Estate Planning and the Problem of Addiction
Addiction is an incredibly unfortunate problem that many families face. It is a problem that is not only present in the lives of those it affects every day, but it is also a problem that creates special issues when creating an estate plan. Families may feel as if they are forced to risk enabling a family member battling addiction in order to ensure the family member is financially secure through an estate plan. Luckily, there are ways to ensure a family member battling addiction (or even in recovery) is financially secure while limiting the risk of enabling.
Living Trusts
A living trust is a type of trust that allows you, as trustee, to continue the use and enjoyment of your assets throughout your life. You have discretion as to, among other things, disposal of your assets and acquiring new assets. However, the trust also names a “successor” trustee who takes over after your death and distributes your assets according to the terms of the trust. It is much like a will in this way, but you have much greater freedom stating exactly how your assets should be distributed than in a will.
Ways to Control Asset Distribution
A common way to control asset distribution within a trust is to include a “spendthrift” provision. A spendthrift provision has two primary advantages: it protects the trust’s assets from the beneficiary, and it protects the assets from the beneficiary’s creditors. Spendthrift provisions in trusts essentially restrain the beneficiary from “alienating” or otherwise selling or parting with the trust’s funds. Therefore, the family member battling addiction could not essentially sell or otherwise dispose of the trust funds in order to further his or her addiction – the successor trustee would not be obligated to release trust funds in recognition of any actions made by the family member alone.
Spendthrift provisions also prevent a beneficiary’s creditors from attaching to the trust’s assets. Therefore, if the family member decided to put charges on a credit card in order to further his or her addiction, the successor trustee would not be obligated to release the funds to pay the credit card bill. The creditor would also not have a way to access the trust’s assets.
Choose a Trusted Successor Trustee
I have been asked what standards or qualities one should look for when choosing a trustee. My answer is always simple: choose someone you trust. In the case of protecting a family member battling addiction, you not only have to choose a trustee you can trust to competently manage the trust’s assets and finances, but you also have to choose a trustee that you trust has the courage to stand firm and exercise discretion when distributing funds. This decision is often times as critical as the language of the trust itself.
There are many estate planning options, and the right option depends on your individual situation. If you have questions regarding your estate plan – whether you are considering editing your existing plan or starting from scratch – it is highly recommended to reach out to legal counsel for assistance.