Dependency and Indemnity Compensation Benefits, 61326-61348 [05-21026]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 70, Number 203 (Friday, October 21, 2005)]
[Proposed Rules]
[Pages 61326-61348]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-21026]



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Part II





Department of Veterans Affairs





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38 CFR Part 5



Dependency and Indemnity Compensation Benefits; Proposed Rule

Federal Register / Vol. 70, No. 203 / Friday, October 21, 2005 / 
Proposed Rules

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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 5

RIN 2900-AL89


Dependency and Indemnity Compensation Benefits

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) has published a series 
of Notices of Proposed Rulemaking (NPRM)s setting out new proposed 
regulations governing VA compensation, pension, burial and related 
benefits that would be located in a new part of the Code of Federal 
Regulations. This NPRM adds proposed regulations concerning dependency 
and indemnity compensation (DIC) for a veteran's surviving spouse, 
children, and parents and general rules relating to proof of death and 
service-connected cause of death to that proposed new part. The 
intended effect of the proposed revisions is to assist claimants and VA 
personnel in locating and understanding these provisions.

DATES: Comments must be received by VA on or before December 20, 2005.

ADDRESSES: Written comments may be submitted by: mail or hand-delivery 
to Director, Regulations Management (00REG1), Department of Veterans 
Affairs, 810 Vermont Ave., NW., Room 1068, Washington, DC 20420; fax to 
(202) 273-9026; e-mail to VAregulations@va.gov or through https://
www.Regulations.gov. Comments should indicate that they are submitted 
in response to ``RIN 2900-AL89.'' All comments received will be 
available for public inspection in the Office of Regulation Policy and 
Management, Room 1063B, between the hours of 8 a.m. and 4:30 p.m., 
Monday through Friday (except holidays). Please call (202) 273-9515 for 
an appointment.

FOR FURTHER INFORMATION CONTACT: Clay Witt, Chief, Regulations Rewrite 
Project (00REG2), Department of Veterans Affairs, 810 Vermont Avenue, 
NW., Washington, DC 20420, (202) 273-9515.

SUPPLEMENTARY INFORMATION: The Secretary of Veterans Affairs has 
established an Office of Regulation Policy and Management to provide 
centralized management and coordination of VA's rulemaking process. One 
of the major functions of this office is to oversee a Regulation 
Rewrite Project (the Project) to improve the clarity and consistency of 
existing VA regulations. The Project responds to a recommendation made 
in the October 2001 ``VA Claims Processing Task Force: Report to the 
Secretary of Veterans Affairs.'' The Task Force recommended that the 
Compensation and Pension regulations be rewritten and reorganized in 
order to improve VA's claims adjudication process. Therefore, the 
Project began its efforts by reviewing, reorganizing and redrafting the 
content of the regulations in 38 CFR part 3 governing the compensation 
and pension program of the Veterans Benefits Administration. These 
regulations are among the most difficult VA regulations for readers to 
understand and apply.
    Once rewritten, the proposed regulations will be published in 
several portions for public review and comment. This is one such 
portion. It includes proposed rules regarding DIC for a veteran's 
surviving spouse, children, and parents and proposed rules relating to 
proof of death and service-connected cause of death. After review and 
consideration of public comments, final versions of these proposed 
regulations will ultimately be published in a new part 5 in 38 CFR.

Outline

Overview of New Part 5 Organization
Overview of Proposed Subpart G Organization
Table Comparing Current Part 3 Rules With Proposed Part 5 Rules
Content of Proposed Regulations

General Provisions

5.500 Proof of death.
5.501 Proving death by other means.
5.502 Proving death after 7 years of continuous, unexplained 
absence.
5.503 Establishing the date of death.
5.504 Service-connected cause of death.

Dependency and Indemnity Compensation--General

5.510 Dependency and indemnity compensation--basic entitlement.
5.511 Special monthly dependency and indemnity compensation.
5.512 Eligibility for death compensation or death pension instead of 
dependency and indemnity compensation.

Dependency and Indemnity Compensation--Eligibility Requirements and 
Payment Rules for Surviving Spouses and Children

5.520 Dependency and indemnity compensation--time of marriage 
requirements for surviving spouses.
5.521 [Reserved]
5.522 Dependency and indemnity compensation benefits for survivors 
of certain veterans rated totally disabled at time of death--offset 
of wrongful death damages.
5.523 [Reserved]
5.524 Awards of dependency and indemnity compensation benefits to 
children when there is a retroactive award to a schoolchild.

Dependency and Indemnity Compensation--Eligibility Requirements and 
Payment Rules for Parents

5.530--Eligibility for, and payment of, parents' dependency and 
indemnity compensation.
5.531 General income rules.
5.532 Deductions from income.
5.533 Exclusions from income.
5.534 When VA counts parents' income.
5.535 Adjustments to parents' DIC when income is less than 
anticipated.
5.536 Parents' dependency and indemnity compensation rates.
5.537 Payment intervals.

Effective Dates

    Note: For information concerning proposed Sec. Sec.  5.550 
through 5.572, see 69 FR 59072 (Oct. 1, 2004).

5.573 Effective date for dependency and indemnity compensation rate 
adjustments when an additional survivor files an application.
5.574 Effective dates of awards and discontinuances of special 
monthly dependency and indemnity compensation.
Omission of rule in 38 CFR 3.22(h).
Endnote Regarding Amendatory Language
Paperwork Reduction Act
Regulatory Flexibility Act
Executive Order 12866
Unfunded Mandates
Catalog of Federal Domestic Assistance Numbers
List of Subjects in 38 CFR Part 5

Overview of New Part 5 Organization

    We plan to organize the part 5 regulations so that all provisions 
governing a specific benefit are located in the same subpart, with 
general provisions pertaining to all compensation and pension benefits 
also grouped together. We believe this organization will allow 
claimants, beneficiaries, and their representatives, as well as VA 
personnel, to find information relating to a specific benefit more 
quickly than the organization provided in current part 3.
    The first major subdivision would be ``Subpart A--General 
Provisions.'' It would include information regarding the scope of the 
regulations in new part 5, delegations of authority, general 
definitions, and general policy provisions for this part.
    ``Subpart B--Service Requirements for Veterans'' would include 
information regarding a veteran's military service, including the 
minimum service requirement, types of service, periods of war, and 
service evidence requirements. This subpart was published as proposed 
on January 30, 2004. See 69 FR 4820.
    ``Subpart C--Adjudicative Process, General'' would inform readers 
about claims and benefit application filing procedures, VA's duties, 
rights and responsibilities of claimants and

