I 
112TH CONGRESS 
2D SESSION 
H. R. 5948 
To amend title 38, United States Code, to improve the supervision of fidu-
ciaries of veterans under the laws administered by the Secretary of 
Veterans Affairs, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 12, 2012 
Mr. JOHNSON of Ohio introduced the following bill; which was referred to the 
Committee on Veterans’ Affairs 
A BILL 
To amend title 38, United States Code, to improve the 
supervision of fiduciaries of veterans under the laws ad-
ministered by the Secretary of Veterans Affairs, and 
for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Veterans Fiduciary 
Reform Act of 2012’’. 
SEC. 2. IMPROVEMENT OF FIDUCIARIES FOR VETERANS. 
(a) INCOMPETENCY.— 
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(1) IN
GENERAL.—Chapter 55 of title 38, 
United States Code, is amended by adding at the 
end the following new section: 
‘‘§ 5511. Adjudication of financial incompetence 
‘‘(a) DETERMINATION.—In any case arising out of 
the administration by the Secretary of laws and benefits 
under this title in which the Secretary must determine 
whether an individual requires a fiduciary, the Secretary 
shall consider the following factors when adjudicating 
whether an individual is considered mentally incapacitated 
or deemed mentally incompetent: 
‘‘(1) A determination made by a State court or 
other court of competent jurisdiction. 
‘‘(2) An evaluation made by a medical profes-
sional, taking into account the role of financial man-
agement in the rehabilitation of the individual. 
‘‘(b) APPEALS.—(1) An individual whom the Sec-
retary has determined to be mentally incapacitated or 
deemed mentally incompetent may appeal such determina-
tion. 
‘‘(2) In hearing an appeal under paragraph (1), the 
Secretary shall consider court determinations, medical evi-
dence, and lay evidence offered by the appellant. 
‘‘(c) REMOVAL OF FIDUCIARY.—(1) An individual de-
scribed in paragraph (2) may file a claim with the Sec-
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retary to terminate any fiduciary relationship established 
under this chapter. 
‘‘(2) An individual described in this paragraph is an 
individual— 
‘‘(A) whom the Secretary determined to be 
mentally incapacitated or mentally incompetent 
under subsection (a); 
‘‘(B) for whom the Secretary appointed a fidu-
ciary under this chapter; and 
‘‘(C) whom, after such appointment, a State 
court or other court of competent jurisdiction or a 
medical professional has determined to be com-
petent.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions at the beginning of such chapter 55 is amend-
ed by adding at the end the following new item: 
‘‘5511. Adjudication of financial incompetence.’’. 
(b) DEFINITION OF FIDUCIARY.—Section 5506 of 
title 38, United States Code is amended— 
(1) by striking ‘‘For purposes’’ and inserting 
‘‘(a) For purposes’’; and 
(2) by adding at the end the following new sub-
section: 
‘‘(b)(1) For purposes of subsection (a), the term ‘per-
son’ includes any— 
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‘‘(A) State or local government agency whose 
mission is to carry out income maintenance, social 
service, or health care-related activities; 
‘‘(B) any State or local government agency with 
fiduciary responsibilities; or 
‘‘(C) any nonprofit social service agency that 
the Secretary determines— 
‘‘(i) regularly provides services as a fidu-
ciary concurrently to five or more individuals; 
and 
‘‘(ii) is not a creditor of any such indi-
vidual. 
‘‘(2) The Secretary shall maintain a list of State or 
local agencies and nonprofit social service agencies under 
paragraph (1) that are qualified to act as a fiduciary 
under this chapter.’’. 
