Legislation Needed To Prevent Loss of Millions From Mentally Incompetent Veterans' Estates

HRD-82-1: Published: Feb 10, 1982. Publicly Released: Feb 24, 1982.

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Joseph F. Delfico
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Congressional concern was expressed that mentally incompetent veterans' estates accumulated from Veterans Administration (VA) benefits are being inherited by relatives other than the veterans' immediate families. GAO reviewed active and closed cases of veteran beneficiaries with court-appointed guardians, legal custodians, and institutional award arrangements at 4 of the 58 VA regional offices to determine the extent to which such situations have occurred and could occur in the future.

GAO estimated that about 3,000 estates of living incompetent veterans comprising about $56 million in veterans' benefits are unprotected from future claims by relatives other than spouses, children, and dependent parents. If the results are representative of the situation nationwide, an estimated 29,000 such estates comprised of about $500 million accumulated from veterans' benefits are currently unprotected from claims by such relatives. Under current law, VA will be unable to recover this money. In 1959, Congress passed legislation limiting the inheritance of incompetent veterans' estates to spouses, children, and dependent parents. This legislation provides that, in the absence of such relatives, VA benefits accumulated in these estates will revert to the federal government. However, because the restrictions do not apply to the estates of most mentally incompetent veterans, other relatives have made successful claims totalling millions. In reviewing VA estate accounting procedures, GAO found that many regional offices apply all veterans' expenses first to VA benefits rather than allocating the expenses to each revenue source in proportion to its contributions to the veterans' estates. This method underestimates the VA contribution to the estates.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: A staff member, from the Committee requesting the GAO review, indicated that the Committee considered this recommendation and does not intend to take action, at the present time, to amend 38 U.S.C. 3202 in line with this recommendation.

    Matter: Congress should amend 38 U.S.C. 3202 by adding a new subsection (f), as follows: any funds hereafter deposited in the hands of a fiduciary appointed by a state court or VA derived from benefits payable to mentally incompetent or insane veterans under laws administered by VA, which under the law of the state wherein the beneficiary had his last legal residence, would descend and be distributed to persons other than the surviving spouse, children, or dependent parents of the beneficiary, there being no such survivors, shall not be paid to such persons but instead shall revert 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 a reverter is in order, to VA, and shall be deposited to the credit of the applicable revolving fund, trust fund, or appropriation.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: VA did not believe that this recommendation was cost-effective.

    Recommendation: The Administrator of Veterans Affairs should direct the Chief Benefits Director to revise the estate accounting procedures to require that all expenses, which cannot be matched directly with specific revenue sources, be allocated to each source in proportion to its contributions to the mentally incompetent veteran's estate.

    Agency Affected: Veterans Administration


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