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beneficiaries, general evidence requirements, and general effective 
dates for new awards, as well as revision of decisions and protection 
of VA ratings. This subpart will be published as three separate NPRMs 
due to its size. The first, concerning the duties of VA and the rights 
and responsibilities of claimants and beneficiaries, was published on 
May 10, 2005. See 70 FR 24680.
    ``Subpart D--Dependents and Survivors'' would inform readers how VA 
determines whether an individual is a dependent or a survivor for 
purposes of determining eligibility for VA benefits. It would also 
provide the evidence requirements for these determinations.
    ``Subpart E--Claims for Service Connection and Disability 
Compensation'' would define service-connected compensation, including 
direct and secondary service connection. This subpart would inform 
readers how VA determines entitlement to service connection. The 
subpart would also contain those provisions governing presumptions 
related to service connection, rating principles, and effective dates, 
as well as several special ratings. This subpart will be published as 
three separate NPRMs due to its size. The first, concerning 
presumptions related to service connection, was published on July 27, 
2004. See 69 FR 44614.
    ``Subpart F--Nonservice-Connected Disability Pensions and Death 
Pensions'' would include information regarding the three types of 
nonservice-connected pension: Improved Pension, Old-Law Pension, and 
Section 306 Pension. This subpart would also include those provisions 
that state how to establish entitlement to each pension, and the 
effective dates governing each pension. This subpart will be published 
as two separate NPRMs due to its size. The portion concerning Old-Law 
Pension, Section 306 Pension, and elections of Improved Pension was 
published as proposed on December 27, 2004. See 69 FR 77578.
    ``Subpart G--Dependency and Indemnity Compensation, Death 
Compensation, Accrued Benefits, and Special Rules Applicable Upon Death 
of a Beneficiary'' would contain regulations governing claims for DIC; 
death compensation; accrued benefits; benefits awarded, but unpaid at 
death; and various special rules that apply to the disposition of VA 
benefits, or proceeds of VA benefits, when a beneficiary dies. This 
subpart would also include related definitions, effective-date rules, 
and rate-of-payment rules. This subpart will be published as two 
separate NPRMs due to its size. The portion concerning accrued 
benefits, special rules applicable upon the death of a beneficiary, and 
several effective date rules, was published as proposed on October 1, 
2004. See 69 FR 59072. The portion concerning DIC benefits and general 
provisions relating to proof of death and service-connected cause of 
death is the subject of this NPRM.
    ``Subpart H--Special and Ancillary Benefits for Veterans, 
Dependents, and Survivors'' would pertain to special and ancillary 
benefits available, including benefits for children with various birth 
defects.
    ``Subpart I--Benefits for Filipino Veterans and Survivors'' would 
pertain to the various benefits available to Filipino veterans and 
their survivors.
    ``Subpart J--Burial Benefits'' would pertain to burial allowances.
    ``Subpart K--Matters Affecting Receipt of Benefits'' would contain 
provisions regarding bars to benefits, forfeiture of benefits, and 
renouncement of benefits.
    ``Subpart L--Payments and Adjustments to Payments'' would include 
general rate-setting rules, several adjustment and resumption 
regulations, and election-of-benefit rules. Because of its size, 
proposed regulations in subpart L will be published in two separate 
NPRMs.
    The final subpart, ``Subpart M--Apportionments and Payments to 
Fiduciaries or Incarcerated Beneficiaries,'' would include regulations 
governing apportionments, benefits for incarcerated beneficiaries, and 
guardianship.
    Some of the regulations in this NPRM cross-reference other 
compensation and pension regulations. If those regulations have been 
published in this or earlier NPRMs, we cite the proposed part 5 
section. We also include, in the relevant portion of the Supplementary 
Information, the Federal Register page where a proposed part 5 section 
published in an earlier NPRM may be found. However, where a regulation 
proposed in this NPRM would cross-reference a proposed part 5 
regulation that has not yet been published, we cite to the current part 
3 regulation that deals with the same subject matter. The current part 
3 section we cite may differ from its eventual part 5 counterpart in 
some respects, but we believe this method will assist readers in 
understanding these proposed regulations where no part 5 counterpart 
has yet been published. If there is no part 3 counterpart to a proposed 
part 5 regulation that has not yet been published, we have inserted 
``[regulation that will be published in a future Notice of Proposed 
Rulemaking]'' where the part 5 regulation citation would be placed.
    In connection with this rulemaking, VA will accept comments 
relating to a prior rulemaking issued as a part of the Project, if the 
matter being commented on relates to both Notices of Proposed 
Rulemaking. VA will provide a separate opportunity for public comment 
on each segment of proposed part 5 regulations before adopting a final 
version of part 5.

Overview of Proposed Subpart G Organization

    As its title, ``Dependency and Indemnity Compensation, Accrued 
Benefits, Death Compensation Benefits, and Special Rules Applicable 
Upon Death of a Beneficiary,'' suggests, proposed subpart G will 
address a broad range of VA death benefits. Because of its length, 
subpart G will be published in two separate NPRMs. This NPRM pertains 
to those regulations governing DIC benefits and general provisions 
relating to proof of death and service-connected cause of death. 
Although these regulations have been substantially restructured and 
rewritten for greater clarity and ease of use, most of the basic 
concepts contained in these proposed regulations are the same as in 
their existing counterparts in 38 CFR part 3. However, a few 
substantive changes are proposed.

Table Comparing Current Part 3 Rules With Proposed Part 5 Rules

    The following table shows the relationship between the current 
regulations in part 3 and the proposed regulations contained in this 
NPRM:

------------------------------------------------------------------------
                                            Based in whole or in part on
   Proposed part 5 section or paragraph       38 CFR part 3 section or
                                                      paragraph
------------------------------------------------------------------------
5.500(a)..................................  New.
5.500(b)..................................  3.211(a).
5.500(c)(1)...............................  3.211(d)(1).
5.500(c)(2)...............................  3.211(d)(2).
5.500(c)(3)...............................  3.211(d)(3).
5.500(d)..................................  3.211(b).
5.500(e)..................................  3.211(c).
5.501(a)..................................  New.
5.501(b)..................................  3.211(e), first sentence.
5.501(c)..................................  3.211(e), second sentence.
5.501(d)..................................  3.211(f) and (g).
5.502(a)..................................  3.212(a).
5.502(b)..................................  3.212(b).
5.502(c)..................................  3.212(b) and (c).
5.503(a)..................................  New.
5.503(b)..................................  3.212(a).
5.503(c)..................................  New.
5.504(a)..................................  New.
5.504(b)..................................  New.
5.504(c)(1)...............................  New.
5.504(c)(2)...............................  3.312(c)(3) and (c)(4).
5.510(a)..................................  3.5(a).

