

are insufficient. 

We do not agree that we proposed 

‘‘unnecessary restrictions’’ on the rights 

of beneficiaries, or that these procedures 

violate a beneficiary’s rights. Our 

intention in drafting the NPRM was to 

ensure that VA benefits are managed in 


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the best interest of beneficiaries and 

their dependents. In that regard, we 

proposed to update and reorganize our 

regulations consistent with current laws 

and VA policies and procedures, and 

clarify the rights of beneficiaries in the 

fiduciary program. The suggestion that 

our proposed rules unnecessarily limit 

the rights of beneficiaries is incorrect. 

Further, assertions that determinations 

made in VA’s fiduciary program are 

based solely on the views of ‘‘one 

examiner’’ mischaracterize the efforts 

expended by VA fiduciary program 

staff. While a field examiner may 

conduct visits with a beneficiary and 

make a recommendation, fiduciaryrelated decisions are not based solely on 

the views of one individual. A field 

examiner’s recommendation is reviewed 

by a VA supervisor and action is taken 

based on a comprehensive view of 

which steps are in the best interest of 

the beneficiary. 

In drafting the rules on beneficiary 

rights, we focused on our general policy 

that a beneficiary in the fiduciary 

program has the same rights as any 

other VA beneficiary. We specifically 

stated in proposed § 13.30, ‘‘The rights 

of beneficiaries in the fiduciary program 

include, but are not limited to’’ those 

listed in the regulation text. Thus, we 

did not propose to prescribe all of the 

rights of beneficiaries in the fiduciary 

program. We prescribed that a 

beneficiary has the right to written 

notice of appealable fiduciary decisions. 

However, in responding to the foregoing 

comment, we discovered that, although 

we prescribed that a beneficiary is 

entitled to written notice on such 

matters, we did not prescribe rules for 

the Hub Manager as to what such notice 

should include. As such, we revised 

§ 13.20 to include a definition of written 

notice. 

We prescribed the right to be 

informed of a fiduciary’s name, 

telephone number, mailing address, and 

email address. We prescribed the right 

to obtain from the fiduciary a copy of 

the fiduciary’s VA-approved annual 

accounting, and other rights that we 

believe are basic to a fiduciarybeneficiary relationship and are 

necessary to define a fiduciary’s role in 

such a relationship. See 79 FR 432. We 

prescribed rights to clarify that VA is 

not the beneficiary’s fiduciary and that 

VA’s role is limited to oversight. See 79 

FR 432. In that regard, in § 13.140(a), 

our core requirement for fiduciaries is to 

ensure that a beneficiary’s benefits are 

managed in that beneficiary’s interest. 

We do not agree that our proposed 

regulations limit the rights of 

beneficiaries and make no changes 

based upon the comment. 

The commenter also stated that the 

proposed regulation on beneficiary 

rights is incomplete and it should 

prescribe a statement regarding the 

reasons and bases for determining that 

the appointment of a fiduciary is in the 

beneficiary’s interest. We did not intend 

that we would make a decision on a 

fiduciary matter without providing 

adequate notice to a beneficiary 

regarding the reasons and bases for such 

a decision. However, as stated above, we 

revised the proposed rule to include a 

definition of ‘‘written notice’’ and to 

specifically prescribe such notice for 

certain decisions. 

We proposed that every beneficiary in 

the fiduciary program has the right to 

notice regarding VA’s appointment of a 

fiduciary or any other decision on a 

fiduciary matter that affects VA’s 

provision of benefits to the beneficiary. 

We explained that VA would provide 

written notice of such decisions to the 

beneficiary or the beneficiary’s legal 

guardian, and the beneficiary’s 

accredited veterans service organization 

representative, attorney, or claims agent. 

See 79 FR 432. We explained that this 

notice is essential because beneficiaries 

would have the right to appeal these 

determinations. See 79 FR 432. 

Furthermore, we specifically proposed 

that a beneficiary in the fiduciary 

program has the right to appeal to the 

Board of Veterans’ Appeals (Board) a 

VA decision on a fiduciary matter that 

affects VA’s provision of benefits to the 

beneficiary, such as VA’s appointment 

of a fiduciary and its determination 

regarding its own negligence in misuse 

and reissuance of benefits matters. To 

assist the beneficiary in making a 

decision related to appealing a decision, 

and to facilitate review by the Board in 

the event of an appeal, any decision that 

affects the provision of benefits must be 

supported by reasons for our decision, 

as required under the new definition for 

‘‘written notice.’’ We revised proposed 

§ 13.30(b)(2) to clarify that every 

beneficiary in the fiduciary program has 

the right to ‘‘written notice’’ regarding 

VA’s appointment of a fiduciary or any 

other decision on a fiduciary matter that 

affects VA’s provision of benefits to the 

beneficiary. 

In responding to the foregoing 

comment, we noticed that a provision in 

proposed § 13.30 needed clarification. 

Specifically in proposed 

§ 13.30(b)(10)(i)(B), we prescribed that a 

beneficiary has the right to be removed 

from the fiduciary program if a court of 

jurisdiction determines the beneficiary 

is able to manage his or her financial 

affairs. There are beneficiaries in the 

fiduciary program who are determined 

to be unable to manage their financial 

affairs by a court and without any rating 

decision by VA. It is our intent that 

these beneficiaries will have the right to 

be removed from the fiduciary program 

if the court makes a determination that 

the beneficiary is able to manage his or 

her financial affairs. Accordingly, we 

have revised proposed 

§ 13.30(b)(10)(i)(B) to clarify that a 

beneficiary who is in the fiduciary 

program based upon a court 

determination that he or she cannot 

manage financial affairs may be 

removed from the fiduciary program if 

the court later determines that the 

beneficiary can manage his or her 

financial affairs. Other beneficiaries, 

who are in the fiduciary program as a 

result of a VA rating decision, may also 

submit evidence from a court regarding 

their ability to manage VA benefits. 

However, such evidence will be 

forwarded to a VA rating authority for 

a decision regarding whether the 

beneficiary is able to manage his or her 

VA benefits, as the rating authority has 

sole responsibility for making such 

determinations. See 38 CFR 3.353. 

The same commenter also stated, 

‘‘The Secretary’s position that the VA 

fiduciary program regulations pre-empt 

state laws in this area deserves specific 

rebuttal,’’ adding that ‘‘the NPRM failed 

to establish an adequate legal basis for 

the disruption of a traditional area of 

state authority.’’ The commenter then 

went on to urge that VA recognize state 

fiduciary laws, which ‘‘offer a broad 

array of [ ] rules establishing fiduciary 

responsibilities.’’ In the proposed rule, 

we stated that, ‘‘in creating the fiduciary 

program, Congress intended to preempt 

State law regarding guardianships and 

other matters to the extent necessary to 

ensure a national standard of practice 

for payment of benefits to or on behalf 

of VA beneficiaries who cannot manage 

their benefits.’’ See 79 FR 430. We stand 

by that interpretation and make no 

changes based on this comment. 

While state law provides some 

guidance concerning fiduciary matters, 

those laws vary significantly from state 

to state and do not pertain to VA’s 

fiduciary program. Further, VA does 

rely on state laws in cases where a state 

court has appointed a fiduciary for 

oversight of the veteran’s assets and 

where there is no conflict between state 

and Federal law, and/or when the courtappointed fiduciary is the same as the 

VA-appointed fiduciary. State laws 

often provide helpful guidance; 

however, under the Supremacy Clause 

of the Constitution, Federal law is 

controlling. See U.S. Const. art. VI, cl 2; 

Crosby v. Nat’l Foreign Trade Council, 

530 U.S. 363, 372–73 (2000). To the 

extent that a dispute arises between 


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Federal and state law, Federal law 

establishing and governing VA’s 

fiduciary program as codified in parts 

55 and 61 of title 38 of the United States 

Code, as well as in regulations 

implementing those statutes, controls. 

See VAOPGC 3–86 (10–28–85) (citing 

the Supremacy Clause and holding that 

a state court lacks jurisdiction to 

override VA’s authority in making 

determinations affecting payment of an 

incompetent veteran’s VA benefits to a 

VA-appointed fiduciary). 

The second commenter favorably 

mentioned the beneficiary rights section 

described in the proposed rule, stating: 

‘‘Overall, we believe that VA’s proposed 

fiduciary program regulations reflect an 

acknowledgement of the rights of 

veterans and other beneficiaries who are 

under the jurisdiction of the program. 

For example, § 13.30 enumerates the 

rights and benefits of veterans and other 

beneficiaries in the program.’’ We make 

no changes based upon the comment. 

Section 13.40—Representation of 

Beneficiaries in the Fiduciary Program 

We received two comments from the 

same commenter regarding § 13.40. 

First, the commenter quoted from the 

NPRM, which distinguished fiduciary 

matters from decisions on claims for 

benefits and noted that, at the time of a 

fiduciary appointment, ‘‘VA has already 

awarded benefits to the beneficiary, and 

any representation provided by an 

accredited attorney or claims agent 

would relate only to the fiduciary 

appointment decision or decision to pay 

benefits directly with VA supervision.’’ 

See 79 FR 432–33. This distinction will 

be the same for all fiduciary matters. 

Nonetheless, the commenter read this 

portion of the preamble to mean that VA 

had proposed to limit attorney fees to 

appointment decisions. 

We intended that the portion of the 

preamble quoted immediately above 

would explain applicability of the 

proposed fee provisions in the context 

of a fiduciary appointment. We did not 

intend that commenters would read the 

preamble as a general limitation on fees, 

such that beneficiaries could not pay 

attorneys for assistance in other 

fiduciary matters. In fact, the 

introductory text to proposed § 13.40 

was clear that the proposed fee 

provisions were applicable to 

representation of beneficiaries before 

VA ‘‘in fiduciary matters governed by 

[38 CFR part 13].’’ Proposed paragraph 

(c) was also clear that a VA-accredited 

attorney or claims agent could charge a 

reasonable fixed or hourly fee for 

representation of a beneficiary ‘‘in a 

fiduciary matter,’’ provided that the fee 

meets the requirements of 38 CFR 

14.636. We intended that beneficiaries 

would have the choice of hiring an 

attorney or claims agent and paying the 

attorney or claims agent a reasonable 

fixed or hourly fee for assistance with 

any fiduciary matter. As proposed, 

§ 13.40(c) reflected this intent and 

addressed the commenter’s concerns. 

We will not make any changes based 

upon the comment. 

Second, the commenter suggested that 

VA should allow contingent fees on 

recouped past-due benefits, to include 

funds recovered from a prior fiduciary 

or placed under control of a successor 

fiduciary. However, as we explained in 

the preamble to the proposed rule, ‘‘the 

provisions of 38 CFR 14.636 that 

reference past-due benefits, use the 

amount of past-due benefits to calculate 

a permissible fee, or authorize the direct 

payment of fees by VA out of withheld 

past-due benefits are not applicable in 

fiduciary matters.’’ See 79 FR 432. We 

based this statement on the fact that 

fiduciary matters do not concern the 

award of past-due benefits. At the time 

of a fiduciary appointment and all other 

fiduciary program matters, VA has 

already awarded benefits to the 

beneficiary, and any representation 

provided by an accredited attorney or 

claims agent could relate only to the 

fiduciary matter. Even in the case of a 

retroactive benefit payment, see 

§ 13.100(c), VA has already awarded the 

benefit pursuant to a decision on a 

benefit claim and withheld it for 

payment to a qualified fiduciary on 

behalf of the beneficiary. An attorney 

representing a beneficiary in the 

fiduciary appointment could not claim 

that his or her legal services resulted in 

VA’s prior award of the retroactive 

benefit. 

The commenter also appears to assert 

that, independent of any payment of 

past-due benefits, a contingent fee could 

be calculated based upon the amount of 

funds being placed under the control of 

a fiduciary who is ‘‘acceptable to the 

client,’’ and that ‘‘this methodology has 

been submitted for review to fiduciary 

program managers and was found to be 

compliant with regulations.’’ The 

method proposed by the commenter 

would require a finding on the amount 

of the funds placed under the control of 

the successor fiduciary and a conclusion 

that the successor fiduciary was 

‘‘acceptable to the client.’’ As 

mentioned above, the amount of VA 

benefits due to the beneficiary would 

not change. The commenter’s suggested 

revision would add unnecessary 

complexity to fee determinations in 

fiduciary cases, and would risk creating 

a conflict of interest for the 

representative by increasing the chances 

that fees charged based upon 

representation on benefit claims are 

duplicated by fees charged for 

representation on fiduciary matters. As 

a result, we have concluded that it 

would not be a prudent revision and 

make no change based on this comment. 

Section 13.50—Suspension of Benefits 

We received one comment regarding 

proposed § 13.50. The commenter read 

the proposed provisions to mean that a 

Hub Manager may suspend and ‘‘hold’’ 

payment of benefits, and generally 

commented that VA must ensure that 

beneficiaries have access to their 

benefits when VA implements a 

suspension for the reasons prescribed in 

the proposed rule in which we agree. 

VA occasionally encounters situations 

in which it must suspend payment of 

benefits to a fiduciary and take 

appropriate action to ensure continuity 

of benefits. In the rare case where VA 

suspends benefits under proposed 

§ 13.50, the VA Regional Office Director 

who has jurisdiction over the fiduciary 

hub would have authority to ensure that 

the beneficiary’s needs are being met 

through the appropriate coordination 

with the beneficiary and disbursement 

of the beneficiary’s funds. We 

emphasized that proposed § 13.50 

would be reserved for those rare cases 

in which VA has no option but to take 

appropriate, temporary steps to suspend 

and separately manage disbursement of 

benefits on behalf of a beneficiary. To 

further limit any adverse impact that 

might result from such a suspension, we 

proposed to limit the Hub Manager’s 

discretion to cases where the beneficiary 

or the beneficiary’s representative 

withholds cooperation in any fiduciary 

matter or where VA must immediately 

remove the fiduciary for cause and is 

unable to appoint a successor fiduciary 

before the beneficiary has an immediate 

need for disbursement of funds. Under 

these two situations only, VA will be 

forced to take appropriate action and 

disburse funds in the beneficiary’s and 

the beneficiary’s dependents’ interests 

so that the beneficiary has access to the 

funds while VA takes steps to remediate 

the problem. We will not make any 

changes based upon the comment 

because we believe that controls 

prescribed in § 13.50 address the 

commenter’s concerns. 

Section 13.100—Fiduciary 

Appointments 

We received several comments 

regarding proposed § 13.100. One 

commenter suggested that VA establish 

a maximum time period for appointing 

a fiduciary once a beneficiary has been 

rated as being unable to manage his or 


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her VA benefits. The commenter stated 

that VA makes long-delayed 

appointments without reconsidering 

whether a beneficiary is able to manage 

his or her VA benefits. The commenter 

noted that delays in fiduciary 

appointments are disruptive because 

they could replace ‘‘well-functioning 

caregiving structures with adversarial 

relationships.’’ Along the same lines, 

another commenter suggested we 

develop timelines for the completion of 

the investigation process to ensure 

expeditious appointment of fiduciaries. 

VA makes every effort to appoint 

fiduciaries in accordance with internal 

performance goals. Furthermore, VA’s 

appointment process ensures that the 

appointment reflects the beneficiary’s 

current capacity to manage his or her 

funds. In our experience in 

administering the fiduciary program, 

each fiduciary appointment is unique. 

The time it takes to appoint a fiduciary 

varies depending upon the facts of 

individual cases, workload, program 

growth, and available resources. 

Because of the foregoing factors, we 

cannot create a bright-line rule for the 

completion of the investigation process 

or the appointment of a fiduciary that 

would be enforceable. While we will not 

change § 13.100 to establish a timeliness 

rule, VA takes seriously its 

responsibility to protect beneficiaries 

who are unable to manage their benefits 

and will make every effort to improve 

the timeliness of fiduciary 

appointments. 

Regarding concerns that long delays 

in appointments should require 

reconsideration of medical evidence as 

to the beneficiary’s ability to manage his 

or her VA benefits, we agree that 

medical evidence plays an important 

role in the determination of one’s ability 

to manage his or her VA benefits and a 

beneficiary should have an opportunity 

to present such evidence. According to 

38 CFR 3.353(c), ‘‘[u]nless the medical 

evidence is clear, convincing and leaves 

no doubt as to the person’s 

incompetency, the rating agency will 

make no determination of incompetency 

without a definite expression regarding 

the question by the responsible medical 

authorities.’’ At the time a fiduciary is 

appointed, a field examiner performs a 

face-to-face interview with the 

beneficiary for the purpose of assessing 

the beneficiary’s ability to manage his or 

her VA benefits and to afford the 

beneficiary the opportunity to submit 

evidence regarding his or her ability to 

manage VA benefits. Any information 

gathered at that face-to-face interview is 

forwarded to the rating agency for 

consideration as to whether the 

beneficiary has the ability to manage his 

or her VA benefits. This is consistent 

with a pertinent regulation that provides 

that if evidence is developed that a 

person is capable of managing his or her 

VA funds, that evidence is forwarded to 

the rating agency for a determination as 

to whether any prior decision of 

incompetency should remain in effect. 

See 38 CFR 3.353(b)(3). Therefore, if a 

beneficiary believes he or she is able to 

manage his or her VA benefits, 

including at the time of a fiduciary 

appointment, the beneficiary may 

request a review of his or her 

incompetency rating. 

Regarding the commenter’s concern 

that delayed fiduciary appointments 

could replace ‘‘well-functioning 

caregiving structures with adversarial 

relationships,’’ we did not intend to 

disturb well-functioning relationships 

with those that are adversarial. In fact, 

we did not propose to appoint a 

particular fiduciary if we believed such 

an appointment would create an 

adversarial relationship. Instead, we 

proposed to make every effort to appoint 

a fiduciary that would best serve the 

interest of a beneficiary, provided that 

the proposed fiduciary is qualified and 

willing to serve. In § 13.100(e), we 

proposed to establish an order of 

preference for the appointment of 

fiduciaries. We proposed to first appoint 

the beneficiary’s preference if the 

beneficiary has the capacity to state 

such a preference. In these cases, a 

beneficiary could request appointment 

of a person with whom he or she has a 

well-functioning relationship. We then 

proposed to appoint the beneficiary’s 

spouse or other individuals or entities 

as set forth in proposed § 13.100(e) that 

we believed would result in an effective 

beneficiary-fiduciary relationship. 

Furthermore, pursuant to § 13.600, a 

beneficiary may appeal VA’s 

appointment of a fiduciary if the 

beneficiary believes that the 

appointment is not in his or her best 

interest. When VA receives such an 

appeal, it will try to resolve the 

disagreement by again requesting the 

beneficiary’s preference. For the 

foregoing reasons, we make no change 

based on this comment. 

The same commenter stated that VA 

should revise proposed § 13.100 to 

require a credit and criminal history 

check at each reappointment of a 

fiduciary and conduct periodic, routine 

credit and criminal history checks on 

fiduciaries thereafter. The commenter 

noted that such requirement would be 

cost-effective and identify suspicious 

financial activities. 

In § 13.100, we proposed to 

implement 38 U.S.C. 5507 regarding the 

investigation VA must conduct of a 

prospective fiduciary. We proposed to 

perform a face-to-face interview, when 

practicable, and obtain and review a 

credit report on the proposed fiduciary 

that was issued by a credit reporting 

agency no more than 30 days prior to 

the date of the proposed appointment. 

We also proposed to conduct a criminal 

background check for the purposes of 

determining whether a proposed 

fiduciary was convicted of any offense 

that would be a bar to serving as a 

fiduciary under proposed § 13.130 or 

that we could consider and weigh under 

the totality of the circumstances 

regarding the proposed fiduciary’s 

qualifications. 

Regarding this investigation, we agree 

with the commenter and revised 

§ 13.100(f) to add paragraph (3), which 

requires the Hub Manager to conduct 

the investigation, specifically the 

requirements of paragraph (f)(1)(i) 

through (iii), for every subsequent 

appointment of the fiduciary for a 

beneficiary. These requirements must be 

met without regard to the proposed 

fiduciary’s service to any other 

beneficiary. Regarding the commenter’s 

suggestion that we conduct periodic, 

routine credit and criminal history 

checks of fiduciaries, in proposed 

§ 13.100(f)(2), we prescribed that, at any 

time after the initial appointment of the 

fiduciary, the Hub Manager may repeat 

all or part of the investigation to ensure 

that a fiduciary continues to meet the 

qualifications for service. Although we 

understand the commenter’s concern, 

our program administration experience 

suggests that periodic, routine checks in 

all fiduciary appointments would not be 

an efficient use of program resources. 

Instead, we have determined that the 

matter should be left to the Hub 

Manager’s discretion on a case-by-case 

basis. In addition, we have other 

controls in place that will alert us 

regarding the need for a review of a 

fiduciary’s qualifications or to remove 

him or her from service as fiduciary. For 

example, if a fiduciary is not meeting 

his or her accounting requirements 

under § 13.280, or any of his financial 

responsibilities under § 13.140, based 

on the circumstances, we will conduct 

a review of his or her qualifications or 

remove him or her from service as a 

fiduciary. Although we currently do not 

have information to support prescribing 

mandatory periodic, routine credit and 

criminal history checks of VAappointed fiduciaries, we will continue 

to monitor the activities of fiduciaries 

and may address the matter in a future 

rulemaking. To this end, we added the 

phrase ‘‘or reappointment’’ after initial 

appointment in § 13.100(f)(2) to clarify 


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that Hub Managers may repeat all or 

part of an investigation of a fiduciary 

when the fiduciary is appointed to 

another VA beneficiary. At this time, we 

do not believe any additional changes 

are needed based on this comment. 

In a separate comment on proposed 

§ 13.100, the same commenter stated 

that face-to-face beneficiary interviews 

should be limited to situations where 

the information sought cannot be 

obtained by other means. The 

commenter was not aware of any 

statutory requirement for this type of 

beneficiary interview. The commenter 

suggested that beneficiary interviews do 

not provide new information and VA 

could substitute information obtained 

from caregivers, medical providers or 

other third parties. The commenter 

believed that beneficiary interviews are 

for the purpose of establishing the 

‘‘financial needs of the beneficiary and 

set[ting] the budget for the fiduciary to 

implement.’’ Thus, the commenter 

suggested we revise proposed § 13.100 

to limit beneficiary interviews to 

situations where the beneficiary is the 

only source for the information we are 

seeking. 

Under current law, ‘‘[w]here it 

appears to the Secretary that the interest 

of the beneficiary would be served 

thereby, payment of benefits under any 

law administered by the Secretary [of 

Veterans Affairs] may be made directly 

to the beneficiary or to a relative or 

some other fiduciary for the use and 

benefit of the beneficiary, regardless of 

any legal disability on the part of the 

beneficiary.’’ See 38 U.S.C. 5502(a)(1). 

Our longstanding interpretation of this 

broad authority is that VA may establish 

a fiduciary program, under which it 

oversees beneficiaries who cannot 

manage their own VA benefits. Congress 

generally deferred to VA to determine 

the appropriate program requirements. 

With respect to specific statutory 

requirements for fiduciary 

appointments, VA must conduct the 

investigation prescribed in 38 U.S.C. 

5507 and then conduct sufficient 

oversight to determine whether 

fiduciaries are properly providing 

services for beneficiaries. While 

Congress specifically mandated the 

foregoing provisions, Congress did not 

address how VA should conduct the 

various activities required for proper 

administration of the fiduciary program, 

to include aspects of oversight to ensure 

that a beneficiary’s benefits are used for 

the ‘‘benefit of the beneficiary.’’ 

However, in 38 U.S.C. 5711(a)(5), 

Congress authorized VA to, among other 

things, ‘‘make investigations and 

examine witnesses upon any matter 

within the jurisdiction of the 

Department.’’ Under the authority in 

sections 5502 and 5711, we conduct 

face-to-face visits with beneficiaries to 

assess their well-being and oversee the 

fiduciaries we appoint to ensure they 

are meeting the beneficiaries’ needs. 

Contrary to the commenter’s reading 

of our proposed rule, VA conducts faceto-face beneficiary visits for a much 

broader purpose. It is VA’s statutory 

obligation to ensure that the fiduciaries 

it appoints on behalf of beneficiaries are 

fulfilling their core requirement of 

monitoring the well-being of the 

beneficiaries they serve and are 

disbursing funds according to the 

beneficiaries’ needs. Speaking with the 

beneficiary and viewing that 

beneficiary’s environment allows VA to 

confirm that the fiduciary is monitoring 

the beneficiary and fulfilling his or her 

responsibilities under § 13.140 as the 

beneficiary’s fiduciary. In addition, VA 

assesses the beneficiary’s ability to 

manage his or her VA funds during the 

face-to-face visit. Thus, speaking to a 

beneficiary is crucial for obtaining 

information about the welfare and 

financial abilities of the beneficiary and 

adequacy of the fiduciary’s services. For 

these reasons, we will not revise 

§ 13.100 to limit face-to-face visits with 

beneficiaries. 

One commenter noted 38 U.S.C. 

5507(d), which states that temporary 

fiduciary appointments may not exceed 

120 days in cases where a beneficiary is 

appealing an incompetency rating 

decision, and inquired about our policy 

regarding appeals of incompetency 

rating decisions that may take more than 

120 days. 

Regarding the commenter’s concern 

that a beneficiary may be without a 

fiduciary at the end of the 120-day 

period, we note that VA does not 

appoint a temporary fiduciary in lieu of 

a permanent fiduciary when the 

beneficiary is appealing an 

incompetency rating. Under section 

5507(d), ‘‘[w]hen in the opinion of [VA], 

a temporary fiduciary is needed in order 

to protect the assets of the beneficiary 

while a determination of incompetency 

is being made or appealed. . . , [VA] 

may appoint one or more temporary 

fiduciaries for a period not to exceed 

120 days.’’ We interpret this statute to 

mean that VA does not have to appoint 

a temporary fiduciary in these cases, but 

if it does, the appointment(s) cannot 

exceed a total of 120 days. Under VA’s 

current administration of the program, 

when a beneficiary is appealing an 

incompetency decision, the beneficiary 

is already rated as being unable to 

manage his or her VA benefits and is in 

the fiduciary program. The decision is 

based on medical evidence or a legal 

determination of incompetency. As a 

general rule, VA makes permanent 

fiduciary appointments pending a 

decision on the appeal of the 

incompetency decision, which may take 

one or more years. We have found that 

this policy best protects beneficiaries 

and is the least disruptive procedure for 

them. In fact, we intended that our 

proposed rules on temporary fiduciary 

appointments would be reserved for 

situations where VA has removed a 

fiduciary for the reasons prescribed in 

proposed § 13.500, cannot expedite a 

successor fiduciary appointment, and 

the beneficiary has an immediate need 

for fiduciary services. We revised 

proposed § 13.100 by removing 

paragraph (h)(1)(i) requiring 

appointment of a temporary fiduciary 

when a beneficiary is appealing an 

incompetency decision. 

In § 13.100(h)(2), we proposed to limit 

appointment of temporary fiduciaries to 

individuals and entities that already 

meet the qualification criteria for 

appointment and are performing 

satisfactorily as a fiduciary for at least 

one other VA beneficiary for whom the 

fiduciary has submitted an annual 

accounting that VA has audited and 

approved. A commenter disagreed with 

the proposed limitation on temporary 

appointments and suggested that our 

proposed rule would exclude family 

members, including spouses and other 

caregivers, from serving as temporary 

fiduciaries. The commenter stated that 

we did not provide a sufficient basis for 

not considering the usual order of 

preference, as proposed in our 

regulations, in temporary fiduciary 

appointments. 

In prescribing the rules on temporary 

fiduciary appointments, our intention is 

to expeditiously appoint a qualified, 

well-performing fiduciary, who can 

temporarily meet the beneficiary’s 

immediate needs in rare circumstances. 

In that regard, we intend to ensure that 

the entity or individual we appoint as 

temporary fiduciary not only meets the 

qualification requirements under 

section 5507, but is also performing 

satisfactorily as a fiduciary for at least 

one other VA beneficiary for whom the 

fiduciary has submitted an annual 

accounting that VA has approved. Both 

requirements are crucial in our decision 

to appoint a temporary fiduciary. 

VA needs to appoint temporary 

fiduciaries promptly in rare cases where 

VA has removed a fiduciary for the 

reasons prescribed in proposed § 13.500, 

VA cannot expedite the appointment of 

a successor fiduciary, or the beneficiary 

has an immediate need for fiduciary 

services, and in other cases in which VA 

determines that it is necessary to protect 


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a beneficiary. Because of the urgency in 

ensuring that a fiduciary is immediately 

appointed in such cases, we might not 

be able to complete the qualification 

process prescribed by Congress in 38 

U.S.C. 5507. As the commenter 

suggested, it might sometimes be ideal 

to appoint a family member as 

temporary fiduciary in these rare cases. 

