Estate Planning for a Loved One with Substance Abuse Issues

Estate Planning for Substance Abuse

An estimated two million people in the United States are struggling with a substance abuse disorder related to prescription opioid pain medications, and 591,000 suffered from a heroin use disorder, according to the National Institute on Drug Abuse. These are shocking statistics and constitute only a portion of society dealing with drug abuse.

If you have a child or spouse who is addicted to drugs or alcohol, the last thing you want to do is provide them with a hefty inheritance that they could potentially use to feed their destructive behavior. Fortunately, inheritance for loved ones with substance abuse problems can be dealt with through thoughtful careful estate planning.

Creating a Trust That Takes Your Loved One’s Substance Abuse Into Consideration

If you believe it is unlikely that your loved one will recover from their addiction, but you still want to provide for them in your estate plan, you should consider leaving your estate in trust for your loved one’s benefit. There are certain provisions and types of trusts you can establish in this situation.

  1. Include a Co-Trustee of Your Loved Ones’ Trust Share

You can include specific instructions in your trust concerning how and when distributions are made to your loved one. Distributions can be protected by appointing someone to act along with your loved one, so that the addicted beneficiary cannot distribute monies to themselves independently.  This will allow the beneficiary to have a say in their trust distributions, but provide protections from themselves should they relapse. This can help ensure your loved one does not squander the entirety of their inheritance.

  1. Create an Incentive Trust

You also have the ability to structure your trust to prohibit any distributions to beneficiaries with a substance abuse issue unless they meet certain milestones. This is known as an incentive trust. For example, you could state that your loved one does not receive a distribution until they successfully complete a drug or alcohol abuse program, or they pass random drug testing for a period of time. If these incentives are not met, your trust could provide for an alternate distribution to a charity or other organization.

  1. Create a Wholly Discretionary Trust

wholly discretionary trust states that your trustee will have the sole discretionary authority over any distributions of income and principal from your trust.  Basically, the trustee becomes a financial gatekeeper for your loved ones, including a loved one who is struggling with a drug or alcohol addiction.

Selection of Your Trustee is Critically Important

When you are planning your estate and have a loved one with a drug problem, the selection of a trustee is extremely important since they will be tasked with managing and investing your assets appropriately and making difficult decisions with respect to distributions to your beneficiaries. That is why selecting a trustee should be taken seriously with extensive research. Simply selecting a close friend or family member may not be the best option in this circumstance.

An option to consider is appointing a corporate trustee (e.g., bank or trust company) or an independent third party (e.g., an attorney, CPA, etc.). Yes, an independent fiduciary will generally charge a fee for their service, but the benefits can far outweigh the financial hit, especially when you consider the fact that many independent fiduciaries are also skilled in handling trust assets and making sound investments.

Schedule a Meeting with Scott or Raymond Today

The decision on how to properly structure your trust to address a loved one with a drug problem is not easy. It can be emotionally taxing and requires a high level of care and delicacy. We are here to help. Polaris Law Group takes pride in offering an effective, proven, process driven estate planning experience for all of our clients. Schedule a meeting with Scott Stork or Raymond Chandler today by phone or by filling out a quick contact form today.