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5.510(b), except for (b)(1)(ii)...........  New.
5.510(b)(1)(ii)...........................  3.5(b).
5.510(c)..................................  3.5(d).
5.510(d)..................................  3.251(a)(1).
5.511(a)..................................  3.351(a)(3), (a)(4), (b),
                                             and (c)(3).
5.511(b)..................................  3.351(c)(1) and (c)(2).
5.511(c)..................................  3.351(e).
5.512.....................................  3.5(c).
5.520(a)..................................  New.
5.520(b)(1)(i)............................  Introduction to 3.54.
5.520(b)(1)(ii)...........................  3.54(c)(2).
5.520(b)(1)(iii)..........................  3.54(c)(3).
5.520(b)(1)(iv)...........................  3.54(c)(1)
5.520(b)(2)...............................  New.
5.521.....................................  Reserved.
5.522(a) and (b)..........................  3.22(e).
5.522(c)(1)...............................  New.
5.522(c)(2)...............................  3.22(g).
5.522(c)(3)...............................  New.
5.522(c)(4)...............................  3.22(f).
5.522(c)(5)...............................  3.22(g).
5.522(d)..................................  3.22(g).
5.523.....................................  Reserved.
5.524(a), except for (a)(1)...............  3.650(c)(2).
5.524(a)(1)...............................  3.650(c)(1).
5.524(b) and (c)..........................  3.650(c)(1).
5.530.....................................  New.
5.531(a)..................................  3.251(b), Introduction to
                                             3.262(a).
5.531(b)(1)...............................  Introduction to 3.262(a).
5.531(b)(2)(i)............................  3.261(a)(7).
5.531(b)(2)(ii)...........................  3.261(a)(26).
5.531(b)(2)(iii)..........................  3.262(h).
5.531(c)..................................  Introduction to 3.262(b) and
                                             3.262(b)(1).
5.531(d)(1) and (d)(2)....................  3.262(k)(1) and (k)(2).
5.531(d)(3)...............................  New.
5.531(d)(4)...............................  3.262(k)(1).
5.531(e)..................................  3.260(b).
5.532(a)..................................  3.262(a)(2) and (a)(3).
5.532(b)..................................  3.262(j)(4).
5.532(c)..................................  3.262(o) and (p).
5.532(d)..................................  Introduction to 3.262(l),
                                             3.262(l)(4).
5.532(e)..................................  3.261(a)(22), and
                                             3.262(a)(1).
5.533(a)..................................  3.261(a)(12).
5.533(b)..................................  3.262(c), (d), and (f).
5.533(c) and (d)..........................  3.261(a)(20).
5.533(e)..................................  3.262(f).
5.533(f)..................................  3.261(a)(13).
5.533(g)..................................  Introduction to 3.262(e),
                                             (e)(4), (f), (g), (i)(2),
                                             (j)(1), (j)(2), and (j)(4).
5.533(h)..................................  Introduction to 3.262(t),
                                             (t)(1).
5.533(i)..................................  3.262(k)(5).
5.533(j)..................................  3.261(a)(31).
5.533(k)..................................  3.262(w).
5.533(l) through (n)......................  New.
5.533(o)..................................  3.262(a)(2), last sentence.
5.533(p)..................................  3.261(a)(22).
5.533(q)..................................  New.
5.534(a)..................................  3.251(b) and Introduction to
                                             3.260.
5.534(b)..................................  3.260(c), (d), and (f).
5.534(c)..................................  3.260(f).
5.535.....................................  3.660(b), Introduction and
                                             (b)(1).
5.536(a)..................................  3.25.
5.536(b)..................................  3.25, 3.27(b) and (d).
5.536(c)..................................  3.251(a)(2).
5.536(d)..................................  3.251(a)(4).
5.536(e)..................................  3.251(a)(5).
5.536(f)(1)...............................  3.25(a), (c), and (d).
5.536(f)(2)...............................  3.25(e).
5.536(g)..................................  3.260(f).
5.536(h)..................................  3.704(b).
5.537.....................................  Introduction to 3.30 and
                                             3.30(e).
5.573(a)..................................  Introduction to 3.650(a).
5.573(b)(1)...............................  3.650(a)(1).
5.573(b)(2)...............................  3.650(a)(2).
5.573(c)..................................  3.650(b).
5.573(d)..................................  Unnumbered paragraph in
                                             3.650(a).
5.573(e)..................................  Introduction to 3.650(a).
5.574(a)..................................  3.402(c) and 3.404.
5.574(b)(1)...............................  3.502(e)(1) and 3.504.
5.574(b)(2)...............................  New.
------------------------------------------------------------------------

    Readers who use this table to compare existing regulatory 
provisions with the proposed provisions, and who observe a substantive 
difference between them, should consult the text that appears later in 
this document for an explanation of significant changes in each 
regulation. Not every paragraph of every current part 3 section 
regarding the subject matter of this rulemaking is accounted for in the 
table. In some instances other portions of the part 3 sections that are 
addressed in these proposed regulations will appear in subparts of part 
5 that are being published separately for public comment. For example, 
a reader might find a reference to paragraph (a) of a part 3 section in 
the table, but no reference to paragraph (b) of that section because 
paragraph (b) will be addressed in a separate NPRM. The table also does 
not include provisions from part 3 regulations that will not be 
repeated in part 5. Such provisions are discussed specifically under 
the appropriate part 5 heading in this preamble. Readers are invited to 
comment on the proposed part 5 provisions and also on our proposals to 
omit those part 3 provisions from part 5.

Content of Proposed Regulations

General Provisions

5.500 Proof of death.

    Proposed Sec.  5.500 is a reorganization of rules in current Sec.  
3.211(a) through (d), which describe the kinds of evidence that would 
suffice as proof of death applicable in most cases. Section 5.500(a) is 
new. Section 5.500(a)(1) states the purpose of Sec.  5.500. Section 
5.500(a)(2) provides a rule for applying Sec.  5.500, specifically that 
VA will accept the evidence described in any relevant paragraph of 
Sec.  5.500 as proof of death. This rule reflects current VA practice 
and clarifies that the various methods of proving death set out in 
Sec.  5.500 are alternatives.
    Current Sec.  3.211(d) describes various forms of proof of death VA 
will accept when an individual dies abroad. Section 3.211(d)(3) lists 
``[a]n official report of death from the head of the department 
concerned, where the deceased person was, at the time of death, a 
civilian employee of such department.'' We propose instead to describe 
this acceptable form of proof of death, in Sec.  5.500(c)(3), as ``[a]n 
official report of death of a civilian employee of the U.S. Government 
from the employing U.S. Government entity.'' This revision serves to 
clarify that the rule applies to a U.S. Government employee and that it 
is not limited to employing Federal entities that are cabinet 
departments. Further, reports of death need not necessarily come from 
the head of the employing entity. VA's concern is that such a report is 
an authentic official report of the Federal entity. Implicit in the 
requirement for an official report is that the report will have been 
issued by a person authorized to issue it, but that person will not 
necessarily be the person who is the head of the employing entity.

5.501 Proving death by other means.

    Proposed Sec.  5.501 is based on current Sec.  3.211(e) through (g) 
and long-standing VA practice. It states the rules on how to prove 
death where the evidence described in proposed Sec.  5.500 is not 
available. It includes new Sec.  5.501(a), which describes the scope of 
the section.
    Proposed Sec.  5.501(d)(2) clarifies how VA determines whether 
death has occurred in those cases where a body has not been recovered, 
or the body cannot be identified. Current Sec.  3.211(f) provides that 
``[w]here it is indicated that the veteran died under circumstances 
which precluded recovery or identification of the body, the fact of 
death should be established

[[Page 61329]]

by the best evidence, which from the nature of the case must be 
supposed to exist.'' The ``best evidence'' requirement is not 
explained. However, it is long-standing VA practice to consider 
statements from the claimant and other witnesses describing the facts 
that led them to believe that the person in question died. We also note 
that this portion of the regulation should provide information 
regarding what to do when the death of any person, not just a veteran, 
is relevant and the body cannot be recovered or identified. Proposed 
Sec.  5.501(d)(2) addresses these issues by broadening the scope of 
this portion of the regulation to cover the death of any person whose 
body cannot be recovered or identified and by clarifying the kinds of 
evidence VA considers in this situation.
    Current Sec.  3.211(f) refers to ``an official'' authorized to 
approve a finding of the fact of death. Proposed Sec.  5.501(d)(3) 
clarifies that this means an authorized VA official.
    Current Sec.  3.211(e) requires the submission of affidavits to 
prove the fact of death. In line with VA's current practice of 
accepting somewhat less formal means of proof in most instances, 
proposed Sec.  5.501 permits the submission of either certified 
statements or affidavits. (We note that ``certified statement'' will be 
defined in subpart A of part 5, which will be the subject of a separate 
NPRM.)

