Chronic Illness Revocable Trust Provisions

Chronic Illness Revocable Trust Provisions

By: Martin M. Shenkman, CPA, MBA, JD

Sample Revocable Living Trust Provisions for those with Chronic Illness:

  • Distributions [Selected provisions]
  • Distributions During Grantor's Lifetime - Grantor Not Disabled

i. During Grantor's lifetime when the Grantor is not disabled:

  • The Trustee shall hold the Trust Estate, in trust, to pay or apply to or for the benefit of any one or more of the following persons: Grantor, Grantor's children (which shall include *CHILDREN-NAMES, and any children born or legally adopted after the execution of this Trust Agreement, collectively "Children", individually "Child"), but not Grantor's grandchildren or later descendants (collectively these are referred to as "Recipients"). The net income of the Trust shall be applied in amounts, whether equal or unequal, as the Trustee (or the Independent Trustee where applicable), in the exercise of discretion, may consider desirable for the health, education, support or maintenance, to maintain the Recipient's in accordance with the Standard for Payment defined below. The judgment of the Trustee, as to the propriety and amount of such payment, shall be conclusive.
  • It is the express desire of the Grantor that the Trustee apply income liberally, and primarily for the care of Grantor and in a manner to maintain Grantor’s historic lifestyle and activities to the extent feasible and practical in light of Grantor’s current and future health status. These decisions shall be made without concern for the retention of any monies for future or remainder beneficiaries.
  • The Trustee may accumulate any of the net income not paid or applied for the benefit of the Recipients, and add it to the principal of this Trust at least annually and thereafter to hold, administer and dispose of it as a part of the Trust Estate.

ii. Distributions During Grantor's Life - Grantor Disabled:

