Estate Planning Options for Beneficiaries with Substance Abuse

When it comes time to make an estate plan, many families are forced to confront issues that beneficiaries may have with substance abuse. It is important that these problems are not ignored at this time.

Giving an adult child who is struggling with addiction a sum of money opens up a risk of them harming themselves. On the other hand, cutting them out of receiving an inheritance means they may never get the help that they need.

There are options available for families to address concerns with substance abuse in how an estate plan is prepared. Here are some of the most common ways to do this when setting up a trust.

Appoint a responsible party as trustee

Anyone who creates a trust often names someone in the family or a close friend as the trustee for their estate. Trustees have many duties to uphold, including administering the trust according to its terms, and it can be complicated. Therefore, make sure you really know your trustee. He or she should be of sound mind, financially astute, and most of all, trustworthy.

That said, avoid naming an adult child with a substance abuse as the trustee. They are likely not up to the tasks involved with administering the trust if they are dependent on drugs or alcohol.

If that child has sons or daughters, they are also not ideal for naming as trustee as well. Many times, the adult child with substance abuse has emotional influence over his or her children, which can be problematic down the line.

Set up ‘clean and sober’ conditions for receiving benefits

This does not mean that a someone struggling with addition should be excluded from receiving benefits. In fact, benefits can be used as a tool to influence someone to get the help that they need.

Understand that beneficiaries need not receive their assets in one lump sum. Assets may be held in trust and distributed periodically. The trustee may be given discretion for how and when assets are distributed. It is advisable to add language in the estate plan that puts into place conditions for a clean and sober lifestyle for someone struggling with substance abuse to receive their benefits.

Paying for rehabilitation with trust benefits

One way to address beneficiaries with substance abuse issues is adding provisions to hold back periodical distribution of benefits until they pass a drug test. In the event the beneficiary fails a drug test, the trust may include clauses to where the estate pays for rehabilitation services until the beneficiary is able to stay clean.

If the beneficiary chooses to rehabilitate, the trustee has discretion to release benefits as-needed. This helps keep a recovering addict off the streets and lessens the chance for relapse. Assets can be used for clothing, a vehicle, and living expenses while they get back on their feet dependent upon the terms you provide and discretion you allow.

Consider adding provisions to the estate plan that gives trustee discretion over when and how the adult child with substance abuse receives benefits. It is then up to the trustee to determines if the beneficiary is in fact routinely or frequently abusing drugs or alcohol, or appears incapable of self-care. At this point, he or she must submit to a physical exam before any more benefits are received.

How to get started

Simply disclose any awareness of these types of issues at any point in your estate planning process. A qualified probate and estate planning attorney can help you add language to your trust that addresses beneficiaries with substance abuse in their present or past.

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