M21-1, Part V, Subpart i, Chapter 3, Section D - Reduction of Income Due to Unreimbursed Expenses

Overview

In This Section

This section contains the following topics:

Topic	Topic Name
1	Determining When Unreimbursed Medical Expenses (UMES) Are Deductible
2	Developing for UMEs
3	Developing for Unreimbursed Funeral and Other Final Expenses
4	Developing for Unreimbursed Educational Expenses

1. Determining When UMEs Are Deductible

Introduction

This topic contains information on determining when UMEs are deductible, including

Change Date

October 18, 2018

V.i.3.D.1.a. Authority Under Which UMEs Are Deductible

The authority for allowing unreimbursed medical expenses (UMEs) under

current-law pension is 38 CFR 3.272(g), and
Parents’ Dependency and Indemnity Compensation (DIC) and Section 306 Pension is 38 CFR 3.262(l).

Note: UMEs can be used to reduce countable income for current-law pension, Section 306 Pension, and Parents’ DIC purposes.

V.i.3.D.1.b. Determining Deductible Expenses

UMEs are not deducted from a claimant’s income on a dollar-for-dollar basis.

Use the table below to determine what medical expenses are deductible from a claimant’s income.

If the case involves …

Then UMEs …

current-law pension

that exceed five percent of the applicable maximum annual pension rate (MAPR) are deductible.

Note: In determining the five-percent deductible, include additional benefits for dependents in the MAPR. Do not include additional benefits for aid and attendance (A&A) or housebound status in the MAPR.

Example: The MAPR for a Veteran without dependents effective December 1, 2013, is $12,652. The Veteran must have medical expenses in excess of $632 ($12,652 X .05) in order for the expenses to have any effect on the rate of pension.

Reference: For more information on MAPR, see the current and historical pension rate tables.

Section 306 Pension or Parents’ DIC

that exceed five percent of the claimant’s reported annual income are deductible.

Example: If reported annual income is $4,000, the claimant must have medical expenses of at least $200 in order for the expenses to have any effect on the rate of benefits.

V.i.3.D.1.c. Impact of Deductible Medical Expenses on Section 306 Pension Rate

As indicated in M21-1, Part V, Subpart i, 1.3, beneficiaries receiving Section 306 Pension cannot get a rate increase by reporting changes in income. The only time medical expenses are relevant to a Section 306 Pension case is if income would otherwise exceed the income limit.

Medical expenses can be used to enable a Section 306 pensioner to continue to receive the protected rate when income would otherwise cause the award to be discontinued for excessive income.

Reference: For more information about Section 306 Pension rates, see theprotected pension rates.

V.i.3.D.1.d. Medical Expense Deduction Allowed Before Expenses Are Incurred

In most instances, the medical expense deduction is allowed after the fact.

However, if a claimant has consistently recurring unreimbursed medical expenses it may be possible to allow the medical expense deduction on a continuing basis.

Examples of common recurring medical expenses allowed prospectively on a continuing basis are:

nursing home or other care facility expenses
payments to an in-home attendant
recurring prescriptions, and
health or hospitalization insurance premiums, including Medicaid premiums.

Note: Life insurance or burial insurance are not allowable medical expense deductions.

Reference: For more information on sources of medical expenses, processing UME deductions, and verifying medical expenses, see

M21-1, Part V, Subpart iii, 1.G, and
38 CFR 3.278.

2. Developing for UMEs

Introduction

This topic contains information on developing for UMEs, including

Change Date

July 30, 2015

V.i.3.D.2.a. Using VA Form 21P-8416 for Development of Medical Expenses

If development for medical expenses is needed, send the beneficiary Department of Veterans Affairs (VA) Form 21P-8416, Medical Expense Report.

Notes:

In a Parents’ DIC or Section 306 Pension case, always develop for medical expenses using the calendar year period (January 1 through December 31). In a current-law pension case, the development period may be the 12-month initial year period or the calendar year period, depending on which period medical expenses are claimed.
Modern Award Processing-Development (MAP-D) should be used for development whenever possible.

References: For more information on

determining the reporting period, see M21-1, Part V, Subpart i, 3.A.3, and
MAP-D development procedures, see the MAP-D User’s Guide.

V.i.3.D.2.b. Cases That Require Additional Development

In some cases, particularly those involving nursing home fees, additional development may be necessary to determine if the claimant will be reimbursed for some of the medical expenses, since only UMEs are allowed.

Use VA Form 21P-8416, to obtain the beneficiary’s statement as to the level of UMEs.