While we implemented section 5507(c) 

to exempt spouses from face-to-face 

interviews, criminal background checks, 

and credit checks, to ensure adequate 

protection for beneficiaries, we still 

have an obligation to explain the 

responsibilities and requirements of 

service to an individual who has never 

served as a fiduciary. This would 

require scheduling and conducting an 

interview, and ensuring compliance of 

the spouse or family member. This 

would not be the case if VA appoints an 

individual or entity successfully serving 

as fiduciary. While these types of 

appointments are rare, they are 

generally time sensitive. The delay 

associated with addressing fiduciary 

responsibilities and ensuring agreement 

from a spouse or family member is 

unnecessary when we have a fiduciary 

who can serve in an emergent but 

temporary situation. A temporary 

fiduciary allows VA to immediately 

deliver benefits while we consider the 

appointment of a fiduciary in 

accordance with the priority of 

appointment prescribed in § 13.100(a). 

For the foregoing reasons we limit our 

temporary fiduciary appointments as 

prescribed in § 13.100(h) and make no 

change based on this comment. 

Under proposed § 13.100(c), ‘‘[t]he 

Hub Manager will withhold any 

retroactive, one-time, or other lump-sum 

benefit payment awarded to a 

beneficiary . . . until the Hub Manager 

has appointed a fiduciary for the 

beneficiary and, if applicable, the 

fiduciary has obtained a surety bond 

under § 13.230.’’ A commenter stated 

that VA should not withhold a 

beneficiary’s entire retroactive benefit 

but should consider the size of the 

award before we make a decision to 

withhold. The commenter believed that 

VA should release any amount that is 

not larger than a beneficiary’s monthly 

recurring benefits and a percentage of 

larger retroactive benefits, or provide a 

method for a beneficiary to access his or 

her retroactive benefits in order to 

ensure that his or her needs are being 

met. 

Our policy for withholding a 

beneficiary’s retroactive benefits is to 

protect benefits that the beneficiary may 

need for future care and services and 

that VA would not be able to reissue 

under 38 U.S.C. 6107 if they were paid 

directly to the beneficiary prior to a 

fiduciary appointment. Under sections 

6107(a) through (c), VA has authority to 

reissue misused benefits when VA is 

negligent in administering aspects of the 

fiduciary program or, without regard to 

negligence, when the fiduciary is an 

entity that provides fiduciary services 

for one or more beneficiaries or an 

individual who provides fiduciary 

services for 10 or more beneficiaries. VA 

has determined that it is not prudent to 

release retroactive benefits to a 

beneficiary prior to a fiduciary 

appointment because, at that point in 

the process, VA has already determined 

that the beneficiary cannot manage his 

or her VA benefits. Moreover, VA’s 

authority to reissue benefits is limited to 

cases of fiduciary misuse. If VA released 

a beneficiary’s retroactive award prior to 

a fiduciary appointment and a family 

member, care provider, or other person 

assisting the beneficiary 

misappropriated the funds, VA would 

be unable to reissue benefits to the 

beneficiary because there would not 

have been misuse by an appointed 

fiduciary. For this reason, we proposed 

§ 13.100(c) with the intent of preserving 

vulnerable beneficiaries’ VA benefits for 

their future needs. 

Regarding the commenter’s suggestion 

that we release smaller amounts of 

retroactive benefits and portions of 

larger retroactive benefits to the 

beneficiary prior to a fiduciary 

appointment, or add provisions to 

ensure the beneficiary’s needs are being 

met, we have determined that current 

fiduciary program policy, under which 

VA initiates and continues payment of 

monthly benefits to the beneficiary 

while a fiduciary appointment is 

pending, strikes the proper balance 

between ensuring that beneficiaries’ 

current needs are met with protection of 

lump-sum benefit payments for future 

needs. For the foregoing reasons we will 

not make any changes based on this 

comment. 

One commenter, a corporate 

fiduciary, suggested that proposed 

paragraph (d)(3) would not adequately 

restrict a Hub Manager’s discretion in 

fiduciary appointments. In proposed 

§ 13.100(d) regarding initial fiduciary 

appointments, we did not propose to 

prescribe a specific limit on the number 

of beneficiaries a single fiduciary could 

serve. We had no data to support 

proposing a bright-line rule for 

discontinuing further appointments to a 

fiduciary and determined that each Hub 

Manager should have discretion to 

determine whether it is in a 

beneficiary’s interest to appoint a 

particular fiduciary. However, to avoid 

default appointments to certain paid 

fiduciaries in lieu of the best interest 

determination required by 38 U.S.C. 

5507(a)(2), we did not propose to give 

the Hub Managers unfettered discretion 

in such matters. First, under proposed 

paragraph (d)(3), a Hub Manager would 

consider whether the fiduciary could 

handle an additional appointment 

without degrading the service that the 

fiduciary provides to any other 

beneficiary who has funds under 

management with the fiduciary. Second, 

under proposed paragraph (e), we 

would establish an order of preference 

for appointing fiduciaries, with the 

result being that beneficiaries generally 

have a one-on-one relationship with a 

volunteer family member, friend, or 

caregiver fiduciary. In our view this 

placed an adequate check on the Hub 

Manager’s discretion in these situations. 

On a case-by-case basis, a Hub Manager 

may consider appointment of a single 

fiduciary with multiple appointments if 

it is in the best interest of the 

beneficiary. 

This commenter clarified that it was 

not seeking a higher order of preference 

in the appointment process or a brightline rule for the maximum number of 

beneficiaries that a fiduciary may serve, 

and understood that VA might have a 

valid business reason to restrict further 

appointments of a fiduciary in some 

cases. However, the commenter 

expressed concern that certain paid 

fiduciaries would not have an equal 

opportunity to compete for 

appointments in those cases where VA 

cannot appoint a qualified volunteer 

fiduciary. Although we considered the 

commenter’s concerns, we believe VA’s 

primary obligation is to act in the best 

interest of its beneficiaries and will 

allow Hub Manager discretion in the 

appointment process in the event a paid 

fiduciary is required. Accordingly, other 

than a technical change to § 13.100(e), 

we are not making any changes to 

§ 13.100 based upon the commenter’s 

suggestion. 

Finally, one commenter suggested 

that VA’s fiduciary regulations 

accommodate durable power of 

attorneys (POAs). We interpret this to 

mean that VA should give appointment 

preference to the person who holds the 

beneficiary’s POA. 

Based upon VA’s experience, it would 

not be good policy to give a person 

holding a beneficiary’s POA priority 

based only upon the existence of a POA. 

Veterans and other beneficiaries in the 

fiduciary program can be extremely 

vulnerable and easily coerced into 

signing documents. Additionally, a POA 

can be executed and revoked by the 

beneficiary at any time. If an individual 

is holding a POA, VA would have no 


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way of determining whether the POA is 

still in effect or if the beneficiary had 

the capacity to execute a legally 

enforceable POA under state law at the 

time of execution. Implementing 

policies and procedures related to the 

adjudication of POAs would needlessly 

complicate and delay the fiduciary 

appointment process. Also, under 

current law, VA has a duty to appoint, 

based upon a field examination and 

consideration of the totality of the 

circumstances, the individual or entity 

that is in the beneficiary’s best interest. 

While such a determination might 

conclude that appointment of an 

individual who holds the beneficiary’s 

POA is in the beneficiary’s interest, VA 

has determined that it cannot give 

undue preference and weight to the 

existence of a POA. Accordingly, we 

will not make any changes to § 13.100 

based upon the commenter’s suggestion. 

Section 13.120—Field Examinations 

In § 13.120(b), we proposed to 

prescribe the scope of field 

examinations, which could include, but 

would not be limited to, ‘‘[a]ssessing a 

beneficiary’s and the beneficiary’s 

dependents’ welfare and physical and 

mental well-being, environmental and 

social conditions, and overall financial 

situation, based upon visiting the 

beneficiary’s current residence and 

conducting a face-to-face interview of 

the beneficiary and the beneficiary’s 

dependents, when practicable.’’ We also 

proposed that, among other things, VA 

would conduct a field examination for 

the purpose of making appropriate 

referrals in cases of actual or suspected 

physical or mental abuse, neglect, or 

other harm to a beneficiary, as well as 

when investigating allegations that a 

fiduciary has misused funds or failed to 

comply with the responsibilities of a 

fiduciary under § 13.140. 

We received two comments regarding 

this proposed regulation. One 

commenter shared his story of his 

mother leaving her home to care for him 

after he was injured in combat. The 

commenter’s mother participates in the 

VA caregiver support program 

administered by the Veterans Health 

Administration (VHA). The commenter 

recommended that VA exempt 

beneficiaries who have VHA-approved 

caregivers from the home visit 

component of a field examination 

because VHA is already monitoring the 

well-being of these beneficiaries. 

Another commenter had the same 

concerns. We agree that beneficiaries 

whose family members are actively 

participating in the VA caregiver 

support program, and who remain 

eligible to participate in this program, 

should generally be exempted from the 

home visit component of the fiduciary 

field examination because VHA is 

already assessing their physical wellbeing. 

In 2010, the President signed into law 

the Caregivers and Veterans Omnibus 

Health Services Act of 2010. Section 

101(a)(1) of that law added a new 38 

U.S.C. 1720G to title 38, U.S.C., which 

required VA to establish a program of 

comprehensive assistance for family 

caregivers of eligible veterans and a 

program of support services for 

caregivers of covered veterans, which 

are collectively referred to as the 

Caregiver Support Program. Congress 

mandated, among other things, that as 

part of the program of comprehensive 

assistance for family caregivers, ‘‘[t]he 

Secretary shall monitor the well-being 

of each eligible veteran receiving 

personal care services under the 

program [and] . . . ensure appropriate 

follow-up regarding findings [by] . . . 

[v]isiting an eligible veteran in the 

eligible veteran’s home to review 

directly the quality of personal care 

services provided to the eligible 

veteran.’’ See 38 U.S.C. 1720G(a)(9)(A), 

(C). The statute further prescribes that 

VHA may take corrective action, 

including providing additional training 

or suspending or revoking the 

caregiver’s approval or designation. See 

38 U.S.C. 1720G(a)(9)(C)(ii). The 

implementing regulations provide: ‘‘The 

primary care team will maintain the 

eligible veteran’s treatment plan and 

collaborate with clinical staff making 

home visits to monitor the eligible 

veteran’s well-being, adequacy of care 

and supervision being provided. This 

monitoring will occur no less often than 

every 90 days, unless otherwise 

clinically indicated, and will include an 

evaluation of the overall health and 

well-being of the eligible veteran.’’ See 

38 CFR 71.40(b)(2). 

Based on the foregoing oversight 

mandated by Congress and provided by 

VHA, we have decided to generally 

exempt beneficiaries who have a VHAapproved and monitored family 

caregiver from the home visit 

component of field examinations 

because VHA already assesses their 

physical well-being and environment. In 

these cases, VHA’s oversight overlaps 

with the fiduciary program’s oversight 

that we proposed. We do not intend to 

intrude on these beneficiaries, as we 

believe VHA provides ample oversight. 

In fact, we respect the relationship of 

veterans and their family members, and 

appreciate the ability to revise our rules 

to limit any unnecessary or duplicative 

oversight. In that regard, we will revise 

§ 13.120 to reflect that VA will generally 

exempt beneficiaries who have a family 

member participating in the VA 

caregiver support program from face-toface visits in the home to assess their 

physical well-being and environment. 

Specifically, we revise § 13.120 to add 

paragraph (b)(1)(i) and prescribe that the 

Hub Manager will waive the 

requirements of paragraph (b)(1) of this 

section if the beneficiary has a VHAapproved family caregiver and VHA 

reports that the veteran is in an 

excellent situation. However, we 

prescribe an exception in new 

paragraph (b)(1)(ii), which states that 

the provisions of paragraph (b)(1)(i) do 

not apply in cases where the Hub 

Manager has information concerning the 

beneficiary’s unmet needs or welfare or 

information that the fiduciary has 

violated his or her responsibilities 

under § 13.140. This exception allows 

VA to ensure that a fiduciary is meeting 

his or her obligations to the beneficiary 

based upon current information that the 

Hub Manager obtains in the course of 

overseeing fiduciary services. In the 

event there is an allegation of misuse of 

a veteran’s VA funds under management 

or an allegation that a fiduciary is 

neglecting a beneficiary or there is 

insufficient evidence to determine the 

veteran’s well-being, this exception will 

allow the Hub Manager to provide 

appropriate oversight. 

However, VA will still conduct a faceto-face visit, any necessary 

investigations, or other inquiries to 

confirm the qualifications of a family 

caregiver seeking to provide fiduciary 

services for a veteran prior to 

appointment. VA must conduct the 

investigation prescribed by Congress in 

38 U.S.C. 5507, which includes 

conducting a face-to-face interview with 

the proposed fiduciary to the extent 

practicable, before appointing a person 

as fiduciary. 

Section 13.130—Bars to Serving as a 

Fiduciary 

We received two comments regarding 

§ 13.130. One commenter stated that his 

comment is specifically geared towards 

VA’s need to coordinate with state 

courts with jurisdiction over adult 

guardianship and conservatorship. The 

commenter cited two U.S. Government 

Accountability Office reports— 

‘‘Guardianships: Collaboration Needed 

to Protect Incapacitated Elderly People’’ 

(2004) and ‘‘Incapacitated Adult: 

Oversight of Federal Fiduciaries and 

Court-Appointed Guardians Needs 

Improvement’’ (2011). Both reports 

discussed the lack of coordination in 

sharing information between the state 

courts handling guardianships, the VA 

fiduciary program, and the Social 


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Security Administrative (SSA) payee 

program. The commenter relied on these 

reports to propose that this lack of 

coordination could result in vital 

information regarding a beneficiary’s 

welfare or the mismanagement of his or 

her VA benefits not being shared. The 

commenter singled out court 

information in particular, by concluding 

that bars to serving as a fiduciary should 

be expanded to include previous court 

sanctions or removals as a guardian or 

conservator and failure to file timely 

reports with the court. 

The topic of coordinating with 

guardianship courts and other 

governmental agencies is beyond the 

scope of this rulemaking. However, it is 

our current practice to coordinate with 

courts and other agencies and share 

information when it is appropriate or 

necessary. We will continue to work on 

any necessary protocols for coordinating 

and information sharing between courts, 

VA and other agencies. Nonetheless, we 

agree with the commenter’s suggestion 

that VA revise § 13.130 to bar a 

fiduciary from service if he or she has 

been removed as legal guardian by a 

court for misconduct. At this time, we 

decline to bar service as a fiduciary 

based solely upon a court sanction or 

other discipline short of removal. We 

anticipate situations where it is in the 

best interest of a particular beneficiary 

for VA to appoint a guardian, such as a 

family member or care provider, who 

has been disciplined by a court but not 

removed from service as a beneficiary’s 

guardian. 

There are various reasons a courtappointed guardian may be sanctioned 

by a court and his or her appointment 

may not pose a risk to the beneficiary 

or still be in best interest of the 

beneficiary. We believe it is best to 

retain the ability to assess these 

situations on a case-by-case basis. We 

intend to weigh the totality of the 

circumstances regarding the proposed 

fiduciary’s qualifications and other 

factors, including any court discipline 

while serving as a guardian, in 

determining whether the appointment is 

in the beneficiary’s best interest. 

Also, to mitigate the risk of 

appointing as fiduciary a legal guardian 

who has been disciplined by a court, we 

proposed under § 13.140(d)(1) that a 

fiduciary who is also appointed by a 

court must annually provide to VA a 

certified copy of the accounting 

provided to the court or facilitate VA’s 

receipt of such an accounting. In 

addition, in § 13.500(a)(2)(ii), we 

proposed to remove a fiduciary if he or 

she fails to maintain his or her 

qualifications or does not adequately 

perform the responsibilities of a 

fiduciary prescribed in § 13.140. Thus, a 

fiduciary will be removed if the 

continuation of his or her appointment 

poses a risk to the beneficiary. 

Accordingly, we will revise this 

section to add paragraph (b)(6) regarding 

a bar to service as a fiduciary if a 

guardian has been removed from service 

by a court for misconduct but do not 

make any additional changes based on 

these two comments. 

Another commenter recommended 

that VA expand the 10-year period in 

proposed § 13.130(a)(2)(i) to 20 years 

following the conviction of a felony as 

a bar to appointment or continuation of 

service as fiduciary. The commenter 

submitted two papers in support of the 

recommendation and claimed that both 

support the conclusion that a person 

who is crime free for 20 years is ‘‘less 

likely’’ to commit a crime than a person 

who has been crime free for 10 years. 

However, the research presented does 

not support the recommendation that 

there is value in waiting an additional 

10 years, i.e., the longer a person goes 

without committing a crime the less he 

or she is likely to commit a crime. In our 

view, a person who has been previously 

convicted of a felony, but has been 

crime free for 10 years, should not be 

barred from serving as a fiduciary. 

One of the papers submitted by the 

commenter cites to a 1994 Bureau of 

Justice Statistics (BJS) study, 

‘‘Recidivism of Prisoners Released in 

1994’’ (June 2002), which tracked 

272,111 former inmates for 3 years after 

their release from prison in 1994. The 

study found that 30 percent of the 

272,111 were rearrested for a new crime 

within the first 6 months of their 

release; 44 percent were rearrested 

within the first year; 59 percent were 

rearrested within the first 2 years; 68 

percent were rearrested within 3 years. 

The BJS collects criminal history data 

from the Federal Bureau of Investigation 

and state record repositories to study 

the recidivism patterns of various 

offenders, including persons on 

probation or discharged from prison. Its 

latest study, ‘‘Recidivism of Prisoners 

Released in 30 States in 2005: Patterns 

from 2005 to 2010’’ (April 2014), 

tracked the recidivism patterns of about 

400,000 persons released from state 

prisons in 2005. The study found that 

28 percent of the 400,000 were 

rearrested for a new crime within the 

first 6 months of their release; 44 

percent were rearrested within the first 

year; 60 percent were rearrested within 

2 years; 68 percent were rearrested 

within 3 years; and 77 percent were 

rearrested within 5 years. See https://

www.bjs.gov/content/pub/pdf/rpr94.pdf. 

The report concluded that the longer 

released prisoners went without being 

arrested, the less likely they were to be 

arrested at all during the 5-year period. 

See https://www.bjs.gov/content/pub/ 

pdf/rprts05p0510.pdf. 

Another report, ‘‘State of 

Recidivism—The Revolving Door of 

America’s Prisons’’ (April 2011), 

prepared by the Pew Center on the 

States (Pew) in collaboration with the 

Association of State Correctional 

Administrators was based on a survey of 

state corrections departments. This 

report noted that 41 states provided 

recidivism data on prisoners released in 

2004, and 33 states provided data on 

prisoners released in 1999. The 

responding states represented 87 

percent of all releases from state prisons 

in 1999 and 91 percent of all releases in 

2004. ‘‘In the first ever state-by-state 

survey of recidivism rates, state 

corrections data show that nearly 43 

percent of prisoners released in 2004, 

and 45 percent of those released in 

1999, were reincarcerated within three 

years, either for committing a new crime 

or violating the terms of their 

supervised release.’’ See http://

www.pewtrusts.org/en/about/newsroom/press-releases/0001/01/01/pewfinds-four-in-10-offenders-return-toprison-within-three-years. Studies by 

BJS and Pew do not examine postrelease recidivism for someone who has 

been crime free for 10 years or more. 

In further consideration of the 

comment to expand the 10-year period 

to 20 years, we looked at industry 

standards for guidance. There are no 

bright-line rules used by states or SSA 

for the appointment of convicted felons. 

Although all fifty states and the District 

of Columbia have enacted guardianship 

statutes, there is a lack of statutory 

consistency among the states regarding 

the appointment of a guardian who was 

convicted of a felony, and how long 

after a conviction one should be barred 

from serving. Research revealed three 

distinct categories of state laws 

concerning the eligibility of 

guardianship candidates with past 

felony convictions. Some states’ statutes 

prescribed a complete disqualification 

of a past felon as guardian. See, e.g., Fla. 

Stat. Ann. § 744.309(3) (LexisNexis 

2017); Wash. Rev. Code Ann. 

§ 11.88.020(1)(c) (LexisNexis 2017). 

Some states require the disclosure of the 

prior felony with consideration given to 

the ward’s best interest and no brightline rule regarding the numbers of years 

after the conviction of a felony before 

appointment. See, e.g., Ariz. Rev. Stat. 

§ 14–5106(A)(1) (LexisNexis 2017); N.H. 

Rev. Stat. Ann. § 464–A:4(V)(b) 

(LexisNexis 2017). Other states’ statutes 

do not address the issue. See, e.g., Ala. 


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Code § 26–2A–104 (LexisNexis 2017); 

Conn. Gen. Stat. § 45a–676(f) 

(LexisNexis 2017). 

SSA obtains information on whether 

a prospective representative payee was 

convicted of any offense under Federal 

or state law and sentenced to a period 

of imprisonment for more than 1 year 

before appointment. As a general rule, 

SSA will not appoint a convicted felon 

as a representative payee unless it 

cannot identify a suitable payee, there is 

no risk to the beneficiary, and the 

appointment is in the best interest of the 

beneficiary. Thus, although SSA 

considers certain crimes an absolute bar 

to service as a representative payee, it 

may still appoint a convicted felon if it 

determines that the appointment is in 

the best interest of the beneficiary. See 

20 CFR 416.622, 416.624. 

We proposed a general rule that a 

felony conviction is a bar to 

appointment or continuation of service 

as a fiduciary for the 10-year period 

following the conviction, provided that 

the conviction is not for fraud, financial 

crimes, or the abuse or neglect of 

another person, all of which would be 

a permanent bar to serving as a 

fiduciary. See 79 FR 437. The 

commenter’s suggestion that we should 

revise the rule by lengthening the lookback period ‘‘to a period longer than ten 

years’’ because a research study on the 

usefulness of criminal background 

checks stated that a violent offender is 

‘‘less likely’’ to commit a crime if he or 

she has been crime free for 20 years 

does not mean that it would be good 

policy to wait longer than 10 years to 

appoint a person VA finds appropriate 

to act as fiduciary for the beneficiary, 

particularly when the person is the 

beneficiary’s choice, it is the least 

restrictive option, and in most cases is 

the beneficiary’s family member. 

We proposed that we could appoint a 

convicted felon after 10 years only if we 

determine that there is no other person 

or entity willing and qualified to serve, 

there is no risk to the beneficiary, and 

such appointment is in the beneficiary’s 

interest. See 79 FR 437. We intend with 

the foregoing criteria in place, we will 

not appoint a person that may pose a 

risk to the beneficiary. In addition, in 

§ 13.500, we proposed to promptly 

remove a fiduciary if he or she poses a 

risk to a beneficiary after appointment. 

We believe that the measures we have 

in place will allow us to carefully 

consider a prospective fiduciary, who 

was convicted of a felony more than 10 

years prior to consideration for 

appointment, to determine whether it is 

in the beneficiary’s best interest to have 

such person serve as fiduciary. 

Therefore, we make no change based on 

this comment. 

In § 13.130, we proposed that an 

individual or entity may not serve as a 

fiduciary for a VA beneficiary if the 

individual or entity was convicted of a 

financial crime, e.g., fraud, theft, 

bribery, embezzlement, identity theft, 

money laundering, or forgery, or for the 

abuse of or neglect of another person. 

These offenses are permanent bars to 

serving as fiduciary. One commenter 

stated that our proposed list of 

disqualifying offenses does not include 

crimes related to dishonesty and 

deception, which are offenses that could 

place a beneficiary at risk for 

victimization. However, the commenter 

did not specifically identify the 

additional crimes that the commenter 

would like to see as bars to service as 

a fiduciary. 

The nature of specific offenses 

included within the phrase dishonesty 

and deception as expressed in Federal 

regulations and state rules varies. For 

example, banking regulations define 

dishonesty as the following: ‘‘[D]irectly 

or indirectly to cheat or defraud, to 

cheat or defraud for monetary gain or its 

equivalent, or to wrongfully take 

property belonging to another in 

violation of any criminal statute. 

Dishonesty includes acts involving a 

want of integrity, lack of probity, or a 

disposition to distort, cheat, or act 

deceitfully or fraudulently, and may 

include crimes which federal, state or 

local laws define as dishonest.’’ See 12 

CFR 585.40. Department of Labor 

regulations define ‘‘fraud or dishonesty’’ 

as encompassing ‘‘all those risks of loss 

that might arise through dishonest or 

fraudulent acts in handling of funds’’ 

and note that, under state law, ‘‘the term 

‘fraud or dishonesty’ encompasses such 

matters as larceny, theft, embezzlement, 

forgery, misappropriation, wrongful 

abstraction, wrongful conversion, 

willful misapplication or any other 

fraudulent or dishonest acts resulting in 

financial loss.’’ See 29 CFR 453.12. 

Furthermore, crimes of dishonesty 

and deception can be either a felony or 

misdemeanor offense, depending on the 

jurisdiction and crime. In addition, 

sentences for such crimes may differ 

widely. As a result, not all crimes of 

dishonesty and deception will be a bar 

to service as fiduciary. For purposes of 

our proposed regulations, we defined a 

felony offense to mean a criminal 

offense for which the minimum period 

of imprisonment is 1 year or more, 

regardless of the actual sentence 

imposed or the actual time served. We 

further explained that such a conviction 

is not a bar to serving as a fiduciary if 

the conviction occurred more than 10 

years preceding the proposed date of 

appointment and the crime is not one of 

the crimes listed in proposed 

§ 13.130(a)(2)(ii). We believe our 

proposed rules on bars to service 

provide the correct level of detail to 

effectively consider a potential 

fiduciary’s criminal background and the 

best interests of beneficiaries. Therefore, 

we will monitor the implementation of 

this rule to ensure that it adequately 

protects beneficiaries but will not make 

any changes at this time based on this 

comment. 

Section 13.140—Responsibilities of 

Fiduciaries 

We received several comments 

regarding proposed § 13.140. In 

paragraph (c) we proposed that a 

fiduciary’s non-financial 

responsibilities, among other things, 

will include contacting social workers 

or mental health professionals regarding 

the beneficiary, when necessary. One 

commenter recommended we include as 

a part of this responsibility that a 

fiduciary also contact a court-appointed 

guardian or conservator regarding the 

beneficiary when necessary. We agree. 

Without such contact, a fiduciary might 

not be able to determine whether a 

beneficiary’s needs are being met by the 

fiduciary’s disbursement of funds. In 

proposing paragraph (c), we intended 

that fiduciary responsibilities would 

include an obligation to monitor the 

beneficiary’s well-being and report any 

concerns to appropriate authorities, or 

anyone legally tasked with ensuring the 

beneficiary’s well-being. Amending this 

rule to include contact with a legal 

guardian or conservator is consistent 

with our intent. We therefore revise 

paragraph (c)(1) to state, ‘‘The 

fiduciary’s primary non-financial 

responsibilities include, but are not 

limited to . . . Contacting social 

workers, mental health professionals, or 

the beneficiary’s legal guardian 

regarding the beneficiary, when 

necessary.’’ 

One commenter, citing 38 U.S.C. 

5507, noted that our ‘‘principal 

responsibility in appointing a fiduciary 

is to determine [his or her] fitness to 

serve as a fiduciary.’’ The commenter 

noted that we nonetheless tasked a 

fiduciary with financial and nonfinancial responsibilities, that proposed 

§ 13.140(a) calls for a fiduciary to 

monitor the beneficiary’s well-being, 

and that proposed § 13.140(c) states that 

a fiduciary has non-financial 

responsibilities that ‘‘include but are not 

limited to[,]’’ seven specific enumerated 

responsibilities. The commenter stated 

that the proposed ‘‘not limited to’’ 

language is vague, particularly when the 


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non-performance of such 

responsibilities can subject a fiduciary 

to removal under proposed § 13.500. 

The commenter is correct that under 

section 5507 VA has authority to ensure 

that a person or entity appointed as 

fiduciary for a beneficiary is fit to serve. 

