Estate Planning for your Addicted Child
Looking at the current epidemic of addiction, many families may have a child addicted to drugs or alcohol. Estate planning with addicts can be emotionally taxing because you likely do not want to disown your child. Taking steps to create an estate plan that considers and accounts for your child’s addiction can prevent them from receiving a lump sum of funds while they are battling this disease. An addicted heir receiving a large inheritance would likely result in wasted money and potentially add to your child’s risk of harming themselves. Fortunately, there are several steps you can take to leave your assets to your child without increasing their risk of harming themselves as well as providing for their future.
Understanding DisinheritanceDisinheritance is often the first option for those considering estate planning for an addict. Depending on your situation, it may be the right decision. Disinheritance is the process of cutting a person out of your will so that if you die, they receive nothing. While it may be tempting for some, especially if you believe that your child will likely never get better, this decision cannot be changed without rewriting your will, even if your child goes into rehabilitation and becomes clean or sober. Should you choose to do this, it is crucial that you do so with a lawyer present, so that your child cannot contest the will.
Using a Trust for AddictsA trust is one of the best options when estate planning for addicts. There are several forms trusts you can consider, and each has pros and cons. A trust enables you to put spending authority in the hands of a trustee who will control the reckless spending of your child. This can prevent them from wasting funds and can prevent them from using funds to purchase drugs.
Spendthrift clauses in trusts are also valuable because you can use them to provide necessary funds such as medical care, food, and shelter to your child, without allowing them to spend anything else. This enables you to offer support, even after you are deceased.
Also, trusts typically protect the funds in the estate from creditors. So long as the funds are in the trust, creditors cannot reach them. This is ideal in instances where your child may be making poor financial decisions while under the influence of drugs or alcohol.
In some cases, you may be able to set up a discretionary spendthrift supplementary needs trust, which enables your child to qualify for needs-based government benefits (SSI, Medicaid, housing, SNAP, etc.), while offering the other benefits of the trust.
Using a Conditional Trust
A conditional trust is a one in which estate assets are made available to the beneficiary only after they have completed certain requirements. In the case of an addiction, you could set requirements such as, your daughter will not receive funds until they have completed rehab and have remained clean or sober for a designated period of time. These trusts distribute funds based on reaching milestones, and you can set continuous milestones to help ensure that your child stays clean or sober while they receive the funds.