4 tips for creating trusts when dependants have addiction issues

by | Sep 17, 2022 | Estate Planning

Estate planning is vital for all families but may be challenging when members suffer from substance abuse.

While many parents might fear leaving a large inheritance to those who may not make sound financial decisions due to their dependencies, various options exist to address this concern.

1. Avoid making addicted family members the trustee

The trustee manages the assets in the trust. People with substance abuse problems should not be trustees to avoid mismanagement of assets to support their addictions. Instead, choose someone that can make sound financial decisions about releasing assets to beneficiaries as instructed.

2. Dedicate funds to promote recovery

Establish criteria for releasing funds to ensure beneficiaries can access addiction treatment. Consider instructing the trustee to provide direct financial payments to counseling centers, drug treatment facilities, and for medical care.

3. Provide incentives for positive behaviors

Grantors can create criteria for fund distribution to beneficiaries with addiction histories, such as completing college or maintaining a job for a specific amount of time. Another option may include passing drug or alcohol tests or attending community addiction programs. Rewards such as a paid vacation or elite gym memberships may be enough to keep beneficiaries from addictive substances.

4. Delay funding to addicted beneficiaries

Stipulations may prevent the distribution of funds to any beneficiary that has or develops dependency problems after creating the trust. Assets appointed to these beneficiaries can remain in the trust until a stated time. Funds can also stay in the trust until that person’s death, then get distributed to their dependants or other people as designated.

Family members with substance abuse problems have opportunities to move beyond addiction. Knowing how to create a trust that addresses these situations allows grantors to pass on their assets without supporting the negative habits.