If you are incarcerated, the Department of Veterans Affairs (VA) will sometimes reduce or terminate your disability benefits. (For other situations, read Nolo's article on when the VA can reduce disability benefits.)
If you are in jail for a felony, the VA will reduce or terminate your disability benefits after your 61st day in jail. If you were rated at 20% or higher for a service-connected disability prior to going to jail, your monthly benefit will get reduced to 10%. If you were rated at 10%, your monthly payment will be cut in half. Importantly, it isn't the disability rating itself that gets reduced, only the monthly payment. After you are released from prison, your benefits will be reinstated at their usual level.
If you are in jail for a misdemeanor or a felony and have a VA pension, on your 61st day in jail, your pension will be terminated for the duration of your prison sentence. Notify the VA upon your release to get your pension reinstated.
If after 60 days or less in jail, you have completed your sentence, been paroled, or sent to a halfway house or work release program, your disability benefits will not be reduced or terminated.
Although your VA pension will be terminated or your disability compensation reduced while you are in jail, your family can apply to have the benefits paid to them instead. The VA calls this apportionment.
By applying for apportionment, your family can receive your pension while you are ineligible to receive it due to incarceration. Likewise, your family can receive any amount of your disability compensation that you are ineligible to receive while in jail. For example, if you are rated at 70% before going to jail, your monthly benefit will get reduced to 10%. But your family can apply for apportionment to receive the remaining 60%. Once you are released, you can again receive the full amount of your benefits directly.
Your spouse, children and parents can apply for apportionment of your benefits while you are in prison. The VA will award apportioned benefits on the basis of financial need.
To apply, your family must use VA Form 21-0788, Information Regarding Apportionment of Beneficiary's Award. They will be required to provide information about their income, assets, and expenses. The VA will divide up the apportioned amount among your dependents according to their financial need.
Make sure you notify the VA when you go to jail. Otherwise, any payments of disability compensation over 10% and any pension payments made to you will be considered overpayments. You will have to pay this money back to the VA. Basically, after you get out of jail, the VA will withhold your monthly check until the full amount of the overpayment has been satisfied.
It is much better to tell the VA you are in jail and let your family receive the money until your release. Once you notify the VA of your release, the full amount of your benefits will again be paid to you directly.
You have the right to apply for VA disability benefits while you are incarcerated. Any benefits awarded to you while you are in jail will be reduced or terminated as described above, but will be fully available to you upon your release.
You technically remain eligible for VA health care while incarcerated, but you can’t actually use the care. You will be restricted to medical care provided by the jail. VA health care benefits will remain available to you upon your release.
If your conviction is overturned on appeal, all of your withheld disability compensation benefits will be restored to you. You will receive a retroactive payment from the VA, but only if you notify them of your successful appeal. This applies to disability compensation only, VA pension payments will not be restored to you after a conviction is overturned. If your family received apportionment of your benefits, you will not receive any repayment of those amounts.
You are a fugitive felon if you flee to avoid prosecution or imprisonment for a felony or if you violate your probation or parole terms. Fugitive felons cannot receive any cash benefits from the VA, and nor can their families. Types of benefits that are restricted include disability compensation, pension, education benefits, life insurance, and medical care. Families do not have the option of receiving apportioned benefits after you flee.
After you stop being a fugitive felon, you and your family are again eligible for receipt of cash benefits. You stop being a fugitive felon after your outstanding warrant is cleared by: