Families of Veterans Now Able to Act as Fiduciaries

Families of Veterans Now Able to Act as Fiduciaries

check book

by Robert Stretch on May 16, 2011

Most of you probably already know how difficult the application process can be for veterans trying to access VA benefits. When a fiduciary is required as a part of the benefit acquisition process, the situation can become even more frustrating for both veterans and their families.

What is a fiduciary?

The VA assigns fiduciaries to veterans who, according to VA doctors, are unable to manage their own personal finances and assets. Over the past few years, countless individuals have come together online to share stories of fiduciaries who take advantage of clients who are veterans.

Although the VA does ask fiduciaries to offer their services to veterans at no cost, they still have the right to charge veterans for their services. They usually do, and oftentimes family members are left paying monthly bills for seemingly negligible services. Unfortunately, countless veterans currently have fiduciaries who continue to siphon money from them on a monthly basis. To top it all off, once a fiduciary is appointed, it’s incredibly difficult for the action to be reversed.

Fortunately, back in January the VA launched a fiduciary website that provides information to those interested in becoming a veteran’s fiduciary. Although the VA must approve the individual as a legal fiduciary, this means those close to veterans now have the ability to maintain control of their finances, estates and benefits without having to pay the hefty fees charged by fiduciaries working for the government.

So what is a fiduciary bond, anyway?

Although the implementation of personal fiduciaries is a great opportunity for veterans and their families, it also means that individuals who are unfamiliar with surety bonds need to familiarize themselves with the market. The VA established the VA fiduciary bond requirement to give veterans the ability to recollect losses if fiduciaries should misuse funds entrusted to them. Personal fiduciaries must also fulfill the VA’s fiduciary bond requirement.

VA fiduciary bonds work as do other surety bonds. Depending on the jurisdiction, these bonds are also known as custodian bonds or guardianship bonds, but they all function the same way. A basic surety bond definition explains that each fiduciary bond that’s issued acts as a legally binding contract between three entities.

  1. The principal is the fiduciary required to purchase the bond to protect a veteran’s assets.
  2. The obligee is the veteran who receives the bond’s protection.
  3. The surety is the special agency that executes the bond by offering a financial guarantee that the fiduciary will act according to government regulations.

How can I get the surety bond I need to become a fiduciary?

Those interested in becoming a fiduciary for the veteran in their life should contact a surety bond agency that is licensed to execute bonds in their area. When applying for a fiduciary bond, the surety will conduct a thorough financial background check of the applicant, which usually involves a credit check. Before applying for the bond, the applicant should know the amount for which the bond will need to be written.

The VA’s fiduciary website says the necessary bond amount for a fiduciary bond is determined based on the

value of the personal estate derived from Department of Veterans Affairs benefits plus the anticipated net income from Department of Veterans Affairs benefits received during the ensuing accounting period.

Because the bond amount required for fiduciary bonds is equal to the veteran’s total estate, some individuals might not qualify for the surety bond that’s required to become a legal fiduciary.

If a fiduciary does mishandle a veteran’s funds, a claim can be made against the bond to recover financial losses or other damages. If a fiduciary fails to purchase the required fiduciary bond as outlined in §14.709, then the the Regional Counsel would not only notify the Veterans Service Center Manager, but also take the fiduciary to court.

In the end, the surety bond requirement for the VA fiduciary bond has not changed, but the audience to which it applies has. The range of potential fiduciaries has increased exponentially. Although some probate officers who work for the government might lose money from this change, veterans and their families will be able to hold on to more of their money.

 

Photo thanks to gizzypooh under creative common license on Flickr.

{ 7 comments… read them below or add one }

Robert J Kirkendall January 14, 2012 at 9:12 am

Does the payee have to take control of all other forms of income apart from the disability money? I receive pension from my company I retired from. And also have a part time job.

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Robyn Doersam February 5, 2012 at 2:09 pm

The fiduciary or payee appointed by VA only has control over the VA benefits.

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Amaro July 18, 2012 at 10:16 pm

I agree with everything you are syniag and hate to be cynical, but I’ve found over the years that for small plans in particular, some of these good processes and practices just don’t seem to matter. The employer/plan sponsor is not really going to get into any trouble (in general) as long as they’ve contracted with a Fidelity or similar vendor and use a payroll services such as ADP, enough is being done to properly administer the plan even if some deficiencies like you mention above exisht. I keep beating my head against the wall to bring up deficiencies such a lack of IPS, but it just doesn’t seem to resonate. What small plans are being sued? Who is the DOL going after for plan operational failures? I just haven’t seen it and I’ve been doing this a long time.

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surety bonds February 5, 2012 at 1:48 am

A fiduciary bond is a statutory requirement, but fiduciary insurance is completely optional.

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Deb February 8, 2012 at 1:43 am

A VA rep came to meet with me and my mom (the VA DIC beneficiary, plus Aid & Attendance) b/c they’ve already deemed her incompetent to handle her VA benefit and we’ve applied for me to be the fiduciary. I’ve been handling my mom’s finances for six years, was her caregiver most of that time, and now she’s in an assisted living home, paying out of pocket $2700/mo, while her VA benefit is $1490/mo. Long story short, because she and I have a joint account and our money is co-mingled, the VA rep was very accusatory and said there may be too much “conflict of interest” for me to be the fiduciary, even though she’s in a very good facility (only 7 other residents in a home-like setting), I pay all of her bills, and the VA benefit is less than even the assisted living, let alone her other expenses. So I’ve not mishandled any funds. But this rep was claiming that the VA appointed fiduciary can take control of ALL her assets and income, including Soc. Sec, annuities from which interest drawn is helping pay bills, and the private home that she and I own as joint tenants in common (although I live there with my boyfriend now). They even say she can’t have a credit card and can’t gift anything to me as her daughter, even though the rest of her income is NOT from the VA. How is this possible? My mom may be unable to handle finances, but she’s not out of it. She sat there with me and told the rep that she and I had always worked together on financial matters, ever since my father died, that I look out for her in every way (including medical) and that she wants me to continue to manage the family finances. I’m worried that the VA is going to appoint some stranger to take over everything, which sounds wrong to me. The rep was very invasive with her questions, including wanting to know how much I paid for this house, which I didn’t. My parents put me on the deed so that, when they both died, I would own it. All assets are set up that way. But this rep seemed to think there’s something wrong with that. She even asked my mom how often I visit her and take her out.

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david April 17, 2013 at 3:04 am

I am 100% service-connected disabled. My mother is my fiduciary and the VV hub for us in KY has told her that my savings can only be spent in small amounts such as $400 on items for me because my savings (about $40,000 will have to be used for me to spend on a nursing home someday!)

What a nasty crystal ball that VBA rep has!

David

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loretta craver July 1, 2013 at 11:47 am

Have a question…how long does it take after fiduciary appointment to get backpay? VA dragging their feet and Mother is now 87 years old. thanks

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