(c) QUALIFICATION.—Section 5507 of title 38, 
United States Code, is amended— 
(1) in subsection (a)— 
(A) in paragraph (1)(B), by striking ‘‘to 
the extent practicable, to include’’ and inserting 
‘‘including, in accordance with subsection 
(e)(1)(A),’’; 
(B) in paragraph (2), by striking ‘‘and’’; 
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(C) by redesignating paragraph (3) as 
paragraph (4); 
(D) by adding after paragraph (2) the fol-
lowing new paragraph (3): 
‘‘(3) adequate evidence that the person to serve 
as fiduciary uses a secure, encrypted Internet con-
nection when conducting activity on the Internet re-
lating to the financial information of the beneficiary 
in accordance with subsection (f); and’’; and 
(E) in paragraph (4), as so redesignated, 
by inserting ‘‘, in accordance with subsection 
(i)’’ before the period at the end; 
(2) in subsection (b), by striking ‘‘which re-
sulted in imprisonment for more than one year’’; 
(3) in subsection (c)— 
(A) in paragraph (1), by striking ‘‘waiver 
of any specific requirement relating to such in-
quiry or investigation, including the otherwise 
applicable provisions of subparagraphs (A), (B), 
and (C) of such subsection.’’ and inserting ‘‘giv-
ing priority to conducting such inquiry or inves-
tigation.’’; and 
(B) in paragraph (2)— 
(i) in subparagraph (C), by striking 
‘‘or’’; 
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(ii) in subparagraph (D), by striking 
the period and inserting ‘‘; or’’; and 
(iii) by adding at the end the fol-
lowing new subparagraph: 
‘‘(E) a person who is authorized to act on be-
half of the beneficiary under a durable power of at-
torney.’’; and 
(4) by adding at the end the following new sub-
sections: 
‘‘(e)(1) In conducting an inquiry or investigation of 
a proposed fiduciary under subsection (a)(1), the Sec-
retary shall conduct— 
‘‘(A) the face-to-face interview with the pro-
posed fiduciary by not later than 30 days after the 
date on which such inquiry or investigation begins; 
and 
‘‘(B) a background check of the proposed fidu-
ciary to— 
‘‘(i) in accordance with subsection (b), de-
termine whether the proposed fiduciary has 
been convicted of a crime; and 
‘‘(ii) determine whether the proposed fidu-
ciary will serve the best interest of the bene-
ficiary, including by conducting a credit check 
of the proposed fiduciary. 
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‘‘(2) The Secretary shall conduct the background 
check described in paragraph (1)(B)— 
‘‘(A) each time a person is proposed to be a fi-
duciary, regardless of whether the person is serving 
or has served as a fiduciary; and 
‘‘(B) at no expense to the beneficiary. 
‘‘(3) Each proposed fiduciary shall disclose to the 
Secretary the number of beneficiaries that the fiduciary 
acts on behalf of. 
‘‘(4)(A) The Secretary shall maintain records of any 
person who has— 
‘‘(i) previously served as a fiduciary; and 
‘‘(ii) had such fiduciary status revoked by the 
Secretary. 
‘‘(B) In conducting the background check described 
in paragraph (1)(B), the Secretary shall check the records 
maintained under subparagraph (A). 
‘‘(C) If a fiduciary appointed by the Secretary is con-
victed of any crime while serving as a fiduciary for any 
person, the Secretary shall notify the beneficiary by not 
later than 14 days after the date on which the Secretary 
learns of such conviction. 
‘‘(f) The Secretary shall ensure that each fiduciary 
has adequate training and knowledge to effectively use an 
encrypted, secure Internet connection when conducting ac-
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tivity relating to the financial information of the bene-
ficiary. 
‘‘(g)(1) If the Secretary has reason to believe that 
a fiduciary may be misusing all or part of the benefit of 
a beneficiary, the Secretary shall— 
‘‘(A) conduct a thorough investigation to deter-
mine the veracity of such belief; and 
‘‘(B) if such veracity is established, transmit to 
the officials described in paragraph (2) a report of 
such investigation. 
‘‘(2) The officials described in this paragraph are the 
following: 
‘‘(A) The Attorney General. 
‘‘(B) Each head of a Federal department or 
agency that pays to a fiduciary or other person ben-
efits under any law administered by such depart-
ment or agency for the use and benefit of a minor, 
incompetent, or other beneficiary. 
‘‘(h)(1) Except as provided by paragraph (2), the 
Secretary may require that a proposed fiduciary only serve 
as a fiduciary for a beneficiary with respect to benefits 
paid under laws administered by the Secretary. 
