Guardianships of Veterans and the VA Fiduciary Program
When administering a guardianship estate for an incapacitated veteran or dependent of a veteran who receives funds from the Department of Veterans Affairs (VA), the guardian should be aware of the authority and right of the VA to determine certain outcomes related to VA benefits in guardianship matters. Additionally, recent statutory and rule changes have elevated the importance of community supports and services and alternatives to guardianship. These multiple progressive measures have resulted in a lessened importance of state guardianship proceedings relating to the estates of veterans with benefits.
The authority of the VA is generally stated in 38 C.F.R. §§ 13.10–.600 [hereinafter Rule 38], which includes citations to the applicable United States Code sections. The relationship between the VA and state guardianship courts was dramatically altered when part 13 of title 38 of the Code of Federal Regulations was substantially modified effective August 13, 2018. See generally www.federalregister.gov/documents/2018/07/13/2018-14856/fiduciary-activities. The summary to the rule changes states:
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.
83 Fed. Reg. 32,716 (Aug. 13, 2018). The rationale for the dramatic VA rule changes—and the federal government’s preemption of state law—was articulated as follows:
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 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).
83 Fed. Reg. 32,717–18. The Federal Register advises that questions about the revised VA regulations may be directed to Pension and Fiduciary Service, Department of Veterans Affairs, 810 Vermont Avenue, NW, Washington, DC 20420, telephone 202-632-8863.
Practice Pointer: The recent changes to Rule 38 appear to render a number of statutory provisions in the Texas Estates Code impractical, at least as they relate to current VA practices and the application of regulations to situations arising with veterans with diminished capacity who receive VA benefits. Existing cases may continue to be governed by past practice and existing provisions in the Estates Code. Practitioners should carefully analyze the intersection of the Estates Code and Rule 38 in determining how VA benefits will be managed within the context of existing and future guardianship proceedings. Because sections of the Estates Code continue to require guardians of the estate to comply with what are becoming archaic statutory mandates regarding VA benefits, those provisions are referenced in this chapter, although they will likely become increasingly irrelevant to VA practice.
Numerous benefits and programs are available to veterans and their dependents, including disability compensation and benefits, allowance for dependents, pensions, education and training, vocational rehabilitation, home loan guarantees, insurance programs, burial benefits, survivor benefits, and health-care benefits.
Benefits from the VA are exempt from claims of creditors and state and local taxing authorities either before or after receipt. 38 U.S.C. § 5301(a); 38 C.F.R. § 13.270. However, any portion of VA benefits paid in lieu of military retirement pay is subject to garnishment for child support. 42 U.S.C. § 659.
The VA is charged with the duty to oversee the use of funds paid for a veteran’s benefit or to a veteran’s dependent to ensure the funds are properly used. 38 U.S.C. § 5502; 38 C.F.R. §§ 13.10–.100.
On August 13, 2018, new rules affecting the VA fiduciary program became effective under 38 C.F.R. §§ 13.10–.600. A thorough review of the new VA regulations should be undertaken in any legal situation involving a person under guardianship who may be receiving VA benefits or may be a beneficiary of the VA fiduciary program. See generally www.federalregister.gov/documents/2018/07/13/2018-14856/fiduciary-activities. The purpose of the VA 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, the VA is responsible for overseeing these vulnerable beneficiaries to ensure their well-being and appoints and oversees fiduciaries who manage the benefits of these beneficiaries. 38 C.F.R. § 13.10(a). Section 13.20 of title 38 of the Code of Federal Regulations provides definitions for key terms such as beneficiary, dependent, and fiduciary.
§ 5.6Designation of VA Fiduciary
A VA beneficiary generally has the right to manage his own VA benefits. However, the VA may determine that the beneficiary is unable to manage his benefits without VA supervision or the assistance of a fiduciary because of the beneficiary’s injury, disease, or infirmities of advanced age or by reason of being less than the age of majority. A court with jurisdiction may also determine that a beneficiary is unable to manage his financial affairs. Under any of these circumstances, the VA is responsible for applying the provisions of this regulation to ensure that VA benefits are being used to maintain the well-being of the beneficiary and the beneficiary’s dependents. 38 C.F.R. § 13.30(a).
The VA Hub manager, who has the authority to oversee the activities of a VA Fiduciary Hub, is responsible for appointing a fiduciary in appropriate cases according to a hierarchy of preference. An individual or entity appointed by a court ranks eighth out of ten in the order of preference. 38 C.F.R. § 13.100(a), (e). A court appointment of a legal guardian for a VA beneficiary results in a presumption that the beneficiary lacks capacity to state a preference of a fiduciary, resulting in application of the priority for appointment. 38 C.F.R. § 13.100(e)(1). The Hub manager will appoint a fiduciary for a beneficiary who has been determined by a court with jurisdiction as being unable to manage his or her financial affairs. 38 C.F.R. § 13.100(a)(2). A person or entity who has been removed as legal guardian by a state court for misconduct or who has been adjudicated by a court as being unable to manage his own federal or state benefits is among those who are barred from serving as a VA fiduciary. 38 C.F.R. § 13.130(b).