  • During Grantor's disability, as defined below, the Trustee shall administer the Trust Estate for the care of Grantor, and shall expend any amounts of Trust income or principal as the Trustee, in the exercise of discretion, shall deem necessary or advisable in accordance with the following provisions.
  • During any disability of the Grantor, the Grantor directs that the no restrictions shall apply as to distributions to or for the benefit of Grantor. Grantor directs that during Grantor's disability:
     a. Grantor directs that Grantor have the best medical and health care provided to Grantor and that the Trustee shall distribute Trust income and principal accordingly. The “term” best shall be defined, to the extent feasible and applicable based on the caliber of medical care that Grantor sought prior to being deemed disabled under the provisions of this Trust, adjusted to reflect the current status of Grantor’s health. Notwithstanding the foregoing, the Trustee is directed to pay for and to the extent feasible actively seek out experimental and new medical therapies to help Grantor’s condition, including but not limited to alternative treatments that have received positive reviews in medical literature.
     b. Grantor directs that every effort reasonable be made to enable Grantor to continue to reside in Grantor's personal residence for as long as practical, and that every reasonable effort be made to accommodate Grantor's health care needs in such home rather than relocating to a health care facility.
     c. In the event that Grantor must be relocated to any nursing or health care facility, Grantor directs that every effort possible be made that any such facility:
       i. Be operated under *RELIGIOUS PREFERENCE auspices.
       ii. Have *DESCRIBE food service facilities, and where possible have, or be within reachable distance to a *RELIGION house of worship.
     d. Notwithstanding anything in this Trust to the contrary, any restrictions on distributions provided in the provision below governing “Distributions To A Person Under A Disability”, shall not apply to restrict any distributions to Grantor when Grantor is disabled, or following any period of Grantor's disability [Note: Many trust documents include additional restrictions on distributions to a beneficiary who is disabled. In this context those would be generic provisions to apply in the event an heir who receives funds from the trust is disabled. Those provisions would not be tailored to address your situation, so they are made inapplicable to you].
  • Short Duration Disability From Which Recovery is Anticipated.
     a. Because Grantor is living with *CHRONIC-ILLNESS it is anticipated that periodically Grantor may suffer a short term attack or exacerbation. The Grantor directs that, barring an emergency situation which cannot await Grantor’s recuperation or recovery from such attack or exacerbation, that the disability provisions in this Trust shall not be applied so long as the period for which it is anticipated that Grantor will not be able to reasonably participate in the management of this Trust shall be less than Thirty (30) days.  This condition shall be referred to as an “Ignored Disability”.
     b. However, in the event that an institutional co-trustee is serving and such institutional trustee [Note: Modify if you are not using an institution – but consider if you wish to grant this authority to a non-institutional trustee] determines in its absolute discretion that Grantor must be replaced to address an important or emergency situation.
     c. In the event of Grantor being subject to an Ignored Disability, a confirmation by any of Grantor’s attending physicians in writing that Grantor is subject to an Ignored Disability as defined above shall suffice to confirm such status.
  • Determination of Grantor's Disability.
     a. The Grantor shall be deemed to be disabled when  Grantor is unable to manage Grantor's affairs and property effectively for reasons such as mental illness, mental deficiency, physical illness or disability, advanced age, chronic use of drugs, chronic intoxication, confinement, kidnapping, detention by a foreign power or disappearance, or for any other reason allowable by statute or law. Grantor expressly states that Grantor presently has *CHRONIC-ILLNES and has the following conditions and symptoms *DESCRIBE-SYMPTOMS. Further, Grantor anticipates that *FUTURE-SYMPTOMS are likely to occur. So long as Grantor, with the assistance and guidance of the Institutional Co-Trustee [Note: If you don’t use an institutional co-trustee modify and re-think this] is able to reasonably participate in the management and decision making under this trust, regardless of *DESCRIBE ACCEPTABLE LIMITATIONS, shall remain a co-Trustee hereunder and shall not be deemed disabled. [Note: The objective is to tailor the definition of “disability” so that you are only replaced as a trustee when you really should be. Unless you address the nuances of your situation, that decision won’t be made at the appropriate time].
     b. In addition to any other method acceptable to any third party relying upon the effectiveness of the appointment of any Trustee or successor Trustee, or any method allowed by law, it shall be deemed conclusive proof that the appointment of such person is effective upon a written statement being executed by each of Grantor’s neurologist [OTHER SPECIALIST] and primary care physician  or internist has become physically or mentally incapacitated, regardless of cause and regardless of whether or not there has been an adjudication of incompetence, mental illness, or need for a committee, conservator, guardian or other personal representative.
  • Successor Trustee When Grantor Disabled. Where Grantor is disabled, the next person selected from the provision below Additional or Successor Trustee shall serve as co-Trustee in place of Grantor. [Note: This is one of the most important decisions. Who should be in charge of your trust when you cannot serve as trustee or co-trustee?].
