Passing on your assets to someone struggling with addiction

Are you planning to include someone with an addiction as a beneficiary of your assets? You may have seen them repeat patterns of compromised decisions, poor judgments, and subsequent results that are far from favorable.

Have a discussion with your estate attorney

Although this discussion can be uncomfortable, it can help you avoid the inadvisable disbursement of your family’s wealth.

The US Department of Health and Human Services estimated that 10.1 million people abused opioids and/or methamphetamine in 2019. During the same time, NIAAA reports recorded that 14.5 million people over the age of 12 have suffered from Alcohol Use Disorders.

If these situations apply to your family, it is advisable to take their addiction into account when establishing your trust. It’s certainly possible to set up a trust account that prevents money from being used to further contribute to addiction. It can be very complicated, but it can be done.

Suppose you want to protect your heirs or your beneficiaries from using their inherited funds to fuel their addiction. Your estate attorney will ask him or her for permission to consult a nursing professional. When you get the help of an addiction expert, your lawyer can make informed recommendations on your behalf.

Addressing the impact of addiction on setting up an estate

Here are a few suggestions to deal with the risks of allocating property, and the safety of your choices. 

  1. Set up a trust account. People who are in recovery should be held accountable within boundaries. As such, you could set it up so that the money can only be disbursed inside certain parameters. The Trust can be monitored with the aid of a third-party on the beneficiary’s behalf. The third-party will usually authorize any distribution until the beneficiary has the means to responsibly manage their own inherited funds. Not all beneficiaries have the ability to be accountable with money, as it may be enticing to spend the money on matters that only contribute to and fuel their dependency. Find out if the inheritor has obtained financial counseling during their recovery, and determine if the beneficiary has the means to have complete management over his or her inheritance.
  1. A “Special Needs Trust” is designed to provide for people who have mental illnesses or disabilities, however, those aren’t always suitable for beneficiaries who have a dependency. As such, it’s not likely to fulfill the desires and positively benefit an heir that suffers from addiction and doesn’t have a disability. These two circumstances can coexist, so it’s recommended to assess if the beneficiary is disabled outside of their addiction.
  1. It is important that the funds placed in a Trust not be viewed as money that someone can only put toward recovery-related purposes. While the assets can be beneficial and support the beneficiary’s sobriety, making everything about the inheritor’s dependency can do more damage than good. People with addictions still need to pay for all of life’s expenses outside of recovery, so limiting their inheritance to recovery alone isn’t recommended.
  1. Appoint someone as a Trust Protector to assure that decisions made are in the best interest of the beneficiary. A Trust Protector will regularly choose certified addiction counselors to help the beneficiary along the way while keeping certain family members updated on treatment progress. This can ensure that the trust assists the beneficiary in a manner that prioritizes recovery rather than interfering with it or sabotaging their sobriety. 
  1. The Trust will contain specific instructions controlling when each distribution will be made and how much will be disbursed at a time. Clarify that the trust isn’t intended to be punishment for their addiction, rather, it’s designed to be a useful resource to help aid them in maintaining their recovery. When drafting the trust and all that it entails, be sure you incorporate some flexibility. You can enforce incentives to motivate the beneficiary to continue treatment or attain milestones.
  1. Finally, a beneficiary with an addiction may benefit from Supplemental Security Income or Medicaid. These are considered government grants, not trust-related assets. Trusts should be created to identify government grants as a means of paying costs to beneficiaries rather than using the trust assets. Make sure that trust does not interfere with the beneficiary’s right to these government benefits.

Setting up an estate with your family’s circumstances in mind

Addiction has infiltrated many families and each situation is unique. Work closely with a knowledgeable legal professional to draft a plan that will protect your heirs and your legacy.

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