The Department of Veterans Affairs (VA) has a Fiduciary Program to protect veterans who aren't able to manage their own financial affairs. Under the fiduciary program, veterans receive their VA benefits through a payee, called a "fiduciary." The VA pays the benefits directly to the fiduciary, who is expected to manage the funds on behalf of the veteran for the use of the veteran and any dependents.
A veteran can be found "incompetent" to manage finances due to:
When the VA finds a veteran incompetent, the decision must be supported by medical evidence or a court ruling. In some cases, a court may have ruled you incompetent, and then the VA will also find you incompetent to manage your benefits.
Other times, the VA will rely on the findings made by the VA doctor who conducted the Compensation and Pension Exam to decide that a veteran is incompetent. The Compensation and Pension exam is the exam that is ordered to evaluate your disability after you've applied for disability compensation. The report from this exam will contain a medical opinion about whether or not your disability is service-connected, but might also include information about your mental capacity to handle money.
The VA also relies on medical findings from your routine medical visits to the VA (or a private physician) when deciding if you can handle your own VA benefits or not.
Being found incompetent by the VA to manage your VA benefits won't affect your right to handle other finances or assets you may have—the decision only matters for the payment of VA benefits such as disability compensation or VA pension.
The VA conducts a Field Examination in order to appoint a fiduciary. During the Field Examination, the VA asks the veteran to provide information about monthly bills, assets, and medications, as well as an emergency contact and contact information for the veteran's primary care physician.
Normally, veterans are allowed to select their own fiduciary. If a veteran requests that a family member (or anyone else) be appointed, the VA will first subject that person to a background investigation, which includes checking criminal records, personal credit, and references. (38 U.S.C. 5507(a)(1)(C) and (b).) The proposed fiduciary may also have to attend a face-to-face interview. The VA may waive these requirements when appointing a parent fiduciary for a minor or a spouse fiduciary.
You or your proposed fiduciary must apply to the VA fiduciary program before the fiduciary can be appointed.
While VA policy states that a veteran is allowed to choose a fiduciary and that a relative or friend of the veteran should be preferred, sometimes the VA declines to appoint qualified family members and instead appoints paid fiduciaries. Unfortunately, some paid fiduciaries have mismanaged or withheld funds. Under 38 U.S.C. 6107(a), in some circumstances, beneficiaries have the right to have benefits reissued if a fiduciary misused them (more on this below).
If you have concerns about a VA-appointed fiduciary, notify the VA. You can do this by calling the agency at (888) 407-0144 and selecting the appropriate regional hub. If you would like a new fiduciary, let the VA know. You have the right to request that a new fiduciary be assigned to you if the current fiduciary is paid or the current fiduciary is not acting in your best interest.
Several years ago, the VA released new regulations on "fiduciary activities" (38 CFR Part 13) that lay out various rights of veterans who are receiving VA benefits ("beneficiaries").
To keep veterans from waiting for many months for the VA to appoint a fiduciary, adult beneficiaries (age 18 and older) can receive their monthly benefits directly while the VA is completing the procedure to appoint a fiduciary. However, veterans who are deemed incompetent to manage their money will still have to wait for a fiduciary to be appointed to gain access to any lump-sum retroactive benefit.
The VA must provide written notice of the VA's appointment of a fiduciary and any other matters affecting how the VA provides benefits to the veteran. This notice will also advise the veteran of the right to appeal some decisions, such as the right to appeal a fiduciary appointment to the Board of Veterans' Appeals.
Veterans have the right to have the name and contact information (phone number, email address, and mailing address) of the appointed fiduciary, as well as the right to request funds for current, future, or past expenditures. In addition, the veteran will be entitled to receive a copy of the annual accounting that the fiduciary provides to the VA.
Under section 38 U.S.C. 5502(b), the VA can suspend payment of benefits to any fiduciary who neglects or refuses to comply with VA accounting requirements.
Should a VA fiduciary misuse funds, in some circumstances, the VA will notify the veteran of their right to ask the VA to reissue the benefits that the fiduciary misused. The veteran will also be given the right to appeal a VA decision against reissuance.
A veteran has the right to request that a new fiduciary be appointed if the new appointee would be unpaid and has "higher preference." (Spouses, relatives, friends, and even unpaid acquaintances have higher preference than a paid fiduciary. 38 CFR § 13.100(e)).
Likewise, a veteran could ask for a new fiduciary to be appointed if the current fiduciary is not effective or is not acting in the veteran's interest. Changing fiduciaries does require reasonable and credible information showing the issues with the existing fiduciary (unless the fiduciary is paid and the veteran wants to select an unpaid, qualified fiduciary.
If the VA removes a fiduciary, the veteran has the right to temporarily receive benefits directly until a new fiduciary is appointed.
Veterans who have been deemed incompetent to manage their own funds can reestablish their competence, and their financial independence, through the supervised direct payment program. The program provides budgeting help, a report to track spending, and periodic reviews of the spending report.
To demonstrate financial competence, a veteran will need to be knowledgeable about monthly income and monthly expenses and show he or she can pay monthly bills on time and save money.
After a year of managing funds through the direct supervision program, the veteran will be reevaluated for competency through a field examination. If, after a year in the program, a vet is still considered incompetent, the program can be extended for another full year.
Veterans can appeal a VA finding of incompetency to the VA Regional Office that issued the decision or the Board of Veterans Appeals (BVA) by providing new medical evidence. If the VA Regional Office does not reverse the finding of incompetency, the veteran can appeal the decision to the Board of Veterans Appeals (BVA) and, if necessary, to the Court of Appeals for Veterans Claims (CAVC).
At any time, you can also ask to have the VA reassess your ability to manage your VA benefits by submitting a reevaluation request, in writing, to your regional office.
Veterans can appeal the VA's selection of a fiduciary to the Board of Veterans Appeals by providing evidence about the assignment.
For years, the VA claimed that its selection of fiduciaries was entirely within its own authority and not subject to judicial review. Many veterans had no recourse when their funds were mismanaged or withheld. But about a decade ago, the U.S. Court of Appeals for Veterans Claims (CAVC) changed that in the case Freeman v. Shinseki, 24 Vet. App. 404 (2011). Veterans now have the right to appeal the selection of a fiduciary to the CAVC.
This means that if the Board of Veterans Appeals denies a veteran's appeal, that lawsuit can now be taken to the U.S. Court of Veterans Appeals.
You file an appeal by submitting a Notice of Disagreement with the Regional Office that issued the decision you disagree with. Read our article on how to appeal a VA decision for more information. (Although the article pertains to denials of disability compensation benefits, the basic principles pertain to all types of VA appeals.)
When you apply for disability compensation, the VA will send you for a Compensation and Pension Exam at your local VA medical center to evaluate your disability. If you're able to manage your own money, make sure you are very clear about this when asked about it.
The doctor who examines you will write a detailed report for the VA. If the VA doctor who examines you asks you about your ability to manage your finances, your answers will appear in the report. If you tell the examining doctor that you have problems budgeting your money or need help paying your bills, then the VA may deem you incompetent to manage your VA benefits. If you want to try to avoid having a fiduciary, you can explain how you're able to handle your money without assistance.
While the VA is notorious for being a complex, slow-moving bureaucracy, the VA Fiduciary Program stands out as especially complex and difficult to navigate. If you would like to challenge a finding of incompetency or have a fiduciary replaced, you may want to find a veterans law attorney to assist you.
Updated September 6, 2023