‘‘(2) Paragraph (1) shall not apply to a proposed fi-
duciary who is— 
‘‘(A) a family member of the beneficiary; or 
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‘‘(B) the individual predesignated by the bene-
ficiary to serve as the fiduciary pursuant to section 
5506A of this title. 
‘‘(i) In requiring the furnishing of a bond under sub-
section (a)(4), the Secretary shall— 
‘‘(1) ensure that any such bond is not paid 
using any funds of the beneficiary; and 
‘‘(2) consider— 
‘‘(A) the care a proposed fiduciary has 
taken to protect the interests of the beneficiary; 
and 
‘‘(B) the capacity of the proposed fiduciary 
to meet the financial requirements of the bond 
without sustaining hardship. 
‘‘(j) A fiduciary appointed by the Secretary shall op-
erate independently of the Department to determine the 
actions that are in the interest of the beneficiary. 
‘‘(k) Each regional office of the Veterans Benefits 
Administration shall maintain a list of the following: 
‘‘(1) The name and contact information of each 
fiduciary, including address, telephone number, and 
email address. 
‘‘(2) With respect to each fiduciary described in 
paragraph (1)— 
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‘‘(A) the date of the most recent back-
ground check and credit check performed by the 
Secretary under this section; 
‘‘(B) the date that any bond was paid 
under this section; 
‘‘(C) the name, address, and telephone 
number of each beneficiary the fiduciary acts on 
behalf of; and 
‘‘(D) the amount that the fiduciary con-
trols with respect to each beneficiary described 
in subparagraph (C).’’. 
(d) DESIGNATION OF FIDUCIARY.— 
(1) IN
GENERAL.—Chapter 55 of title 38, 
United States Code, is amended by inserting after 
section 5506 the following new sections: 
‘‘§ 5506A. Predesignation of fiduciary 
‘‘(a) APPLICATION
FOR COMPENSATION.—(1) The 
Secretary shall include in the form described in paragraph 
(2) the following: 
‘‘(A) An opportunity for the individual submit-
ting the form to designate an individual, including a 
spouse or other family member of the individual, to 
serve as a fiduciary in the event a fiduciary is need-
ed. 
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‘‘(B) A description of what a fiduciary is and 
the role served by the fiduciary. 
‘‘(C) A description of the actions to be taken by 
the Secretary in the event a fiduciary is not des-
ignated by the individual. 
‘‘(2) The form described in this paragraph is a form 
that the Secretary requires an individual to submit for a 
claim for compensation or a pension administered under 
this title, including Form 21–526 or any successor form. 
‘‘(3) The information included under paragraph (1) 
shall be provided in a manner that is conspicuous, easy 
to read, and without the use of technical or legal terms, 
other than the term ‘fiduciary’. 
‘‘(b) PRIORITY OF APPOINTMENT.—In appointing a 
fiduciary under this chapter, if a beneficiary does not des-
ignate a fiduciary pursuant to subsection (a), to the extent 
possible the Secretary shall appoint a person who is— 
‘‘(1) appointed as guardian of the beneficiary 
by a court of competent jurisdiction; or 
‘‘(2) authorized to act on behalf of the bene-
ficiary under a durable power of attorney. 
‘‘(c) APPOINTMENT OF NON-PREDESIGNATED FIDU-
CIARY.—If a beneficiary designates an individual to serve 
as a fiduciary under subsection (a)(1)(A) and the Sec-
retary appoints an individual not so designated as the fi-
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duciary for such beneficiary, the Secretary shall notify 
such beneficiary of— 
‘‘(1) the reason why such designated individual 
was not appointed; and 
‘‘(2) the ability of the beneficiary to file a claim 
under section 5506B of this title to modify the ap-
pointed fiduciary. 
‘‘§ 5506B. Modification of appointed fiduciary 
‘‘(a) IN GENERAL.—A beneficiary for whom the Sec-
retary appoints a fiduciary under this chapter may, at any 
time, file a claim with the Secretary to— 
‘‘(1) remove the fiduciary so appointed; and 
‘‘(2) have a new fiduciary appointed. 
