Leaving Money to a Family Member with an Addiction
Challenges and Options
The 3 C’s: “You cannot control it, you did not cause it, you cannot cure it,” – but you can contribute to it. – Anonymous
Opioid addiction has reached epidemic proportions. According to the Centers for Disease Control and Prevention, more than 42,000 people lost their lives due to opioid use in 2016. Drug overdoses now represent the leading cause of deaths for Americans under the age of 50. The National Council on Alcoholism and Drug Dependence estimates that more than 50% of all adults have a family history of alcohol problems and that 8% of Americans over the age of 12 have used an illegal drug within the last 30 days. Up to 60% of patients who receive substance abuse treatment will relapse within one year according to the Journal of the American Medical Association.
Acknowledgement
Acknowledge that your family member suffers from an illness and should be treated with compassion, when possible.
Options
The good news is that you have options! Some options include: (1) Leave them nothing at all. (2) Leave it all to your other family member with the understanding that he or she will help your family member, when appropriate. However, this plan may not work. This may cause distention in the family. (3) A better option may be to leave your addicted family member’s share in trust for his/her benefit.
Define the Role of the Trust
Consult with your attorney and other advisers to define the role you would like the trust to play in your family member’s recovery. Trust distributions could be made for basic support, or limit other distributions to trustee’s discretion.
The trust could be given an active role to play with the trustee, the individual or institution being directed to work proactively with the family member’s treatment team and to pay for the costs incurred in carrying out the treatment plan. With this model, no distributions would be allowed if they were not related to the family member’s recovery.
The Trustee: Choose the Right Trustee
Many large corporate trustees will not administer trusts which contain substance abuse language. It is the trustee’s responsibility to adhere to the terms of the document and making distributions from the trust. This person must be willing, able and equipped to withhold distributions if the beneficiary does not meet the conditions set forth in the document such as adding provisions for random drug tests or meeting employment requirements. In some situations, we find the ideal solution is to name a co-trustee (someone who has a personal relationship with your family member) along with a corporate trustee while also including the supervision of a care manager who specializes in addiction.
Special Needs Trustees
Another option for engaging an institutional trustee for a substance abuse trust would be one that specializes in administering special needs trusts or works in tangent with an attorney who specializes in special needs trusts. These types of trusts are usually created for the benefit of individuals with intellectual disabilities. They usually have case managers and social workers who are experienced in handling the medical and health needs of disabled beneficiaries, and they may be willing to extend their services to work with the treatment team for a beneficiary with a substance use disorder. They are also knowledgeable about SSI and Medicaid eligibility rules. If the beneficiary is eligible for benefits from government programs, such as SSI or Medicaid, or from private health insurance, a whole new set of duties will be imposed on the trustee to make sure that distributions will not be classified as “maintenance” or “support,” since that could result in the family member being declared ineligible for state/government benefits. Distributions from the trust are meant only to supplement the benefits that SSI or Medicaid provides, but never duplicate or supplant them, the trustee will have to closely monitor the uses of the distributions so they do not cross the line into support and maintenance.
Trust Structure
Incentive Trusts or Addiction Trusts fall within a specialized area of legal expertise, so working with an experienced attorney is crucial. This type of trust is designed to make sure that your family member’s basic needs are met, while allowing him/her to receive the benefits from the Trust if they abstain from their addiction. The trust can allow the trustee to withhold payments if they fail a drug test. The trust provisions may also include setting goals – which may be employment related, or may include volunteering a certain amount of time within a certain time period or perhaps reaching educational milestones before any distributions may be made.
Monitoring
As you can see, these type of trusts can be difficult to administer, since it can be hard to verify if the beneficiary has actually met the goals. For example, how can the trustee verify the beneficiary’s assertion that he has refrained from using drugs for the period set in the trust? Clever beneficiaries have been known to fix employment records and lab results in order to claim that an incentive is merited. You may want to hire a care manager to handle the monitoring process or engaging the services of a friend or family member who was willing to work closely with the treatment team to carry out the plan. Another suggestion is hiring a trust protector.
Trust Protectors
A Trust Protector can provide supervision and direction if the trustee lacks experience in coordinating trust distributions with a substance abuse treatment plan, or with monitoring the beneficiary’s eligibility for SSI and Medicaid. Rather than relying on the trustee to appoint agents for help in these matters, the Trust Protector would be charged with actively monitoring the progress of the beneficiary’s recovery and, if necessary, direct the trustee to hire a treatment manager for the beneficiary or an advocate to secure SSI and Medicaid benefits.
True Link Visa card. This card is a reloadable Visa card that offers a trustee a way to control how much money gets transferred to the card and manage where money can be spent.
Communicate: It is important that your heirs fully understand your estate plan, and the intent behind that plan. This could also be stated in your “Letter of Wishes.” Supporting a family member who is struggling with an addiction is a daily challenge, but providing support after you pass is an important responsibility, and can also provide peace of mind and added assurance that your heirs will be provided for.
Hopefully some of these options will assist you in establishing a carefully thought-out estate plan for your family member without jeopardizing their well-being or feeding their addiction.
For more information, please contact:
Donna Baudanza, CTFA
Vice President / Relationship Manager
Phone: 561-515-6157 / Email: dbaudanza@fs-trust.com
The posts expressed are views of FSTC and are not intended as advice or recommendations. For informational purposes only.