If the VA fiduciary is also appointed by a court, the fiduciary must annually provide a certified copy of the accountings provided to the court to the Fiduciary Hub with jurisdiction or facilitate the Hub’s receipt of such accountings. 38 C.F.R. § 13.140(d)(1). Section 13.280 outlines the form for VA accountings to the Fiduciary Hub. 38 C.F.R. § 13.280.
The Hub manager must approve the VA fiduciary’s fee, and the fee cannot exceed 4 percent of the monthly VA benefit. 38 C.F.R. § 13.220(b)(1).
Practice Pointer: VA Rule 38 changes the definition of “fiduciary” under VA standards and no longer recognizes the authority of a guardianship court to approve guardian fees to be paid from VA funds in excess of 4 percent of the VA income. Even then, the VA has ultimate authority over the payment of fees from VA income. Previously, the VA could allow a professional guardian to be fully compensated with a court order.
§ 5.9When Guardianship of Veteran May Be Necessary
A veteran with a VA fiduciary may still require the appointment of a guardian because (1) the fiduciary lacks legal standing to deal with real property and assets other than VA funds, (2) the fiduciary does not have legal authority to file suit on behalf of the veteran, and (3) a guardianship court may provide enhanced safeguards to protect the veteran or the veteran’s funds against neglect, misappropriation, or mismanagement by the fiduciary or other third parties. The personal affairs of the veteran will likely be better managed by a court-appointed guardian of the person, as a fiduciary appointment is not designed with the central focus of providing protection for the personal affairs of the veteran.
§ 5.10Alternatives to Guardianship
The “appointment of a representative payee to manage public benefits” is listed as one of the “alternatives to guardianship” under Texas Estates Code section 1002.0015(4), and the appointment of a fiduciary by the VA should be considered an alternative to guardianship. The VA fiduciary option would also be considered an available resource to help an individual with certain needs pursuant to Tex. Est. Code § 1002.031.
A guardianship applicant should consider VA benefits when complying with Estates Code section 1101.001(b)(3–a) and (3–b), which requires that an application must state whether alternatives to guardianship and available supports and services to avoid guardianship were considered and whether any alternatives to guardianship and supports and services available to the proposed ward considered are feasible and would avoid the need for guardianship Tex. Est. Code §§ 1101.001(b)(3–a), (b)(3–b).
VA benefits should also be considered when complying with the requirements of Estates Code section 1101.101(a)(1) regarding the findings and proof required in the order appointing guardian, which include the mandate of the court to find by clear and convincing evidence that alternatives to guardianship that would avoid the need for the appointment of a guardian have been considered and determined not to be feasible and that supports and services available to the proposed ward that would avoid the need for the appointment of a guardian have been considered and determined not to be feasible. Tex. Est. Code § 1101.101(a)(1)(D), (a)(1)(E).
The VA encourages legal planning that would avoid the need for guardianship and avoid court intervention into the personal and financial affairs of a veteran. The VA promotes execution of the VA Advance Directive Durable Power of Attorney for Health Care and Living Will, which allows the veteran to state preferences for health care. See form 5-1 in this chapter, a form VA advance directive, available at www.va.gov/vaforms/medical/pdf/vha-10-0137-fill.pdf. The instructions to the directive provide that it can serve as a guide for those who will be making decisions for the veteran in the event the veteran is no longer able to do so.
§ 5.11Inception of Guardianship Proceeding by VA
Texas law continues to provide that the VA may determine that the appointment of a guardian of the estate is needed as a condition precedent for payment of VA benefits. In such cases a certificate executed by the VA’s designee stating that a guardianship is necessary is prima facie evidence of that fact in lieu of the medical report or evaluation generally required. See Tex. Est. Code § 1101.106. See forms 5-2 and 5-3 in this chapter. Despite the provisions of section 1101.106 of the Texas Estates Code, some courts still (and should) require the same medical capacity assessment letter or certificate required for other incapacitated adults. The VA medical center in which the veteran receives treatment has typically provided this letter or certificate in the past. But this provision may likely become increasingly obsolete as the VA will be appointing VA fiduciaries to manage VA benefits and will evidently no longer routinely be making referrals to Texas courts for guardianships on veterans.