‘‘(b) CONTINUATION OF BENEFITS.—The Secretary 
shall ensure that any removal or new appointment of a 
fiduciary under subsection (a) does not delay or interrupt 
the beneficiary’s receipt of benefits administered by the 
Secretary.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions at the beginning of such chapter is amended 
by inserting after the item relating to section 5506 
the following new items: 
‘‘5506A. Predesignation of fiduciary. 
‘‘5506B. Modification of appointed fiduciary.’’. 
(e) FEE.—Subsection (a)(2) of section 5502 of title 
38, United States Code, is amended to read as follows: 
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‘‘(2)(A) In a case in which the Secretary determines 
that a commission is necessary in order to obtain the serv-
ices of a fiduciary in the best interests of a beneficiary, 
the Secretary may authorize a fiduciary appointed by the 
Secretary to obtain from the monthly benefits provided to 
the beneficiary a reasonable commission for fiduciary serv-
ices rendered, but the commission for any month may not 
exceed the lesser of the following amounts: 
‘‘(i) The amount that equals three percent of 
the monthly monetary benefits under laws adminis-
tered by the Secretary paid on behalf of the bene-
ficiary to the fiduciary. 
‘‘(ii) $35. 
‘‘(B) A commission paid under this paragraph may 
not be derived from any award to a beneficiary regarding 
back pay or retroactive benefits payments. 
‘‘(C) A commission may not be authorized for a fidu-
ciary who receives any other form of remuneration or pay-
ment in connection with rendering fiduciary services for 
benefits under this title on behalf of the beneficiary. 
‘‘(D) In accordance with section 6106 of this title, 
a commission may not be paid to a fiduciary if the Sec-
retary determines that the fiduciary misused any benefit 
payments of a beneficiary. 
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‘‘(E) If the Secretary determines that the fiduciary 
has misused any benefit or payments of a beneficiary, the 
Secretary may revoke the fiduciary status of the fidu-
ciary.’’. 
(f) REPAYMENT OF MISUSED BENEFITS.—Section 
6107(a)(2)(C) of title 38, United States Code, is amended 
by inserting before the period the following: ‘‘, including 
by the Secretary not acting in accordance with section 
5507 of this title’’. 
(g) ANNUAL RECEIPT OF PAYMENTS.—Section 5509 
of title 38, United States Code, is amended— 
(1) in subsection (a)— 
(A) by striking ‘‘may require a fiduciary to 
file a’’ and inserting ‘‘shall require a fiduciary 
to file an annual’’; and 
(B) by adding at the end the following new 
sentence: ‘‘The Secretary shall transmit such 
annual report or accounting to the beneficiary 
and any legal guardian of such beneficiary.’’; 
and 
(2) by adding at the end the following new sub-
section: 
‘‘(c) MATTERS INCLUDED.—An annual report or ac-
counting under subsection (a) shall include, for each bene-
ficiary that a fiduciary acts on behalf of— 
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‘‘(1) the amount of the benefits of the bene-
ficiary accrued during the year, the amount spent, 
and the amount remaining; and 
‘‘(2) if the fiduciary serves the beneficiary with 
respect to benefits not administered by the Sec-
retary, an accounting of all sources of benefits or 
other income the fiduciary oversees for the bene-
ficiary.’’. 
(h) ANNUAL REPORTS.—Section 5510 of title 38, 
United States Code, is amended by striking ‘‘The Sec-
retary shall include in the Annual Benefits Report of the 
Veterans Benefits Administration or the Secretary’s An-
nual Performance and Accountability Report’’ and insert-
ing ‘‘Not later than July 1 of each year, the Secretary 
shall submit to the Committees on Veterans’ Affairs of 
the House of Representatives and the Senate a separate 
report containing’’. 
(i) REPORT.—Not later than one year after the date 
of the enactment of this Act, the Secretary of Veterans 
Affairs shall submit to the Committee on Veterans’ Affairs 
of the Senate and the Committee on Veterans’ Affairs of 
the House of Representatives a comprehensive report on 
the implementation of the amendments made by this Act, 
including detailed information on the establishment of new 
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policies and procedures pursuant to such amendments and 
training provided on such policies and procedures. 
Æ 
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