However, under 38 U.S.C. 5502(a)(1) 

Congress also authorized VA to make 

benefit payments to a fiduciary on 

behalf of a beneficiary if it appears to 

VA that such payment will serve the 

interest of the beneficiary. Under this 

authority, it is VA’s obligation to 

oversee the fiduciaries it appoints to 

manage VA benefits on behalf of 

beneficiaries, and this oversight 

includes prescribing fiduciary 

responsibilities. While we may appoint 

a fiduciary pursuant to the requirements 

in section 5507, and remove them 

pursuant to our oversight authority 

under section 5502(a)(1) and (b), prior to 

this rulemaking, we provided no 

binding notice to beneficiaries and 

fiduciaries regarding the responsibilities 

of fiduciaries in VA’s program. For this 

reason, we proposed to prescribe the 

core requirements for all fiduciaries, 

which are to monitor the well-being of 

the beneficiaries they are appointed to 

serve and to disburse funds according to 

beneficiary needs. Prescribing these 

requirements is consistent with 

Congress’ intent when it authorized VA 

to create the fiduciary program. As we 

explained in the proposed rule, our 

intention is to change the culture in the 

fiduciary program to ensure that the 

fiduciary we appoint determines the 

beneficiary’s needs and disburses funds 

to address those needs in the 

beneficiary’s interest. See 79 FR 438. We 

explained that VA is not the fiduciary 

for the beneficiary and must defer to the 

fiduciary consistent with VA 

regulations. See 79 FR 438. 

We also proposed to prescribe 

fiduciaries’ specific non-financial 

responsibilities. These responsibilities 

generally concern a fiduciary’s 

obligation to monitor the beneficiary’s 

well-being and report any concerns to 

appropriate authorities, including any 

legal guardian for the beneficiary. These 

responsibilities, among other things, 

reinforce VA’s view that a fiduciary 

must maintain regular contact with a 

beneficiary and be responsive to 

beneficiary requests. 

Furthermore, we used the ‘‘include, 

but are not limited to’’ language in 

paragraph (c) to clarify that the 

relationship between the beneficiary 

and fiduciary must be defined by each 

beneficiary’s needs. This rulemaking 

provides the minimum expectations for 

the fiduciaries whom VA appoints but 

recognizes that fiduciaries may have 

additional responsibilities to particular 

beneficiaries depending upon the 

fiduciary-beneficiary relationship and 

the beneficiary’s individual needs. 

Regarding the commenter’s concern 

that a fiduciary could be removed for 

any unknown reasons as a result of the 

‘‘include, but are not limited to’’ 

language, the alternative is to list all 

possible non-financial responsibilities 

of a fiduciary, which is impossible 

because of all the unique circumstances 

specific to individual beneficiaries. 

Rather, consistent with VA’s intent to 

emphasize the fiduciary’s responsibility 

for not only managing the beneficiary’s 

VA funds, but also monitoring the 

beneficiary’s general well-being, we 

believe § 13.140 provides sufficient 

guidance regarding our expectations for 

a fiduciary. Moreover, a fiduciary may 

always consult with a Fiduciary Hub 

regarding the scope of his or her duties 

and responsibilities relating to a 

particular beneficiary. Prior to initiating 

removal action, VA will thoroughly 

investigate any alleged misconduct or 

failure to satisfy responsibilities by a 

fiduciary and assess whether to pursue 

removal action. Furthermore, we 

explained in the preamble to proposed 

§ 13.600 that, although the Court of 

Appeals for Veterans Claims’ holding in 

Freeman v. Shinseki, 24 Vet. App. 404 

(2011), was limited to fiduciary 

appointments under section 5502, it 

would be consistent to interpret the 

court’s opinion to mean that there is a 

right to appeal any VA fiduciary 

decision that is made under a law that 

affects the provision of benefits to a VA 

beneficiary. See 79 FR 449. We therefore 

proposed in § 13.600 that a beneficiary 

could appeal the removal of a fiduciary. 

Under § 13.500, VA will provide a 

beneficiary clear notice of any decision 

to remove a fiduciary and the 

beneficiary’s right to appeal the 

removal. If the basis for removal does 

not involve a deficiency falling within 

the seven enumerated non-financial 

responsibilities, again, VA will, 

consistent with VA’s general fiduciary 

oversight authority in 38 U.S.C. 5502(a) 

and (b), thoroughly investigate any 

alleged misconduct or failure to satisfy 

responsibilities by a fiduciary and 

assess whether to pursue removal action 

prior to initiating removal action. For 

the foregoing reasons, we make no 

change to this proposed rule. 

One commenter cited to the preamble 

of the proposed rule on accountings, 

which stated that ‘‘[c]urrent policy also 

recognizes, based upon VA’s experience 

in administering the program, that the 

burden of preparing, submitting, and 

auditing accountings outweighs any 

oversight benefit for many beneficiaries 

and VA.’’ See 79 FR 444. The 

commenter interpreted this statement as 

VA’s acknowledgement that certain 

fiduciary responsibilities are 

burdensome. The commenter suggested 

that a fiduciary’s financial 

responsibilities are burdensome and 

technical, and complained that VA 

would require family member 

fiduciaries to be fiscal managers, 

prudent investors and financial 

planners. The commenter suggested that 

VA instead promulgate rules regarding 

VA’s responsibilities to fiduciaries, to 

include providing family member 

fiduciaries with technical support and 

software to carry out their financial 

responsibilities and protection of 

private information. 

VA’s fiduciary program policies have 

long recognized that service as a 

fiduciary for a beneficiary includes 

financial and other obligations that may 

at times be burdensome, particularly for 

fiduciaries that are family members. For 

this reason, VA’s policies attempt to 

strike the appropriate balance between 

oversight and fiduciary burden. VA 

must protect beneficiaries from 

fiduciary misuse of their benefits, while 

also promoting service by family 

members and other volunteers. We do 

not agree with the commenter’s 

assertion that the proposed 

responsibilities of a fiduciary in 

§ 13.140 impose an unwarranted burden 

on family members. In our proposed 

rules on accountings we explained that 

we would continue to require 

accountings only when the amount of 

VA benefit funds under management by 

the fiduciary exceeds $10,000, the 

fiduciary receives a fee deducted from 

the beneficiary’s account under 

proposed § 13.220, or the beneficiary is 

being paid monthly benefits in an 

amount equal to or greater than the rate 

for service-connected disability rated 

totally disabling. See 79 FR 444. As a 

general rule, no other fiduciaries will be 

required to submit an annual 

accounting. Regarding this rule, we 

stated, ‘‘[c]urrent policy also recognizes, 

based upon VA’s experience in 

administering the program, that the 

burden of preparing, submitting, and 

auditing accountings outweighs any 

oversight benefit for many beneficiaries 

and VA.’’ See 79 FR 444. Thus, contrary 

to the commenter’s interpretation, we 

did not intend the quoted portion of the 

preamble to mean that our proposed 

rules of fiduciary responsibilities are 

burdensome. 

Furthermore, we did publish 

proposed rules that impose obligations 

comparable to financial management 

and planning. In fact, we proposed 

separate rules for fiduciary accounts 


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(§ 13.200), fiduciary investments 

(§ 13.210), and accountings (§ 13.280) 

for the express purpose of clearly 

notifying fiduciaries regarding their 

basic financial management and 

reporting obligations. These rules 

require maintenance of a separate 

fiduciary account, establish policy 

regarding conservation of beneficiary 

funds, limit investments to United 

States savings bonds or Federallyinsured interest or dividend-paying 

accounts, exempt spouses and chief 

officers of institutions from the 

investment limitations, and, as 

described above, exempt most 

fiduciaries from the submission of 

annual audits. We do not agree that the 

responsibilities prescribed in § 13.140 or 

more specifically in § 13.200, § 13.210, 

or § 13.280 are unduly burdensome for 

family member fiduciaries. Rather, it is 

our intent that these rules will strike the 

appropriate balance between oversight 

and encouraging volunteer fiduciary 

service, with the emphasis being on 

allowing the fiduciary to determine the 

beneficiary’s needs and disburse funds 

to address those. 

We also explained our intent to 

change the culture of the program to 

ensure that fiduciaries do not 

unnecessarily conserve beneficiary 

funds. We explained, ‘‘[w]e are 

concerned that some elderly 

beneficiaries are dying with a large 

amount of funds under management by 

a fiduciary that could have been used 

during the beneficiary’s life to improve 

his or her standard of living.’’ See 79 FR 

438. We intend that fiduciaries will 

conserve or invest funds under 

management that the beneficiary or the 

beneficiary’s dependents do not 

immediately need for maintenance, 

reasonably foreseeable expenses, or 

reasonable improvements in the 

beneficiary’s and the beneficiary’s 

dependents’ standard of living. In our 

view, these basic responsibilities are 

consistent with industry standards and 

the fiduciary-beneficiary relationship, 

protect beneficiaries while limiting the 

burden on family member and other 

volunteer fiduciaries, and promote 

policies intended to improve 

beneficiaries’ standard of living. 

Regarding the responsibility of 

protecting a beneficiary’s financial 

information, we prescribed the basic 

precautions, which if not taken, might 

put the beneficiary at risk of identity 

theft, misappropriation of funds, or 

other harm. In that regard, we 

prescribed the minimum requirements 

for protection of beneficiaries’ private 

information. We intend that fiduciaries 

will take the reasonable precautions that 

every person should take when 

maintaining his or her private 

information in paper or electronic 

records to prevent identity theft and 

unauthorized access. In proposing these 

requirements, we did not intend to 

supersede state law or other 

professional industry standards, under 

which a fiduciary may have additional 

requirements that exceed the minimum 

standard proposed by VA. We therefore 

make no change based on this comment. 

Section 13.140(a)(2)(iv) requires a 

fiduciary to maintain financial records 

for a minimum of 2 years from the date 

VA removes the fiduciary under 

§ 13.500, and § 13.500(a)(1)(iv) provides 

that VA may remove a fiduciary if ‘‘[t]he 

beneficiary dies.’’ Therefore, we note 

that § 13.140(a)(2)(iv) includes the 

requirement that a fiduciary must 

maintain financial records for a 

minimum of 2 years after a fiduciary is 

removed following a beneficiary’s death. 

This requirement facilitates any inquiry 

into the fiduciary program and allows 

VA to address questions regarding the 

fiduciary’s past services to the 

beneficiary. We also made a few 

nonsubstantive changes to § 13.140. 

Section 13.210—Fiduciary Investments 

We made a minor revision to § 13.210 

by substituting ‘‘Fiduciaries should not 

conserve VA benefit funds under 

management for a beneficiary based 

primarily upon the interests of the 

beneficiary’s heirs or according to the 

fiduciary’s own values, preferences, and 

interests’’ for ‘‘Fiduciaries will not 

conserve VA benefit funds under 

management for a beneficiary based 

upon the interests of the beneficiary’s 

heirs or according to the fiduciary’s own 

beliefs, values, preferences, and 

interests.’’ This change is necessary to 

provide fiduciaries with some flexibility 

and to avoid the perception that belief 

systems are an element of VA’s 

oversight. 

Section 13.220—Fiduciary Fees 

We received three comments 

regarding proposed § 13.220. One 

commenter agreed with our proposal to 

bar fiduciary fees on retroactive benefits 

payments, but suggested we explicitly 

preempt state laws that allow a higher 

than 4 percent fee for fiduciary services. 

The commenter stated that while we 

proposed that our regulations would 

preempt state laws, we failed to invoke 

this preemption for fiduciary fees. The 

commenter read our proposed rules on 

fiduciary fees to mean that a fiduciary 

can receive a higher than 4 percent fee 

for his or her services, if state laws 

allow such higher fees. 

The commenter may have overlooked 

our explicit language to preempt state 

law in fiduciary matters. We specifically 

stated that we interpret 38 U.S.C. 

5502(a)(1) to mean, ‘‘in creating the 

fiduciary program, Congress intended to 

preempt State law regarding 

guardianships and other matters to the 

extent necessary to ensure a national 

standard of practice for payment of 

benefits to or on behalf of VA 

beneficiaries who cannot manage their 

benefits.’’ See 79 FR 430. We further 

explained that we intended to apply this 

approach to all fiduciary matters on the 

effective date of the final rule. See 79 FR 

430. We did not propose to authorize a 

higher than 4 percent fee for services 

performed by a fiduciary even if a state 

authorizes a higher fee. In the preamble 

to proposed § 13.220, we made it clear 

that when we determine that a fee is 

necessary to obtain a fiduciary in the 

best interests of a beneficiary, Congress 

authorized a reasonable fee to be paid 

from the beneficiary’s VA funds, but 

such fee for any year may not exceed 4 

percent of the beneficiary’s monetary 

VA benefits paid to the fiduciary during 

any month in which the fiduciary 

serves. See 79 FR 440. We will not make 

any changes based on this comment 

because § 13.220 clearly prescribes that 

a fiduciary fee cannot exceed 4 percent 

of a beneficiary’s monetary VA benefits 

paid to the beneficiary during any 

month in which the fiduciary serves. 

Another commenter cited to proposed 

§ 13.140(d)(1), where we prescribed that 

‘‘[i]f the fiduciary is also appointed by 

a court, [the fiduciary must] annually 

provide to [VA] a certified copy of the 

accounting provided to the court or 

facilitate [VA’s] receipt of such an 

accounting,’’ and proposed § 13.30(a), 

which prescribed the circumstances in 

which we would appoint a fiduciary on 

behalf of a beneficiary, to include when 

‘‘a court with jurisdiction might 

determine that a beneficiary is unable to 

manage his or her financial affairs.’’ The 

commenter appears to have read our 

references to ‘‘court’’ in these sections to 

mean that VA would continue to 

recognize court-appointed guardians as 

fiduciaries, which would grant them 

certain exemptions from our proposed 

rules. 

It is our intent to continue to appoint 

a beneficiary’s court-appointed guardian 

to serve as VA fiduciary if we determine 

that no other appropriate person or 

entity is willing to serve without a fee 

and such an appointment will be in the 

beneficiary’s interest. For existing courtappointed guardians who are serving 

satisfactorily as fiduciaries, we will 

continue their appointments as 

fiduciaries. However, in such 

appointments, only VA’s regulations 

will prescribe the fiduciary’s 


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responsibilities, as well as the fees they 

are authorized to receive. Accordingly, 

fees in excess of 4 percent of a 

beneficiary’s monthly benefit payment 

are not authorized. Our proposed rules 

were clear that they would apply to 

existing court-appointed guardians who 

are also fiduciaries. We proposed to 

discontinue the distinction between 

‘‘Federal’’ fiduciaries and ‘‘courtappointed’’ fiduciaries, and instead refer 

only to ‘‘fiduciary’’ or ‘‘fiduciaries’’ in 

our regulations. We explained that it is 

VA’s long-standing interpretation of 

current law to appoint and conduct 

oversight regarding all individuals and 

entities that provide fiduciary services 

for beneficiaries. See 79 FR 430. We 

intend to issue uniform rules for all VAappointed fiduciaries, such as allowable 

fees, surety bond requirements and 

appropriate investments, to include 

fiduciaries who also serve as courtappointed guardians for beneficiaries. 

However, for fiduciary investments that 

already exist, we do not intend to 

disturb these investments, as we 

recognize the risks that may be involved 

in any liquidation or changes. 

Therefore, we intend to apply our 

proposed regulations on fiduciary 

investment only to those investments 

acquired after the effective date of the 

final rule. 

In proposed § 13.140(d)(1), we 

prescribed that a court-appointed 

guardian who is also a VA fiduciary 

should annually provide us with a 

certified copy of the accounting he or 

she provides to the court. We did not 

propose that this will be in lieu of 

submitting an accounting to VA 

pursuant to proposed § 13.280. 

Fiduciaries who are also courtappointed guardians are required to 

provide VA with an annual accounting 

as prescribed in § 13.280. Pursuant to 

our oversight authority, we must ensure 

consistency in reporting to the court and 

VA, and ensure that funds are used in 

the interest of beneficiaries. 

Furthermore, proposed § 13.30(a) 

stated that our authority to appoint a 

fiduciary on behalf of a beneficiary 

includes cases in which ‘‘a court with 

jurisdiction . . . determine[s] that a 

beneficiary is unable to manage his or 

her financial affairs.’’ This language 

does not mean that VA will continue to 

recognize court-appointed guardians 

without subjecting them to our rules. If 

VA appoints or continues the 

appointment of a court-appointed 

guardian as fiduciary, that fiduciary will 

be subject to VA rules only for purposes 

of managing the beneficiary’s VA 

benefits. For the foregoing reasons, we 

do not make any changes to § 13.220 

based upon the commenter’s inquiry. 

In proposed § 13.220(b)(4), we 

prescribed that VA will not authorize 

fiduciary fees for any month a court 

with jurisdiction or VA determines that 

a fiduciary misused or misappropriated 

benefits. A commenter suggested that 

VA would need to coordinate with 

courts to obtain information on misuse. 

The commenter further stated that there 

is also a need for coordination regarding 

fiduciary fees, as a fiduciary could 

receive fees from both the court and VA. 

We agree with the commenter that 

coordination with courts is important to 

curtail misuse. It is our current practice 

to coordinate with courts and other 

agencies and share information when it 

is appropriate or necessary. We will 

continue to work on any necessary 

protocols for coordinating and 

information sharing between courts, VA 

and other agencies. However, the topic 

of coordinating with guardianship 

courts and other governmental agencies 

is beyond the scope of this rulemaking. 

With regard to fees, we clarify that a 

fiduciary, who is also acting as a stateappointed guardian for the beneficiary, 

may receive a fee not to exceed 4 

percent of the monthly VA benefit for 

the fiduciary responsibilities but may 

additionally receive a fee for his or her 

responsibilities as a state-appointed 

guardian. 

Section 13.230—Protection of 

Beneficiary Funds 

We received three comments 

regarding proposed § 13.230. A 

commenter suggested that we not only 

exempt spouses from the surety bond 

requirements, but also exempt all family 

members who are fiduciaries. The 

commenter stated that requiring family 

members to obtain surety bonds to 

protect beneficiaries’ funds is a waste of 

the beneficiary’s VA funds. 

Under current law, ‘‘[a]ny 

certification of a person for payment of 

benefits of a beneficiary to that person 

as such beneficiary’s fiduciary . . . shall 

be made on the basis of,’’ among other 

things, ‘‘the furnishing of any bond that 

may be required by [VA].’’ See 38 U.S.C. 

5507(a)(3). We interpret this 

requirement to mean that, where VA has 

imposed a bond requirement, the 

certification of any person as a fiduciary 

must be based in part upon the 

proposed fiduciary’s ability to qualify 

for and purchase such bond. As such, 

this requirement is a screening tool for 

VA to use in confirming qualification 

for appointment before releasing any 

large retroactive payment to a fiduciary. 

If a fiduciary cannot obtain a bond 

because the bonding company considers 

the risk of fund exploitation too high, 

VA will not appoint the prospective 

fiduciary and appoint an individual or 

entity who can obtain the necessary 

fund protection. In addition, requiring a 

prospective fiduciary to secure a surety 

bond is consistent with our oversight 

obligations, which among other things, 

include deterring fiduciary misuse of 

benefits. VA’s surety bond requirements 

put a fiduciary on notice that he or she 

is liable to a third party for any payment 

on the bond, and in the event a 

fiduciary misuses a beneficiary’s VA 

benefits, the bonding requirements 

protect the beneficiary’s funds. 

For the foregoing reasons, we 

proposed that all fiduciaries with the 

general exception of spouses must, 

within 60 days of appointment, furnish 

to the fiduciary hub of jurisdiction a 

surety bond conditioned upon faithful 

discharge of all of the responsibilities of 

a fiduciary if the VA benefit funds that 

are due and to be paid will exceed 

$25,000. We also proposed to apply this 

rule to a fiduciary who is not initially 

required to obtain a bond but later over 

time accumulates funds on behalf of a 

beneficiary that exceed the $25,000 

threshold. Based on our experience in 

administering the program, the risks of 

not requiring all fiduciaries, with the 

exception of spouses, to furnish a surety 

bond significantly outweigh any burden 

on a prospective fiduciary. 

We have exempted spouses who are 

fiduciaries from the surety bond 

requirements consistent with our longstanding policy of requiring less 

intrusive oversight of spouse fiduciaries. 

It has always been our policy to 

minimize the Government’s intrusion 

into the marital relationship and to 

avoid dictating requirements for 

property that is jointly owned by a 

beneficiary and his or her spouse. We 

therefore make no changes based on this 

comment. 

One commenter suggested that VA 

should require a court-appointed 

guardian who was previously 

sanctioned, disciplined, or removed by 

a court to furnish a surety bond as an 

additional screening tool, if VA is 

considering the appointment of that 

guardian as a fiduciary. In 38 U.S.C. 

5502, Congress authorized VA to 

appoint a fiduciary for a beneficiary 

only if it appears to VA that it would 

serve the beneficiary’s interest. 

Depending on the sanction, discipline 

or removal a guardian received from a 

court, VA may appoint or continue the 

appointment of that fiduciary only if VA 

determines that there is no other person 

or entity willing and qualified to serve, 

there is no risk to the beneficiary, and 

the appointment is in the beneficiary’s 

interest. VA will consider the totality of 

the circumstances before the 


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appointment or continuation of the 

appointment. Should VA decide to 

appoint or continue the appointment of 

a guardian as fiduciary, who was 

sanctioned, disciplined or removed by a 

court, we agree with the commenter that 

requiring a surety bond in such 

appointments may serve as an 

additional screening tool. Accordingly, 

we prescribed in § 13.230(c)(2), that 

‘‘the Hub Manager may, at any time, 

require the fiduciary to obtain a bond 

described in [§ 13.230(a)] and meeting 

the requirements of [§ 13.230(d)], 

without regard to the amount of VA 

benefit funds under management by the 

fiduciary for the beneficiary, if special 

circumstances indicate that obtaining a 

bond would be in the beneficiary’s 

interest.’’ Such special circumstances 

may include cases where a fiduciary 

was sanctioned, disciplined or removed 

by the court. We therefore make no 

changes based on this comment. 

One commenter stated that family 

caregivers who are also fiduciaries 

should be exempted from the surety 

bond requirements. Another commenter 

generally stated that family caregivers 

who are fiduciaries should also be 

exempted from the surety bond 

requirements because they are approved 

and monitored by VHA. 

We note that VHA does not monitor 

caregivers’ management of veterans’ VA 

benefits. Under 38 U.S.C. 

1720G(a)(1)(A), VA ‘‘establish[ed] a 

program of comprehensive assistance 

for family caregivers of eligible 

veterans.’’ As part of this program, VA 

has authority to provide family 

caregivers with ‘‘instruction, 

preparation and training’’ appropriate to 

provide services as caregivers, and to 

monitor the well-being of each eligible 

veteran receiving personal care services 

under the program. See 38 U.S.C. 

1720G(a)(3)(A)(i)(I), (a)(9)(A). 

VHA’s monitoring consists of 

maintaining a ‘‘veteran’s treatment plan 

and collaborat[ing] with clinical staff 

making home visits to monitor the 

eligible veteran’s well-being, adequacy 

of care and supervision being 

provided.’’ See 38 CFR 71.40(b)(2). 

Thus, while VHA provides monitoring 

of the adequacy of care as it pertains to 

the veteran’s health and well-being, it 

does not provide any training or 

oversight as it pertains to the ability of 

a family caregiver to manage the 

veteran’s VA benefits. See 38 U.S.C. 

1720G(a)(9)(C); 38 CFR 71.15, 71.25(c) 

and (d). The fiduciary program appoints 

fiduciaries on behalf of beneficiaries 

who are unable to manage their VA 

benefits and provides oversight to these 

fiduciaries. VA-appointed fiduciaries 

are tasked with, among other things, 

managing a beneficiary’s monetary VA 

benefits, while family caregivers are 

tasked with supporting the veteran’s 

health and well-being. We note further 

that requirements for caregivers are 

distinguishable in many ways from the 

requirements of fiduciaries. In this 

regard, the fact that someone may 

qualify as a family caregiver does not 

mean that they also would be able to 

serve as a fiduciary and/or obtain a 

surety bond. 

Under 38 U.S.C. 5507, VA must 

conduct an investigation regarding a 

proposed fiduciary before appointing 

the individual to serve as a fiduciary. 

This investigation must include an 

inquiry regarding the proposed 

fiduciary’s criminal and credit history. 

See 38 U.S.C. 5507(a)(1)(C) and (b). 

Furthermore, under 38 U.S.C. 5507(a), 

‘‘[a]ny certification of a person for 

payment of benefits of a beneficiary to 

that person as such beneficiary’s 

fiduciary . . . shall be made on the 

basis of,’’ among other things, ‘‘the 

furnishing of any bond that may be 

required by [VA].’’ In order to meet our 

oversight responsibilities and ensure 

that only the most qualified individuals 

are appointed as fiduciary to serve our 

vulnerable beneficiaries, we require 

prospective fiduciaries to furnish a 

surety bond consistent with proposed 

§ 13.230. We cannot exempt a family 

caregiver from the surety bond 

requirements because the VHA caregiver 

program does not provide oversight as it 

pertains to a beneficiary’s VA benefits. 

We therefore do not make any changes 

based on this comment. 

One commenter did not agree with 

VA’s proposal to generally eliminate the 

use of restricted withdrawal agreements. 

The commenter believes the process of 

converting restricted withdrawal 

agreements into surety bonds would 

result in a cost to VA by generating 

more work for VA’s field fiduciary 

employees, to include scheduling new 

field examinations to replace fiduciaries 

who cannot obtain surety bonds. 

It has been VA’s practice to 

occasionally allow a fiduciary, generally 

a family member or other close 

acquaintance of the beneficiary, to enter 

into a restricted withdrawal agreement 

with the beneficiary and VA regarding 

management of accumulated funds 

under management in lieu of obtaining 

a surety bond. We proposed to eliminate 

the use of withdrawal agreements in 

proposed § 13.230, except for fiduciaries 

residing in the Commonwealth of Puerto 

Rico, Guam, or another territory of the 

United States, or in the Republic of the 

Philippines, where surety bonds may 

not be available. We have determined 

that withdrawal agreements are 

generally inconsistent with VA policy 

regarding the role of VA and fiduciaries 

in the fiduciary program. See 79 FR 441. 

One of the overall goals of our rewrite 

of VA’s fiduciary regulations was to 

change the program’s culture to ensure 

that it is the fiduciary, and not VA, that 

determines the beneficiary’s needs and 

disburses funds to address those needs 

in the beneficiary’s interest. In our view, 

it is the fiduciary’s obligation to make 

best-interest determinations regarding 

beneficiary funds under management. 

The use of a restricted withdrawal 

agreement may improperly insert VA 

into matters reserved for fiduciaries. In 

that regard, we proposed the core 

requirements for all fiduciaries, which 

are to monitor the well-being of the 

beneficiaries they serve and to disburse 

funds according to beneficiary needs. 

VA is not the fiduciary for the 

beneficiary and must defer to the 

fiduciary consistent with VA 

regulations. 

We do not anticipate a change in 

workload or any budget increases with 

the implementation of this rule. 

Currently, less than 1/8th of 1 percent 

of our fiduciaries have withdrawal 

agreements. This is a result of our 

current policy to require surety bonds in 

lieu of withdrawal agreements. For the 

few fiduciaries that still have 

withdrawal agreements, effective with 

our final rule, we will require them to 

obtain surety bonds. It will be 

incumbent upon the fiduciary to obtain 

a surety bond and provide VA with 

proof of the surety bond. If a fiduciary 

cannot obtain a surety bond because the 

bonding company considers the risk of 

fund exploitation too high, VA will not 

continue the appointment of the 

fiduciary and will instead appoint an 

individual or entity that can obtain the 

necessary fund protection. To the extent 

this will require additional field 

examinations, we expect any additional 

costs for this activity to be marginal. 

Consistent with Congress’ intent, VA 

makes every effort to ensure that only 

qualified individuals and entities 

provide fiduciary services for 

beneficiaries. As such, this requirement 

is a screening tool for VA to use in 

confirming an appointment decision 

before releasing any large retroactive 

payment to a fiduciary. We make no 

change based on this comment. 

Section 13.250—Funds of Deceased 

Beneficiaries 

We did not receive any comments on 

this regulation; however, we made a 

technical change consistent with 

governing authority. Under 38 U.S.C. 

5502(e), when a beneficiary who has a 

fiduciary dies without leaving a valid 


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will and without heirs, all VA benefits 

under management by the fiduciary for 

the deceased beneficiary must be 

returned to VA if such funds will 

‘‘escheat’’ to the state, less any 

deductions of expenses to determine 

that escheat is in order. In our proposed 

rules, we used the plain language term 

‘‘forfeited’’ instead of ‘‘escheat.’’ 