5.502 Proving death after 7 years of continuous, unexplained absence.

    Proposed Sec.  5.502 provides rules regarding how a claimant may 
establish the fact of a person's death if that person has been missing 
for 7 years or more and his or her absence is unexplained. It is 
derived from current Sec.  3.212.
    Current Sec.  3.212 includes a requirement that ``satisfactory 
evidence'' be produced to show a person's continued and unexplained 
absence. In order to clarify what evidence is necessary to establish 
the death of a missing person, we propose to replace the phrase 
``satisfactory evidence'' with ``competent, credible evidence'' because 
this term more appropriately describes the qualities that make such 
evidence ``satisfactory.'' VA will propose a definition of ``competent 
evidence'' in a separate NPRM. ``Credible'' evidence is just evidence 
that is believable. (``Credible testimony is that which is plausible or 
capable of being believed.'' Caluza v. Brown, 7 Vet. App. 498, 511 
(1995).)
    All other proposed revisions to the language of Sec.  3.212 are 
structural in nature and do not change the substance of the regulation.

5.503 Establishing the date of death.

    The fact of death, that is that a person died, may be established 
through the evidence described in Sec. Sec.  5.500 and 5.501, but that 
evidence may not show exactly when death occurred. The exact date of 
death may never be known when the fact of death is established using 
the presumption in Sec.  5.502 when there has been a 7-year unexplained 
absence. Proposed Sec.  5.503 sets out rules for establishing the date 
of death for VA purposes in such circumstances.
    The current regulation concerning the 7-year-absence death 
presumption, Sec.  3.212(a), refers to an individual who has been 
absent ``from his or her home and family for a period of 7 years or 
more.'' It provides that in such cases death occurred ``as of the 
expiration of such period.'' It is not entirely clear from the language 
used whether the ``or more'' is part of ``such period.'' VA's practice 
has been to presume that death occurred seven years after the person 
was last known to be alive in cases where the fact of death is 
established under current Sec.  3.212 (proposed Sec.  5.502). This date 
of death presumption is set out more clearly in proposed Sec.  
5.503(b).
    In cases where the fact of death is proven by the evidence 
described in proposed Sec.  5.500 or Sec.  5.501, and not the 7-year-
absence rule, but the exact date of death is unknown, long-standing VA 
practice is that the date of death can be established as the date the 
deceased person was last seen alive, the date the body was found, or 
any time between those dates, depending on the circumstances. Proposed 
Sec.  5.503(c) incorporates and clarifies this practice. It includes 
standards for setting the date of death when the body of the deceased 
is found and a presumption that, if no identifiable body is found, the 
date of death is the date the deceased was last known to be alive in 
the absence of evidence to the contrary.

5.504 Service-connected cause of death.

    The next regulation in this NPRM concerns how VA determines whether 
a veteran's death was service connected. This determination is 
important to a veteran's survivors because a veteran's service-
connected death is a foundation for awarding several types of VA 
benefits. For example, see proposed Sec.  5.510, ``Dependency and 
indemnity compensation--basic entitlement,'' and Sec.  3.1600(a) 
(concerning the service-connected burial allowance). Proposed paragraph 
(a) of Sec.  5.504 sets this context and explains that the purpose of 
the section is to provide rules on how VA determines whether a 
veteran's death was service connected.
    Proposed paragraph (b) defines ``service-connected disability'' for 
purposes of proposed Sec.  5.504. An examination of 38 U.S.C. 1310(a), 
the basic authorizing statute for the award of DIC for service-
connected deaths, is instructive. The statute provides:

    (a) When any veteran dies after December 31, 1956, from a 
service-connected or compensable disability, the Secretary shall pay 
dependency and indemnity compensation to such veteran's surviving 
spouse, children, and parents. The standards and criteria for 
determining whether or not a disability is service-connected shall 
be those applicable under chapter 11 of this title.

    Chapter 11 of Title 38, United States Code, referenced in 38 U.S.C. 
1310(a), contains the provisions for determining whether living 
veterans are entitled to service connection for disabilities. In other 
words, VA determines whether a disability is service connected in death 
cases using the same principles it applies in determining service 
connection for the disabilities of living veterans. Therefore, Sec.  
5.504(b)(1) defines service-connected disability, in the context of 
service-connected cause of death, as ``(i) * * * a disability that was 
service connected at the time of the veteran's death, or (ii) [a] 
disability that is service connectable under the provisions of subpart 
E of this part, `Claims for service connection and disability 
compensation.' '' (Subpart E will be the subject of a separate NPRM.) 
To preclude an interpretation that a traumatic death in service was so 
sudden that it did not produce a ``disability'' before death and that 
the death was therefore not service-connectable, we also propose to 
state in Sec.  5.504(b)(1)(ii) that ``[f]or purposes of this section, 
VA will deem a sudden death in service from trauma to have been 
preceded by disability from the trauma.''
    There is an important exception to the principle stated in proposed 
Sec.  5.504(b)(1)(i) that (for purposes of determining service-
connected causes of death) service-connected disabilities include 
disabilities that were service connected at the time of the veteran's 
death. Congress has precluded VA from granting service connection for 
the cause of a veteran's death in some cases, even though the 
disability in question may have been service connected at the time of 
the veteran's death.
    One such case results from 38 U.S.C. 1103(a), which provides that 
``[n]otwithstanding any other provision of law, a veteran's disability 
or death shall not be considered to have resulted