References: For more information on

developing for nursing home fees, see M21-1, Part V, Subpart iii, 1.G.3.k, and
the fields on VA Form 21P-8416 and what those fields must contain, seeM21-1, Part V, Subpart iii, 1.G.4.b.

3. Developing for Unreimbursed Funeral and Other Final Expenses

Introduction

This topic contains information on developing for unreimbursed funeral and other final expenses, including

Change Date

August 9, 2016

V.i.3.D.3.a. Applicability of Deductions for Final Expenses

A claimant’s income for VA purposes may be reduced by deducting amounts paid for certain funeral and other last expenses.

Allow a deduction only for expenses actually paid by the claimant for which he/she will not be reimbursed.

Final expenses are a factor in

current-law pension cases, per 38 CFR 3.272(h)
Parents’ DIC cases, per 38 CFR 3.262(o), and
Section 306 Pension cases, per 38 CFR 3.262(n).

V.i.3.D.3.b. Definition: Last Illness

The term last illness means the period from the onset of the acute attack causing death up to the date of death.

If death resulted from a lingering or prolonged illness instead of an acute attack, the period of last illness is considered to have begun at the time the person became so ill as to require the regular and daily attendance of another person.

V.i.3.D.3.c. Denying a Deduction for Expenses of Last Illness

Deny a deduction for expenses of last illness if those same expenses have been reported to VA as unreimbursed medical expenses.

V.i.3.D.3.d. Definition: Burial Expenses

The term burial expenses includes all normal expenses incident to disposition of the remains of deceased persons.

V.i.3.D.3.e. Allowing a Deduction for Burial Expenses

If an expense would be allowable for purposes of paying VA burial benefits, consider it a burial expense for purposes of the final expense deduction.

V.i.3.D.3.f. Definition: Just Debts

A just debts is any debt that would be recognized by a probate court, meaning that the debt is legally enforceable and not fraudulent.

V.i.3.D.3.g. Allowing/Denying a Deduction for Just Debts

Allow for a deduction only for debts that are the debts of

a Veteran, when paid by the Veteran’s surviving spouse or child, and
a DIC parent, when paid by his/her surviving spouse.

Deny a deduction when a surviving spouse or surviving parent pays debts that were incurred jointly with the deceased person for the purchase of real or personal property, including a jointly incurred charge card debt.

V.i.3.D.3.h. Example: Denying a Deduction for Just Debts

Situation:

A surviving spouse claims a deduction for payment of just debts of the Veteran.
Development reveals that the
- spouse has been making payments on a car note, and
- Veteran and surviving spouse were joint obligors on the note.

Result:

Payments on the car note are not deductible as just debts of the Veteran because the debt was jointly incurred by the survivor and the Veteran for the purchase of real or personal property (the car).
No further development of the claimed expense is necessary.

V.i.3.D.3.i. Determining Allowable Final Expenses

Use the table below to determine allowable final expenses for

Veterans Pension cases
Survivors Pension cases
Parents’ DIC cases, and
Section 306 Pension cases.

If the case involves …	Then allowable final expenses, include amounts paid by a …
Veterans Pension benefits	Veteran for expenses of last illness and burial of the Veteran’s deceased spouse or child.
Survivors Pension benefits	surviving spouse for expenses of the Veteran’s last illness and burial (even if paid before the Veteran’s death), and the Veteran’s just debts paid after the Veteran’s death surviving spouse for expenses of the last illness and burial of the Veteran’s child, and child after the Veteran’s death for expenses of the Veteran’s last illness, burial, and just debts. *References*: For more information on final expenses paid by a surviving spouse before the date of pension entitlement, see M21-1, Part V, Subpart iii, 1.G.6.g, and periods to deduct final expenses, seeM21-1, Part V, Subpart iii, 1.G.7.a.
Parents’ DIC benefits	parent for expenses of the deceased Veteran’s last illness and burial, and parent for expenses of his/her spouse’s last illness, burial, and just debts.
Section 306 Pension benefits	Veteran for expenses of last illness and burial of a deceased child or spouse, or surviving spouse for expenses of last illness and burial of the Veteran’s child. *Note: This deduction is used only when needed to keep a beneficiary’s income within the applicable income limit. Reference*: For more information on income limitations affecting Section 306 Pension claims, see M21-1, Part V, Subpart i, 1.3.