However, to be more precise and 

consistent with the governing authority, 

we replaced the term ‘‘forfeited’’ with 

‘‘escheat.’’ 

Section 13.260—Personal Funds of 

Patients 

We did not receive any comments on 

this rule; however, we made a couple of 

nonsubstantive changes to § 13.260. 

Section 13.280—Accountings 

In proposed § 13.280(b), we defined 

‘‘accounting’’ to mean ‘‘the fiduciary’s 

written report regarding the income and 

funds under management by the 

fiduciary for the beneficiary during the 

accounting period prescribed by the 

Hub Manager.’’ The proposed rule 

further states that, ‘‘[t]he accounting 

prescribed by this section pertains to all 

activity in the beneficiary’s accounts, 

regardless of the source of funds 

maintained in those accounts.’’ One 

commenter questioned VA’s authority to 

require accountings regarding non-VA 

funds that are under management by a 

VA-appointed fiduciary. The 

commenter also believed that it is VA 

policy to require fiduciaries to disburse 

non-VA funds before VA funds, and 

again questioned our authority for such 

actions. 

Under 38 U.S.C. 5509(a), VA has 

authority to require fiduciaries to file 

accountings regarding funds under 

management. Pursuant to 38 U.S.C. 

5502(b), such accountings may include 

disclosure of ‘‘any additional financial 

information concerning the beneficiary 

(except for information that is not 

available to the fiduciary).’’ For 

accounting purposes, VA has authority 

to request information regarding all 

activity in a beneficiary’s account. It 

would be very difficult to detect misuse 

of benefits if VA were required to limit 

its audit to activity related only to 

income and expenditures actually 

derived from VA benefits. Therefore, we 

prescribed, consistent with our statutory 

authority, that an accounting pertains to 

all activity in the beneficiary’s accounts, 

regardless of the source of income. 

It is not VA’s policy to require 

fiduciaries to disburse a beneficiary’s 

non-VA funds before his or her VA 

funds. In fact, it is our policy as clarified 

in this rulemaking that it is the fiduciary 

who determines the beneficiary’s needs 

and disburses funds to address those 

needs in the beneficiary’s interest. In 

that regard, we specifically prescribed 

in§ 13.140(a) that a fiduciary must 

disburse or otherwise manage funds, 

which would include all non-VA funds 

of the beneficiary under the fiduciary’s 

control, according to the best interests of 

the beneficiary and the beneficiary’s 

dependents and ‘‘in light of the 

beneficiary’s unique circumstances, 

needs, desires, beliefs, and values.’’ We 

did not propose to require fiduciaries to 

disburse funds under management in 

any specific order. Accordingly, we 

make no change based upon these 

comments. 

In § 13.280, we proposed that a 

fiduciary would be required to provide 

VA an annual accounting regarding 

funds under management for a 

beneficiary when the amount of VA 

benefit funds under management by the 

fiduciary exceeds $10,000, the fiduciary 

receives a fee deducted from the 

beneficiary’s account under proposed 

§ 13.220, or the beneficiary is being paid 

monthly benefits in an amount equal to 

or greater than the rate for a serviceconnected disability rated totally 

disabling. We received several 

comments that generally suggested that 

we should exempt fiduciaries who are 

VHA-approved family caregivers from 

our accounting requirements because 

they receive ample oversight from the 

VA Caregiver Support Program. One 

commenter specifically stated that the 

VA Caregiver Handbook states that joint 

checking, investment, and other 

accounts are allowed between veterans 

and their caregivers. 

Congress granted VA the authority to 

‘‘establish a program of comprehensive 

assistance for family caregivers of 

eligible veterans,’’ as well as a program 

of general support services for 

caregivers of ‘‘veterans who are enrolled 

in the health care system established 

under [38 U.S.C. 1705(a)] (including 

caregivers who do not reside with such 

veterans).’’ See 38 U.S.C. 1720G(a), (b). 

VHA has since established a Caregiver 

Support Program, which provides 

certain medical, travel, training, and 

financial benefits to caregivers of certain 

veterans and service members who were 

seriously injured in the line of duty on 

or after September 11, 2001. As 

discussed above, neither the statute and 

implementing regulations nor the VA 

Caregiver Support Program provides for 

any oversight as it pertains to a veteran’s 

VA benefits. 

For fiduciaries in the fiduciary 

program, VA must conduct the 

investigation prescribed in 38 U.S.C. 

5507, and thereafter conduct sufficient 

oversight for the purpose of, among 

other things, monitoring a fiduciary 

regarding misappropriation or misuse of 

benefits and reissuance of benefits 

under 38 U.S.C. chapter 61. Under 38 

U.S.C. 5509(a), VA has authority to 

require fiduciaries to file accountings 

regarding funds under management, and 

it is the responsibility of the fiduciary 

program to oversee the actions of 

fiduciaries as it relates to the use of VA 

benefits. Accordingly, we propose to 

continue to require accountings only 

when the amount of VA benefit funds 

under management by the fiduciary 

exceeds $10,000, the fiduciary receives 

a fee deducted from the beneficiary’s 

account, or the beneficiary is being paid 

monthly benefits in an amount equal to 

or greater than the rate for serviceconnected disability rated totally 

disabling. At this time, we will not 

exempt VHA-approved caregivers from 

the fiduciary accounting requirement 

because the caregiver program does not 

include alternative oversight of the 

caregiver’s fiduciary obligations. 

While a commenter cited page 157 of 

the ‘‘VA Caregiver Handbook’’ and 

stated that the Caregiver Support 

Program allows joint accounts between 

veterans and family caregivers, a review 

of both the VA Caregiver Support 

Program Guidebook, which is no longer 

in use following the issuance of VHA 

Directive 1152, Caregiver Support 

Program (June 14, 2017), and the 

National Caregiver Training Program 

Caregiver Workbook did not confirm the 

commenter’s assertion. In the 

‘‘Resources’’ module of the National 

Caregiver Training Program Caregiver 

Workbook, pages 153 through 168, VA 

outlines the resources that are available 

to family caregivers and mentions joint 

accounts, but it does not state that 

caregivers can open joint accounts with 

veterans. Because the VA Caregiver 

Support Program does not provide 

oversight of a caregiver-fiduciary’s 

management of a veteran’s VA benefits, 

we make no change based on these 

comments. 

Two commenters suggested that we 

should require accountings from all 

fiduciaries, to include spouses. The 

commenters generally stated that some 

family members exploit the 

beneficiaries they are appointed to 

serve, and requiring accountings would 

serve as an additional deterrent to the 

misuse of benefits. Another commenter 

stated that a spouse caregiver who is 

also a fiduciary should be exempted 

from the accounting requirement. As 

stated previously, VA proposed only to 

require accountings when the amount of 

VA benefit funds under management by 

the fiduciary exceeds $10,000, the 

fiduciary receives a fee deducted from 


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the beneficiary’s account, or the 

beneficiary is being paid monthly 

benefits in an amount equal to or greater 

than the rate for a service-connected 

disability rated totally disabling. It is 

our general policy that every fiduciary 

that meets the foregoing criteria must 

submit an annual accounting to VA. 

We prescribed exceptions to the 

general accounting rules. First, no 

spouse will be required to submit an 

annual accounting. As we explained 

above, it is VA’s long-standing policy to 

avoid undue intrusion into the 

relationship between a beneficiary and 

the beneficiary’s spouse. It is our policy 

to minimize the Government’s intrusion 

into the marital relationship and avoid 

dictating requirements for property that 

is jointly owned by a beneficiary and his 

or her spouse. Second, we will not 

require the chief officer of a Federal 

institution to submit an annual 

accounting because such officers 

generally do not disburse funds, 

disburse only small fund amounts for 

the beneficiary’s personal use, or 

disburse funds according to the 

discretion delegated to the Secretary of 

Veterans Affairs by law. Third, we will 

not require an annual accounting from 

the chief officer of a non-VA facility 

receiving benefits for a beneficiary 

institutionalized in the facility when the 

cost of the monthly care and 

maintenance and personal cost expenses 

of the beneficiary in the institution 

equals or exceeds the beneficiary’s 

monthly benefit and the beneficiary’s 

funds under management by the 

fiduciary do not exceed $10,000. 

However, VA will continue to require 

accountings from all family members 

who serve as fiduciaries with the 

exceptions noted above. We make no 

change based on these comments but 

will continue to monitor the accounting 

requirements to ensure that we have the 

proper balance between oversight and 

fiduciary burden. We have, however, 

added new language in paragraph (a)(4) 

stating that accounting is required if the 

Hub Manager determines that it is 

necessary to ensure the fiduciary has 

properly managed the beneficiary’s 

funds. This will allow the Hub Manager, 

on a case-by-case basis, to determine 

when an annual accounting is required 

to protect the beneficiary. 

Section 13.400—Misuse of Benefits 

We received three comments 

regarding proposed § 13.400. One 

commenter suggested our definition of 

misuse should include the failure of a 

fiduciary to distribute funds to fulfill a 

beneficiary’s needs. However, VA 

cannot conclude, without a clear 

evidentiary basis, that a fiduciary is 

misusing a beneficiary’s VA benefits if 

that fiduciary is not distributing funds 

to fulfill a beneficiary’s needs. A 

fiduciary, for example, could be 

conserving a beneficiary’s funds instead 

of distributing funds to fulfill the 

beneficiary’s needs, or be unable to 

perform his or her duties as fiduciary for 

a number of reasons, which would not 

equate to misuse but might justify 

removing the fiduciary. Our definition 

of misuse restates the statutory 

definition, and consistent with current 

VA policy, will facilitate VA’s 

identification of possible misuse. 

Nonetheless, in the event a fiduciary is 

not distributing funds to fulfill a 

beneficiary’s needs in accordance with 

proposed § 13.140, which would 

prescribe that a fiduciary must monitor 

the well-being of the beneficiary the 

fiduciary serves and disburse funds 

according to beneficiary’s needs, the 

fiduciary will be removed under 

§ 13.500. We therefore make no changes 

based on the comment. 

Another commenter suggested that 

when we make a misuse determination 

on reconsideration, the decision should 

identify whether a fiduciary is a courtappointed guardian or conservator. We 

agree. We have amended paragraph 

(d)(4) to reflect that we would identify 

in our final misuse determination 

whether the fiduciary is a courtappointed guardian or conservator. 

The same commenter also suggested 

that VA develop protocols and notify 

the court, in addition to the beneficiary 

and legal guardian, of our misuse 

determinations when the fiduciary is 

also a court-appointed guardian. We 

agree. In cases where a fiduciary, who 

is also the beneficiary’s legal guardian, 

misappropriates or misuses a 

beneficiary’s VA benefits and there is a 

bond in place payable to the court, VA 

will contact the court to make it aware 

of the situation and facilitate recovery of 

any misappropriated or misused funds 

from the surety company. In addition, 

VA will put the court on notice that the 

continuation of the appointment of the 

legal guardian may no longer be in the 

beneficiary’s interest. Accordingly, in 

response to this comment, we have 

revised § 13.400(c) and (e)(1) by 

requiring the Director of the VA 

Regional Office of jurisdiction to also 

report misuse cases to ‘‘the court of 

jurisdiction if the fiduciary is also the 

beneficiary’s court-appointed legal 

guardian and/or conservator.’’ 

We have amended proposed 

§ 13.400(b) to clarify the discretionary 

authority of the Hub Manager to 

investigate or not investigate an 

allegation of misuse. The Hub Manager’s 

decision is discretionary because it 

involves the complicated balancing of a 

number of factors, including whether 

the misuse allegation is likely to lead to 

a finding of misuse and whether to 

expend limited funds and staffing 

resources in an investigation and 

issuance of a formal decision in 

response to such allegation. The revised 

language provides that ‘‘[u]pon receipt 

of information from any source 

regarding possible misuse of VA 

benefits by a fiduciary, the Hub Manager 

may, upon his or her discretion, 

investigate the matter and issue a 

misuse determination in writing.’’ 

Section 13.410—Reissuance and 

Recoupment of Misused Benefits 

Section 6107(a)(2) provides that VA 

negligence causes misuse when the Hub 

Manager fails to properly investigate or 

monitor the fiduciary, such as when the 

Hub Manager fails to timely review the 

fiduciary’s accounting or receives notice 

of an allegation of misuse but fails to act 

within 60 days of the date of 

notification of the alleged misuse to 

terminate the fiduciary. We made a 

technical change to proposed 

§ 13.410(b)(1) through (b)(3) to more 

accurately reflect 38 U.S.C. 6107(a)(2). 

In reviewing proposed § 13.410, we 

noticed that we failed to list one 

criterion in section 6107(a) for the 

reissuance of benefits based upon a 

determination that VA negligence 

resulted in misuse of benefits. As such, 

we are adding a new paragraph 

(b)(1)(iii) to make clear that negligence 

includes situations where VA received 

an allegation of misuse, decided to 

investigate after exercising its 

discretion, and found misuse, but failed 

to initiate action within 60 days of 

receipt of the misuse allegation to 

terminate the fiduciary. We are also 

clarifying paragraph (b)(1)(ii) to state, 

‘‘The Hub Manager did not decide 

whether to investigate an allegation of 

misuse within 60 days of receipt of the 

allegation,’’ which more accurately 

reflects the responsibility of the Hub 

Manager to exercise his or her 

discretionary authority to investigate a 

misuse allegation in a timely manner. 

Section 13.600—Appeals 

In proposed § 13.600, we proposed to 

close the evidentiary record on an 

appealable fiduciary matter once we 

reviewed the evidence relating to the 

fiduciary matter and made a decision. 

See 79 FR 449. We explained that our 

intent was to expeditiously process 

appeals in fiduciary matters to avoid 

delaying VA’s effort to resolve the 

beneficiary’s disagreement with a 

decision or issuing a statement of the 

case or certifying an appeal to the 


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Board. See 79 FR 449. We further 

explained that closing the record would 

not limit the Board’s authority to 

remand a matter to the Hub Manager, 

Regional Office Director, or Director of 

the Pension and Fiduciary Service 

under 38 CFR 19.9 for any action 

necessary for an appellate decision or 

the issuance of a supplemental 

statement of the case under 38 CFR 

19.31(b)(2), (b)(3), or (c). See 79 FR 449. 

We received several comments 

regarding proposed § 13.600 as it 

pertains to closing the record. One 

commenter is concerned that closing the 

record on the date our decision is made 

to remove a fiduciary would prevent a 

beneficiary from submitting new 

information about ‘‘the continuation of 

misfeasance or malfeasance by the 

fiduciary.’’ The commenter is concerned 

that if a fiduciary retaliates against the 

beneficiary during the appeals process, 

VA could be negligent for not having 

such information, as the record would 

be closed. The commenter further 

believes that the closing of the record 

would prevent a beneficiary from 

submitting additional evidence for 

reconsideration or additional misuse. 

Another commenter stated that 

closing the evidentiary record will 

obstruct compliance with the duty-toassist statute, which provides that VA 

has an affirmative duty to assist a 

claimant in obtaining evidence to 

substantiate the claimant’s claim for VA 

benefits, which may include obtaining 

relevant private or Government records 

or providing a medical examination or 

obtaining a medical opinion when 

necessary to decide the claim. See 38 

U.S.C. 5103A. 

In light of the foregoing comments, we 

reexamined proposed § 13.600 and 

agreed with the commenters that closing 

the record could prevent an appellant 

from submitting additional evidence 

that could impact a final decision under 

current regulations. A reexamination of 

this regulation also led us to conclude 

that closing of the evidentiary record 

would interfere with the general 

appellate process. Under 38 CFR 20.800, 

an appellant may submit additional 

evidence after initiating an appeal. 

Under 38 U.S.C. 7105(e), if an appellant 

submits additional evidence to the 

agency of original jurisdiction or the 

Board after the filing of a substantive 

appeal, the Board may review it for the 

first time on appeal unless the appellant 

specifically requests the agency of 

original jurisdiction to review it first; 

under 38 CFR 20.1304(a), an appellant 

may submit additional evidence within 

90 days after an appeal is certified to the 

Board or before the Board issues a 

decision, whichever comes first; under 

§ 20.1304(b), an appellant may submit 

additional evidence after the 90-day 

period upon a showing of good cause. 

Accordingly, we have revised 

§ 13.600(b) to remove reference to 

closing the record, thus permitting the 

potential submission of additional 

evidence to the extent allowed by 

statutes and regulations generally 

governing appeals. 

Regarding the commenter’s concerns 

that the duty to assist should apply to 

all stages of the appeal, we stated in the 

preamble to proposed § 13.600 that, 

although decisions on fiduciary matters 

are made under laws that affect the 

provision of benefits and, therefore, fall 

within the scope of 38 U.S.C. 511(a) 

(Decisions of the Secretary; finality), 

fiduciary matters are not decisions on 

claims for benefits and would not be 

afforded the same procedures as 

prescribed by VA for benefit claims 

under 38 CFR part 3. See 79 FR 449. 

Any duty to assist will be triggered at 

the claim development stage. Fiduciary 

matters arise after a beneficiary has 

established his or her claim for VA 

benefits. Therefore, the duty to assist is 

not applicable to fiduciary matters. 

Another commenter suggested that we 

include incompetency rating decisions 

in our list of appealable decisions. The 

commenter stated that it is unclear 

whether we intend to include 

incompetency rating decisions as an 

appealable decision in our part 13 

fiduciary regulations or leave such 

decisions in VA’s 38 CFR part 3 

adjudication regulations. 

We did not propose to include 

incompetency rating decisions in our 

fiduciary regulations because VA 

determinations of incompetency are the 

subject of the adjudication regulations 

in part 3, see 38 CFR 3.353(e), which 

precede the appointment of a fiduciary 

in cases where a beneficiary is 

determined unable to manage his or her 

VA-derived monetary benefits. 

Beneficiaries rated by VA as being 

unable to manage their VA benefits are 

afforded the right of appeal regarding 

that rating through VA’s regulations in 

38 CFR parts 3, 19, and 20. A 

beneficiary enters the fiduciary program 

after he or she is rated unable to manage 

his or her VA benefits. VA’s rating 

agencies are authorized to find 

beneficiaries incompetent for the 

purpose of disbursement of benefits, see 

38 CFR 3.353(b), (c), (d), and the rules 

that govern these determinations are 

contained in VA’s part 3 regulations. 

While VA adjudication regulations 

trigger entry into VA’s fiduciary 

program, these regulations have aspects 

that operate independently from VA’s 

fiduciary program. Finally, we have 

found that the process described above 

works effectively. For the foregoing 

reasons, we did not propose to 

consolidate the rules applicable to 

incompetency rating decisions in our 

proposed part 13 regulations. 

The same commenter stated that VA 

did not provide any reasons for closing 

the record after we make a final decision 

on an appealable fiduciary matter. The 

commenter stated that because fiduciary 

appeals involve ‘‘mentally challenged 

and impaired beneficiaries, the record is 

highly likely to be incomplete or 

otherwise in need of enhancement to 

ensure a fair and well-founded decision 

of appeal.’’ Citing to 38 CFR 3.103 and 

Cushman v. Shinseki, 576 F.3d 1290 

(Fed. Cir. 2009), the commenter stated 

that existing VA appellate procedures 

should govern fiduciary appeals. The 

commenter further stated that an 

appellant’s right to due process includes 

the right to a complete and accurate 

record, and closing the record amounts 

to a violation of a beneficiary’s right to 

due process. 

As previously explained, we are 

amending § 13.600 to remove reference 

to closing the evidentiary record. 

Regarding an appellant’s right to due 

process in fiduciary matters, VA’s 

fiduciary regulations will afford 

beneficiaries all of the process that is 

due to them under the law through 

specific notice and opportunity-to-beheard provisions. After the appointment 

of a fiduciary, we will afford due 

process in VA decisions regarding 

fiduciary matters as prescribed in the 

part 13 regulations. For instance, VA 

will provide to the beneficiary a written 

decision and notice of appellate rights 

in a fiduciary matter that is appealable 

under § 13.600. See 38 CFR 13.30(b). 

Regarding misuse, VA will issue a 

decision and provide the parties an 

opportunity to request reconsideration 

and submit any additional information, 

see § 13.400(c), (d), and will provide to 

the beneficiary a written decision and 

notice of appellate rights following 

reconsideration, see §§ 13.400(d), 

13.600(a)(4). 

For the foregoing reasons, we have 

changed our position regarding the 

evidentiary record on appeal. To reflect 

these changes, in § 13.600(b), we have 

removed language as it pertains to the 

closing of the record. 

General Matters 

In 38 U.S.C. 5502(a)(1), Congress 

authorized VA to appoint a fiduciary for 

the purpose of receiving and disbursing 

VA benefits on behalf of a beneficiary: 

‘‘Where it appears to the Secretary that 

the interest of the beneficiary would be 

served thereby, payment of benefits 


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32732 Federal Register / Vol. 83, No. 135 / Friday, July 13, 2018 / Rules and Regulations 

under any law administered by [VA] 

may be made directly to the beneficiary 

or to a relative or some other fiduciary 

for the use and benefit of the 

beneficiary, regardless of any legal 

disability on the part of the 

beneficiary.’’ In the preamble to the 

proposed rule, we explained that VA 

interprets ‘‘regardless of any legal 

disability’’ in section 5502(a)(1) to mean 

that, in creating the fiduciary program, 

Congress intended VA to preempt state 

laws regarding guardianships and other 

matters to the extent necessary to ensure 

a national standard of practice for 

payment of benefits to or on behalf of 

VA beneficiaries who cannot manage 

their benefits. See 79 FR 430. 

One commenter disagreed with our 

interpretation that Congress intended 

VA to preempt state law. The 

commenter stated that Congress 

intended VA to utilize ‘‘well-developed 

state law in this area to aid in the 

appointment, regulation, and oversight 

of its fiduciaries.’’ Citing to various 

Supreme Court cases, the commenter 

generally stated that there is no 

reasonable basis for our interpretation of 

section 5502(a)(1) and we did not 

address well-established legal tests for 

whether Congress intended a Federal 

statute to preempt state laws. 

Matters regarding the governance of 

guardianships for persons with legal 

disabilities have their jurisdiction in 

state courts. See, e.g., Neb. Rev. Stat. 

Ann. § 30–2602(a) (LexisNexis 2017). 

Congress specifically provided that, 

‘‘regardless of any legal disability on the 

part of the beneficiary,’’ VA can act and 

appoint a fiduciary on behalf of such 

beneficiary. Contrary to the 

commenter’s concern, as discussed 

below, this language cannot be 

construed to mean that Congress 

explicitly authorized VA to create a 

fiduciary program whereby it appoints a 

fiduciary on behalf of a beneficiary, 

irrespective to any legal disability, and 

then defers to state laws for the 

administration of the fiduciary program. 

We do not disagree with the 

commenter that there are welldeveloped laws in matters of 

guardianship. We did not propose to 

preempt these state laws regarding the 

administration of state guardianship 

matters. When Congress enacted section 

5502, it did not intend a sweeping 

preemption of state laws that govern 

guardianship activities. As we discuss 

further below, we believe Congress only 

intended for VA to preempt state law in 

guardianship matters as they relate to 

VA benefits. Under the authority 

granted by current law, we proposed to 

promulgate uniform rules for all 

fiduciaries appointed by VA to manage 

VA benefit payments on behalf of 

beneficiaries. As such, if we appoint a 

state-appointed guardian to serve as a 

fiduciary on behalf of a beneficiary who 

is receiving VA benefits, our 

regulations, not state law, are applicable 

to the appointment and oversight of the 

fiduciary and the fiduciary’s 

management of VA benefits for the 

beneficiary, as Congress intended. 

In establishing the fiduciary program, 

Congress did not intend for VA to refer 

to various state laws for the 

administration of the fiduciary program. 

For example, Congress did not intend 

for VA to utilize state laws regarding 

fiduciary fees that are paid from a 

beneficiary’s VA benefits and subject 

beneficiaries to the various fee 

schedules prescribed by states, such that 

beneficiaries will be treated differently 

depending upon state of residence. 

Under section 5502(a)(2), Congress 

specifically mandated ‘‘a reasonable 

commission for fiduciary services 

rendered’’ to be paid from the 

beneficiary’s VA funds, ‘‘but the 

commission for any year may not 

exceed 4 percent of the monetary 

benefits.’’ Furthermore, among other 

things, Congress authorized VA to 

remove any fiduciary who is not 

meeting the fiduciary’s responsibilities 

to a beneficiary or who is not acting in 

the beneficiary’s interest. See 38 U.S.C. 

5502. VA’s authority also extends to 

appointment of a temporary fiduciary in 

certain circumstances, suspending 

payments to any fiduciary who fails to 

properly submit an accounting to VA, 

and, with respect to the appointment of 

a fiduciary, conducting investigations of 

prospective fiduciaries. See 38 U.S.C. 

5502, 5507. The foregoing statutory 

obligations demonstrate Congress’ intent 

to create a uniform system of fiduciary 

services for VA beneficiaries, 

irrespective of inconsistent state laws. 

The commenter relied on Hines v. 

Stein, 298 U.S. 94 (1936), and stated that 

the United States Supreme Court 

addressed the matter as to whether 

Congress intended VA to preempt state 

laws regarding guardianships and 

rejected VA’s supremacy theory 75 years 

ago. The commenter’s reliance on Hines 

for this proposition is misplaced. In 

Hines, the then Administrator of 

Veterans Affairs objected to an 

attorney’s fee, which was allowed by a 

state court for an attorney’s special 

services in a guardianship matter, on the 

grounds that the fees were in excess of 

the amount fixed by Federal statutes. 

See Id. at 96–97. The Court found that 

‘‘[n]othing brought to our attention 

would justify the view that Congress 

intended to deprive state courts of their 

usual authority over fiduciaries, or to 

sanction the promulgation of rules to 

that end by executive officers or 

bureaus.’’ See Id. at 98. It accordingly 

affirmed the order of the court of 

common pleas allowing the attorney’s 

fees. The Supreme Court’s decision in 

Hines reflects that state courts at the 

time of that decision had the authority 

to make decisions in state-appointed 

guardianship cases involving veterans. 

This remains true in matters that do not 

involve matters affecting the payment of 

VA monetary benefits to persons whom 

VA has adjudicated as unable to manage 

these funds. In cases that involve VA’s 

appointment of fiduciaries and their 

oversight of VA funds due to persons 

adjudicated by VA as incompetent to 

manage those funds, Congress has 

provided specific authority authorizing 

VA oversight via statutes now codified 

in chapters 55 and 61 of title 38 of the 

United States Code. Because these 

statutes were enacted after Hines and 

therefore were not addressed in Hines, 

Hines does not control in matters 

involving VA’s appointment of 

fiduciaries and oversight of VA funds. 

VA’s longstanding interpretation of 38 

U.S.C. 5502 is that VA may establish a 

fiduciary program, under which it 

oversees beneficiaries who cannot 

manage their own VA benefits, and 

preempt state law regarding 

guardianships and other matters to the 

extent necessary to ensure a national 

standard of practice for payment of 

benefits to or on behalf of VA 

beneficiaries who cannot manage their 

benefits. It is reasonable to conclude 

that Congress had knowledge of state 

laws and Hines as they pertain to 

guardianship matters, when it granted 

VA the authority to administer the 

fiduciary program. Therefore, with its 

enactment of 38 U.S.C. 5502, Congress 

expressed a remedy for subjecting VA 

beneficiaries to varying state laws and 

intended for VA to preempt state law as 

it relates to appointment of fiduciaries 

to oversee the assets of persons whom 

VA adjudicated as incompetent to 

manage their VA-derived monetary 

benefits. 

The commenter cited various 

Supreme Court cases that discuss the 

methods by which the Court may 

discern whether Congress intended to 

preempt state law when it enacted 

certain Federal legislation, and the 

commenter stated that VA did not 

address any of the tests for preemption 

as established by the Court. There is no 

dispute that the Supreme Court has 

established various tests on the issue of 

whether a Federal statute preempts state 

laws and has discussed the various tests 

in numerous cases. The commenter 

cited Pharmaceutical Research and 


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Manufacturers of America v. Walsh, 538 

U.S. 644 (2003), in which the Court 

noted: ‘‘the question [in this case] is 

whether there is a probability that [a 

state’s] program was pre-empted by the 

mere existence of the federal statute. We 

start therefore with a presumption that 

the state statute is valid . . . and ask 

whether petitioner has shouldered the 

burden of overcoming that 

presumption.’’ See Id. at 661–662 

(citation omitted). Walsh concerned 

whether a Maine prescription drug law, 

under which the state attempted to 

renegotiate rebates with drug 

manufacturers, was preempted by the 

Federal Medicaid statute. See Id. at 650– 

51. 

