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Advertisements for estate planning lawyers typically feature images of happy, carefree families whose problems seem to have been solved by putting a plan in place. But the truth is that people don’t make an estate plan to eliminate life’s challenges; they do it to prepare for them. One of those problems is substance use disorders.
If you have a child or family member who is struggling with addiction, you’re not alone: a Gallup poll reports that substance abuse has been a problem for 32% of American families—almost a third. But addiction and substance abuse are often stigmatized, so people may not talk about it, out of misplaced embarrassment or shame.
That can create a “perfect storm:” you have a situation that requires careful estate planning, but also creates resistance to talking about it. The combination of factors can significantly complicate estate planning for an addicted heir.
Challenges in Estate Planning with an Addicted Heir
Substance use disorders can complicate the estate planning process in many ways. Some parents or grandparents may want to punish an heir for their addiction or substance use by disinheriting them altogether. Others may fear that giving their loved one a large inheritance might enable their substance abuse and endanger their health. A sudden windfall can also make a beneficiary vulnerable to bad actors who will take advantage of them. If an heir has judgments against them, an inheritance could fall into creditors’ hands instead of helping the intended beneficiary.
Most people who are planning for an heir with addiction issues want to protect both their loved one and their assets. Doing so requires talking candidly with your estate planning attorney. As with many issues surrounding addiction, this is a problem that cannot be solved unless it is acknowledged and faced.
The good news is that your estate planning attorney can work with you to clarify your goals and develop an estate plan that provides the safeguards you are looking for.
Estate Planning Pitfalls of Substance Use Disorder
It’s important to understand what you are hoping for your estate plan to achieve. If you want to keep an inheritance safe from your loved one’s creditors or protect your family member from having access to cash to fuel self-destructive behavior, your attorney can help you with that. But it’s important to keep your goals realistic.
Some people imagine that disinheriting an addicted heir could motivate their loved one to get sober rather than risk losing their inheritance. While it’s possible that could happen, it’s equally possible that the threat of disinheritance could further alienate the family member.
Then there are parents who take the opposite approach, wanting to leave a greater share of their estate to an addicted child because they hope it will provide financial stability and put them on the same footing as their siblings. Of course, the danger exists that the child will use the inheritance to feed the addiction, leaving them worse off in the end (and leaving siblings who feel shortchanged and resentful).
In our experience, when estate planning, it is best to focus on the things that are within your control: deciding whom you want to inherit your assets, and then structuring that inheritance to the appropriate mix of protection and flexibility. As a general rule, it is usually also best to distribute assets equally among children to avoid resentment and damaged relationships.
Estate Planning with Addicted Family Members: Why it Matters
Before we discuss estate planning options, let’s talk about what happens if you have a loved one with a substance use disorder and you don’t have an estate plan. In that case, your property would pass according to state law of intestate succession, which defaults to what most people would do if they had an estate plan. In general, assets go to the nearest relatives, like a spouse or children, first.
When your heirs receive their share of your estate under intestate succession law, they receive it all at once, without restriction. For many people with a substance abuse problem, that is the worst possible outcome, for the reasons we’ve described above. With the right estate plan, you can control the flow of assets and income, making sure your loved one has the support they need while keeping their funds protected.
Note that we said “the right estate plan.” Simply making an estate plan is not sufficient. For instance, with a last will and testament, you can specify the distribution of your assets, but your beneficiaries are still entitled to receive their entire inheritance at once. If you want to exercise the type of control over your estate that allows you to protect a family member with an addiction, you will need to create a trust.
Using a Trust to Protect Your Loved One’s Assets
Unlike with a will, you can control your loved one’s access to their inheritance with a trust. Assets are owned by the trust and managed by a trustee; distributions are made to beneficiaries according to the terms of the trust. For instance, “incentive trusts” reward some behavior (like getting a college education) and disincentivize other conduct.
Trusts can also be used to directly pay some expenses of a beneficiary, like rent, tuition, or medical bills, without the money passing directly into the beneficiary’s hands. That is a relief to many worried parents and grandparents. And, if properly structured, a trust can keep assets out of the reach of a beneficiary’s creditors.
That’s why it is so critical to be able to talk to your estate planning attorney about what you hope to achieve with your estate plan. To learn more about how a trust can help you with estate planning for an addicted heir, contact Estate Planning & Elder Law Services to schedule a consultation.