[[Page 61330]]

from personal injury suffered or disease contracted in the line of duty 
in the active military, naval, or air service for purposes of this 
title on the basis that it resulted from injury or disease attributable 
to the use of tobacco products by the veteran during the veteran's 
service.'' See also Kane v. Principi, 17 Vet. App. 97, 101 (2003) 
(``Thus, the plain language of 38 U.S.C. Sec.  1103 expresses the 
Congressional intent to no longer award service connection for a 
veteran's death that results from a service connected disease that was 
`capable of being attributed' to the use of tobacco products during the 
veteran's service.'').
    Another case in which service connection may not be granted for the 
cause of death based on a disability service connected at the time of 
death is the result of 38 U.S.C. 105(a) which provides, in part, that 
``[a]n injury or disease incurred during active military, naval, or air 
service will be deemed to have been incurred in line of duty and not 
the result of the veteran's own misconduct when the person on whose 
account benefits are claimed was, at the time the injury was suffered 
or disease contracted, in active military, naval, or air service, 
whether on active duty or on authorized leave, unless such injury or 
disease was a result of the person's own willful misconduct or abuse of 
alcohol or drugs.'' See also VAOPGCPREC 11-96, 61 FR 66748, 66750 
(1996), which held that ``[s]ection 8052 of the Omnibus Budget 
Reconciliation Act of 1990, Pub. L. No. 101-508, Sec.  8052, 104 Stat. 
1388, 1388-351, applicable to claims filed after October 31, 1990, 
precludes an injury or disease that is a result of a person's own abuse 
of alcohol or drugs from being considered incurred in line of duty and, 
consequently, precludes resulting disability or death from being 
considered service connected.''
    We propose to provide for these Congressionally mandated 
exceptions, and any such exceptions that may arise in the future, by 
stating the following in proposed Sec.  5.504(b)(2):

    (2) Exception. For purposes of this section, ``service-connected 
disability'' does not include a disability that was service 
connected at the time of the veteran's death if the law in effect at 
the time of a survivor's claim precludes VA from establishing 
service connection for the cause of the veteran's death. See Sec.  
3.300 of this chapter, ``Claims based on the effects of tobacco 
products,'' and Sec.  3.301(d) of this chapter ``Line of duty; abuse 
of alcohol or drugs.''

    We note that current Sec.  3.301(d), cross-referenced in proposed 
Sec.  5.504(b)(2), does not yet include provisions based on Allen v. 
Principi, 237 F.3d 1368 (Fed. Cir. 2001) (concluding that 38 U.S.C. 
1110 does not preclude compensation for an alcohol or drug abuse 
disability secondary to a service-connected disability). However, we 
anticipated that we will address that issue in the part 5 equivalent of 
Sec.  3.301(d) and that part 5 regulation would be the one cross-
referenced in the final version of proposed 5.504.
    Proposed Sec.  5.504(c) addresses the kind of link that must exist 
between a service-connected disability and the veteran's death in order 
for VA to determine that the death was service connected. It is based 
on the provisions of current Sec.  3.312(c). Current Sec.  3.312(c) 
distinguishes between ``principal'' and ``contributory'' causes of 
death and includes elaborate provisions concerning ``contributory'' 
causes of death. We believe that these provisions can be simplified 
considerably.
    The causation question can be adjudicated using two relatively 
simple standards that better reflect VA's long-standing practice and 
interpretation of the authorizing statutes. The first standard would be 
to determine if the veteran's death would have occurred in the absence 
of the service-connected disability, or the combined effects of 
multiple service-connected disabilities. If the answer is that the 
death would not have occurred in the absence of the service-connected 
disability, or disabilities, service connection should be awarded for 
the cause of the veteran's death.
    Answering this ``in the absence of'' question should resolve a 
broad spectrum of cases. Sometimes the answer to the question will 
depend upon medical evidence. For example, if the medical evidence 
(such as autopsy reports, reports of the veteran's final 
hospitalization, etc.) shows that the veteran died of a particular kind 
of cancer, then clearly the veteran would not have died in the absence 
of that cancer. If that cancer was service connected or service 
connectable, the death should be service connected.
    The ``in the absence of'' standard should also work well in other 
types of cases that may involve fact finding beyond the purely medical 
realm, such as cases involving service-connected or service-connectable 
disabilities that produce impairment of balance or physical mobility 
that plays a role in the death of a veteran. For example, a veteran 
with a service-connected leg amputation might have died as the result 
of a slip and fall accident. A veteran who was bedridden due to the 
service-connected residuals of a stroke might have died in a home fire. 
The literal cause of death might be the injuries sustained in the 
accident or fire, but the evidence might show that the impaired 
mobility due to the service-connected disabilities caused the accident 
in one case and prevented the veteran from escaping from the fire in 
the other. In both cases, the veteran would not have died in the 
absence of the service-connected disability and determining that the 
death is service connected would be appropriate under the proposed 
test.
    However, there are circumstances where death would be service 
connected under the provisions in current Sec.  3.312(c) even though 
such death would not satisfy the ``in the absence of'' test described 
above. Specifically, current Sec.  3.312(c)(3) and (4) provide:

    (3) Service-connected diseases or injuries involving active 
processes affecting vital organs should receive careful 
consideration as a contributory cause of death, the primary cause 
being unrelated, from the viewpoint of whether there were resulting 
debilitating effects and general impairment of health to an extent 
that would render the person materially less capable of resisting 
the effects of other disease or injury primarily causing death. 
Where the service-connected condition affects vital organs as 
distinguished from muscular or skeletal functions and is evaluated 
as 100 percent disabling, debilitation may be assumed.
    (4) There are primary causes of death which by their very nature 
are so overwhelming that eventual death can be anticipated 
irrespective of coexisting conditions, but, even in such cases, 
there is for consideration whether there may be a reasonable basis 
for holding that a service-connected condition was of such severity 
as to have a material influence in accelerating death. In this 
situation, however, it would not generally be reasonable to hold 
that a service-connected condition accelerated death unless such 
condition affected a vital organ and was of itself of a progressive 
or debilitating nature.

    While stated in different ways, the basic concept in these 
provisions is the same. Even though a veteran may have died of a 
nonservice-connected disability, VA may grant service connection for 
the cause of death if the service-connected disability was so 
debilitating that death was materially hastened. VA proposes to 
preserve this concept in Sec.  5.504(c)(2), together with the 
presumption that such a degree of debilitation is presumed where a 
service-connected disability rated as 100% disabling affects vital 
organs. ``Vital organs'' are also defined in this proposed paragraph as 
``those organs necessary to sustain life, including the heart, lungs, 
central nervous system, liver, and kidneys.'' (``The word `vital' means 
necessary to life or essential.'' Federal Tel. & Radio Corp. v. 
Associated

[[Page 61331]]

Tel. & Tel. Co., 169 F.2nd 1012, 1015 (3rd Cir. 1948). ``[V]ital * * * 
1. Of or characteristic of life: vital processes. 2. Necessary to the 
continuation of life; life sustaining: vital functions.'' The American 
Heritage Dictionary of the English Language 1433 (New College Ed. 
1976). ``[V]ital * * * necessary to or pertaining to life.'' Dorland's 
Illustrated Medical Dictionary 1834 (28th ed. 1994).)