The above-quoted statement in Walsh 

describes how the burden of showing 

preemption is allocated in litigation 

between private parties. It does not 

describe how courts determine whether 

an agency is correct in finding that 

Federal law preempts certain state 

actions. See, e.g., id. at 661 (stating that, 

if the agency had determined that the 

state law impermissibly conflicted with 

Federal law, the agency’s ‘‘ruling would 

have been presumptively valid’’). As 

explained below, our conclusion is 

consistent with the general standards 

courts apply in determining that Federal 

law preempts any conflicting state laws 

as to matters that Congress intended 

would be governed by Federal law. 

Further, unlike Walsh, we are not 

assessing the validity or invalidity of a 

specific state statute but, rather, are 

merely explaining the basis for our 

conclusion that Congress authorized VA 

to establish uniform standards 

governing VA fiduciary matters that 

would preempt state law in the event of 

any conflict. 

As an initial matter, we emphasize 

that VA did not propose to intrude on 

state authority over a particular activity, 

specifically its governance of 

guardianship matters. In that regard, if 

a state appoints a person or entity to 

serve as legal guardian for an 

individual, the state law of jurisdiction 

would apply to that matter, and VA has 

no authority to interfere. VA did not 

propose to regulate state guardianships 

or to invalidate state laws as they apply 

to guardianship matters. However, if VA 

determines that it will be in a VA 

beneficiary’s interest to appoint the 

beneficiary’s state-appointed guardian 

as fiduciary over the beneficiary’s VA 

monetary benefits, VA’s regulations will 

apply to VA’s appointment of that 

fiduciary and VA’s oversight of the 

fiduciary’s management of VA funds. 

The doctrine of preemption has its 

roots in the Supremacy Clause, U.S. 

Const., art. VI, cl. 2, and requires courts 

to examine congressional intent. Fid. 

Fed. Sav. & Loan Ass’n v. de la Cuesta, 

458 U.S. 141, 152–53 (1982). The 

Supreme Court has held that 

preemption ‘‘may be either express or 

implied, and is compelled whether 

Congress’ command is explicitly stated 

in the statute’s language or implicitly 

contained in its structure and purpose. 

Absent explicit pre-emptive language, 

Congress’ intent to supersede state law 

altogether may be inferred because the 

scheme of federal regulation may be so 

pervasive as to make reasonable the 

inference that Congress left no room for 

the states to supplement it, because the 

Act of Congress may touch a field in 

which the federal interest is so 

dominant that the federal system will be 

assumed to preclude enforcement of 

state laws on the same subject, or 

because the object sought to be obtained 

by federal law and the character of 

obligations imposed by it may reveal the 

same purpose.’’ See Id. (citations and 

quotations omitted). Further, ‘‘[e]ven 

where Congress has not completely 

displaced state regulation in a specific 

area, state law is nullified to the extent 

that it actually conflicts with federal 

law. Such a conflict arises when 

compliance with both federal and state 

regulations is a physical impossibility.’’ 

See Id. at 153. 

In deciding questions of preemption, 

courts follow two guiding principles: 

‘‘First, the purpose of Congress is the 

ultimate touchstone in every preemption case. Second, in all preemption 

cases, and particularly in those in which 

Congress has legislated . . . in a field 

which the States have traditionally 

occupied, . . . [courts] start with the 

assumption that the historic police 

powers of the States were not to be 

superseded by the Federal Act unless 

that was the clear and manifest purpose 

of Congress.’’ See Wyeth v. Levine, 555 

U.S. 555, 565 (2009) (citations and 

quotations omitted). 

Here, upon a plain reading of section 

5502(a)(2) and a review of its legislative 

history, Congress intended VA to 

preempt state law regarding 

guardianships and other matters to the 

extent necessary to ensure a national 

standard of practice for payment of 

benefits to or on behalf of VA 

beneficiaries who cannot manage their 

benefits. As noted above, it is well 

established in guardianship statutes that 

guardianship matters relating to legal 

disability have their jurisdiction in state 

courts. State courts ultimately 

determine the necessity of a legal 

guardian based on the individual’s legal 

disability. As such, Congress would 

have excluded the specific language 

‘‘regardless of any legal disability’’ in 

section 5502 had it intended for state 

laws to apply to matters of payment of 

VA benefits to fiduciaries on behalf of 

VA beneficiaries who cannot manage 

their VA benefits. Instead, Congress 

provided for VA to appoint a fiduciary 

irrespective to any legal disability of the 

beneficiary and for Federal laws, rather 

than state laws, to govern the fiduciary 

program. See 38 U.S.C. 5502(a)(2) (‘‘a 

fiduciary appointed by the Secretary’’). 

More fundamentally, by vesting VA 

with statutory authority over the 

appointment, supervision, payment, and 

removal VA fiduciaries, Congress has 

made clear its intent that Federal law 

will govern those matters. Thus, VA 

proposed rules that are uniform to all 

fiduciaries that it appoints to manage 

VA benefits on behalf of beneficiaries. 

In 1974, Congress amended then 38 

U.S.C. 3202 and authorized VA to make 

payments to a fiduciary other than a 

state-appointed guardian. See Public 

Law 93–295, sec. 301, 88 Stat. 180, 183– 

84 (1974). Furthermore, 38 U.S.C. 

5502(b), among other things, authorizes 

VA to suspend benefits to a fiduciary, 

regardless of whether he or she is 

appointed as guardian by the state court, 

if that fiduciary refuses to render an 

account to VA, or if he or she neglects 

to administer a beneficiary’s estate 

according to law. Our conclusions 

regarding the plain language and the 

structure and purpose of section 5502 

are bolstered by its legislative history. 

The language and available legislative 

history of the statute reflect Congress’ 

intent to create a uniform fiduciary 

program for all VA beneficiaries who are 

unable to manage their VA benefits. 

In support of the commenter’s 

assertion that Congress intended VA to 

defer to the various state laws in its 

administration of the fiduciary program, 

the commenter noted that Congress did 

not prescribe any specific duty of trust 

for fiduciaries or administrative 

provisions, and generally stated that 

section 5502 contains language 

establishing Congress’ intent to have VA 

defer to state law. We do not agree. 

As the commenter stated, there are 

well-established legal tests for whether 

Congress intended to have a Federal 

statute preempt state laws, and the 

absence of language in a Federal statute 

does not itself mean that Congress 

intended that VA will defer to state law, 

particularly when Congress routinely 

delegates broad authority to Federal 

agencies to determine how to best 

administer Federal programs. Section 

5502 is this type of broad authority. 

Nonetheless, in light of this comment, 

we revised § 13.140(a)(1) to include that 

fiduciaries in the fiduciary program owe 

VA and beneficiaries the duties of good 


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faith and candor and must administer a 

beneficiary’s funds under management 

in accordance with paragraph (b) of 

§ 13.140. We agree with the commenter 

that duties of candor and good faith are 

essential in a fiduciary-beneficiary 

relationship, and a fiduciary should be 

required to exercise good faith and to 

take the same care regarding a 

beneficiary’s funds under management 

as he would for his or her own funds. 

Although the statute is silent as to these 

duties, it is highly unlikely that 

Congress would not have intended VA 

to require such duties from a fiduciary 

it appoints. 

Furthermore, pursuant to 38 U.S.C. 

501(a), VA may promulgate regulations 

that are ‘‘necessary or appropriate to 

carry out the laws administered by the 

Department and are consistent with [38 

U.S.C. 5502].’’ We therefore determined 

that the foregoing change to 

§ 13.140(a)(1) is appropriate and 

consistent with Congress’ intent. 

The commenter’s reliance on the 

language in section 5502(b) that states 

that ‘‘[VA] may appear or intervene . . . 

in any court as an interested party in 

any litigation . . . affecting money paid 

to such fiduciary’’ to argue that 

Congress intended VA to utilize state 

law in administrating the fiduciary 

program is misplaced. The intent of the 

1935 amendment to add this language to 

the statute was to clarify and expand the 

authority of the Veterans 

Administration to supervise courtappointed fiduciaries and to participate 

in litigation. See H.R. Rep. No. 74–16, 

at 1–2 (1935) (‘‘[T]here is also a need for 

amendment to more clearly define and 

extend the authority of the 

Administrator of Veterans’ Affairs to 

appear in courts or intervene as an 

interested party in litigation directly 

affecting money paid to fiduciaries of 

beneficiaries under this section.’’). This 

language, however, does not require in 

any way for VA to use state laws to 

administer its fiduciary program. Where 

Congress has intended to require VA to 

follow state law on a particular matter 

relevant to VA benefits, it has done so 

expressly. See 38 U.S.C. 103(c). In 

contrast, section 5502 vests VA with 

authority to establish uniform Federal 

standards governing the appointment, 

supervision, payment, and removal of 

VA fiduciaries. VA has implemented 

that authority by establishing such 

uniform Federal standard, rather than 

relying upon state law, in view of the 

complexity, inconsistency and 

confusion that could result from 

administering a Federal program by 

following myriad state laws. 

Furthermore, the commenter’s belief 

that the language in section 5502(e) 

regarding escheat of funds held by a 

fiduciary demonstrates Congress’ intent 

regarding state law is contrary to the 

plain text of the statute. Section 5502(e) 

in its entirety provides that ‘‘[a]ny funds 

in the hands of a fiduciary appointed by 

a State court or the Secretary derived 

from benefits payable under laws 

administered by the Secretary, which 

under the law of the State wherein the 

beneficiary had last legal residence 

would escheat to the State, shall escheat 

to the United States and shall be 

returned by such fiduciary, or by the 

personal representative of the deceased 

beneficiary, less legal expenses of any 

administration necessary to determine 

that an escheat is in order, to the 

Department, and shall be deposited to 

the credit of the applicable revolving 

fund, trust fund, or appropriation.’’ It 

does not provide that any escheat of VA 

funds with a fiduciary should be 

administered pursuant to state laws. 

Based on the foregoing, we find that 

Congress clearly intended in section 

5502 that VA would be responsible for 

prescribing and enforcing Federal 

standards governing the appointment, 

supervision, payment, and removal of 

VA fiduciaries and that those Federal 

standards would preempt any 

conflicting state laws on such matters. 

Consistent with that intent and 

authority, VA has established national 

standards for all vulnerable VA 

beneficiaries, regardless of their state of 

residence. As such, we make no changes 

based on the comment. 

The same commenter stated that our 

proposed regulations should establish 

clear evidentiary standards upon which 

VA bases its decision that a beneficiary 

is unable to manage his or her VA 

benefits; however, this matter is beyond 

the scope of this rulemaking. The 

commenter noted that such standards 

are necessary to ensure that a 

beneficiary is not arbitrarily and 

capriciously deprived of the right to 

control his or her own property. 

While our proposed fiduciary 

regulations do not contain the 

evidentiary standards for determining 

when a beneficiary is unable to manage 

his or her VA benefits, the regulations 

in 38 CFR part 3 prescribe such 

standards. Therefore, there are measures 

in place to ensure that a beneficiary is 

not arbitrarily or capriciously deprived 

of his or her right to control his or her 

VA benefits. A VA regulation provides 

that, for purposes of payment of VA 

benefits, VA’s rating agencies have the 

authority to make determinations of 

competency and incompetency. See 38 

CFR 3.353(b)(1). ‘‘Unless the medical 

evidence is clear, convincing and leaves 

no doubt as to the person’s 

incompetency, [VA] will make no 

determination of incompetency without 

a definite expression regarding the 

question by the responsible medical 

authorities.’’ See 38 CFR 3.353(c). Such 

determinations must be ‘‘based upon all 

evidence of record and there should be 

a consistent relationship between the 

percentage of disability, facts relating to 

commitment or hospitalization and the 

holding of incompetency.’’ See Id. The 

regulation further provides that there is 

a presumption in favor of competency. 

See 38 CFR 3.353(d). ‘‘Where reasonable 

doubt arises regarding a beneficiary’s 

mental capacity to contract or to manage 

his or her own affairs, including the 

disbursement of funds without 

limitation, such doubt will be resolved 

in favor of competency.’’ See Id. In 

addition, VA regulations provide for 

notice and an opportunity to be heard 

regarding the determination of 

incompetency. See 38 CFR 3.103(c), 

3.353(e). 

Moreover, not only is a beneficiary 

who is deemed unable to manage his or 

her VA benefits entitled to all of the 

appellate procedures associated with 

other VA decisions that affect the 

provision of his or her VA benefits, as 

noted above, he or she is also entitled 

to a pre-determination hearing if he or 

she so requests. In addition, even after 

the beneficiary is found to be unable to 

manage his or her VA benefits, current 

part 13 regulations, in appropriate 

circumstances, allow a beneficiary to 

manage his or her own VA benefits by 

placing him or her in a supervised 

direct pay program. This option 

provides an additional layer of 

protection against the erroneous 

deprivation of a beneficiary to control 

his or her own VA benefits. Finally, a 

beneficiary who believes that VA did 

not follow all applicable procedures in 

selecting a fiduciary may appeal this 

determination to the Board. 

Collectively, these standards provide 

protection against any arbitrary and 

capricious determinations relating to the 

beneficiary’s ability to control his or her 

own VA benefits. We therefore make no 

change based on this comment. 

A commenter stated that our proposed 

rules should contain qualifications and 

training requirements for field 

examiners because, among other things, 

field examiners are required to make 

decisions regarding budgets and living 

conditions for beneficiaries. However, 

the qualifications of and training for VA 

field examiners is an administrative 

matter that is outside the scope of this 

rulemaking. VA makes every effort to 

hire the most qualified field examiners 

and provide any training VA deems 

necessary, but such matters generally 


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are not the subject of VA regulations. 

Further, while VA field examiners make 

recommendations about whether a 

beneficiary’s needs are being addressed 

and whether his or her funds are being 

utilized appropriately, decisions 

concerning appointment and/or removal 

of fiduciaries are made by the fiduciary 

hub with jurisdiction over the case, not 

the individual field examiner. 

One commenter stated that fiduciaries 

are tasked with many responsibilities 

and noted that our rulemaking cannot 

address training for fiduciaries but 

asked that we provide services or 

training for fiduciaries. VA makes every 

effort to provide training and services to 

fiduciaries we appoint to serve our 

beneficiaries. Currently, there is a 

handbook titled, ‘‘A Guide for VA 

Fiduciaries,’’ which we provide to 

fiduciaries. In addition, VA has an 

internet website that provides training 

and other resources to fiduciaries. The 

link to the website is: http://

www.benefits.va.gov/fiduciary/ 

index.asp. Fiduciaries also have ways of 

contacting VA with questions. 

Fiduciaries can also call the VA 

Fiduciary’s Program’s assistance line at 

1–888–407–0144 with questions or 

email questions to any of the fiduciary 

hubs at the following email addresses: 

Columbia: vavbacms/ro/fid@va.gov; 

Louisville: avbacms/ro/fid@va.gov; 

Milwaukee: vavbamiw/ro/fidhub@

va.gov; Lincoln: vavbalin/ro/fidhub@

va.gov; Indianapolis: ind.fidhub@va.gov; 

Salt Lake City: vbawa.hub@va.gov. 

In proposed § 13.140, regarding the 

responsibilities of fiduciaries, we 

prescribed financial and nonfinancial 

responsibilities for fiduciaries. We 

believe that such responsibilities are 

consistent with industry standards for 

fiduciaries. We prescribed that 

fiduciaries will be required to use funds 

in the interest of beneficiaries and their 

dependents, protect funds from loss, 

maintain separate accounts, determine 

and pay just debts, provide the 

beneficiary information regarding VA 

benefit funds under management, 

protect funds from the claims of 

creditors, and provide beneficiaries a 

copy of any VA-approved annual 

accounting. In addition, we prescribed a 

fiduciary’s non-financial responsibilities 

to generally include a fiduciary’s 

obligation to monitor the beneficiary’s 

well-being and report any concerns to 

appropriate authorities, including any 

legal guardian for the beneficiary, and 

that a fiduciary must maintain regular 

contact with a beneficiary and be 

responsive to beneficiary requests. We 

believe such responsibilities are the 

basic responsibilities of any fiduciarybeneficiary relationship. We do not 

believe that such responsibilities are 

burdensome. Nonetheless, we strive to 

provide fiduciaries with any 

information that could be useful in the 

performance of their duties as 

fiduciaries. 

One commenter inquired about VA’s 

approach regarding court-appointed 

guardianships and the cost associated 

with such guardianships. The 

commenter noted that state courts have 

primary oversight of court-appointed 

guardians and fees associated with such 

guardianships. The commenter inquired 

about VA’s approach to legal 

guardianships, as state courts have 

jurisdiction over such matters. 

VA’s fiduciary regulations will result 

in a gradual discontinuance of the 

current practice of recognizing a courtappointed guardian or fiduciary for 

purposes of receiving VA benefits on 

behalf of a VA beneficiary. Instead, VA 

will establish a national standard for 

appointing and overseeing fiduciaries. 

In certain cases, VA may appoint a 

beneficiary’s court-appointed guardian 

or fiduciary to serve as VA fiduciary if 

we determine that such an appointment 

will be in the beneficiary’s interest. In 

that regard, if VA appoints a courtappointed guardian or fiduciary to also 

serve as VA fiduciary, VA’s rules will 

apply as it pertains to the management 

of VA funds. This final rule will, over 

time, result in uniformity for all 

fiduciaries appointed by VA to manage 

VA benefit payments on behalf of a 

beneficiary and significantly reduce 

costs associated with court-appointed 

guardians or fiduciaries. Congress 

enacted 38 U.S.C. 5502, under which it 

gave VA the authority to administer the 

fiduciary program. VA’s longstanding 

interpretation of this authority is that 

VA may establish a fiduciary program 

that is governed by federal laws and not 

various state laws. In this regard, federal 

laws (and not competing state laws) 

apply to the appointment of a VA 

fiduciary and VA’s oversight of the 

fiduciary’s management of a 

beneficiary’s VA benefits. 

For example, all prospective 

fiduciaries who will receive VA benefit 

payments on behalf of a beneficiary will 

undergo a VA investigation mandated 

by 38 U.S.C. 5507, regardless of if that 

potential fiduciary serves as a courtappointed guardian and underwent a 

qualification process prescribed by state 

law, which may vary from state to state. 

Also, all VA fiduciaries will have the 

same accounting requirements regarding 

a beneficiary’s VA funds under 

management, to include the frequency 

of submitting an accounting, 

irrespective of state courts requirements. 

In addition, VA will not rely on state 

laws that subject beneficiaries to varying 

fee schedules depending upon the 

beneficiaries’ state of residence. In cases 

in which VA determines that a fee or 

commission is necessary to obtain a 

fiduciary, Congress authorized ‘‘a 

reasonable commission for fiduciary 

services rendered’’ to be paid from the 

beneficiary’s VA funds. See 38 U.S.C. 

5502(a)(2). However, section 5502(a)(2) 

limits such commissions for any year to 

4 percent of the beneficiary’s VA 

monetary benefits paid to the fiduciary 

during the year. VA’s regulations will 

consistently implement this authority 

and limit fees to 4 percent to any 

fiduciary we appoint. This will 

diminish the potential for adverse 

impacts on beneficiaries caused by 

orders issued in state courts approving 

fiduciary commissions that exceed the 4 

percent Federal cap and make clear that 

a VA fiduciary’s fees are limited to a 

statutory cap of 4 percent of the 

beneficiary’s VA funds. 

VA makes a distinction between 

commissions charged by the guardian 

related to the services of a fiduciary and 

expenses incurred by a beneficiary for 

administrative items. This final rule 

does not prohibit a fiduciary appointed 

by VA from disbursing funds to meet 

the expenses associated with a 

beneficiary’s court-appointed 

guardianship, if such expenses are 

deemed reasonable. Duplication of work 

performed by VA-appointed and statecourt-appointed fiduciaries is highly 

discouraged as it unnecessarily 

diminishes beneficiary assets. 

One commenter recommended that 

we inform all probate courts in the 

nation that VA intends to appoint courtappointed fiduciaries as VA fiduciaries 

as a last resort. We agree and intend to 

notify certain interested parties, to 

include courts and guardians, of the 

important changes in this final rule. 

We have made a few non-substantive 

edits to the proposed regulations: We 

changed references to ‘‘18 years of age’’ 

to ‘‘age of majority,’’ changed a 

reference to ‘‘Regional Counsel’’ to 

‘‘District Counsel’’ to reflect current 

terminology, changed a reference to 

‘‘Assistant General Counsel’’ to ‘‘Chief 

Counsel’’ for the same reason, and 

replaced ‘‘State’’ with ‘‘state.’’ 

Paperwork Reduction Act 

This final rule at §§ 13.30, 13.140, 

13.230, 13.280, and 13.600 contains new 

and revised collections of information 

under the Paperwork Reduction Act of 

1995 (44 U.S.C. 3501–3521). On January 

3, 2014, in the proposed rule published 

in the Federal Register, we requested 

public comments on the new and 

revised collections of information. We 


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received no comments. VA has 

submitted the additional collections in 

part 13 to OMB for review under OMB 

Control Numbers 2900–0017, 2900– 

0085, 2900–0803, 2900–0804, and 2900– 

0815. We are adding a parenthetical 

statement after the authority citations in 

the amendatory language of this final 

rule to all of the sections in part 39 for 

which new and revised collections have 

been been assigned control numbers, so 

that the control numbers are displayed 

for each collection. 

In accordance with 44 U.S.C. 3507(d), 

VA submitted a copy of the proposed 

rule to OMB for review and they 

assigned OMB control Number 2900– 

0815 for a new information collection 

contained in section 13.140(a)(2)(iv) of 

the proposed rule. However, the 

proposed rule did not explicitly solicit 

comments on the new information 

collection contained in section 

13.140(a)(2)(iv). Therefore, VA requests 

comments by the public on the new 

collection of information contained in 

section 13.140(a)(2)(iv) in— 

• Evaluating whether the proposed 

collections of information are necessary 

for the proper performance of the 

functions of VA, including whether the 

information will have practical utility; 

• Evaluating the accuracy of VA’s 

estimate of the burden of the proposed 

collections of information, including the 

validity of the methodology and 

assumptions used; 

• Enhancing the quality, usefulness, 

and clarity of the information to be 

collected; and 

• Minimizing the burden of the 

collections of information on those who 

are to respond, including through the 

use of appropriate automated electronic, 

mechanical, or other technological 

collection techniques or other form of 

information technology, e.g., permitting 

electronic submission of responses. 

The details of the new collection of 

information contained in 38 CFR 

13.140(a)(2)(iv) that were omitted from 

the comment solicitation in the 

proposed rule and that we seek 

comments through this final rule are 

described as follows: 

Title: Maintenance of Financial 

Records by Federal Fiduciaries. 

Summary of collection of information: 

Under 38 CFR 13.140, a fiduciary is 

required to maintain paper and 

electronic records relating to the 

management of VA benefits for the 

duration of service as fiduciary and for 

a minimum of two years following 

removal or resignation. No form is 

required for the submission of this 

information. 

Description of the need for 

information and proposed use of 

information: This information is needed 

for the purposes of continued 

monitoring and oversight of the 

fiduciary. 

Description of likely respondents: 

Fiduciaries appointed by VA to manage 

VA benefit payments on behalf of a 

beneficiary. 

Estimated number of respondents per 

year: 37,500. 

Estimated frequency of responses: 

Once per year. 

Estimated total annual reporting and 

recordkeeping burden: 1,875 additional 

hours. 

VA welcomes comments on this new 

information collection. Comments on 

the collections of information contained 

in this final rule should be submitted to 

the Office of Management and Budget, 

Attention: Desk Officer for the 

Department of Veterans Affairs, Office 

of Information and Regulatory Affairs, 

Washington, DC 20503, with copies sent 

by mail or hand delivery to: Director, 

Office of Regulation Policy and 

Management (00REG), Department of 

Veterans Affairs, 810 Vermont Ave. NW, 

Room 1063B, Washington, DC 20420; 

fax to (202) 273–9026 (this is not a tollfree number); or email comments 

through www.Regulations.gov. 

Comments should indicate that they are 

submitted in response to ‘‘RIN 2900– 

AO53.’’ 

We are providing a 30 day comment 

period on this new information 

collection. Comments are due to OMB 

by August 13, 2018. We will consider all 

comments on the above described 

information collection. 

The information collection provisions 

in this final rule subject to the PRA will 

not become effective until OMB 

approves the collections. 

Regulatory Flexibility Act 

The Secretary hereby certifies that 

this final rule will not have a significant 

economic impact on a substantial 

number of small entities as they are 

defined in the Regulatory Flexibility 

Act, 5 U.S.C. 601–612. The final rule 

will primarily affect individual 

beneficiaries and fiduciaries. It will not 

cause a significant economic impact on 

fiduciaries since VA generally appoints 

individual family members, friends, or 

caretakers to provide fiduciary services 

for beneficiaries. These services are, in 

most instances, provided without 

charge. While some business entities 

provide fiduciary services to VA 

beneficiaries for a fee, those fees, which 

are capped at 4 percent of monetary 

benefits paid, are not sufficient to result 

in a significant economic impact. 

Therefore, pursuant to 5 U.S.C. 605(b), 

this final rule is exempt from the initial 

and final regulatory flexibility analysis 

requirements of sections 603 and 604. 

Executive Order 13132, Federalism 

A rule has federalism implications 

under Executive Order 13132, 

Federalism, if it has a substantial direct 

effect on the states, on the relationship 

between the national government and 

the states, or on the distribution of 

power and responsibilities among the 

various levels of government. Under the 

Order, if a rule has federalism 

implications and preempts state law, to 

the extent practicable and permitted by 

law, an agency must consult with state 

officials concerning the rule. We have 

analyzed this rule under that Order and 

have determined that this rule does not 

have any new federalism implications 

but merely clarifies existing regulations 

that govern the VA fiduciary program 

and implements existing statutory 

authority provided by Congress for VA 

to establish and administer a fiduciary 

program relating to VA benefits on 

behalf of beneficiaries. VA does not 

intend to act through this rule to 

preempt state law but relies on authority 

provided by Congress. Accordingly, we 

do not believe this final rule requires 

VA to consult with state officials prior 

to its publication. 

In 38 U.S.C. 5502(a)(1), Congress 

authorized VA to appoint a fiduciary for 

the purpose of receiving and disbursing 

VA benefits on behalf of a beneficiary: 

‘‘Where it appears to the Secretary that 

the interest of the beneficiary would be 

served thereby, payment of benefits 

under any law administered by [VA] 

may be made directly to the beneficiary 

or to a relative or some other fiduciary 

for the use and benefit of the 

beneficiary, regardless of any legal 

disability on the part of the 

beneficiary.’’ In the preamble to the 

proposed rule, we explained that VA 

interprets ‘‘regardless of any legal 

disability’’ in section 5502(a)(1) to mean 

that, in creating the fiduciary program, 

Congress intended VA to preempt state 

laws regarding guardianships and other 

matters to the extent necessary to ensure 

a national standard of practice for 

payment of benefits to or on behalf of 

VA beneficiaries who cannot manage 

their benefits. See 79 FR 430. 

Matters regarding the governance of 

guardianships for persons with legal 

disabilities have their jurisdiction in 

state courts. See e.g., Neb. Rev. Stat. 

Ann. § 30–2602(a) (LexisNexis 2017). 

Congress specifically provided that, 

‘‘regardless of any legal disability on the 

part of the beneficiary,’’ VA can act and 

appoint a fiduciary on behalf of such 

beneficiary. This language cannot be 

construed to mean that Congress 


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explicitly authorized VA to create a 

fiduciary program whereby it appoints a 

fiduciary on behalf of a beneficiary, 

irrespective to any legal disability, and 

then defers to state laws for the 

administration of the fiduciary program. 

We realize that there are welldeveloped state laws in matters of 

guardianship. When Congress enacted 

section 5502, it did not intend a 

sweeping preemption of state laws that 

govern guardianship activities. Rather, 

we believe Congress only intended for 

VA to preempt state law in guardianship 

matters as they relate to VA benefits. 

Under the authority granted by current 

law, the purpose for this final rule is to 

promulgate uniform rules for all 

fiduciaries appointed by VA to manage 

VA benefit payments on behalf of 

beneficiaries. As such, if we appoint a 

state-appointed guardian to serve as a 

fiduciary on behalf of a beneficiary who 

is receiving VA benefits, our 

regulations, not state law, are applicable 

to the appointment and oversight of the 

fiduciary and the fiduciary’s 

management of VA benefits for the 

beneficiary, as Congress intended. 

