Do you plan to list people who have an addiction as beneficiaries of your assets? You might have seen them repeat patterns of impaired decisions, poor judgment, and subsequent consequences that were anything but favorable. The lack of self-regulation paired with little to no self-control can often result in unpredictable mood shifts and omnipresent instability.
Informing your lawyer about the circumstances
As a result of these behaviors and mindsets, you may not be interested in telling your lawyer about your loved one’s addiction when you are setting up your trust account, even if the subject of whether you have any concerns regarding the health or the behavior of any of your beneficiaries. This topic tends to arise when discussing current and past family dynamics.
Even though it might be uncomfortable to disclose this information, it is in your best interest to do so. At the end of the day, you’ll want to avoid the ill-guided dispersal of your family’s wealth.
This is especially important if your family member happens to be one of over 10 million people to date who have an opioid addiction. Maybe your family member is one of the more than 2 million people who are addicted to methamphetamines. If neither of those situations applies, then perhaps your family member is among the upwards of 14 million adults with an alcohol dependency.
If these circumstances are applicable to your family member, then it is advisable to take his or her addiction into consideration when creating a trust. It is certainly possible to put together a trust account that will prevent the money from being spent in ways that further propel an addiction.
While it can be rather complicated to do, it can be done. If you want to protect your heirs or your beneficiaries from using their inherited funds to fuel their addictions, you will need to notify your estate planning attorney of the situation at hand.
From there, your lawyer will likely request permission from you so that he or she may consult with care professionals from the very beginning of the estate planning process. Since lawyers are not always educated on the specifics of addiction or how to best assist someone with an addiction to a substance, calling upon the assistance of addiction experts will allow your lawyer to make well-informed decisions about your estate on your behalf.
Addressing the impact of addiction on setting up an estate
Hiring a lawyer is important because everyone’s situation will be different and specific to them. However, if you are curious, these are some suggestions worth considering when you are trying to address both the dangers of allocating assets to a particular beneficiary and the protection of your estate-related preferences.
1. Identify the purposes behind the trust account. Why are you setting one up? This is an important question to answer ahead of time because people who are in recovery operate within boundaries that must be upheld in all areas of life. As such, with a trust, you can set it up in a way in which the money can only be distributed within certain parameters, which you can define in the best interest of the beneficiary with an addiction. Likewise, you can create a trust in a way that ensures those parameters are upheld over time. In many cases, trust accounts designated to people with addictions are monitored by a third party on the beneficiary’s behalf. From there, the third-party individual will typically authorize any and all distributions until the beneficiary has the means to responsibly manage their own inherited funds. Not all beneficiaries have the capacity to be responsible with money, especially a lump sum, as it can be enticing to spend the money on things that fuel their addiction, which is not safe for them. So, look into whether the heir has received financial management counseling during recovery, and use your discretion to figure out if the beneficiary has the means to have full control over his or her inheritance.
2. A type of trust known as a special needs trust might sound like a solid option, but these are not always suitable for beneficiaries who have an addiction. Rather, they are designed with people who have mental illnesses or disabilities in mind. As such, a special needs trust is highly unlikely to adequately meet the needs and positively benefit an heir with an addiction and no disability. Even so, it is always possible for someone who has an addiction to also have a disability. The two circumstances can coexist, so it is advisable to ask yourself if the beneficiary in mind is disabled outside of his or her addiction.
3. It is important that the funds placed in a trust account not be viewed as money that someone can only put toward recovery-related purposes. While the assets can be helpful when paying
for expenses that support the beneficiary’s sobriety, making everything all about the heir’s addiction can do more harm than good. Additionally, people with addictions still have to pay for all of life’s expenses outside of recovery, so limiting how they can spend their inheritance to recovery alone is not advisable.
4. It is wise to appoint someone to the position of trust protector or trust advisor. No matter the exact title you use to refer to this person, this is a position of power that gives the protector or adviser control over the trust, though the decisions must be made in the best interest of the beneficiary. A trust protector will often select licensed addiction counselors to assist the beneficiary along the way while keeping certain family members updated as to how treatment is going, which can ensure that the trust assists the heir in a way that prioritizes recovery as opposed to interfering with it or sabotaging the sobriety of the heir.
5. The trust will contain specific instructions regarding when distributions should be made as well as how much can be distributed at a time. Make sure you clarify that the trust is not intended to act as a punishment for someone with an addiction, but rather, it is designed to be a resource that should aid the heir in maintaining a sustainable recovery. When drafting the trust and all that it entails, make sure you do so in a way that incorporates a lot of flexibility that allows changes to be made if and when necessary. You are free to implement incentives as well, which can be used as motivation for the beneficiary in terms of seeking professional treatment or reaching certain milestones, at which point benefits from the inheritance will be dispersed.
6. Last but not least, a beneficiary with an addiction might be able to benefit from Supplemental Security Income or Medicaid. These are considered public benefits as opposed to trust-related assets, and the trust should be written in a way that identifies public benefits as the means by which the beneficiary pays his or her expenses rather than using the trust assets. Make sure the trust does not interfere with the beneficiary’s ability to be eligible for said benefits.
Setting up an estate with your family’s circumstances in mind
The fact of the matter is that every family will be dealing with their own situation. No two families are the same, meaning the process of drafting trusts that involve beneficiaries who have addictions will look different for every family. The best plan of action is to work closely with a reputable and experienced legal professional who has the means to create a plan that protects not only your heir but also your legacy and your assets.