VA Petitioner Wins Right To Challenge Secretary’s Appointment Of Fiduciary

In Freeman v. Shinseki, No. 10-1462 (U.S. Ct. App. Vet. Claims April 26, 2011), 2011 U.S. App. Vet. Claims LEXIS 906, the U.S. Court of Appeals for Veterans Claims handed a partial victory to a veteran attempting to challenge the VA’s appointment of a third-party fiduciary, instead of petitioner’s sister, to control his finances. The action was brought as an application seeking a writ of mandamus, in which the petitioner asked that the Court compel the Secretary of Veterans Affairs to accept the Notice of Disagreement (“NOD”) he had filed following the VA’s appointment of a federal third-party fiduciary, instead of the petitioner’s own sister, to manage the petitioner’s VA benefits.

In Freeman, the petitioner had been granted service connection and awarded a 100% disability rating, in addition to entitlement to special monthly compensation based on aid and attendance. He was also found to be incompetent to handle the resulting disbursement of VA funds. The VARO sent petitioner a letter advising that it had appointed a paid fiduciary to control his VA benefits.

The petitioner filed an NOD with the appointment of the paid fiduciary. In response, the VARO notified the petitioner that he could not file an NOD regarding the selection of a fiduciary. When subsequent correspondence proved futile, the petitioner filed the writ of mandamus.

The petitioner contended that the Court had jurisdiction over the matter because the Secretary’s fiduciary appointment was subject to review by the Board, and then by the Court, as a matter that “affects the provision of benefits” under 38 U.S.C. §511(a). The Court agreed, concluding that “a beneficiary may challenge whether or not the Secretary properly exercised his authority in this area. Such a beneficiary would be entitled to one review on appeal within VA and, subsequently, an appeal to this Court.”

Consequently, the Court ordered the Secretary to issue a Statement of the Case, based upon the petitioner’s NOD and, upon perfection of the petitioner’s appeal, to certify the petitioner’s appeal to the Board.

While the Court did not make a ruling regarding the merits of petitioner’s appeal, it did provide insightful analysis of the issue.     The Court found that 38 U.S.C. §5507 “acknowledges that a showing must be made that certification of a certain individual to handle the beneficiary’s funds is ‘in the interest’ of the beneficiary,” and that “there is also an expedited process or a preference for certain individuals with a close relationship to the beneficiary.” According to the regulations,

in the absence of special circumstances, the person or legal entity to be appointed legal custodian will be the person or legal entity caring for and/or having custody of the beneficiary or the beneficiary’s estate.

38 C.F.R. §13.58(a). The Court noted that the Secretary’s adjudication manual, M21-1MR, contains “a specific statement that paid fiduciaries should only be appointed when there is no qualified fiduciary willing to serve without compensation.” The Court also noted that, in the instant case, the petitioner had been cared for by his father and sister for most of the last thirty years, and that the fiduciary appointed by the secretary would be paid a 3% commission out of the petitioner’s benefits.


The Freeman case is annexed here – Freeman v. Shinseki