§ 5.12Inception of Guardianship Proceeding on Veteran—Notice to VA
Although not required by the Texas Estates Code, an applicant in a guardianship proceeding on a veteran receiving veterans benefits should contact and provide notice to the VA Fiduciary Hub before, or shortly after, the initiation of the guardianship. The VA will be responsible for appointing a fiduciary to manage the veteran’s benefits; however, the practitioner and the court should ensure that the veteran’s benefits are being managed by a VA fiduciary.
§ 5.13Exemption from Guardianship Proceeding Fees for Certain Military Servicemembers
Between September 1, 2017, and September 1, 2019, the clerk of a county court could not charge or collect from the estate of a proposed ward or ward who became incapacitated as a result of a personal injury sustained while in active service as a member of the U.S. armed forces in a combat zone, defined by statute, the following fees: (1) a fee for filing the guardianship proceeding and (2) a fee for any service rendered by the court during the administration of the guardianship. Tex. Est. Code § 1053.053. This provision expired as of September 1, 2019, and has not been extended.
§ 5.14Powers, Duties, and Obligations of Guardian of Person Entitled to Government Funds
Section 1151.251(a) of the Texas Estates Code continues to provide that, in the event the court has appointed a guardian of a person for whom it is necessary to have a guardian appointed to receive VA funds, the guardian has power to administer only the funds received from the governmental source, including earnings and interest from those funds and property acquired with those funds. Section 1151.251(b) allows a guardian, without prior court approval, to expend up to $12,000 during any one-year period for the support, maintenance, and education of the veteran and the veteran’s dependents. See Tex. Est. Code § 1151.251. Although there may be some existing cases where these provisions apply, it would be against current VA regulations for the VA to make referrals for the guardianship of a veteran’s funds to Texas courts.
Practice Pointer: The Estates Code has not been amended to reflect the trend in recent years for the VA to appoint its own authorized fiduciaries to manage veterans’ benefits, and it certainly does not reflect the dramatic impact of VA Rule 38 on Texas guardianship practice. Practitioners and courts should be wary of following Texas statutes on newly filed cases and should give due consideration of VA Rule 38 pending appropriate revisions to the Estates Code.
§ 5.15Required Notification to VA by Guardian
Pursuant to the Texas Estates Code, once a guardianship has been established and the guardian seeks to expend VA funds, the VA must be notified—
1.when an annual or other accounting of funds and assets is filed;
2.on application for expenditure of funds;
3.on application to invest funds; and
4.when a claim is filed against the estate.
The preferred method of providing the required notice is to forward a copy of the document to the VA Hub that serves the county in which the guardianship is pending and to request a waiver from the regional counsel of the department before filing the application. A form waiver may be supplied with the request, although some regional offices may generate their own waivers. Courts exercising jurisdiction over guardianships may refuse to take any action on the account or application until the VA waiver is filed with the court. See section 5.18 below for contact information for the two regional VA offices in Texas and the VA Fiduciary Hub in Nebraska.
Practice Pointer: The VA will likely require the following information in the notice letter:
1.Claim number.
2.Insurance file number or other insurance number.
3.The ward’s last name, first name, and middle name.
4.The ward’s Social Security number.
5.The ward’s service number.
6.The ward’s service dates (date entered and separation date).
7.The ward’s date of birth.
Notice of the filing and of hearing by submission can be sent to the VA in the event a waiver is not secured, and the request submitted to the court may be approved if the VA does not respond to the notice. See form 5-4 in this chapter.
The basis for computing the commission to be paid to a guardian does not include veterans benefits received. Tex. Est. Code § 1155.001(1).
§ 5.17Death of Beneficiary/Ward
On the death of a beneficiary for whom benefits from the VA were payable to a court-appointed guardian, any remaining funds derived from the department that would under state law escheat to the state, less certain expenses, must be returned to the VA with limited exceptions. 38 U.S.C. § 5502(e); 38 C.F.R. § 13.250. The rules for closing these guardianships are similar to those for other guardianships: a final account must be filed (with notice to the VA pursuant to Tex. Est. Code § 1151.301), and the estate is distributed to an estate representative appointed by the court, or, alternatively, distribution is made directly to the heirs pursuant to determination of heirship proceedings. See Tex. Est. Code §§ 202.001–.002.
Additional information may be obtained by contacting the nearest area VA office or representative. The toll-free telephone number of the VA is 800-827-1000. The VA’s website is at www.va.gov/.
The VA currently has two regional offices in Texas. The Houston regional office is located at 6900 Almeda Road, Houston, TX 77030. The website for the Houston regional office is www.benefits.va.gov/houston/. The Houston regional office serves veterans in ninety counties of southern Texas (much of East Texas, the Gulf Coast area, and the southern Rio Grande Valley, including Harris, Bexar, Jefferson, and Victoria counties) in addition to the Republic of Mexico, Central and South America, and the Caribbean. The Waco regional office is located at 701 Clay Avenue, Waco, TX 76799. The website for the Waco regional office is www.benefits.va.gov/waco/. The Waco regional office serves North and West Texas, including Dallas, Tarrant, Potter, and El Paso counties, and much of the Hill Country, including Travis County.
