Planning for Addict Beneficiaries

I have two children, a toddler and a six-month-old. In thinking about their future, I think about the best that I want for them, but I also consider what I hope they will never have to experience. I want them to live a happy, fulfilling life. I want them to be blessed in their relationships. I want them to excel in that which they pursue. And I hope that they never have to deal with substance abuse.

I am not the only parent who hopes their children never have to battle the allure of drugs and alcohol. In fact, some parents draft trusts with safeguards to try to prevent drug and alcohol issues. Safeguards may include paragraphs precluding the successor trustee from distributing assets to (or for the benefit of) the beneficiary child if that child is abusing drugs and or alcohol.

HOW SHOULD AN ADDICT BENEFICIARY RECEIVE AN INHERITANCE?

An important element in planning for addiction is to acknowledge that your trustee is not omniscient. Yes, some information is easy for your trustee to ascertain. For example, if your trustee is required to ascertain your beneficiary’s access to assets, your trustee can request last year’s tax return or a financial statement. This is not as simple for drug and or alcohol use. How often would you drug test a beneficiary who has no history of abuse? Would you test that person once a year, once a quarter, or even once a month?

SO HOW CAN YOU PLAN FOR POTENTIAL ADDICTION?

I recommend you do so in the same way you would plan for a known addiction:

1. Directing asset distribution. Do not give your beneficiaries an outright distribution; rather keep the assets held in trust. Providing a beneficiary with a lump sum cash inheritance gives them the ability to do with it as they please. This means that a beneficiary could squander the money by spending it irresponsibly, including unhealthy lifestyle decisions.
2.  Who should be the trustee? It is difficult to ask a family member to be an addict’s trustee. Consider the uncomfortable position (to say the least) for your family member who must decide when a beneficiary with an addiction will receive assets – or how they will receive assets. Addict beneficiaries, especially when they are asking for monetary assistance, can be challenging. Sometimes, even aggressive. Appointing a family member as trustee in this situation can turn a relationship from supportive and loving to adversarial – and if that happens, the addict beneficiary has a smaller support system when they need it most.

CORPORATE TRUSTEE

If substance abuse, or the possibility of substance abuse, weighs heavily on your mind as you plan, remember that Trust Company of Oklahoma can act as your unbiased professional trustee, relieving this burden from your family members. This is just one of the many reasons to consider engaging TCO to help you manage your estate.