For instance, Congress did not intend 

for VA to utilize state laws regarding 

fiduciary fees that are paid from a 

beneficiary’s VA benefits and subject 

beneficiaries to the various fee 

schedules prescribed by states, such that 

beneficiaries will be treated differently 

depending upon state of residence. 

Under section 5502(a)(2), Congress 

specifically mandated ‘‘a reasonable 

commission for fiduciary services 

rendered’’ to be paid from the 

beneficiary’s VA funds, ‘‘but the 

commission for any year may not 

exceed 4 percent of the monetary 

benefits.’’ Furthermore, among other 

things, Congress authorized VA to 

remove any fiduciary who is not 

meeting the fiduciary’s responsibilities 

to a beneficiary or who is not acting in 

the beneficiary’s interest. See 38 U.S.C. 

5502. VA’s authority also extends to 

appointment of a temporary fiduciary in 

certain circumstances and suspending 

payments to any fiduciary who fails to 

properly submit an accounting to VA. 

See 38 U.S.C. 5502. 

Current 38 CFR part 13 has not been 

updated since 1975. Congress has since 

amended 38 U.S.C. chapters 55 and 61 

to add new provisions, which, among 

other things, authorize VA to conduct 

specific investigations regarding the 

fitness of individuals to serve as 

fiduciaries, conduct onsite reviews of 

fiduciaries who serve more than 20 

beneficiaries, require fiduciaries to file 

reports or accountings, and reissue 

certain benefits that are misused by 

fiduciaries. See 38 U.S.C. 5507–5510, 

6106–6107. The foregoing statutory 

obligations demonstrate Congress’ intent 

to create a uniform system of fiduciary 

services for VA beneficiaries, 

irrespective of inconsistent state laws. 

Congress’ intent to have Federal laws 

governing VA’s fiduciary program 

preempt any conflicting state laws is 

clear in the chapter 55 and 61 

provisions. While state law provides 

some guidance concerning fiduciary 

matters, those laws vary significantly 

from state to state and do not pertain to 

VA’s fiduciary program. Further, VA 

does rely on state laws in cases where 

a state court has appointed a fiduciary 

for oversight of the veteran’s assets and 

where there is no conflict between state 

and Federal law, and/or when the courtappointed fiduciary is the same as the 

VA-appointed fiduciary. State laws 

often provide helpful guidance; 

however, under the Supremacy Clause 

of the Constitution, Federal law is 

controlling. See U.S. Const. art. VI, cl 2; 

Crosby v. Nat’l Foreign Trade Council, 

530 U.S. 363, 372–73 (2000). To the 

extent that a dispute arises between 

Federal and state law, Federal law 

establishing and governing VA’s 

fiduciary program as codified in 38 

U.S.C. chapters 55 and 61, as well as in 

regulations implementing those statutes, 

controls. 

Again, because this rule does not have 

any new federalism implications but 

merely clarifies existing regulations that 

govern the VA fiduciary program and 

implements existing statutory authority 

provided by Congress for VA to 

establish and administer a fiduciary 

program relating to VA benefits on 

behalf of beneficiaries, we do not 

believe this final rule requires VA to 

consult with state officials prior to its 

publication and believe that this rule is 

in compliance with Executive Order 

13132. 

Executive Orders 12866, 13563, and 

13771 

Executive Orders 12866 and 13563 

direct agencies to assess the costs and 

benefits of available regulatory 

alternatives and, when regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, and other advantages; 

distributive impacts; and equity). 

Executive Order 13563 (Improving 

Regulation and Regulatory Review) 

emphasizes the importance of 

quantifying both costs and benefits, 

reducing costs, harmonizing rules, and 

promoting flexibility. Executive Order 

12866 (Regulatory Planning and 

Review) defines a ‘‘significant 

regulatory action,’’ which requires 

review by the Office of Management and 

Budget (OMB), unless OMB waives such 

review, as ‘‘any regulatory action that is 

likely to result in a rule that may: (1) 

Have an annual effect on the economy 

of $100 million or more or adversely 

affect in a material way the economy, a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or State, local, 

or tribal governments or communities; 

(2) Create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; (3) 

Materially alter the budgetary impact of 

entitlements, grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof; or (4) Raise novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in this Executive 

Order. 

VA has examined the economic, 

interagency, budgetary, legal, and policy 

implications of this final rule, and it has 

been determined to be a significant 

regulatory action under Executive Order 

12866, because it raises novel legal or 

policy issues arising out of legal 

mandates. 

This final rule is considered an E.O. 

13771 regulatory action. Details on the 

estimated costs of this final rule can be 

found in the rule’s economic analysis. 

Unfunded Mandates 

The Unfunded Mandates Reform Act 

of 1995 requires, at 2 U.S.C. 1532, that 

agencies prepare an assessment of 

anticipated costs and benefits before 

issuing any rule that may result in the 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

(adjusted annually for inflation) in any 

one year. This final rule will have no 

such effect on State, local, and tribal 

governments, or on the private sector. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance program numbers and titles 

for this final rule are as follows: 64.104, 

Pension for Non-Service-Connected 

Disability for Veterans; 64.105, Pension 

to Veterans Surviving Spouses, and 

Children; 64.109, Veterans 

Compensation for Service-Connected 

Disability; and 64.110, Veterans 

Dependency and Indemnity 

Compensation for Service-Connected 

Death. 

List of Subjects 

38 CFR Part 3 

Administrative practice and 

procedure, Claims, Disability benefits, 


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Health care, Pensions, Radioactive 

materials, Veterans, and Vietnam. 

38 CFR Part 13 

Surety bonds, Trusts and trustees, and 

Veterans. 

Signing Authority 

The Secretary of Veterans Affairs, or 

designee, approved this document and 

authorized the undersigned to sign and 

submit the document to the Office of the 

Federal Register for publication 

electronically as an official document of 

the Department of Veterans Affairs. 

Jacquelyn Hayes-Byrd, Deputy Chief of 

Staff, Department of Veterans Affairs, 

approved this document on March 20, 

2018, for publication. 

Dated: July 6, 2018. 

Consuela Benjamin, 

Regulation Development Coordinator, Office 

of Regulation Policy & Management, Office 

of the Secretary, Department of Veterans 

Affairs. 

For the reasons stated in the 

preamble, VA amends 38 CFR parts 3 

and 13 as follows: 

PART 3—ADJUDICATION 

Subpart A—Pension, Compensation, 

and Dependency and Indemnity 

Compensation 

■ 1. The authority citation for subpart A 

continues to read as follows: 

Authority: 38 U.S.C. 501(a), unless 

otherwise noted. 

§ 3.353 [Amended] 

■ 2. Amend 3.353 by: 

■ a. In paragraph (b)(1), removing 

‘‘§ 13.56’’ and adding, in its place, 

‘‘§ 13.110’’. 

■ b. In paragraph (b)(2), removing 

‘‘§ 13.55’’, ‘‘§ 13.56’’, and ‘‘§ 13.57’’ and 

adding, in each place, ‘‘§ 13.100’’. 

§ 3.401 [Amended] 

■ 3. Amend § 3.401 by removing and 

reserving paragraph (d). 

■ 4. In § 3.403, revise the paragraph 

heading for paragraph (a)(2) to read as 

follows: 

§ 3.403 Children. 

(a) * * * 

(2) Majority (§ 13.100). * * * 

* * * * * 

■ 5. In § 3.452, revise the CROSS 

REFERENCES immediately after 

paragraph (d) to read as follows: 

§ 3.452 Situations when benefits may be 

apportioned. 

* * * * * 

CROSS REFERENCES: Disappearance 

of veteran. See § 3.656. Reduction 

because of hospitalization. See § 3.551. 

Penal institutions. See § 3.666. 

§ 3.500 [Amended] 

■ 6. In § 3.500, remove and reserve 

paragraphs (l) and (m). 

§ 3.501 [Amended] 

■ 7. In § 3.501, remove and reserve 

paragraph (j) and remove paragraph (n). 

§ § 3.850 through 3.857 and undesignated 

center heading [Removed] 

■ 8. Remove §§ 3.850 through 3.857 and 

the undesignated center heading 

‘‘INCOMPETENTS, GUARDIANSHIP 

AND INSTITUTIONAL AWARDS’’ 

immediately preceding § 3.850. 

■ 9. Part 13 is revised to read as follows: 

PART 13—FIDUCIARY ACTIVITIES 

Sec. 

13.10 Purpose and applicability of other 

regulations. 

13.20 Definitions. 

13.30 Beneficiary rights. 

13.40 Representation of beneficiaries in the 

fiduciary program. 

13.50 Suspension of benefits. 

13.100 Fiduciary appointments. 

13.110 Supervised direct payment. 

13.120 Field examinations. 

13.130 Bars to serving as a fiduciary. 

13.140 Responsibilities of fiduciaries. 

13.200 Fiduciary accounts. 

13.210 Fiduciary investments. 

13.220 Fiduciary fees. 

13.230 Protection of beneficiary funds. 

13.240 Funds of beneficiaries less than the 

age of majority. 

13.250 Funds of deceased beneficiaries. 

13.260 Personal funds of patients. 

13.270 Creditors’ claims. 

13.280 Accountings. 

13.300 Onsite reviews. 

13.400 Misuse of benefits. 

13.410 Reissuance and recoupment of 

misused benefits. 

13.500 Removal of fiduciaries. 

13.510 Fiduciary withdrawals. 

13.600 Appeals. 

Authority: 38 U.S.C. 501, 5502, 5506– 

5510, 6101, 6106–6108, and as noted in 

specific sections. 

§ 13.10 Purpose and applicability of other 

regulations. 

(a) Purpose. The regulations in this 

part implement the Department of 

Veterans Affairs’ (VA) fiduciary 

program, which is authorized by 38 

U.S.C. chapters 55 and 61. The purpose 

of the fiduciary program is to protect 

certain VA beneficiaries who, as a result 

of injury, disease, or infirmities of 

advanced age, or by reason of being less 

than the age of majority, cannot manage 

their VA benefits. Under this program, 

VA oversees these vulnerable 

beneficiaries to ensure their well-being, 

and appoints and oversees fiduciaries 

who manage these beneficiaries’ 

benefits. 

(b) Applicability of other regulations. 

Fiduciary matters arise after VA has 

determined that a beneficiary is entitled 

to benefits, and decisions on fiduciary 

matters are not decisions on claims for 

VA monetary benefits. Accordingly, 

VA’s regulations governing the 

adjudication of claims for benefits, see 

38 CFR part 3, do not apply to fiduciary 

matters unless VA has prescribed 

applicability in this part. 

(Authority: 38 U.S.C. 501) 

§ 13.20 Definitions. 

The following definitions apply to 

this part: 

Dependent means a beneficiary’s 

spouse as defined by this section, a 

beneficiary’s child as defined by § 3.57 

of this chapter, or a beneficiary’s parent 

as defined by § 3.59 of this chapter, who 

does not have an income sufficient for 

reasonable maintenance and who 

obtains support for such maintenance 

from the beneficiary. 

Fiduciary means an individual or 

entity appointed by VA to receive VA 

benefits on behalf of a beneficiary for 

the use and benefit of the beneficiary 

and the beneficiary’s dependents. 

Hub Manager means the individual 

who has authority to oversee the 

activities of a VA Fiduciary Hub or the 

Veterans Service Center Manager of the 

Manila, Philippines, VA Regional 

Office. 

In the fiduciary program means, with 

respect to a beneficiary, that the 

beneficiary: 

(1) Has been rated by VA as incapable 

of managing his or her own VA benefits 

as a result of injury, disease, or the 

infirmities of advanced age; 

(2) Has been determined by a court 

with jurisdiction as being unable to 

manage his or her own financial affairs; 

or 

(3) Is less than the age of majority. 

Rating authority means VA employees 

who have authority under § 3.353 of this 

chapter to determine whether a 

beneficiary can manage his or her VA 

benefits. 

Relative means a person who is an 

adopted child or is related to a 

beneficiary by blood or marriage, as 

defined by this chapter. 

Restricted withdrawal agreement 

means a written contract between VA, a 

fiduciary, and a financial institution in 

which the fiduciary has VA benefit 

funds under management for a 

beneficiary, under which certain funds 

cannot be withdrawn without the 

consent of the Hub Manager. 

Spouse means a husband or wife 

whose marriage, including common law 


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marriage and same-sex marriage, meets 

the requirements of 38 U.S.C. 103(c). 

VA benefit funds under management 

means the combined value of the VA 

funds maintained in a fiduciary account 

or accounts managed by a fiduciary for 

a beneficiary under § 13.200 and any VA 

funds invested by the fiduciary for the 

beneficiary under § 13.210, to include 

any interest income and return on 

investment derived from any account. 

Written notice means that VA will 

provide to the beneficiary and the 

beneficiary’s representative and legal 

guardian, if any, a written decision in a 

fiduciary matter that is appealable 

under § 13.600. Such notice will 

include: 

(1) A clear statement of the decision, 

(2) The reason(s) for the decision, 

(3) A summary of the evidence 

considered in reaching the decision, and 

(4) The necessary procedures and 

time limits to initiate an appeal of the 

decision. 

(Authority: 38 U.S.C. 501) 

§ 13.30 Beneficiary rights. 

Except as prescribed in this part, a 

beneficiary in the fiduciary program is 

entitled to the same rights afforded any 

other VA beneficiary. 

(a) General policy. Generally, a 

beneficiary has the right to manage his 

or her own VA benefits. However, due 

to a beneficiary’s injury, disease, or 

infirmities of advanced age or by reason 

of being less than the age of majority, 

VA may determine that the beneficiary 

is unable to manage his or her benefits 

without VA supervision or the 

assistance of a fiduciary. Or a court with 

jurisdiction might determine that a 

beneficiary is unable to manage his or 

her financial affairs. Under any of these 

circumstances, VA will apply the 

provisions of this part to ensure that VA 

benefits are being used to maintain the 

well-being of the beneficiary and the 

beneficiary’s dependents. 

(b) Specific rights. The rights of 

beneficiaries in the fiduciary program 

include, but are not limited to, the right 

to: 

(1) Receive direct payment of 

recurring monthly benefits until VA 

appoints a fiduciary if the beneficiary 

reaches the age of majority or older; 

(2) Receive written notice regarding 

VA’s appointment of a fiduciary or any 

other decision on a fiduciary matter that 

affects VA’s provision of benefits to the 

beneficiary; 

(3) Appeal to the Board of Veterans’ 

Appeals VA’s appointment of a 

fiduciary; 

(4) Be informed of the fiduciary’s 

name, telephone number, mailing 

address, and email address; 

(5) Contact his or her fiduciary and 

request a disbursement of funds for 

current or foreseeable needs or 

consideration for payment of previously 

incurred expenses, account balance 

information, or other information or 

assistance consistent with the 

responsibilities of the fiduciary 

prescribed in § 13.140; 

(6) Obtain from his or her fiduciary a 

copy of the fiduciary’s VA-approved 

annual accounting; 

(7) Have VA reissue benefits misused 

by a fiduciary if VA is negligent in 

appointing or overseeing the fiduciary 

or if the fiduciary who misused the 

benefits meets the criteria prescribed in 

§ 13.410; 

(8) Appeal to the Board of Veterans’ 

Appeals VA’s determination regarding 

its own negligence in misuse and 

reissuance of benefits matters; 

(9) Submit to VA a reasonable request 

for appointment of a successor 

fiduciary. For purposes of this 

paragraph, reasonable request means a 

good faith effort to seek replacement of 

a fiduciary, if: 

(i) The beneficiary’s current fiduciary 

receives a fee deducted from the 

beneficiary’s account under § 13.220 

and the beneficiary requests an unpaid 

volunteer fiduciary who ranks higher in 

the order of preference under 

§ 13.100(e); 

(ii) The beneficiary requests removal 

of his or her fiduciary under 

§ 13.500(a)(1)(iii) and supervised direct 

payment of benefits under § 13.110; or 

(iii) The beneficiary provides credible 

information that the current fiduciary is 

not acting in the beneficiary’s interest or 

is unable to effectively serve the 

beneficiary due to a personality conflict 

or disagreement and VA is not able to 

obtain resolution; 

(10)(i) Be removed from the fiduciary 

program and receive direct payment of 

benefits without VA supervision 

provided that the beneficiary: 

(A) Is rated by VA as able to manage 

his or her own benefits; or 

(B) Is determined by a court with 

jurisdiction as able to manage his or her 

financial affairs if the beneficiary is in 

the fiduciary program as a result of a 

court order and not a decision by VA’s 

rating agency; or 

(C) Attains the age of majority; 

(ii) Have a fiduciary removed and 

receive direct payment of benefits with 

VA supervision as prescribed in 

§ 13.110 regarding supervised direct 

payment and § 13.500 regarding removal 

of fiduciaries generally, provided that 

the beneficiary establishes the ability to 

manage his or her own benefits with 

limited and temporary VA supervision; 

and 

(11) Be represented by a VAaccredited attorney, claims agent, or 

representative of a VA-recognized 

veterans service organization. This 

includes the right to have a 

representative present during a field 

examination and the right to be 

represented in the appeal of a fiduciary 

matter under § 13.600. 

(Authority: 38 U.S.C. 501) 

(Approved by the Office of Management and 

Budget under control number 2900–0017.) 

§ 13.40 Representation of beneficiaries in 

the fiduciary program. 

The provisions of 38 CFR 14.626 

through 14.629 and 14.631 through 

14.637 regarding accreditation and 

representation of VA claimants and 

beneficiaries in proceedings before VA 

are applicable to representation of 

beneficiaries before VA in fiduciary 

matters governed by this part. 

(a) Accreditation. Only VA-accredited 

attorneys, claims agents, and accredited 

representatives of VA-recognized 

veterans service organizations who have 

complied with the power-of-attorney 

requirements in § 14.631 of this chapter 

may represent beneficiaries before VA 

in fiduciary matters. 

(b) Standards of conduct. Accredited 

individuals who represent beneficiaries 

in fiduciary matters must comply with 

the general and specific standards of 

conduct prescribed in § 14.632(a) 

through (c) of this chapter, and 

attorneys must also comply with the 

standards prescribed in § 14.632(d). For 

purposes of this section: 

(1) A fiduciary matter is not a claim 

for VA benefits. However, the term 

claimant in § 14.632 of this chapter 

includes VA beneficiaries who are in 

the fiduciary program, and the term 

claim in § 14.632 includes a fiduciary 

matter that is pending before VA. 

(2) The provisions of § 14.632(c)(7) 

through (9) of this chapter mean that an 

accredited individual representing a 

beneficiary in a fiduciary matter may 

not: 

(i) Delay or refuse to cooperate in the 

processing of a fiduciary appointment or 

any other fiduciary matter, including 

but not limited to a field examination 

prescribed by § 13.120 and the 

investigation of a proposed fiduciary 

prescribed by § 13.100; 

(ii) Mislead, threaten, coerce, or 

deceive a beneficiary in the fiduciary 

program or a proposed or current 

fiduciary regarding payment of benefits 

or the rights of beneficiaries in the 

fiduciary program; or 

(iii) Engage in, or counsel or advise a 

beneficiary or proposed or current 

fiduciary to engage in, acts or behavior 

prejudicial to the fair and orderly 


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conduct of administrative proceedings 

before VA. 

(3) The Hub Manager will submit a 

written report regarding an alleged 

violation of the standards of conduct 

prescribed in this section to the VA 

Chief Counsel who administers the 

accreditation program for a 

determination regarding further action, 

including suspension or cancellation of 

accreditation under § 14.633 of this 

chapter, and notification to any agency, 

court, or bar to which the attorney, 

agent, or representative is admitted to 

practice. 

(c) Fees. Except as prescribed in 

paragraphs (c)(1)(i) through (iii) of this 

section, an accredited attorney or claims 

agent may charge a reasonable fixed or 

hourly fee for representation services 

provided to a beneficiary in a fiduciary 

matter, provided that the fee meets the 

requirements of § 14.636 of this chapter. 

(1) The following provisions of 

§ 14.636 of this chapter do not apply in 

fiduciary matters: 

(i) Fees under § 14.636(e) of this 

chapter, to the extent that the regulation 

authorizes a fee based on a percentage 

of benefits recovered; 

(ii) The presumptions prescribed by 

§ 14.636(f) of this chapter based upon a 

percentage of a past-due benefit amount. 

In fiduciary matters, the reasonableness 

of a fixed or hourly-rate fee will be 

determined based upon application of 

the reasonableness factors prescribed in 

§ 14.636(e); and 

(iii) Direct payment of fees by VA out 

of past-due benefits under § 14.636(g)(2) 

and (h) of this chapter. 

(2) An accredited attorney or claims 

agent who wishes to charge a fee for 

representing a beneficiary in a fiduciary 

matter must comply with the fee 

agreement filing requirement prescribed 

in § 14.636(g)(3) of this chapter. 

(3) VA, the beneficiary, or the 

beneficiary’s fiduciary may challenge 

the reasonableness of a fee charged by 

an accredited attorney or claims agent 

using the procedures prescribed in 

§ 14.636(i) of this chapter. 

(Authority: 38 U.S.C. 501, 38 U.S.C. chapter 

59) 

§ 13.50 Suspension of benefits. 

(a) Notwithstanding the beneficiary 

rights prescribed in § 13.30, the Hub 

Manager will temporarily suspend 

payment of benefits and hold such 

benefits in the U.S. Treasury to the 

credit of the beneficiary or take other 

action that the Hub Manager deems 

appropriate to prevent exploitation of 

VA benefit funds or to ensure that the 

beneficiary’s needs are being met, if: 

(1) The beneficiary or the 

beneficiary’s attorney, claims agent, or 

representative withholds cooperation in 

any of the appointment and oversight 

procedures prescribed in this part; or 

(2) VA removes the beneficiary’s 

fiduciary for any reason prescribed in 

§ 13.500(b) and is unable to appoint a 

successor fiduciary before the 

beneficiary has an immediate need for 

disbursement of funds. 

(b) All or any part of the funds held 

in the U.S. Treasury to the beneficiary’s 

credit under paragraph (a) of this 

section will be disbursed under the 

order and in the discretion of the VA 

Regional Office Director who has 

jurisdiction over the fiduciary hub or 

regional office for the benefit of the 

beneficiary or the beneficiary’s 

dependents. 

(Authority: 38 U.S.C. 501, 512, 5502, 5504) 

§ 13.100 Fiduciary appointments. 

(a) Authority. Except as prescribed in 

paragraph (b) of this section, the Hub 

Manager will appoint a fiduciary for a 

beneficiary who: 

(1) Has been rated by VA as being 

unable to manage his or her VA benefits, 

(2) Has been determined by a court 

with jurisdiction as being unable to 

manage his or her financial affairs, or 

(3) Has not reached age of majority. 

(b) Exceptions. The Hub Manager will 

not appoint a fiduciary for a beneficiary 

who: 

(1) Is eligible for supervised direct 

payment under § 13.110, or 

(2) Is not a beneficiary described in 

paragraph (a)(1) or (a)(2) of this section 

and has not reached age of majority, but 

(i) Is serving in the Armed Forces of 

the United States, or 

(ii) Has been discharged from service 

in the Armed Forces of the United 

States, or 

(iii) Qualifies for survivors’ benefits as 

a surviving spouse. 

(c) Retroactive benefit payments. The 

Hub Manager will withhold any 

retroactive, one-time, or other lump-sum 

benefit payment awarded to a 

beneficiary described in paragraph (a) of 

this section until the Hub Manager has 

appointed a fiduciary for the beneficiary 

and, if applicable, the fiduciary has 

obtained a surety bond under § 13.230. 

(d) Initial appointment. In appointing 

a fiduciary, the Hub Manager will make 

every effort to appoint the person, 

agency, organization, or institution that 

will best serve the interest of the 

beneficiary. The Hub Manager will 

consider the results of a field 

examination, which will include a faceto-face meeting with the beneficiary and 

the beneficiary’s dependents at their 

residence when practicable, and will 

conduct the investigation prescribed in 

paragraph (f) of this section. The Hub 

Manager will also consider whether: 

(1) VA benefits can be paid directly to 

the beneficiary with limited and 

temporary supervision by VA, as 

prescribed in § 13.110; 

(2) The circumstances require 

appointment of a temporary fiduciary 

under paragraph (h) of this section; and 

(3) The proposed fiduciary is 

complying with the responsibilities of a 

fiduciary prescribed in § 13.140 with 

respect to all beneficiaries in the 

fiduciary program currently being 

served by the proposed fiduciary and 

whether the proposed fiduciary can 

handle an additional appointment 

without degrading service for any other 

beneficiary. 

(e) Order of preference in appointing 

a fiduciary. The Hub Manager will 

consider individuals and entities for 

appointment in the following order of 

preference, provided that the proposed 

fiduciary is qualified and willing to 

serve and the appointment would serve 

the beneficiary’s interest: 

(1) The preference stated by the 

beneficiary in the fiduciary program, if 

the beneficiary has the capacity to state 

such a preference. If the beneficiary has 

a legal guardian appointed to handle his 

or her affairs, the Hub Manager will 

presume that the beneficiary does not 

have the capacity to state a preference 

and will consider individuals and 

entities in the order of preference 

prescribed in paragraphs (e)(2) through 

(10) of this section; 

(2) The beneficiary’s spouse; 

(3) A relative who has care or custody 

of the beneficiary or his or her funds; 

(4) Any other relative of the 

beneficiary; 

(5) Any friend, acquaintance, or other 

person who is willing to serve as 

fiduciary for the beneficiary without a 

fee; 

(6) The chief officer of a public or 

private institution in which the 

beneficiary receives care or which has 

custody of the beneficiary; 

(7) The bonded officer of an Indian 

reservation, if applicable; 

(8) An individual or entity who has 

been appointed by a court with 

jurisdiction to handle the beneficiary’s 

affairs; 

(9) An individual or entity who is not 

willing to serve without a fee; or 

(10) A temporary fiduciary, if 

necessary. 

(f) Investigation of a proposed 

fiduciary. Except as prescribed in 

paragraph (f)(3) of this section, before 

appointing a fiduciary for a beneficiary 

in the fiduciary program, the Hub 

Manager will conduct an investigation 


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regarding the proposed fiduciary’s 

qualifications. 

(1) The investigation will include: 

(i) To the extent practicable, a face-toface interview of the proposed fiduciary; 

(ii) A review of a credit report on the 

proposed fiduciary issued by a credit 

reporting agency no more than 30 days 

prior to the date of the proposed 

appointment; 

(iii) A criminal background check to 

determine whether the proposed 

fiduciary has been convicted of any 

offense which would be a bar to serving 

as a fiduciary under § 13.130 or which 

the Hub Manager may consider and 

weigh under the totality of the 

circumstances regarding the proposed 

fiduciary’s qualifications; 

(iv) Obtaining proof of the proposed 

fiduciary’s identity and relationship to 

the beneficiary, if any; and 

(v) A determination regarding the 

need for surety bond under § 13.230 and 

the proposed fiduciary’s ability to 

obtain such a bond. 

(2) The Hub Manager may, at any time 

after the initial appointment or 

reappointment of the fiduciary for a 

beneficiary, repeat all or part of the 

investigation prescribed by paragraph 

(f)(1) of this section to ensure that the 

fiduciary continues to meet the 

qualifications for service and there is no 

current bar to service under § 13.130. 

(3) The Hub Manager must conduct 

the requirements of paragraphs 

(f)(1)(i),(ii) and (iii) for every subsequent 

appointment of the fiduciary for each 

beneficiary. 

(4) VA will not conduct the 

investigation prescribed by paragraph (f) 

of this section if the proposed fiduciary 

is an entity, such as the trust 

department of a bank that provides 

fiduciary services. 

(g) Expedited appointment. The Hub 

Manager may waive the requirements of 

paragraphs (f)(1)(i) through (iii) of this 

section and expedite the appointment of 

a proposed fiduciary if the Hub Manager 

determines that an expedited 

appointment would be in the 

beneficiary’s interest and: 

(1) The proposed fiduciary is: 

(i) The beneficiary’s parent (natural, 

adopted, or step-parent) and the 

beneficiary is less than the age of 

majority, or 

(ii) The beneficiary’s spouse; or 

(2) The annual amount of VA benefits 

the proposed fiduciary would manage 

for the beneficiary does not exceed the 

amount specified in 38 U.S.C. 

5507(c)(2)(D), as adjusted by VA 

pursuant to 38 U.S.C. 5312. 

