How to create an estate plan for beneficiaries with addictions

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Many families today are forced to deal with the problems and pain of a loved one suffering from addiction. The afflicted party may suffer from addiction to drugs, alcohol, or other substances, or they may suffer from behavioral addictions such as gambling, shopping, eating or sex. With any of these addictions, an inheritance of cash or other assets can quickly escalate the problem.

While leaving an inheritance to anyone should be carefully planned, leaving an inheritance to a person with addiction (past or present) requires particular attention. Giving an addict an inheritance of any amount outright could be funding destructive, even fatal, behavior, while disinheriting them may mean they are never able to get the recovery help they need. There are better options.

Talk to your advisers

Putting the inheritance of a beneficiary suffering from addiction into a trust should be discussed thoroughly with your estate planning attorney and other professional advisers. The concern about an heir’s addiction cannot be addressed if your advisers aren’t aware of the issue.

Don’t be embarrassed or unsure if you should say anything. Doing nothing should not be an option. In fact, if you died without a will or trust in place, a spouse or child dealing with an addiction issue will likely receive assets outright under California’s intestacy laws, which could lead to disaster. Failing to plan is a plan…it’s just not a good one.

Consider a trust

On the other hand, setting up a trust to hold certain assets for the benefit of a beneficiary with an addiction can help to promote recovery rather than interfere with it. A trust provides for a beneficiary while protecting them from themselves and their creditors.

A well-drafted trust will set forth your goals in establishing the trust and provide specific directions for the trustee as to how and when distributions can be made to the beneficiary. You can make clear that the trust is not a “punishment” of the beneficiary, but rather should be viewed as a resource to aid in sustained recovery.

Depending on the size of the inheritance, a trust could provide simply for the baseline needs — medical care, food and shelter. The trustee can make those payments on behalf of the beneficiary, rather than handing funds directly to them.

The trust might also include provisions for rehabilitation, counseling, and other forms of treatment, and allow for assistance (to the trustee or the beneficiary) from qualified professionals with knowledge of the particular addiction issue.

Trust terms

It is important the trust be drafted to adapt to a dynamic situation rather than a static one. A person in the throes of their addiction is going to have different needs (and issues) than an addict with 30 days of sobriety. An addict with years of recovery will again have different needs.

The trustee should be given the flexibility to adjust accordingly. Consider incentive provisions to motivate the beneficiary to seek treatment, or that allow for more flexibility in distributions when certain goals are met.

The trust should also specify what a trustee can and should do if …read more

Source:: Los Angeles Daily News


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