QUESTIONS PRESENTED:

a.  What is the proper disposition of funds derived from Department of Veterans Affairs (VA) benefits and held by a legal custodian, when a beneficiary dies intestate but with known heirs?

b.  Does VA have a legal duty to supervise estate assets derived from VA benefits and in the hands of a legal custodian, after the death of the beneficiary?

c.  Does VA have authority to distribute a deceased beneficiary’s estate assets, derived from VA benefit payments, and, if so, how should the distribution be made?

HELD:

When a veteran or other VA beneficiary dies without a will  but with known heirs, VA-derived funds held by a legal custodian should be distributed by an appropriate estate administrator in accordance with applicable state law governing intestate succession.  VA is not authorized to recover such funds and distribute them to the beneficiary’s heirs.  Generally, VA is authorized to supervise the estate only to the extent necessary to assure that the fiduciary fulfilled his or her responsibilities to the beneficiary and to assure preservation of assets which may be reclaimed by the Government pursuant to 38 U.S.C.§ 5502(e).