(h) Temporary fiduciary 

appointments. (1) The Hub Manager 

may appoint a temporary fiduciary for a 

period not to exceed 120 days in any of 

the following circumstances: 

(i) VA has removed a fiduciary for 

cause under § 13.500 and cannot 

expedite the appointment of a successor 

fiduciary, and the beneficiary has an 

immediate need for fiduciary services; 

or 

(ii) The Hub Manager determines that 

the beneficiary has an immediate need 

for fiduciary services and it would not 

be in the beneficiary’s or the 

beneficiary’s dependents’ interest to pay 

benefits to the beneficiary until a 

fiduciary is appointed. 

(2) Any temporary fiduciary 

appointed under this paragraph (h) must 

be: 

(i) An individual or entity that has 

already been subject to the procedures 

for appointment in paragraphs (d) and 

(f) of this section, and 

(ii) Performing satisfactorily as a 

fiduciary for at least one other VA 

beneficiary for whom the fiduciary has 

submitted an annual accounting that VA 

has approved. 

(i) Authorization for disclosure of 

information. The Hub Manager will: 

(1) Obtain from every proposed 

fiduciary who is an individual a written 

authorization for VA to disclose to the 

beneficiary information regarding any 

fiduciary matter that may be appealed 

under § 13.600, including but not 

limited to the fiduciary’s qualifications 

for appointment under § 13.100 or 

misuse of benefits under § 13.400. Such 

disclosures may occur in VA’s 

correspondence with the beneficiary, in 

a VA fiduciary appointment or misuse 

of benefits decision, in a statement of 

the case for purposes of appeal under 

§ 13.600, or upon request by the 

beneficiary, the beneficiary’s guardian, 

or the beneficiary’s accredited attorney, 

claims agent, or representative; 

(2) Notify the proposed fiduciary that 

the disclosed information may be used 

by the beneficiary in appealing a VA 

appointment or misuse decision to the 

Board of Veterans’ Appeals under 

§ 13.600; and 

(3) Terminate consideration of a 

proposed fiduciary if the individual 

refuses to provide the authorization 

prescribed in paragraph (i)(1) of this 

section. Such refusal is a bar to serving 

as a fiduciary for a beneficiary under 

§ 13.130(b). 

(Authority: 38 U.S.C. 501, 5502, 5506, 5507) 

§ 13.110 Supervised direct payment. 

(a) Authority. The Hub Manager may 

authorize the payment of VA benefits 

directly to an adult beneficiary in the 

fiduciary program who has reached the 

age of majority if the Hub Manager 

determines, based upon a field 

examination, that the beneficiary can 

manage his or her VA benefits with 

limited and temporary VA supervision. 

In making this determination, the Hub 

Manager will consider: 

(1) Whether the beneficiary is aware 

of his or her monthly income; 

(2) Whether the beneficiary is aware 

of his or her fixed monthly expenses 

such as rent, mortgage, utilities, 

clothing, food, and medical bills; 

(3) The beneficiary’s ability to: 

(i) Allocate appropriate funds to fixed 

monthly expenses and discretionary 

items; 

(ii) Pay monthly bills in a timely 

manner; and 

(iii) Conserve excess funds; and 

(4) Any other information that 

demonstrates the beneficiary’s actual 

ability to manage his or her VA benefits 

with limited VA supervision. 

(b) Supervision. The limited and 

temporary supervision of beneficiaries 

receiving direct payment under 

paragraph (a) of this section will consist 

of: 

(1) Assistance in the development of 

a budget regarding the beneficiary’s 

income and expenses, 

(2) Assistance with creating a fund 

usage report to aid the beneficiary in 

tracking his or her income and 

expenses, and 

(3) Periodic reviews of the 

beneficiary’s fund usage report, as 

required by the Hub Manager. 

(c) Reassessment. The Hub Manager 

will reassess the beneficiary’s ability to 

manage his or her VA benefits at or 

before the end of the first 12-month 

period of supervision. Based upon a 

field examination, an evaluation of the 

factors listed in paragraph (a) of this 

section, and the results of the 

supervision prescribed in paragraph (b) 

of this section, the Hub Manager will 

determine whether the beneficiary can 

manage his or her benefits without VA 

supervision. 

(1) If the beneficiary demonstrates the 

ability to manage his or her VA benefits 

without supervision, the Hub Manager 

will prepare a report that summarizes 

the findings and refer the matter with a 

recommendation and supporting 

evidence to the rating authority for 

application of § 3.353(b)(3) of this 

chapter regarding reevaluation of ability 

to manage VA benefits and § 3.353(d) of 

this chapter regarding the presumption 

of ability to manage VA benefits without 

restriction. 

(2) If the beneficiary does not 

demonstrate the ability to manage his or 

her VA benefits without VA 

supervision, the Hub Manager will: 

(i) Appoint a fiduciary, or 


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(ii) Continue supervised direct 

payment for not longer than one 

additional 12-month period based upon 

evidence that additional supervision 

might assist the beneficiary in 

developing the ability to manage his or 

her own VA benefits. At the conclusion 

of the additional period of supervised 

direct payment, the Hub Manager will 

conduct the reassessment prescribed by 

paragraph (c) of this section and either 

recommend reevaluation under 

paragraph (c)(1) of this section or 

appoint a fiduciary under paragraph 

(c)(2)(i) of this section. 

(Authority: 38 U.S.C. 501, 5502) 

§ 13.120 Field examinations. 

(a) Authority. The Hub Manager will 

order a field examination regarding 

fiduciary matters within the Hub 

Manager’s jurisdiction for any of the 

reasons prescribed in paragraph (c) of 

this section. For purposes of this 

section, field examination means the 

inquiry, investigation, or monitoring 

activity conducted by designated 

fiduciary hub or other qualified VA 

personnel who are authorized to: 

(1) Interview beneficiaries, 

dependents, and other interested 

persons regarding fiduciary matters; 

(2) Interview proposed fiduciaries and 

current fiduciaries regarding their 

qualifications, performance, or 

compliance with VA regulations; 

(3) Conduct investigations and 

examine witnesses regarding any 

fiduciary matter; 

(4) Take affidavits; 

(5) Administer oaths and affirmations; 

(6) Certify copies of public or private 

documents; and 

(7) Aid claimants and beneficiaries in 

the preparation of claims for VA 

benefits or other fiduciary or claimrelated material. 

(b) Scope of field examinations. Field 

examinations may include, but are not 

limited to: 

(1) Assessing a beneficiary’s and the 

beneficiary’s dependents’ welfare and 

physical and mental well-being, 

environmental and social conditions, 

and overall financial situation, based 

upon visiting the beneficiary’s current 

residence and conducting a face-to-face 

interview of the beneficiary and the 

beneficiary’s dependents, when 

practicable; 

(i) The Hub Manager will waive the 

requirements of paragraph (b)(1) of this 

section if the Veterans Health 

Administration (VHA) has approved the 

fiduciary as the beneficiary’s family 

caregiver, and VHA’s status report 

regarding the beneficiary indicates the 

beneficiary is in an excellent situation. 

(ii) The provisions of paragraph 

(b)(1)(i) of this section do not apply 

when the Hub Manager has information 

that a fiduciary, who is also the 

beneficiary’s VHA-designated family 

caregiver, is misusing a beneficiary’s VA 

funds under management, is neglecting 

a beneficiary, or has failed to comply 

with the requirements of § 13.140, or 

there is insufficient evidence to 

determine the beneficiary’s well-being. 

(2) Assessing the beneficiary’s ability 

to manage his or her own VA benefits 

with only limited VA supervision (see 

§ 13.110 regarding supervised direct 

payment); 

(3) Collecting and reviewing financial 

documentation, including income and 

expenditure information; 

(4) Providing any necessary assistance 

to the beneficiary with issues affecting 

current or additional VA benefits, 

claims, and non-VA matters that may 

affect or conflict with VA benefits; 

(5) Making appropriate referrals in 

cases of actual or suspected physical or 

mental abuse, neglect, or other harm to 

a beneficiary; 

(6) Investigating, when necessary, 

allegations that a beneficiary’s fiduciary 

has engaged in misconduct or misused 

VA benefits to include but not limited 

to allegations regarding: 

(i) Theft or misappropriation of funds, 

(ii) Failure to comply with the 

responsibilities of a fiduciary as 

prescribed in § 13.140, 

(iii) Other allegations of inappropriate 

fund management by a fiduciary, and 

(iv) Other special circumstances 

which require a visit with or onsite 

review of the fiduciary, such as a change 

in an award of benefits or benefit status, 

or non-fiduciary program matters. 

(c) Reasons for conducting field 

examinations. A Hub Manager will 

order a field examination to: 

(1) Determine whether benefits should 

be paid directly to a beneficiary under 

§ 13.110 or to a fiduciary appointed for 

the beneficiary under § 13.100; 

(2) Determine whether benefit 

payments should continue to be made 

directly to a beneficiary under § 13.110 

or to a fiduciary on behalf of a 

beneficiary; or 

(3) Ensure the well-being of a 

beneficiary in the fiduciary program or 

to protect a beneficiary’s VA benefit 

funds. 

(Authority: U.S.C. 501, 512, 5502, 5506, 

5507, 5711) 

(Approved by the Office of Management and 

Budget under control numbers 2900–0815 

and 2900–0803.) 

§ 13.130 Bars to serving as a fiduciary. 

(a) An individual or entity may not 

serve as a fiduciary for a VA beneficiary 

if the individual or entity: 

(1) Misused or misappropriated a 

beneficiary’s VA benefits while serving 

as the beneficiary’s fiduciary; 

(2) Has been convicted of a felony 

offense. For purposes of this paragraph, 

felony offense means a criminal offense 

for which the minimum period of 

imprisonment is 1 year or more, 

regardless of the actual sentence 

imposed or the actual time served. 

However, such conviction is not a bar to 

serving as a fiduciary for a beneficiary 

if all of the following conditions are 

met: 

(i) The conviction occurred more than 

10 years preceding the proposed date of 

appointment; 

(ii) The conviction did not involve 

any of the following offenses: 

(A) Fraud; 

(B) Theft; 

(C) Bribery; 

(D) Embezzlement; 

(E) Identity theft; 

(F) Money laundering; 

(G) Forgery; 

(H) The abuse of or neglect of another 

person; or 

(I) Any other financial crime; 

(iii) There is no other person or entity 

who is willing and qualified to serve; 

and 

(iv) The Hub Manager determines that 

the nature of the conviction is such that 

appointment of the individual poses no 

risk to the beneficiary and is in the 

beneficiary’s interest. 

(b) An individual may not serve as a 

fiduciary for a VA beneficiary if the 

individual: 

(1) Refuses or neglects to provide the 

authorization for VA disclosure of 

information prescribed in § 13.100(i); 

(2) Is unable to manage his or her own 

Federal or state benefits and is in a 

Federal or state agency’s fiduciary, 

representative payment, or similar 

program; 

(3) Has been adjudicated by a court 

with jurisdiction as being unable to 

manage his or her own financial affairs; 

(4) Is incarcerated in a Federal, state, 

local, or other penal institution or 

correctional facility, sentenced to home 

confinement, released from 

incarceration to a half-way house, or on 

house arrest or in custody in any facility 

awaiting trial on pending criminal 

charges; 

(5) Has felony charges pending; 

(6) Has been removed as legal 

guardian by a state court for 

misconduct; 

(7) Is under the age of majority; or 

(8) Knowingly violates or refuses to 

comply with the regulations in this part. 

(Authority: 38 U.S.C. 501, 5502, 5506, 5507, 

6101, 6106) 


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§ 13.140 Responsibilities of fiduciaries. 

Any individual or entity appointed by 

VA as a fiduciary to receive VA benefit 

payments on behalf of a beneficiary in 

the fiduciary program must fulfill 

certain responsibilities associated with 

the services of a fiduciary. These 

responsibilities include: 

(a) General. (1) Fiduciaries appointed 

by VA to manage the VA funds of a 

beneficiary are also responsible for 

monitoring the beneficiary’s well-being 

and using available funds to ensure that 

the beneficiary’s needs are met. 

Fiduciaries owe VA and beneficiaries 

the duties of good faith and candor and 

must administer a beneficiary’s funds 

under management in accordance with 

paragraph (b) of this section. In all 

cases, the fiduciary must disburse or 

otherwise manage funds according to 

the best interests of the beneficiary and 

the beneficiary’s dependents and in 

light of the beneficiary’s unique 

circumstances, needs, desires, beliefs, 

and values. 

(2) The fiduciary must take all 

reasonable precautions to protect the 

beneficiary’s private information 

contained in the fiduciary’s paper and 

electronic records. 

(i) For purposes of this section: 

(A) Reasonable precautions means 

protecting against any unauthorized 

access to or use of the beneficiary’s 

private information that may result in 

substantial harm or inconvenience to 

the beneficiary; and 

(B) Private information means a 

beneficiary’s first name and last name or 

first initial and last name in 

combination with any one or more of 

the following data elements that relate 

to such beneficiary: VA claim number, 

Social Security number, date of birth, 

address, driver’s license number or 

state-issued identification card number, 

or financial account number or credit 

card or debit card number, with or 

without any required security code, 

access code, personal identification 

number, or password, that would permit 

access to the beneficiary’s account. 

(ii) At a minimum, fiduciaries must 

place reasonable restrictions upon 

access to paper records containing the 

beneficiary’s private information, 

including storage of such records in 

locked facilities, storage areas, or 

containers. 

(iii) For electronic records containing 

the beneficiary’s private information, 

the fiduciary must: 

(A) Use unique identifications and 

passwords, which are not vendorsupplied default identifications and 

passwords, for computer, network, or 

online site access that are reasonably 

designed to maintain the security of the 

beneficiary’s information and the 

fiduciary’s financial transactions; 

(B) Control access to data security 

passwords to ensure that such 

passwords are kept in a location and 

format that do not compromise the 

security of the beneficiary’s private 

information; and 

(C) For records containing private 

information on a computer system that 

is connected to the internet, keep 

reasonably up-to-date firewall and virus 

protection and operating system 

security patches to maintain the 

integrity of the beneficiary’s private 

information and prevent unauthorized 

disclosure. For purposes of this section, 

a system is reasonably updated if the 

fiduciary installs software updates 

immediately upon release by the 

original equipment or software 

manufacturer, uses internet browser 

security settings suitable for 

transmission of private information, and 

maintains password-protected wireless 

connections or other networks. 

(iv) The fiduciary must keep all paper 

and electronic records relating to the 

fiduciary’s management of VA benefit 

funds for the beneficiary for the 

duration of service as fiduciary for the 

beneficiary and for a minimum of 2 

years from the date that VA removes the 

fiduciary under § 13.500 or from the 

date that the fiduciary withdraws as 

fiduciary for the beneficiary under 

§ 13.510. 

(b) Financial responsibilities. The 

fiduciary’s primary financial 

responsibilities include, but are not 

limited to: 

(1) The use of the beneficiary’s VA 

benefit funds under management only 

for the care, support, education, health, 

and welfare of the beneficiary and his or 

her dependents. Except as authorized 

under § 13.220 regarding fiduciary fees, 

a fiduciary may not derive a personal 

financial benefit from management or 

use of the beneficiary’s funds; 

(2) Protection of the beneficiary’s VA 

benefits from loss or diversion; 

(3) Except as prescribed in § 13.200 

regarding fiduciary accounts, 

maintenance of separate financial 

accounts to prevent commingling of the 

beneficiary’s funds with the fiduciary’s 

own funds or the funds of any other 

beneficiary for whom the fiduciary has 

funds under management; 

(4) Determination of the beneficiary’s 

just debts. For purposes of this section, 

just debts mean the beneficiary’s 

legitimate, legally enforceable debts; 

(5) Timely payment of the 

beneficiary’s just debts, provided that 

the fiduciary has VA benefit funds 

under management for the beneficiary to 

cover such debts; 

(6) Providing the beneficiary with 

information regarding VA benefit funds 

under management for the beneficiary, 

including fund usage, upon request; 

(7) Providing the beneficiary with a 

copy of the annual accounting approved 

by VA under § 13.280; 

(8) Ensuring that any best-interest 

determination regarding the use of 

funds is consistent with VA policy, 

which recognizes that beneficiaries in 

the fiduciary program are entitled to the 

same standard of living as any other 

beneficiary with the same or similar 

financial resources, and that the 

fiduciary program is not primarily for 

the purpose of preserving funds for the 

beneficiary’s heirs or disbursing funds 

according to the fiduciary’s own beliefs, 

values, preferences, and interests; and 

(9) Protecting the beneficiary’s funds 

from the claims of creditors as described 

in § 13.270. 

(c) Non-financial responsibilities. The 

fiduciary’s primary non-financial 

responsibilities include, but are not 

limited to: 

(1) Contacting social workers, mental 

health professionals, or the beneficiary’s 

legal guardian regarding the beneficiary, 

when necessary; 

(2) To the extent possible, ensuring 

the beneficiary receives appropriate 

medical care; 

(3) Correcting any discord or 

uncomfortable living or other situations 

when possible; 

(4) Acknowledging and addressing 

any complaints or concerns of the 

beneficiary to the best of the fiduciary’s 

ability; 

(5) Reporting to the appropriate 

authorities, including any legal 

guardian, any type of known or 

suspected abuse of the beneficiary; 

(6) Maintaining contact with the 

beneficiary for purposes of assessing the 

beneficiary’s capabilities, limitations, 

needs, and opportunities; 

(7) Being responsive to the beneficiary 

and ensuring the beneficiary and his or 

her legal guardian have the fiduciary’s 

current contact information. 

(d) The fiduciary’s responsibilities to 

VA. Any fiduciary who has VA benefit 

funds under management on behalf of a 

beneficiary in the fiduciary program 

must: 

(1) If the fiduciary is also appointed 

by a court, annually provide to the 

fiduciary hub with jurisdiction a 

certified copy of the accounting(s) 

provided to the court or facilitate the 

hub’s receipt of such accountings; 

(2) Notify the fiduciary hub regarding 

any change in the beneficiary’s 

circumstances, to include the 

beneficiary’s relocation, the 

beneficiary’s serious illness, or any 


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other significant change in the 

beneficiary’s circumstances which 

might adversely impact the beneficiary’s 

well-being; 

(3) Provide documentation or 

verification of any records concerning 

the beneficiary or matters relating to the 

fiduciary’s responsibilities within 30 

days of a VA request, unless otherwise 

directed by the Hub Manager; 

(4) When necessary, appear before VA 

for face-to-face meetings; and 

(5) Comply with the policies and 

procedures prescribed in this part. 

(Authority: 38 U.S.C. 501, 512, 5502, 5507, 

5509, 5711) 

(Approved by the Office of Management and 

Budget under control numbers 2900–0017 

and 2900–0085.) 

§ 13.200 Fiduciary accounts. 

Except as prescribed in paragraph (b) 

of this section, any fiduciary appointed 

by VA to receive payments on behalf of 

a beneficiary must deposit the 

beneficiary’s VA benefits in a fiduciary 

account that meets the requirements 

prescribed in paragraph (a) of this 

section. 

(a) Separate accounts. Except as 

prescribed in paragraph (b) of this 

section, a fiduciary must establish and 

maintain a separate financial institution 

account for each VA beneficiary that the 

fiduciary serves. The fiduciary must not 

commingle a beneficiary’s funds with 

the fiduciary’s funds or any other 

beneficiary’s funds, either upon or after 

receipt. The account must be: 

(1) Established for direct deposit of 

VA benefits, 

(2) Established in a Federally-insured 

financial institution, and in Federallyinsured accounts when funds qualify for 

such deposit insurance, and 

(3) Titled in the beneficiary’s and 

fiduciary’s names and note the existence 

of the fiduciary relationship. 

(b) Exceptions. The general rule 

prescribed in paragraph (a) of this 

section regarding establishment and 

maintenance of separate accounts does 

not apply to the following fiduciaries: 

(1) The beneficiary’s spouse; 

(2) State or local Government entities; 

(3) Institutions, such as public or 

private medical care facilities, nursing 

homes, or other residential care 

facilities, when an annual accounting is 

not required. See § 13.280 regarding 

accounting requirements; or 

(4) A trust company or a bank with 

trust powers organized under the laws 

of the United States or a state. 

(Authority: U.S.C. 501, 5502, 5509, 5711) 

§ 13.210 Fiduciary investments. 

(a) General. A fiduciary must 

conserve or invest any VA benefits that 

the fiduciary receives on behalf of a 

beneficiary, whether such benefits are in 

the form of recurring monthly payments 

or a one-time payment, if the beneficiary 

or the beneficiary’s dependents do not 

need the benefits for current 

maintenance, reasonably foreseeable 

expenses, or reasonable improvements 

in the beneficiary’s and the beneficiary’s 

dependents’ standard of living. 

Conservation of beneficiary funds is for 

the purpose of addressing unforeseen 

circumstances or planning for future 

care needs given the beneficiary’s 

disabilities, circumstances, and 

eligibility for care furnished by the 

Government at Government expense. 

Fiduciaries should not conserve VA 

benefit funds under management for a 

beneficiary based primarily upon the 

interests of the beneficiary’s heirs or 

according to the fiduciary’s own values, 

preferences, and interests. 

(b) Types of investments. An 

investment must be prudent and in the 

best interest of the beneficiary. 

Authorized investments include United 

States savings bonds or interest or 

dividend-paying accounts insured 

under Federal law. Any such 

investment must be clearly titled in the 

beneficiary’s and fiduciary’s names and 

identify the fiduciary relationship. 

(c) Exceptions. The general rules 

regarding investment of VA benefits do 

not apply to the following fiduciaries: 

(1) The beneficiary’s spouse, and 

(2) The chief officer of an institution 

in which the beneficiary is being 

furnished hospital treatment or 

institutional, nursing, or domiciliary 

care. VA benefits paid to the chief 

officer may not be invested. 

(Authority: 38 U.S.C. 501, 5502) 

§ 13.220 Fiduciary fees. 

(a) Authority. The Hub Manager with 

jurisdiction over a fiduciary 

appointment may determine whether a 

fee is necessary to obtain the services of 

a fiduciary. A fee is necessary only if no 

other person or entity is qualified and 

willing to serve without a fee and the 

beneficiary’s interests would be served 

by the appointment of a qualified paid 

fiduciary. The Hub Manager will not 

authorize a fee if the fiduciary: 

(1) Is a spouse, dependent, or other 

relative of the beneficiary; or 

(2) Will receive any other form of 

payment in connection with providing 

fiduciary services for the beneficiary. 

(b) Limitation on fees. The Hub 

Manager will authorize a fiduciary to 

whom a fee is payable under paragraph 

(a) of this section to deduct from the 

beneficiary’s account a reasonable 

monthly fee for fiduciary services 

rendered. 

(1) For purposes of this section, 

reasonable monthly fee means a 

monetary amount that is authorized by 

the Hub Manager and does not exceed 

4 percent of the monthly VA benefit 

paid to the fiduciary on behalf of the 

beneficiary for a month in which the 

fiduciary is eligible under paragraph 

(b)(2) of this section to collect a fee. 

(2) A monthly fee may be collected for 

any month during which the fiduciary: 

(i) Provides fiduciary services on 

behalf of the beneficiary, 

(ii) Receives a recurring VA benefit 

payment for the beneficiary, and 

(iii) Is authorized by the Hub Manager 

to receive a fee for fiduciary services. 

(3) Fees may not be computed based 

upon: 

(i) Any one-time, retroactive, or lumpsum payment made to the fiduciary on 

behalf of the beneficiary; 

(ii) Any funds conserved by the 

fiduciary for the beneficiary in the 

beneficiary’s account under § 13.200 or 

invested by the fiduciary for the 

beneficiary under § 13.210, to include 

any interest income and return on 

investment derived from any account; or 

(iii) Any funds transferred to the 

fiduciary by a prior fiduciary for the 

beneficiary, or from the personal funds 

of patients or any other source. 

(4) The Hub Manager will not 

authorize a fee for any month for which: 

(i) VA or a court with jurisdiction 

determines that the fiduciary misused or 

misappropriated benefits, or 

(ii) The beneficiary does not receive a 

VA benefit payment. However, the Hub 

Manager may authorize a fee for a 

month in which the beneficiary did not 

receive a benefit payment if VA later 

issues benefits for that month and the 

fiduciary: 

(A) Receives VA approval to collect a 

fee for the month for which payment 

was made, 

(B) Provided fiduciary services during 

the month for which payment was 

made, and 

(C) Was the beneficiary’s fiduciary 

when VA made the retroactive payment. 

(Authority: 38 U.S.C. 501, 5502, 6101, 6106) 

§ 13.230 Protection of beneficiary funds. 

(a) General. Except as prescribed in 

paragraph (c) of this section, within 60 

days of appointment, the fiduciary must 

furnish to the fiduciary hub with 

jurisdiction a corporate surety bond that 

is conditioned upon faithful discharge 

of all of the responsibilities of a 

fiduciary prescribed in § 13.140 and 

meets the requirements of paragraph (d) 

of this section, if the VA benefit funds 

that are due and to be paid for the 

beneficiary will exceed $25,000 at the 

time of appointment. The Hub Manager 


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will not authorize the release of a 

retroactive, one-time, or other pending 

lump-sum benefit payment to the 

fiduciary until the fiduciary has 

furnished the bond prescribed by this 

section. 

(b) Accumulated funds. The 

provisions of paragraph (a) of this 

section, which require a fiduciary to 

furnish a surety bond, apply in any case 

in which the accumulation over time of 

VA benefit funds under management by 

a fiduciary for a beneficiary exceeds 

$25,000. Except as prescribed in 

paragraph (c) of this section, within 60 

days of accumulated funds exceeding 

the prescribed threshold, the fiduciary 

will furnish to the fiduciary hub a bond 

that meets the requirements of 

paragraph (d) of this section. 

(c) Exceptions. (1) The provisions of 

paragraphs (a) and (b) of this section do 

not apply to: 

(i) A fiduciary that is a trust company 

or a bank with trust powers organized 

under the laws of the United States or 

a state; 

(ii) A fiduciary who is the 

beneficiary’s spouse; or 

(iii) A fiduciary in the Commonwealth 

of Puerto Rico, Guam, or another 

territory of the United States, or in the 

Republic of the Philippines, who has 

entered into a restricted withdrawal 

agreement in lieu of a surety bond. 

(2) The Hub Manager may, at any 

time, require the fiduciary to obtain a 

bond described in paragraph (a) of this 

section and meeting the requirements of 

paragraph (d) of this section, without 

regard to the amount of VA benefit 

funds under management by the 

fiduciary for the beneficiary, if special 

circumstances indicate that obtaining a 

bond would be in the beneficiary’s 

interest. Such special circumstances 

may include but are not limited to: 

(i) A marginal credit report for the 

fiduciary; or 

(ii) A fiduciary’s misdemeanor 

criminal conviction either before or after 

appointment for any offense listed in 

§ 13.130(a)(2)(ii); 

(d) Bond requirements. A bond 

furnished by a fiduciary under 

paragraph (a) or (b) of this section must 

meet the following requirements: 

(1) The bond must be a corporate 

surety bond in an amount sufficient to 

cover the value of the VA benefit funds 

under management by the fiduciary for 

the beneficiary. 

(2) After furnishing the prescribed 

bond to the fiduciary hub, the fiduciary 

must: 

(i) Adjust the bond amount to account 

for any increase or decrease of more 

than 20 percent in the VA benefit funds 

under management by the fiduciary for 

the beneficiary; and 

(ii) Furnish proof of the adjustment to 

the fiduciary hub not later than 60 days 

after a change in circumstance described 

in paragraph (d)(2)(i) of this section. 

(3) The bond furnished by the 

fiduciary must also: 

(i) Identify the fiduciary, the 

beneficiary, and the bonding company; 

and 

(ii) Contain a statement that the bond 

is payable to the Secretary of Veterans 

Affairs. 

(e) Periodic proof of bond. A fiduciary 

must furnish proof of adequate bonding: 

(1) With each annual accounting 

prescribed by § 13.280; and 

(2) At any other time the Hub 

Manager with jurisdiction requests 

proof. 

(f) Liability. (1) Except as otherwise 

provided by the terms of the bond, the 

surety and the fiduciary guaranteed by 

the surety are jointly and severally 

liable for any misappropriation or 

misuse of VA benefits by the fiduciary. 

(2) VA may collect on the bond 

regardless of any prior reissuance of 

benefits by VA under § 13.410 and until 

liability under the terms of the bond is 

exhausted. 

(g) Bond expenses—(1) Authority. The 

fiduciary may deduct from the 

beneficiary’s account any expense 

related to obtaining, maintaining, or 

adjusting a bond prescribed by this 

section. 

