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Revocable Living Trusts Need to be Revised to
Permit Smooth Succession
A Revocable Living Trust is a trust created during the lifetime of the grantor, usually providing for the grantor to serve as trustee for as long as he is able to manage his financial affairs. During the lifetime of the grantor, the trust usually provides for distributions of income and principal to the grantor, who is also the beneficiary of the trust.
A successor trustee named in the trust agreement takes over responsibility for the management of the trust, if the grantor can no longer serve as trustee. The mechanism for the successor trustee to take responsibility usually provides for certification of the original trustee’s disability by one or more of his personal or attending physicians, or a similar procedure. Obviously, for a physician to certify the incapacity of his patient, he needs to review the patient’s medical records.
Here’s the new development: In 1996, Congress passed the Health Insurance Portability and Accountability Act, (“HIPAA”) to better ensure the privacy of a patient’s medical records. Final regulations became effective earlier this year, which mandate that any hospital or doctor (among others) require a specific authorization for the release of a patient’s medical records before they are released to anyone. This is relatively simple, if a patient admits himself for elective non-emergency treatment and the need for the release arises in non-emergency circumstances. But, in those circumstances, it would not be likely that the patient is threatened with a disability so severe that he would not be able to continue acting as a trustee after he completes treatment. The greater danger occurs when the grantor enters the hospital unable to sign a medical release, or later suddenly becomes incapacitated. Since it is impossible to know when that might happen, advanced preparation is essential in all cases.
The way to prepare for these emergency situations is to have specific language in the revocable trust authorizing the release of the medical records to the named successor trustee. For existing revocable trusts, this means that an amendment to the trust must be executed by the grantor. Since almost all revocable trusts are also amendable, there should be little difficulty in actually making the legal changes. The only problem is probably just to do it. For new revocable trusts, obviously the terms of the trust must be revised to permit the release of medical records of the original trustee to the successor trustee.
The revocable trust is a very useful tool in the estate planner’s toolbox. We have prepared revocable trusts for our client, when they have been appropriate. Now, with the changes in the privacy regulations we have discussed, we are revising existing trusts to conform to the new requirements. If you have a revocable trust and need an amendment to it to bring the provisions in compliance with HIPAA, please feel free to call us for an appointment.
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Uniondale, NY 11556
Telephone
(516) 522-2575
Copyright © 2007 STEPHEN C. SILVERBERG, PLLC All rights reserved.
Last modified: December 27, 2007
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