Dependency and Indemnity Compensation--General

5.510 Dependency and indemnity compensation--basic entitlement.

    Proposed Sec.  5.510 is the first of several sequential proposed 
regulations explaining DIC benefits for a veteran's surviving spouse, 
children, and parents. It serves as an introduction to the DIC program 
and outlines basic requirements for DIC entitlement. It includes 
provisions from current 38 CFR 3.5(a), (b), and (d).
    Proposed paragraph (a) defines DIC and is derived from current 
Sec.  3.5(a).
    Proposed Sec.  5.510(b) sets out the three statutory bases for the 
award of DIC: (1) Service-connected death during or after service (38 
U.S.C. 1310, ``Deaths entitling survivors to dependency and indemnity 
compensation''); (2) service-connected disability that had been rated 
as totally disabling for certain specified periods of time prior to the 
veteran's death (38 U.S.C. 1318, ``Benefits for survivors of certain 
veterans rated totally disabled at time of death''); and (3) death due 
to incidents occurring during certain VA-furnished medical, training, 
rehabilitation, or compensated work therapy services (38 U.S.C. 1151, 
``Benefits for persons disabled by treatment or vocational 
rehabilitation'').
    Proposed paragraph (b) also includes provisions from current Sec.  
3.5(b). Current Sec.  3.5(b) includes three different date of death 
requirements for basic entitlement to DIC based upon the interplay 
between DIC and a benefit program called death compensation that DIC 
replaced in the 1950s. VA data shows that fewer than 1,000 persons, 
primarily the parents of veterans, are still receiving death 
compensation benefits. On the other hand, more than 300,000 persons are 
receiving DIC benefits. Detailed information about the relationship 
between DIC and death compensation was desirable years ago when current 
Sec.  3.5 was drafted and VA was transitioning between the two death-
benefit programs. However, a simpler explanation of DIC benefits will 
now be more useful to most claimants and VA personnel adjudicating 
claims. Therefore, we propose to place death compensation rules in a 
portion of subpart G dealing with death compensation (published as part 
of a separate NPRM, see 69 FR 59072, Oct. 1, 2004) and include only 
essential information about the relationship between DIC and death 
compensation in VA's DIC regulations, such as proposed Sec.  5.510.
    Specifically, we state in proposed Sec.  5.510(b)(1)(ii) that ``DIC 
is not payable unless the service-connected death occurred after 
December 31, 1956, except in the case of certain individuals receiving 
or eligible to receive death compensation who elect to receive DIC in 
lieu of death compensation.''. The few users seeking more information 
about death compensation and the election of DIC in lieu of death 
compensation would be referred to other sections that address those 
topics.
    In keeping with the simplification of Sec.  5.510 in comparison 
with current Sec.  3.5, we have intentionally not repeated in Sec.  
5.510 some of the details in current Sec.  3.5(b)(2) concerning 
entitlement to elect DIC in lieu of death compensation. Current Sec.  
3.5(b)(2) provides that one of the bases for DIC entitlement is that 
``[d]eath occurred prior to January 1, 1957, and the claimant was 
receiving or eligible to receive death compensation on December 31, 
1956 (or, as to a parent, would have been eligible except for income), 
under laws in effect on that date or who subsequently becomes eligible 
by reason of a death which occurred prior to January 1, 1957.'' 
Instead, as previously indicated, we propose to merely state in Sec.  
5.510(b)(1)(ii) that ``DIC is not payable unless the service-connected 
death occurred after December 31, 1956, except in the case of certain 
individuals receiving or eligible to receive death compensation who 
elect to receive DIC in lieu of death compensation.'' We intend no 
substantive change. A person could not be ``receiving, or eligible to 
receive, death compensation'' unless they were ``receiving or eligible 
to receive death compensation on December 31, 1956 `` under laws in 
effect on that date or * * * subsequently bec[a]me[] eligible by reason 
of a death which occurred prior to January 1, 1957.'' And, as also 
mentioned previously, rules concerning death compensation entitlement 
are addressed elsewhere in proposed part 5. The same is true of rules 
concerning the election of DIC in lieu of death compensation.
    Finally, in paragraph (d) of proposed Sec.  5.510, we state that 
DIC for parents is subject to income limitations. This provision is 
derived from current 38 CFR 3.251(a).

5.511 Special monthly dependency and indemnity compensation.

    Proposed Sec.  5.511, based on current 38 CFR 3.351(a)(3), (a)(4), 
(b), (c), and (e), provides for payment of increased DIC benefits to a 
surviving spouse or parent based on the need for regular aid and 
attendance or being permanently housebound.

5.512 Eligibility for death compensation or death pension instead of 
dependency and indemnity compensation.

    Proposed Sec.  5.512 explains that VA may not pay death 
compensation or death pension to a person eligible for DIC based upon a 
death occurring after December 31, 1956, subject to the right of a 
surviving spouse to elect death pension in lieu of DIC. This proposed 
section is based on current Sec.  3.5(c), which is, in turn, based on 
38 U.S.C. 1317, ``Restriction on payments under this chapter.''
    Current Sec.  3.5(c) states:

    No person eligible for dependency and indemnity compensation by 
reason of a death occurring on or after January 1, 1957, shall be 
eligible by reason of such death for death pension or compensation 
under any other law administered by the Department of Veterans 
Affairs, except that, effective November 2, 1994, a surviving spouse 
who is receiving dependency and indemnity compensation may elect to 
receive death pension instead of such compensation.

    The November 2, 1994, date referenced in current Sec.  3.5(c) is 
the effective date of Pub. L. 103-446, which added subsection (b) to 38 
U.S.C. 1317, thereby permitting DIC recipients to elect to receive 
death pension instead of DIC. See Veterans' Benefits Improvements Act 
of 1994, Pub. L. 103-446, section 111(a), 108 Stat. 4645, 4654. 
Including the date was helpful during the time when the right to elect 
death pension in lieu of DIC was new. However, we propose to omit it 
from this revision inasmuch as elections are prospective and its 
inclusion is no longer necessary.
    Current Sec.  3.5(c) speaks of the right of a surviving spouse 
``receiving'' DIC to elect death pension. However, under 38 U.S.C. 
1317(b), the surviving spouse need only be eligible for DIC in order to 
make this election. Proposed Sec.  5.512(b) uses the statutory term. No 
other substantive changes are proposed.

[[Page 61332]]

Dependency and Indemnity Compensation--Eligibility Requirements and 
Payment Rules for Surviving Spouses and Children

5.520 Dependency and indemnity compensation--time of marriage 
requirements for surviving spouses.

    A surviving spouse must meet various requirements in order to 
qualify for DIC benefits. These include requirements that the date of 
his or her marriage to the veteran, or the length of that marriage, 
must fall within certain parameters. Proposed Sec.  5.520, based on 
portions of current Sec.  3.54 and applicable statutory provisions, 
sets out the time of marriage requirements and the ways in which the 
requirements can be met.
    The first way in which the requirements can be met is set out in 
the introduction to current Sec.  3.54, which explains that a surviving 
spouse who married the veteran before, or during, the veteran's service 
may qualify for DIC. Three alternative time-of-marriage requirements, 
which apply when the veteran and the surviving spouse were married 
after the veteran's separation from service, are listed in current 
Sec.  3.54(c). These alternative requirements are that the surviving 
spouse was married to the veteran:

    (1) Before the expiration of 15 years after the termination of 
the period of service in which the injury or disease causing the 
death of the veteran was incurred or aggravated, or
    (2) For 1 year or more, or
    (3) For any period of time if a child was born of the marriage, 
or was born to them before the marriage.