(2) Notice. The Hub Manager will 

provide the beneficiary written notice 

regarding any bond furnished at the 

beneficiary’s expense under paragraph 

(a), (b), or (c)(2) of this section or 

adjusted under paragraph (d)(2) of this 

section. 

(Authority: 38 U.S.C. 501, 5502, 5507) 

(Approved by the Office of Management and 

Budget under control numbers 2900–0017 

and 2900–0804.) 

§ 13.240 Funds of beneficiaries less than 

the age of majority. 

(a) General. Except as prescribed in 

paragraph (b) of this section, a fiduciary 

who receives VA benefits on behalf of 

a beneficiary who is less than the age of 

majority may use the benefits only for 

the use and benefit of that beneficiary 

and only if the fiduciary first determines 

that the person or persons who have 

custody of the beneficiary and are 

responsible for the beneficiary’s needs 

are unable to provide for those needs. 

(b) Education benefits. A fiduciary 

who receives VA education benefits on 

behalf of a beneficiary who is less than 

the age of majority may use the benefits 

for the beneficiary’s education 

regardless of the ability of the person or 

persons who have custody of the 

beneficiary to pay for the beneficiary’s 

education. 

(Authority: 38 U.S.C. 501, 5502) 

§ 13.250 Funds of deceased beneficiaries. 

(a) General. When a beneficiary who 

has a fiduciary dies without leaving a 

valid will and without heirs, all VA 

benefit funds under management by the 

fiduciary for the deceased beneficiary 

on the date of death, less any 

deductions authorized by paragraph (c) 

of this section, must be returned to VA 

if such funds would escheat to a state. 

(b) Accountings. Upon the death of a 

beneficiary described in paragraph (a) 

for whom the fiduciary must return to 

VA all benefit funds under management, 

less any deductions authorized under 

paragraph (c) of this section, or upon the 

death of any beneficiary for whom a 

fiduciary was required to submit an 

annual accounting to VA under 

§ 13.280, the fiduciary must submit a 

final accounting to the fiduciary hub 

with jurisdiction within 90 days of the 

beneficiary’s death. 

(c) Expenses. The fiduciary may 

deduct a reasonable fee from the 

deceased beneficiary’s account for 

purposes of determining whether the 

beneficiary’s funds under management 

would escheat to a state under state law 

or whether the deceased beneficiary left 

a valid will or is survived by heirs. For 

the purpose of this section, reasonable 

fee means an amount customarily 

charged by attorneys or other 

professionals authorized to do such 

work in the state where the deceased 

beneficiary had his or her permanent 

place of residence. 

(d) Estate matters. Upon the death of 

a beneficiary who has a valid will or 

heirs, the fiduciary must hold the 

remaining funds under management in 

trust for the deceased beneficiary’s 

estate until the will is probated or heirs 

are ascertained, and disburse the funds 

according to applicable state law. 

(Authority: U.S.C. 501, 5502) 

§ 13.260 Personal funds of patients. 

(a) Distribution of funds. Benefits 

deposited by VA in the personal funds 

of patients account for a veteran who 

was rated by VA as being unable to 

manage his or her VA benefits and who 

died leaving an account balance are 

payable to an eligible person. For 

purposes of this section, eligible person 

means an individual living at the time 

the account balance is distributed in the 

following order of preference: 

(1) The deceased veteran’s spouse, as 

defined by § 3.1000(d)(1) of this chapter; 

(2) The veteran’s children (in equal 

shares), as defined by § 3.57 of this 


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chapter, but without regard to age or 

marital status; or 

(3) The veteran’s dependent parents 

(in equal shares) or surviving parent, as 

defined by § 3.59 of this chapter, 

provided that the parents were or parent 

was dependent within the meaning of 

§ 3.250 of this chapter on the date of the 

veteran’s death. 

(4) Any balance remaining in the 

personal funds of patients account that 

cannot be distributed in accordance 

with paragraphs (a)(1) through (3) of this 

section will be used by VA to reimburse 

anyone who bore the expense of the 

veteran’s last sickness or burial or will 

be deposited to the credit of the 

applicable current VA appropriation. 

(b) Application. A person who seeks 

distribution of a deceased veteran’s 

funds from the personal funds of 

patients account under paragraph (a) of 

this section must file an application 

with VA not later than 5 years after the 

veteran’s death. If any person who seeks 

such distribution is under a legal 

disability that prevents him or her from 

filing an application at the time of the 

veteran’s death, the 5-year period will 

run from the date of termination or 

removal of the legal disability. 

(Authority: 38 U.S.C. 501, 5502) 

§ 13.270 Creditors’ claims. 

Under 38 U.S.C. 5301(a)(1), VA 

benefit payments are exempt, both 

before and after receipt by the 

beneficiary, from the claims of creditors 

and taxation. The fiduciary should 

invoke this defense in applicable 

circumstances. If the fiduciary does not 

do so, the Hub Manager may refer the 

matter to the District Counsel for 

evaluation and appropriate legal action. 

(Authority: 38 U.S.C. 501, 512, 5301) 

§ 13.280 Accountings. 

(a) General. Except as prescribed in 

paragraph (d) of this section, a fiduciary 

for a beneficiary must submit to the 

fiduciary hub with jurisdiction an 

annual accounting regarding the VA 

benefit funds under management by the 

fiduciary for the beneficiary if: 

(1) The amount of VA benefit funds 

under management for the beneficiary 

exceeds $10,000; 

(2) The fiduciary deducts a fee 

authorized under § 13.220 from the 

beneficiary’s account; 

(3) The beneficiary is being paid VA 

compensation benefits at a total 

disability rating (100 percent), whether 

schedular, extra-schedular, or based on 

individual unemployability; or 

(4) The Hub Manager determines an 

accounting is necessary to ensure the 

fiduciary has properly managed the 

beneficiary’s funds. 

(b) Scope of accounting. For purposes 

of this section, accounting means the 

fiduciary’s written report regarding the 

income and funds under management 

by the fiduciary for the beneficiary 

during the accounting period prescribed 

by the Hub Manager. The accounting 

prescribed by this section pertains to all 

activity in the beneficiary’s accounts, 

regardless of the source of funds 

maintained in those accounts. An 

accounting consists of: 

(1) A beginning inventory or account 

balance, 

(2) An itemization of income, 

(3) An itemization of expenses, 

(4) An ending inventory or account 

balance, 

(5) Copies of financial institution 

documents reflecting receipts, 

expenditures, and beginning and ending 

balances, and 

(6) Receipts, when required by the 

Hub Manager. 

(c) Submission requirements. 

Fiduciaries must submit annual 

accountings to the fiduciary hub as 

follows: 

(1) The fiduciary must submit 

accountings on the appropriate VA form 

not later than 30 days after the end of 

the accounting period prescribed by the 

Hub Manager. 

(2) The fiduciary must submit a 

corrected or supplemental accounting 

not later than 14 days after the date of 

VA notice of an accounting discrepancy. 

(d) Exceptions. The provisions of this 

section that generally require the 

submission of an annual accounting do 

not apply to a fiduciary who is: 

(1) The beneficiary’s spouse; 

(2) A chief officer of a Federal 

institution; 

(3) A chief officer of a non-VA facility 

receiving benefits for a beneficiary 

institutionalized in the facility and: 

(i) The beneficiary’s monthly care, 

maintenance, and personal use expenses 

equal or exceed the amount of the 

beneficiary’s monthly VA benefit; and 

(ii) The amount of VA benefit funds 

under management by the fiduciary 

does not exceed $10,000; or 

(4) A fiduciary who receives benefits 

on behalf of a beneficiary and both 

permanently resides outside of the 

United States or in the Commonwealth 

of Puerto Rico or the Republic of the 

Philippines, and the fiduciary was 

appointed outside of the United States 

or in the Commonwealth of Puerto Rico 

or the Republic of the Philippines. 

(e) Failure to comply with accounting 

requirements. The Hub Manager will 

treat any willful neglect or refusal to file 

proper accountings as prima facie 

evidence of embezzlement or 

misappropriation of VA benefits. Such 

evidence is grounds for starting a 

misuse investigation under § 13.400. 

(Authority: 38 U.S.C. 501, 5502, 5509, 6101) 

(Approved by the Office of Management and 

Budget under control number 2900–0017.) 

§ 13.300 Onsite reviews. 

(a) Periodic onsite reviews. (1) The 

Hub Manager will conduct a periodic, 

scheduled, onsite review of any 

fiduciary in the United States, whether 

the fiduciary is an individual or an 

entity, if: 

(i) The fiduciary serves 20 or more 

beneficiaries, and 

(ii) The total annual amount of 

recurring VA benefits paid to the 

fiduciary for such beneficiaries exceeds 

the threshold established in 38 U.S.C. 

5508 as adjusted by VA under 38 U.S.C. 

5312. 

(2) The Hub Manager must complete 

at least one periodic onsite review 

triennially if the fiduciary meets the 

requirements of paragraph (a)(1) of this 

section. 

(3) VA will provide the fiduciary with 

written notice of the periodic onsite 

review at least 30 days before the 

scheduled review date. The notice will: 

(i) Inform the fiduciary of the pending 

review and the fiduciary’s obligation 

under this part to cooperate in the 

onsite review process, and 

(ii) Request that the fiduciary make 

available for review all relevant records, 

including but not limited to case files, 

bank statements, accountings, ledgers, 

check registers, receipts, bills, and any 

other items necessary to determine that 

the fiduciary has been acting in the best 

interest of VA beneficiaries and meeting 

the responsibilities of fiduciaries 

prescribed in § 13.140. 

(b) Unscheduled onsite reviews. The 

Hub Manager may conduct unscheduled 

onsite reviews of any fiduciary, 

regardless of the number of beneficiaries 

served by the fiduciary or the total 

amount of VA benefit funds under 

management by the fiduciary, if: 

(1) VA receives from any source 

credible information that the fiduciary 

has misused or is misusing VA benefits; 

(2) The fiduciary’s annual accounting 

is seriously delinquent. For purposes of 

this section, seriously delinquent means 

the fiduciary failed to submit the 

required accounting within 120 days 

after the ending date of the annual 

accounting period; 

(3) VA receives from any source 

credible information that the fiduciary 

is not adequately performing the 

responsibilities of a fiduciary prescribed 

in § 13.140; or 

(4) The Hub Manager determines that 

an unscheduled onsite review is 

necessary to ensure that the fiduciary is 


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acting in the interest of the beneficiary 

or beneficiaries served by the fiduciary. 

(c) Procedures. (1) Onsite reviews will 

consist of the following: 

(i) A face-to-face meeting with the 

fiduciary. In the case of a fiduciary that 

is an entity, the face-to-face meeting will 

be with a representative of the entity; 

(ii) A review of all relevant records 

maintained by the fiduciary, including 

but not limited to case files, bank 

statements, accountings, ledgers, check 

registers, receipts, bills, and any other 

items necessary to determine whether 

the fiduciary has been acting in the 

interest of VA beneficiaries; and 

(iii) Interviews of beneficiaries, the 

fiduciary’s employees, and other 

individuals as determined necessary by 

the Hub Manager. 

(2) Not later than 30 days after 

completing a periodic or unscheduled 

onsite review, the Hub Manager will 

provide the fiduciary a written report of 

VA’s findings, recommendations for 

correction of deficiencies, requests for 

additional information, and notice of 

VA’s intent regarding further action. 

(3) Unless good cause for an extension 

is shown, not later than 30 days after the 

date that VA mails the report prescribed 

by paragraph (d)(2) of this section, the 

fiduciary must submit to the fiduciary 

hub a response to any VA request for 

additional information or 

recommendation for corrective action. 

(4) The Hub Manager will remove the 

fiduciary for all VA beneficiaries whom 

the fiduciary serves if the fiduciary: 

(i) Refuses to cooperate with VA 

during a periodic or unscheduled onsite 

review, 

(ii) Is unable to produce necessary 

records, 

(iii) Fails to respond to a VA request 

for additional information or 

recommendation for corrective action, 

or 

(iv) Is found during an onsite review 

to have misused VA benefits. 

(Authority: 38 U.S.C. 501, 5508) 

§ 13.400 Misuse of benefits. 

(a) Definition of misuse. Misuse of 

benefits by a fiduciary occurs in any 

case in which the fiduciary receives 

payment of benefits for the use and 

benefit of a beneficiary and the 

beneficiary’s dependents, if any, and 

uses any part of such payment for a use 

other than the use and benefit of the 

beneficiary or the beneficiary’s 

dependents. For the purpose of this 

section, use and benefit means any 

expenditure reasonably intended for the 

care, support, or maintenance of the 

beneficiary or the beneficiary’s 

dependents. Such expenditures may 

include the fiduciary’s efforts to 

improve the beneficiary’s standard of 

living under rules prescribed in this 

part. 

(b) Misuse determinations. Upon 

receipt of information from any source 

regarding possible misuse of VA 

benefits by a fiduciary, the Hub Manager 

may, upon his or her discretion, 

investigate the matter and issue a 

misuse determination in writing. This 

decision will: 

(1) Identify the beneficiary, 

(2) Identify the fiduciary, 

(3) State whether the fiduciary is an 

individual fiduciary serving 10 or more 

beneficiaries or a corporation or other 

entity serving one or more beneficiaries, 

(4) Identify the source of the 

information, 

(5) Describe in detail the facts found 

as a result of the investigation, 

(6) State the reasons for the Hub 

Manager’s determination regarding 

whether the fiduciary misused any part 

of the beneficiary’s benefit paid to the 

fiduciary, and 

(7) If the Hub Manager determines 

that the fiduciary did misuse any part of 

the beneficiary’s benefit, identify the 

months in which such misuse occurred. 

(c) Notice. The Hub Manager will 

provide written notice of the misuse 

determination prescribed in paragraph 

(b) of this section, including a copy of 

the Hub Manager’s written decision, an 

explanation regarding the 

reconsideration procedure prescribed in 

paragraph (d) of this section, and the 

beneficiary’s right to appeal under 

§ 13.600, to: 

(1) The fiduciary; 

(2) The beneficiary or the 

beneficiary’s legal guardian, and the 

beneficiary’s accredited representative, 

attorney, or claims agents; 

(3) The court of jurisdiction if the 

fiduciary is also the beneficiary’s courtappointed guardian and/or conservator; 

and 

(4) The Director of the Pension and 

Fiduciary Service. 

(d) Finality and reconsideration of 

misuse determinations. (1) The Hub 

Manager’s misuse determination is a 

final decision, unless: 

(i) The Hub Manager receives a 

written request for reconsideration from 

the fiduciary or the beneficiary not later 

than 30 days after the date that the Hub 

Manager mailed notice of his or her 

misuse determination; or 

(ii) The Hub Manager receives a 

notice of disagreement from the 

beneficiary not later than 1 year after the 

date that the Hub Manager mailed 

notice of his or her misuse 

determination. 

(2) The fiduciary or the beneficiary 

may submit additional information 

pertinent to reconsideration of the 

misuse determination and not 

previously considered by the Hub 

Manager, provided that the additional 

information is submitted with the 

written reconsideration request. 

(3) The Hub Manager will close the 

record regarding reconsideration at the 

end of the 30-day period described in 

paragraph (d)(1)(i) of this section and 

furnish a timely request submitted by 

the fiduciary or the beneficiary, 

including any new information, to the 

Director of the VA Regional Office with 

jurisdiction over the fiduciary hub for a 

final decision. 

(4) In making the misuse 

determination on reconsideration, the 

Regional Office Director’s decision will 

be based upon a review of the 

information of record as of the date of 

the Hub Manager’s misuse 

determination and any new information 

submitted with the request. The 

decision will: 

(i) Identify the beneficiary, 

(ii) Identify the fiduciary, 

(iii) Identify if the fiduciary is also the 

beneficiary’s court-appointed guardian 

or conservator, 

(iv) Identify the date of the Hub 

Manager’s prior decision, 

(v) Describe in detail the facts found 

as a result of the Director’s review of the 

Hub Manager’s decision and any new 

information submitted with the 

reconsideration request, and 

(vi) State the reasons for the Director’s 

final decision, which may affirm, 

modify, or overturn the Hub Manager’s 

decision. 

(5) The Hub Manager will provide 

written notice of the Regional Office 

Director’s final decision on 

reconsideration to: 

(i) The fiduciary, 

(ii) The beneficiary or the 

beneficiary’s legal guardian, and the 

beneficiary’s accredited representative, 

attorney, or claims agent; 

(iii) The court, if the fiduciary is also 

the beneficiary’s court-appointed 

guardian or conservator; and 

(iv) The Director of the Pension and 

Fiduciary Service. 

(e) Reporting of misuse. Except as 

prescribed in § 1.204 of this chapter, 

which requires VA management 

officials to promptly report possible 

criminal matters involving felonies to 

the VA Office of Inspector General, 

reporting of misuse cases will occur as 

follows: 

(1) Not later than 30 days after a final 

determination is made under paragraph 

(d) of this section that a fiduciary has 

misused VA benefits, the Director of the 

VA Regional Office who has jurisdiction 

over the fiduciary hub will notify the 


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VA Office of Inspector General for 

purposes of any further action that the 

Inspector General deems appropriate 

under separate authority, and the court 

of jurisdiction if the fiduciary is also the 

beneficiary’s court-appointed legal 

guardian and/or conservator. 

(2) For purposes of application of 

§ 13.410 regarding reissuance and 

recoupment of benefits, the Office of 

Inspector General will advise the 

Director of the Pension and Fiduciary 

Service of any final decision regarding 

prosecution of a fiduciary who misused 

VA benefits and any final judgment of 

a court in such a prosecution not later 

than 30 days after the decision is made 

or judgment is entered. 

(Authority: 38 U.S.C. 501, 5502, 6106) 

§ 13.410 Reissuance and recoupment of 

misused benefits. 

(a) General. (1) If the Hub Manager or 

the Regional Office Director upon 

reconsideration determines that a 

fiduciary described in paragraph (a)(2) 

of this section misused any part of a 

beneficiary’s benefit paid to the 

fiduciary, the Regional Office Director 

will reissue benefits to the beneficiary’s 

successor fiduciary in an amount equal 

to the amount of funds misused. 

(2) This paragraph (a) applies to a 

fiduciary that is: 

(i) An individual who served 10 or 

more beneficiaries during any month in 

which misuse occurred; or 

(ii) A corporation or other entity 

serving one or more beneficiaries. 

(b) Negligence. In any case in which 

the Hub Manager or the Regional Office 

Director upon reconsideration 

determines that an individual fiduciary 

who served fewer than 10 beneficiaries 

during any month in which misuse 

occurred misused a beneficiary’s funds 

under management by the fiduciary, the 

Hub Manager will refer the matter to the 

Director, Pension and Fiduciary Service, 

for a determination of whether VA 

negligence caused the misuse. The 

Regional Office Director will reissue 

benefits to the beneficiary’s successor 

fiduciary in an amount equal to the 

amount of funds misused if the Director 

of the Pension and Fiduciary Service 

determines that VA negligence caused 

the misuse. The Pension and Fiduciary 

Service Director’s negligence 

determination will be based upon a 

review of the VA information of record 

as of the date of the Hub Manager’s or 

Regional Office Director’s misuse 

determination. For purposes of this 

section, VA negligence causes misuse 

when: 

(1) The Hub Manager failed to 

properly investigate or monitor the 

fiduciary; for example, when: 

(i) The Hub Manager failed to review 

the fiduciary’s accounting within 60 

days after the date on which the 

accounting was scheduled for review. 

The date that an accounting is 

scheduled for review is the date the 

fiduciary hub receives the accounting; 

(ii) The Hub Manager did not decide 

whether to investigate an allegation of 

misuse within 60 days of receipt of the 

allegation; 

(iii) After deciding to investigate an 

allegation of misuse and finding misuse, 

the Hub Manager failed to initiate action 

within 60 days of receipt of the misuse 

allegation to terminate the fiduciary. 

(2) Actual negligence by VA is shown. 

For purposes of this section, actual 

negligence means the Hub Manager’s 

failure to exercise toward a beneficiary 

in the fiduciary program the care which 

a reasonable or prudent person would 

exercise in the circumstances, or the 

Hub Manager’s taking action that a 

reasonable or prudent person would not 

take. The Regional Office Director shall 

reissue benefits based on actual 

negligence if the Director of the Pension 

and Fiduciary Service determines that: 

(i) The Hub Manager owed a duty to 

the beneficiary under this part, 

(ii) The Hub Manager’s action or 

failure to act was negligent, and 

(iii) The Hub Manager’s negligence 

proximately caused the misuse of 

benefits by the fiduciary. For purposes 

of this section, proximate cause means 

that the misuse would not have 

occurred but for the Hub Manager’s 

negligence. 

(c) Recoupment of misused benefits. 

In all cases in which the Hub Manager 

or Regional Office Director upon 

reconsideration determines that a 

fiduciary misused benefits, VA will 

make a good faith effort to recoup the 

total amount of misused benefits from 

the fiduciary. 

(1) For purposes of this section, good 

faith effort means that the Hub Manager 

will: 

(i) Recover any misused benefits from 

the surety company, if a surety bond 

was in place regarding protection of 

beneficiary funds; or 

(ii) In cases in which no surety bond 

was in place and the fiduciary does not 

repay all misused benefits within the 

time prescribed by the Hub Manager in 

consultation with the fiduciary: 

(A) Request the creation of a debt to 

the United States in the amount of any 

misused benefits that remain unpaid; 

and 

(B) Coordinate further recoupment 

action, including collection of any debt 

owed by the fiduciary to the United 

States as a result of the misuse, with the 

appropriate Federal and state agencies. 

(2) VA will pay benefits recouped 

under paragraph (c) of this section to the 

beneficiary’s successor fiduciary after 

deducting any amount reissued under 

paragraph (a) or (b) of this section. 

(d) Notice. The Hub Manager, or in 

the case of a negligence determination, 

the Director of the Pension and 

Fiduciary Service, will provide the 

beneficiary or the beneficiary’s legal 

guardian, and the beneficiary’s 

accredited representative, attorney or 

claims agent written notice of any 

decision regarding reissuance or 

recoupment of benefits under this 

section. 

(Authority: 38 U.S.C. 501, 6106, 6107) 

§ 13.500 Removal of fiduciaries. 

(a) The Hub Manager may remove a 

fiduciary if the Hub Manager determines 

that fiduciary services are no longer 

required for a beneficiary or removal is 

in the beneficiary’s interest. Reasons for 

removal include, but are not limited to: 

(1) Beneficiary reasons. (i) A VA 

rating authority determines that the 

beneficiary can manage his or her own 

VA benefits without VA supervision or 

appointment of a fiduciary; 

(ii) The beneficiary requests 

appointment of a successor fiduciary 

under § 13.100; 

(iii) The beneficiary requests 

supervised direct payment of benefits 

under § 13.110; or 

(iv) The beneficiary dies. 

(2) Fiduciary reasons. (i) The 

fiduciary’s further service is barred 

under § 13.130; 

(ii) The fiduciary fails to maintain his 

or her qualifications or does not 

adequately perform the responsibilities 

of a fiduciary prescribed in § 13.140; 

(iii) The fiduciary fails to timely 

submit a complete accounting as 

prescribed in § 13.280; 

(iv) VA or a court with jurisdiction 

determines that the fiduciary misused or 

misappropriated VA benefits; 

(v) The fiduciary fails to respond to a 

VA request for information within 30 

days after such request is made, unless 

the Hub Manager grants an extension 

based upon good cause shown by the 

fiduciary; 

(vi) The fiduciary is unable or 

unwilling to provide the surety bond 

prescribed by § 13.230 or, if applicable, 

enter into a restricted withdrawal 

agreement; 

(vii) The fiduciary no longer meets the 

requirements for appointment under 

§ 13.100; or 

(viii) The fiduciary is unable or 

unwilling to manage the beneficiary’s 

benefit payments, accounts, or 

investments. 


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Federal Register / Vol. 83, No. 135 / Friday, July 13, 2018 / Rules and Regulations 32749 

(b) Procedures. (1) If the Hub Manager 

determines that it is necessary to 

remove a fiduciary and appoint a 

successor fiduciary, the Hub Manager 

will: 

(i) Provide the fiduciary and the 

beneficiary written notice of the 

removal; and 

(ii) Instruct the fiduciary regarding the 

fiduciary’s responsibilities prior to 

transfer of funds to a successor fiduciary 

or provide other instructions to the 

fiduciary. 

(2) The fiduciary must: 

(i) Continue as fiduciary for the 

beneficiary until the Hub Manager 

provides the fiduciary with the name 

and address of the successor fiduciary 

and instructions regarding the transfer 

of funds to the successor fiduciary; and 

(ii) Not later than 30 days after 

transferring funds to the successor 

fiduciary or as otherwise instructed by 

the Hub Manager, provide the fiduciary 

hub a final accounting. 

(Authority: 38 U.S.C. 501, 5502, 5507, 6106) 

§ 13.510 Fiduciary withdrawals. 

(a) General. A fiduciary may not 

withdraw as fiduciary for a beneficiary 

until the fiduciary receives notice from 

the Hub Manager regarding transfer of 

the beneficiary’s funds to a successor 

fiduciary. 

(b) Voluntary withdrawal. (1) Subject 

to the limitation prescribed in paragraph 

(a) of this section, a fiduciary who has 

VA benefit funds under management for 

a beneficiary may withdraw from the 

fiduciary relationship with the 

beneficiary at any time if the fiduciary: 

(i) Provides the fiduciary hub with 

jurisdiction written notice of the 

fiduciary’s intent to withdraw as 

fiduciary for the beneficiary; 

(ii) Describes the reasons for 

withdrawal; 

(iii) Continues as fiduciary for the 

beneficiary until the Hub Manager 

provides the fiduciary with the name 

and address of the successor fiduciary 

and instructions regarding the transfer 

of funds to the successor fiduciary; and 

(iv) Not later than 30 days after 

transferring funds to the successor 

fiduciary or as otherwise instructed by 

the Hub Manager, provides the fiduciary 

hub with jurisdiction a final accounting. 

(2) Upon receipt of the notice of intent 

to withdraw prescribed in paragraph 

(b)(1)(i) of this section, the Hub Manager 

will make a reasonable effort under the 

circumstances to expedite the 

appointment of a successor fiduciary. In 

determining the extent to which the 

fiduciary hub must expedite the 

appointment of a successor fiduciary, 

the Hub Manager will consider: 

(i) The reasons for the withdrawal 

request provided under paragraph 

(b)(1)(ii) of this section; 

(ii) The number of beneficiaries 

affected; 

(iii) The relationship between the 

affected beneficiary or beneficiaries and 

the fiduciary; and 

(iv) Whether expedited appointment 

of a successor fiduciary is necessary to 

protect the interests of the beneficiary or 

beneficiaries. 

(c) Notice. If a fiduciary requests to 

withdraw from service for a beneficiary, 

the Hub Manager will provide the 

beneficiary or the beneficiary’s legal 

guardian, and the beneficiary’s 

accredited representative, attorney, or 

claims agent written notice of the 

withdrawal request and the procedures 

for appointment of a successor 

fiduciary. 

(Authority: 38 U.S.C. 501, 5502) 

§ 13.600 Appeals. 

Except as prescribed in paragraph (a) 

of this section, VA decisions regarding 

fiduciary matters are committed to the 

Secretary of Veterans Affairs’ discretion 

by law, as delegated to subordinate 

officials under this part, and cannot be 

appealed to the Board of Veterans’ 

Appeals or any court. 

(a) Appealable decisions. A 

beneficiary may appeal to the Board of 

Veterans’ Appeals the following 

decisions: 

(1) The Hub Manager’s appointment 

of a fiduciary under § 13.100; 

(2) The Hub Manager’s removal of a 

fiduciary under § 13.500; 

(3) The Hub Manager’s misuse 

determination under § 13.400; 

(4) The VA Regional Office Director’s 

final decision upon reconsideration of a 

misuse determination under § 13.400(d); 

and 

(5) The Director of the Pension and 

Fiduciary Service’s negligence 

determination for purposes of 

reissuance of benefits under § 13.410. 

(b) Procedures. (1) VA decisions 

regarding fiduciary matters are final, 

subject only to the right of appeal 

prescribed in this section. 

(2) The initiation and processing of 

appeals under this section are governed 

by parts 19 and 20 of this chapter. 

(Authority: 38 U.S.C. 501) 

(Approved by the Office of Management and 

Budget under control number 2900–0085.) 

[FR Doc. 2018–14856 Filed 7–12–18; 8:45 am] 

BILLING CODE 8320–01–P 


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