How to Create a Trust for Heirs With Substance Abuse Problems
We’ve all no doubt heard the phrase “here today, gone tomorrow,” which can speak to the habits of some people of spending money as soon as they get it. This is a bad habit in general, but when it applies to feeding one’s addiction to drugs or alcohol, it carries the added liability of serious health risks, and it also jeopardizes that person’s future both professionally and personally.
If you’re the parent of a child, adult or otherwise, who has trouble with drugs or alcohol, and you’re embarking on estate planning, maybe the last thing you want to do is leave that child with a cash- or asset-rich inheritance to be squandered on their addiction, or even worse than that, to run up debts to unsavory characters in feeding their habit—making the inheritance legally liable.
While the best course for someone with a substance abuse problem is treatment and counseling to overcome the problem, as the parent of a child with a drug or alcohol problem, you also should consider the consequences of leaving an immediately available inheritance to that child. Fortunately, there is a way to combine both treatment and sobriety efforts with instilling sound monetary policies through an inheritance.
The path to this is through a spendthrift trust. A living trust, in contrast, is much like a will in that it names beneficiaries and assigns assets, and when the testator who created the trust passes on, the assets transfer almost immediately and in whole.
This is solved by creating a spendthrift trust, which places restrictions and conditions on how the troubled beneficiary can receive funds or assets. Also, since the beneficiary doesn’t control the assets (the trust does), creditors cannot come after the inheritance.
If you’re the parent of a child with a substance abuse problem in or around Bradenton, Florida, and you’re embarking on your estate planning—or reviewing what you have in place—contact the Law Offices of David W. Wilcox to discuss spendthrift trusts.
With nearly four decades’ experience in advising clients on the intricacies of estate planning, Attorney Wilcox can help you create a spendthrift trust that will provide for your child while preventing “here today, gone tomorrow.” His firm proudly serves clients throughout Manatee County and Sarasota County.
Possible Inheritance Concerns for a Child With a Drug Problem
If you leave a lump sum to a child with a drug problem, or leave that person valuable assets, or with a combination of cash and assets, these suddenly available revenue/inheritance sources can be used to fuel your child’s addiction. The same can be said of a child who wants to live the high life with fancy cars and lavish vacations.
You won’t be doing your child a great favor if they do not value what you give them because they will immediately start spending it on their personal preferences, which unfortunately also include addictions. Another problem is that the inheritor can run up debts while pursuing their habits and life choices. Soon, creditors can have a claim on the inheritance you left your child with.
A tragic result could be that the sudden influx of funds could lead to an overdose, whether of your child or one of his or her co-addicts or co-experimenters. An overdose suffered by your child would represent a major, negative development in that person’s life, and can even result in death. An overdose of someone partaking with your child can lead to legal problems.
Spendthrift Trusts and How They Work
As referenced earlier, a spendthrift places conditions on the beneficiary. The funds and assets in the trust for that person’s benefit can be made contingent upon several actions by the beneficiary, for instance:
Funds may be available only when a bill or other obligation, such as a monthly rent or lease payment, is presented to the trustee.
Funds may also be contingent upon the beneficiary’s passing a drug test and bringing the results to the trustee.
There could be a provision for a lump sum if the beneficiary can hold a job for a certain amount of time.
The trustee could also be instructed to pay rent, utilities, and other bills directly rather than dispersing funds to the beneficiary with the drug problem.
The Role of the Trustee
In any trust, there will be a trustee overseeing the assets and their distribution. In a living trust, the testator generally remains the trustee until he or she becomes incapacitated or passes away. In a spendthrift trust, the testator must name someone who is completely trustworthy and attuned to the specifications of how the beneficiary can receive funds. That person manages the trust following its formation.
Clearly, you don’t want to name a child with a drug problem to be the trustee of any trust, and certainly not a spendthrift trust created to provide for them. If your adult child with the addiction has children, you don’t want to name any of them as trustee either since their parent could control them too easily.
Don’t Face These Challenges Alone
If you have a child with a substance abuse problem and you’re worried that they may blow away any inheritance in short order to support their habit, then you need to consider the creation of a spendthrift trust.
If you’re in Bradenton, Florida, or in surrounding communities, reach out with all your estate planning questions and concerns to the Law Offices of David W. Wilcox. You will receive compassionate and understanding attention to all your wishes and needs for your loved ones.