    This list in current Sec.  3.54(c) is based on 38 U.S.C. 1304, 
``Special provisions relating to surviving spouses,'' which applies to 
a surviving spouse who is seeking DIC under 38 U.S.C. 1310. However, 
current Sec.  3.54 does not explain time of marriage requirements for 
surviving spouses who married the veteran after service and who are 
seeking DIC under 38 U.S.C. 1151 or 38 U.S.C. 1318. Proposed Sec.  
5.520 explains how the time of marriage requirement applies to claims 
for DIC under any of the three statutory bases for DIC.
    The time of marriage requirements are not specifically addressed in 
38 U.S.C. 1151. However, subsection 1151(a) provides that ``[DIC] under 
chapter 13 of this title shall be awarded for a qualifying * * * death 
of a veteran in the same manner as if such * * * death were service-
connected.'' (Emphasis added.) Therefore, we conclude that the three 
methods in current Sec.  3.54(c) for meeting the time of marriage 
requirements under 38 U.S.C. 1310 also apply to cases in which DIC is 
awarded based upon the provisions of 38 U.S.C. 1151. Proposed Sec.  
5.520(b) includes this information.
    Proposed Sec.  5.520(b)(1)(ii) resolves an ambiguity in the current 
regulation. As noted above, the time of marriage requirements for 
eligibility for DIC under 38 U.S.C. 1151 or 1310 may be met if the 
surviving spouse was married to the veteran for one year or more. We 
propose to state that multiple periods of marriage can be added 
together to meet this 1-year marriage requirement. The one-year 
marriage requirement is designed to prevent abuse by sham ``death bed'' 
marriages to obtain benefits. We believe that there is much less risk 
of such abuse where the veteran and the surviving spouse have had an 
ongoing close relationship demonstrated by previous marriage. This 
information has been included to fill a gap in the current regulation.
    We believe that this interpretation, favorable to surviving 
spouses, is reasonable. The statute authorizing the time of marriage 
requirement, 38 U.S.C. 1304, does not prohibit adding multiple periods 
of marriage together. On the other hand, 38 U.S.C. 1318 does provide 
such a prohibition. Specifically, 38 U.S.C. 1318(c)(1) provides that 
benefits may not be paid under that section to a surviving spouse of a 
veteran unless ``the surviving spouse was married to the veteran for 
one year or more immediately preceding the veteran's death.'' Inasmuch 
as Congress prohibited combining multiple marriages together to meet 
the 1-year marriage requirement in 38 U.S.C. 1318 and did not do so in 
38 U.S.C. 1304, we believe it was Congress' intent not to apply the 
prohibition to other claims for DIC. Norman J. Singer, Sutherland On 
Statutory Construction Sec.  46:06 (6th ed. 2000) (``when the 
legislature uses certain language in one part of the statute and 
different language in another, the court assumes different meanings 
were intended. In like manner, where the legislature has carefully 
employed a term in one place and excluded it in another, it should not 
be implied where excluded.''). Therefore, we have included in proposed 
Sec.  5.520(b)(1)(ii) that multiple periods of marriage may be combined 
to meet the 1-year marriage requirement for claims of DIC based on 38 
U.S.C. 1151 or 1310.
    Proposed Sec.  5.520(b)(2) describes the methods of meeting the 
time of marriage requirements under 38 U.S.C. 1318, which only provides 
for two methods of meeting the requirements. Following the statute, 
proposed paragraph (b)(2) omits the provision for marriage ``[b]efore 
the expiration of 15 years after the termination of the period of 
service in which the injury or disease causing the death of the veteran 
was incurred or aggravated.''
    Concerning the one-year marriage requirement in claims based on 38 
U.S.C. 1318, we have previously noted that the statute provides that 
benefits may not be paid to a surviving spouse unless ``the surviving 
spouse was married to the veteran for one year or more immediately 
preceding the veteran's death.'' 38 U.S.C. 1318(c)(1) (emphasis added). 
VA interprets this provision to mean that multiple periods of marriage 
cannot be added together to meet the 1-year marriage requirement for 
purposes of eligibility for DIC under 38 U.S.C. 1318. In order to 
satisfy the one-year marriage requirement, the veteran and spouse must 
have been married continuously for a year or more immediately prior to 
the veteran's death. Therefore, we propose to add the requirement for 
continuity of the marriage during the year prior to the veteran's death 
to paragraph Sec.  5.520(b)(2).

5.521 [Reserved]

    VA proposes to set out in Sec. Sec.  5.521 and 5.522 the rules 
concerning the payment of DIC benefits to the survivors of certain 
deceased veterans who received, or were entitled to receive, 
compensation for service-connected disability rated as totally 
disabling. These rules would be based on the statute that authorizes 
DIC on this basis, 38 U.S.C. 1318, and VA's implementing regulation, 
current Sec.  3.22.
    However, we propose to simply reserve Sec.  5.521 for purposes of 
this NPRM. VA is undertaking a separate rulemaking to respond to a 
decision by the United States Court of Appeals for the Federal Circuit 
in National Organization of Veterans' Advocates, Inc. v. Secretary of 
Veterans Affairs, 314 F.3d 1373 (Fed. Cir. 2003). See 69 FR 62229 
(2004). This proposed rulemaking involves revision of provisions of 
current Sec.  3.22(b), which defines ``entitled to receive'' for 
purposes of determining whether a veteran's survivors are entitled to 
benefits under 38 U.S.C. 1318. See 38 U.S.C. 1318(b). We propose to 
reserve Sec.  5.521 as the eventual location for a part 5 regulation 
that will repeat the material in Sec.  3.22(b) after the final 
amendment of Sec.  3.22(b) is adopted.

5.522 Dependency and indemnity compensation benefits for survivors of 
certain veterans rated totally disabled at time of death--offset of 
wrongful death damages.

    VA is required by 38 U.S.C. 1318(d) to offset the value of money or 
property

[[Page 61333]]

a surviving spouse or child may receive ``pursuant to an award in a 
judicial proceeding based upon, or a settlement or compromise of, any 
cause of action for damages'' for the death of a veteran against any 
death benefits to which the spouse or child may be entitled under 38 
U.S.C. 1318. Current Sec.  3.22(e) implements this requirement. In 
proposed Sec.  5.522, the part 5 replacement for Sec.  3.22(e), we have 
restructured this material in more readily understandable language and 
to provide additional information about how the offset should be 
calculated.
    An opinion by the United States Court of Appeals for Veterans 
Claims in Bryan v. West, 13 Vet. App. 482 (2000), shows the need for 
regulatory guidance concerning how offsets are calculated. In Bryan the 
Court remanded a case to the Board of Veterans' Appeals in order for 
the Board to decide the following matters with respect to a 38 U.S.C. 
1318(d) offset: ``(1) How much money was received by a plaintiff other 
than [the VA claimant]; (2) Whether the money received by such a 
plaintiff was received ultimately by [the VA claimant] through estate 
distribution; (3) If so, whether such distribution was considered 
received by [the VA claimant]; and (4) Whether the money received by 
her attorney was, in contemplation of law, `received' by [the VA 
claimant].'' Proposed Sec.  5.522 addresses these and other practical 
issues.
    Proposed Sec.  5.522(c)(1) incorporates a concept favorable to VA 
claimants (because it would reduce the amount of offset) from a 1997 
Precedent Opinion by VA's General Counsel, VAOPGCPREC 3-97, which 
states:

    Section 1318(d) of title 38, United States Code, requires offset 
against survivors' benefits payable under section 1318 of amounts 
received by the beneficiary pursuant to an award, settlement, or 
compromise based on a claim for damages resulting from the death of 
a veteran, i.e., the types of damages typically recoverable under 
state wrongful death statutes, but does not require offset of 
amounts received pursuant to a survival action as compensation for 
injuries suffered by the veteran prior to his or her death.

