Using a Trust to Provide for a Child with Substance Abuse Issues

Parents and grandparents can go to great lengths to provide for their loved ones, even after they are gone. Estate strategies for leaving behind lifetime benefits can provide life-changing opportunities. Estate planning, however, is not just about maximizing inheritances.  It can also involve making arrangements for certain family matters, such as protecting a loved one who struggles with substance abuse and addiction. Did you know that, in these cases, a trust may be ideal?

Trusts can help parents and grandparents provide for an addicted loved one without wasting assets or jeopardizing the beneficiary’s health. First, let us talk about a few common mistakes to avoid:

• Lump-sum gift: Family dynamics can play a significant role in addiction scenarios, with well-meaning parents often enabling the troubled loved one. A lump-sum gift could enable a squandered inheritance, or worse.
• Putting other family members in charge: Giving a responsible family member control over the addicted relative’s inheritance may be a recipe for disaster. Such arrangements can often invite relationship difficulties as both parties may feel justified in fighting over money.
• Disinheritance: Substance abuse and addiction can frequently involve other problems, such as lying, irresponsibility, and even crime. Disinheriting a loved one to keep them from wasting money or hurting themselves, however, may not be the only way to protect them.

An intelligently designed trust could make the best of a difficult situation. For example, staggering trust distributions over a period of years could provide for the addicted loved one without allowing them to spend the inheritance too quickly. Staggered distributions, perhaps every five years, could not only preserve funds, but provide support in the event of personal recovery.

Trusts can also be designed to only administer distributions if certain benchmarks are met or positive activities are completed. These so-called “incentive trusts” could tie inheritance payments to a college degree, several years of continuous employment, or the completion of a drug and alcohol rehabilitation program. However the trust is designed, choosing the right trustee to manage it can be critically important. In some cases, a “wholly discretionary trust” may be preferable, which provides the trustee with sole discretion over distributions and principal management.

Providing for a loved one struggling with addiction without enabling the addiction can be possible. For assistance with this and related legal issues, please reach out to our office to schedule a meeting.