  • Grantor's Recovery from Disability. The Grantor shall be deemed to have recovered from any such disability when the other then serving Trustee receives written certification from Two (2) physicians regularly attending the Grantor, at least One (1) of which physicians is board certified in the specialty most closely associated with the alleged disability, that the Grantor is no longer physically or mentally incapacitated, and that Grantor is again able to manage his or her own financial affairs. The Trustee shall not be liable to any person, including Grantor, for the removal of the Grantor as a Trustee, if he or she acted in good faith on the certificates obtained in accordance with this provision. Upon such recovery Grantor shall serve as a co-trustee with any trustee theretofore serving. [Note: This is a common used provision but may not apply in the context of your situation as once your cognitive ability has declined to the point where you are not able to serve as a co-trustee, this provision will never apply. In the event your illness is marked by intermittent attacks or exacerbations, this cumbersome process of declaring you “disabled” and the “recovered” makes little sense to repeat].
  • Charitable Bequest Following Grantor’s Death. The Trustee shall distribute an amount equal to AMOUNT Dollars ($*.00) to CHARITY-NAME from the Trust Estate following the death of Grantor. The Trustee shall have the power and discretion to fund this gift wholly or partly in cash or kind, and to select the assets which shall constitute this gift. However, the Trustee shall determine the value all assets so selected, and assets comprising the Trust Estate. [Note: Give consideration to making some gift to the charity that is devoted to serving those with the illness you have and funding research to cure that disease. Even a small gift will enlarge the roster of those making such commitments and may thereby enhance overall fund raising efforts, even current fund raising].
  • Grantor's Investment Goals For Trust Estate.
  • Grantor hereby communicates Grantor's general investment goals to the Trustee. Grantor states that *DESCRIBE-INVESTMENT POLICY. [Note: See Chapter # for a discussion of investment planning for you in light of your chronic illness. Your investment goals may differ from those of someone without your health considerations. But it is impossible without further details and planning to understand how it should differ. If you establish a living trust your financial adviser should help you address this.].
  • In formulating any investment policy or making any decision with respect to any assets, and assets relating to any closely held or family business and investment interests, it is Grantor's direction and intent that such interests may be held in the reasonable judgment of the Trustee. [Note: if you have a business you want retained, it should be addressed].
  • Grantor expressly directs the Trustee endeavor to retain Grantor’s personal residence located at HOME-ADDRESS if feasible for Grantor to remain there. Grantor does not make this an absolute prohibition against sale in light of the possibility that Grantor may benefit from residing in an assisted living or other facility. Grantor recommends that the Trustee consider Grantor’s strong desire, but not mandate, that Grantor remain in said home, the modifications previously made to the home to accommodate Grantor and an future aide or companion, and other factors.
  • Grantor expressly authorizes, as an exception to the Prudent Investor Act, the Trustees to invest a portion of the trust estate in gift annuities provided through the auspices of CHARITY-NAME even if these gift annuities are not an optimal or advisable investment allocation. Grantor authorizes the Trustees to consider Grantor’s personal goals of benefit such charity in its research efforts to find a cure for CHRONIC-DISEASE and other efforts through the use of gift annuities. [Note: Gift annuities can be an important source of fundraising for many of the charities devoted to combating various chronic illnesses. However, a trustee may be precluded from purchasing such annuities by the Prudent Investor Act, a law which directs how trustees should invest trust assets. If you wish to permit this a specific exception to protect and direct the trustees may be necessary].
  • Trustee Decision Making and Authority.
  • Any authority, discretion or power granted to or conferred upon the Co-Trustees by this Trust may be exercised by any such Trustees who shall be acting under this Trust Agreement at such time, or by such one of them who shall be so designated by an instrument in writing executed by any other Trustee.
  • Any one of the Co-Trustees acting alone and without any requirement for joint action is authorized and permitted to complete alone any ministerial and administrative act, including but not limited to routine banking, investment, and brokerage transactions, except that when an institutional trustee is serving as a Co-Trustee hereunder only such Institutional Co-Trustee shall make investment decisions. It is the express intent of this provision to permit the Grantor when not disabled to continue to manage routine matters within the Grantor’s purview, and to permit the Co-Trustee other than the Grantor to manage routine matters when the Grantor is subject to an Ignored Disability.
  • This paragraph, however, shall not be interpreted or applied in a manner that violates any restriction in the provisions governing an Independent Trustee, person under legal obligation. Therefore, where the provisions governing an Independent Trustee apply, the Independent Trustee alone may make any such decisions or take any actions reasonably within the purview of such Independent Trustee.
  • Where there are more than Two (2) Trustees at anytime the decision of a majority of them shall control and shall be binding on all of the Trustees.
  • If Two (2) or more Trustees are acting hereunder, the following provisions shall apply where the context permits:
    • The corporate or institutional Trustee shall have custody of the Trust Estate and of the books and records of the Trust.
    • With respect to any matter as to which the Trustees have joint authority, a Trustee from time to time may delegate any or all of that Trustee's rights, powers, duties, and discretion as Trustee to the other Trustee, with the consent of the latter.
    • The Trustee may establish bank accounts and it shall be assumed unless specified otherwise in the application for such account that checks or drafts may be drawn on, or withdrawals made from, any such account on the individual signature of either Trustee.
    • A Trustee shall be presumed to have approved a proposed act or decision to refrain from acting if that Trustee fails to indicate approval or disapproval therefor within Thirty (30) days after written Notice requesting approval.

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