V.i.3.D.3.j. Developing for Final Expenses

The Survivors Pension application forms, VA Form 21P-534, Application for Dependency and Indemnity Compensation, Death Pension and Accrued Benefits by a Surviving Spouse or Child (Including Death Compensation If Applicable), and VA Form 21P-534EZ, Application for DIC, Death Pension, and/or Accrued Benefits, provide space for reporting final expenses.

When developing for final expenses, use Section VI of VA Form 21-8049, Request for Details of Expenses.

Note: MAP-D should be used for development whenever possible.

Reference: For more information on MAP-D development procedures, see theMAP-D User’s Guide.

4. Developing for Unreimbursed Educational Expenses

Introduction

This topic contains information on developing for unreimbursed educational expenses, including

Change Date

December 13, 2005

V.i.3.D.4.a. Applicability of the Educational Expense Deduction to Veteran or Surviving Spouse Payees

The educational expense deduction applies only in current-law Pension cases.

Per 38 CFR 3.272(i), a Veteran’s or surviving spouse’s income for VA purposes may be reduced by amounts paid for tuition, fees, books and necessary materials.

If the Veteran or surviving spouse is found to be in need of regular A&A, an additional deduction is allowed for transportation expenses which

are related to school attendance, and
exceed the reasonable amounts that would have been incurred by a nondisabled person.

V.i.3.D.4.b. Developing for Educational Expenses for a Veteran or Surviving Spouse Payee

The educational expense deduction is allowed after the fact.

Send the claimant VA Form 21P-8049, if follow-up development is needed.

V.i.3.D.4.c. Applicability of the Educational Expense Deduction to Children

The educational expense deduction for children applies only in current-law pension cases.

Per 38 CFR 3.272(j)(2), the educational expense deduction applies

both in cases in which the child is
- the payee, and
- a dependent on a Veteran’s or surviving spouse’s claim
only to reduce the child’s earned income and does not apply if the child has only unearned income, and
only if the child is pursuing a course of post-secondary (after high school) education or training.

Note: Deductible expenses include amounts paid for tuition, fees, books, and materials.

V.i.3.D.4.d. Developing for a Child’s Educational Expenses

Use VA Form 21-4138, Statement in Support of Claim, to develop a child’s post-secondary education expenses.

Do not develop these expenses unless a child’s earned income exceeds the amount that can be deducted under 38 CFR 3.272(j)(1).

Reference: For the current amount of the 38 CFR 3.272(j)(1) exclusion from a child’s earnings, see the current-law pension rate charts.

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Last Updated: 9 months ago in Chapter 3 Income and Net Worth Development, Part V Pension and Parents Dependency and Indemnity Compensation (DIC), Subpart i Eligibility and Development

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M21-1, Part V, Subpart i, Chapter 3, Section D – Reduction of Income Due to Unreimbursed Expenses

Overview

In This Section

1. Determining When UMEs Are Deductible

Introduction

Change Date

V.i.3.D.1.a. Authority Under Which UMEs Are Deductible

V.i.3.D.1.b. Determining Deductible Expenses

V.i.3.D.1.c. Impact of Deductible Medical Expenses on Section 306 Pension Rate

V.i.3.D.1.d. Medical Expense Deduction Allowed Before Expenses Are Incurred

2. Developing for UMEs

Introduction

Change Date

V.i.3.D.2.a. Using VA Form 21P-8416 for Development of Medical Expenses

V.i.3.D.2.b. Cases That Require Additional Development

3. Developing for Unreimbursed Funeral and Other Final Expenses

Introduction

Change Date

V.i.3.D.3.a. Applicability of Deductions for Final Expenses

V.i.3.D.3.b. Definition: Last Illness

V.i.3.D.3.c. Denying a Deduction for Expenses of Last Illness

V.i.3.D.3.d. Definition: Burial Expenses

V.i.3.D.3.e. Allowing a Deduction for Burial Expenses

V.i.3.D.3.f. Definition: Just Debts

V.i.3.D.3.g. Allowing/Denying a Deduction for Just Debts

V.i.3.D.3.h. Example: Denying a Deduction for Just Debts

V.i.3.D.3.i. Determining Allowable Final Expenses

V.i.3.D.3.j. Developing for Final Expenses

4. Developing for Unreimbursed Educational Expenses

Introduction

Change Date

V.i.3.D.4.a. Applicability of the Educational Expense Deduction to Veteran or Surviving Spouse Payees

V.i.3.D.4.b. Developing for Educational Expenses for a Veteran or Surviving Spouse Payee

V.i.3.D.4.c. Applicability of the Educational Expense Deduction to Children

V.i.3.D.4.d. Developing for a Child’s Educational Expenses

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