    Legislative history is of some assistance in determining other 
aspects of how the offset should be calculated. VAOPGCPREC 3-97 
includes the following information, at paragraph 10:

    The legislative history indicates that the purpose of providing 
DIC in the case of such non-service-connected deaths was to provide 
a measure of income to the surviving spouse or child to replace the 
support lost when the veteran died. In a report prepared during 
consideration of that legislation, the Senate Committee on Veterans' 
Affairs stated that ``[t]he appropriate Federal obligation to these 
survivors should, in the Committee's view, be the replacement of the 
support lost when the veteran dies.'' S. Rep. No. 1054, 95th Cong., 
2d Sess. 28 (1978), reprinted in 1978 U.S.C.C.A.N. 3465, 3486. 
Similarly, the basis for authorizing such benefits was described 
during floor debates as follows:
    The purpose of those benefits is to provide income security to 
the survivors. This reflects the Committee's view that the veteran's 
total disability endured over a lengthy period of time, necessarily 
results in a substantial impairment of the veteran's ability to 
provide for his or her survivors; and that the primary purpose of 
the new benefit is to compensate for that impairment.

124 Cong. Rec. S12687 (daily ed. Aug. 7, 1978) (statement of Sen. 
Cranston). * * *

    Particularly in view of Congressional intent that 38 U.S.C. 1318 
benefits are to provide for the survivors' support, we propose to look 
to whether the money or property received is actually available to meet 
the claimants' needs and obligations, rather than the technical form in 
which the money or property is passed to the claimant, in calculating 
the offset under 38 U.S.C. 1318(d). In this regard, we propose to adopt 
the rationale in paragraph 13 of VAOPGCPREC 3-97:

    13. Finally, we note that the reference in section 1318(d) to 
amounts received ``pursuant to'' an award, settlement, or compromise 
may be intended to indicate that the surviving spouse or child need 
not have been an actual party to the action, but need only have 
received money or property of value ``pursuant to'' the action. Many 
state statutes require wrongful death actions to be brought by a 
representative of the estate or other designated representative, 
although such actions are for the exclusive benefit of the actual 
beneficiaries. 22A Am. Jur. 2d Death Sec.  399. The phrase 
``pursuant to'' may be read as clarifying that offset will be 
required against amounts received by the actual beneficiaries 
pursuant to a wrongful death action regardless of whether the 
beneficiaries were individually named as parties in the award, 
settlement, or compromise.

    Under proposed Sec.  5.522(c)(2), any amounts used to pay a third 
party to satisfy a legal obligation of the claimant would be considered 
as ``received'' by the claimant regardless of whether the claimant 
receives the damages and pays the third party directly or whether the 
third party is paid on the claimant's behalf by the party liable for 
the damages. This view is consistent with long-standing VA policy that 
attorney's fees, court costs and other expenses incident to a civil 
claim are not deductible from the total amount awarded or accepted. For 
example, current Sec.  3.22(g) provides that when a VA beneficiary 
reports money or property received, ``[e]xpenses incident to recovery, 
such as attorney's fees, may not be deducted from the amount to be 
reported.'' However, in providing that damages going to pay attorney's 
fees and costs be included in the offset, proposed Sec.  5.522(c)(2) 
limits the amount included to the particular claimant's proportional 
share of fees and costs in cases where the recovered damages are 
payable to multiple parties.
    The 38 U.S.C. 1318(d) offset would not normally include damages 
payable to another person or entity. However, because the focus of 38 
U.S.C. 1318(d) is on who receives the money or property, that exclusion 
does not apply where the other person or entity is merely acting as a 
conduit to pass the money or property recovered to the claimant. For 
example, a wrongful death award paid to a veteran's estate that is then 
distributed to the claimant, or paid into a trust for the benefit of 
the claimant, would be included in the offset. We propose to address 
this situation in Sec.  5.522(c)(3).
    Another addition to proposed Sec.  5.522 provides for determining 
the date of the valuation of property for purposes of this section. 
Current Sec.  3.22(g) requires, in part, that a beneficiary receiving 
DIC under 38 U.S.C. 1318 report the value of property received as 
damages for the death of a veteran at fair market value, but is silent 
as to the time of valuation of such property. The statute, 38 U.S.C. 
1318, is also silent as to the time of valuation. We propose to fill 
this gap by providing, in Sec.  5.522(c)(5), that the property be 
valued at its fair market value at the time the claimant receives it. 
We believe that this is most consistent with the expressed 
Congressional intent that these DIC benefits serve to provide for the 
support of the veteran's survivors.
    Proposed paragraph (d), based on current Sec.  3.22(g), states the 
DIC beneficiary's obligation to report wrongful death recoveries to VA. 
We propose to add that overpayments created by failure to report will 
be subject to recovery if not waived. The instructions for VA Form 21-
534, ``Application for Dependency and Indemnity Compensation, Death 
Pension and Accrued Benefits by a Surviving Spouse or Child (Including 
Death Compensation if Applicable),'' notify claimants of the reporting 
requirement described in proposed Sec.  5.522(d).

5.523 [Reserved]

    As indicated in the discussion concerning reservation of Sec.  
5.521, VA is undertaking a separate rule-making to respond to a 
decision by the United

[[Page 61334]]

States Court of Appeals for the Federal Circuit in National 
Organization of Veterans' Advocates, Inc. v. Secretary of Veterans 
Affairs, 314 F.3d 1373 (Fed. Cir. 2003). See 69 FR 62229 (2004). That 
proposed rulemaking involves revision of provisions of current Sec.  
3.5(e) relating to the rates of DIC payable to surviving spouses and 
moving those provisions into new Sec.  3.10. We propose to reserve 
Sec.  5.523 as the eventual location for the part 5 regulation that 
will repeat the material in proposed Sec.  3.10 when Sec.  3.10 is 
adopted as a final rule.

5.524 Awards of dependency and indemnity compensation benefits to 
children when there is a retroactive award to a school child.

    Under 38 U.S.C. 1313, ``Dependency and indemnity compensation to 
children,'' DIC is payable to eligible children when there is no 
surviving spouse entitled to DIC. The total amount payable to the 
children, which varies according to the number of eligible children, is 
divided and paid to the children in equal shares. However, there is an 
exception to the equal-share rule that applies to a retroactive payment 
to a child whose entitlement terminated when he or she reached eighteen 
years of age, but who later reestablished entitlement because he or she 
is pursuing a course of instruction at an approved educational 
institution.
    We have addressed rules concerning this exception, currently found 
in Sec.  3.650(c), in proposed Sec.  5.524. In an