Texas falls within the VA Lincoln Fiduciary Hub in Lincoln, Nebraska, which processes guardianship documents from Texas. The Lincoln Fiduciary Hub controls the region including Kansas, North Dakota, South Dakota, Nebraska, Oklahoma, and Texas. The address for the Lincoln Fiduciary Hub is P.O. Box 85817, Lincoln, NE 68501-5817.
§ 5.19Veterans Justice Outreach Program
The VA has recently engaged in a system-wide effort to ensure access to services for “justice-involved veteran” populations at risk for homelessness, substance abuse, mental illness, and physical health problems. The Veterans Justice Outreach (VJO) program was created to provide timely access to VA services for eligible, justice-involved veterans to avoid unnecessary criminalization and incarceration of veteran offenders with mental illness.
A justice-involved veteran is—
1.a veteran in contact with local law enforcement who can be appropriately diverted from arrest into mental health or substance abuse treatment;
2.a veteran in a local jail, either pretrial or serving a sentence; or
3.a veteran involved in adjudication or monitoring by a court.
Under this initiative, the VJO specialists provide direct outreach, assessment, referral, and case management services to justice-involved veterans in local courts and jails and coordinate support efforts with local justice system partners. See, e.g., www.centraltexas.va.gov/services/Social_Work/VJO_Program.asp.
In 2009, Senate Bill 1940 was passed, authorizing the creation of specialty courts for veterans in Texas. The law took effect on September 1, 2009, as chapter 617 of the Texas Health and Safety Code (now Tex. Gov’t Code ch. 124). Veterans courts are designed to provide a team-based approach to ensuring a veteran receives appropriate treatment for the underlying risk factors that can contribute to criminal behavior. Pursuant to chapter 124, the objectives of a veterans treatment court program are—
1.the integration of services in the processing of cases in the judicial system;
2.the use of a nonadversarial approach involving prosecutors and defense attorneys to promote public safety and to protect the due-process rights of program participants;
3.early identification and prompt placement of eligible participants in the program;
4.access to a continuum of alcohol, controlled substance, mental health, and other related treatment and rehabilitative services;
5.careful monitoring of treatment and services provided to program participants;
6.a coordinated strategy to govern program responses to participants’ compliance;
7.ongoing judicial interaction with program participants;
8.monitoring and evaluation of program goals and effectiveness;
9.continuing interdisciplinary education to promote effective program planning, implementation, and operations;
10.development of partnerships with public agencies and community organizations, including the U.S. Department of Veterans Affairs; and
11.inclusion of a participant’s family members who agree to be involved in the treatment and services provided to the participant under the program.
The National Center for State Courts has compiled a Veterans Courts Resource Guide, which can be found at www.ncsc.org/Topics/Alternative-Dockets/Problem-Solving-Courts/Veterans-Court/Resource-Guide.aspx. A list of specialty courts in Texas, which includes veterans courts, is located at www.texvet.org.
§ 5.21Guardianship/VA Conflicts
The federal government’s assertion of the Supremacy Clause of the U.S. Constitution through the revised federal regulations in VA Rule 38 appears to render most provisions of the Texas Estates Code related to new proceedings involving wards receiving VA benefits ineffective, if not totally irrelevant. As a result, the past conflict between state courts’ efforts to protect VA beneficiaries and the increasing assertion of federal authority over veterans benefits seems now to be mostly a historical footnote because of the total eclipsing of this area by the federal government.
Practitioners and courts seeking to protect the interests of recipients of VA benefits with diminished capacity must recognize the superior right of the VA-appointed fiduciary to manage those funds.
At a minimum, it seems likely that there will be fewer guardianships of the estate for veterans whose only asset is VA income; however, there may well be an increase in the number of guardianships of the person of veterans in need of assistance. Guardianships of the estate should not include VA benefits as part of the guardianship estate, although the guardian of the estate may separately serve as fiduciary for VA benefits. Accountings in such guardianships will almost certainly not include VA benefits, as they will be solely managed by VA fiduciaries.
If a veteran is in need of protection by the court, and the VA may be providing little or no oversight over the veteran and the veteran’s resources, the court-appointed guardian or advocate will likely need to be prepared, if necessary, to challenge the appointment and actions of the federal fiduciary via the VA administrative appeals process. Local courts and practitioners may also be presented with facts revealing a veteran’s substandard living conditions as well as abuse, neglect, or exploitation of the veteran. As these regulations are implemented, Texas courts and legal practitioners will be faced with the dilemma of determining how best to protect vulnerable veterans while working around the VA fiduciary “carve-out” created by Rule 38.