We often receive calls advising someone needs a “simple will” and that’s all. Very rarely is that the case once we talk about their wishes and concerns, usually due to some skeletons in the family closest they hoped to not have to acknowledge. These issues are what we call the Elephant in the Estate Planning room and they most often cover addiction, mental illness, incarceration, and less-than-responsible handling of the finances. Understandably, there are hesitations sharing information about a wayward child or family member, but our job is not to judge, it’s to ensure your wishes are followed and to plan for the both the known and unknown. If this situation sounds familiar, read on to learn some of the ways we can help you help those you care about.
How Your Trust Can Help a Loved One Who Struggles with Addiction
Substance addiction is by no means rare, impacting 19.7 million Americans aged 12 and older, with that number likely to grow due to the pandemic. Because of its prevalence, navigating a loved one’s addiction is actually a relatively common topic in everyday life. But it is something that needs to be considered when working on your estate planning. We all want our loved ones to be safe and experience a successful recovery, and a properly created estate plan can help.
A “simple will” gives your assets to your named beneficiaries outright, with no oversight on how those funds are used. Imagine someone struggling with drug or alcohol addiction suddenly receiving a check for $50,000. Now, we can hope they take that money and use it to get sober and improve their life, or we can PLAN for ways to help them help themselves. This usually involves setting up a Trust.
Funding for Treatment
One of the ways your Trust can have a positive influence on your loved one’s life is by helping
fund their addiction treatment. If a loved one is already struggling with addiction issues, you can
explicitly designate your Trust funds for use in his or her voluntary recovery efforts. encouraging
involuntary treatment until the problem is stabilized and the loved one begins recovery.
Incentive Trusts
Incentive features can be included in your estate planning to help improve the behavior of your
loved one. For example, the person struggling with an addiction can be required to maintain
steady employment or voluntarily seek treatment in order to obtain additional benefits of the
Trust (such as money for a vacation or new car). Although this might seem controlling, this type
of incentive structure can also help with treatment and recovery by giving a loved one something
to work towards. This approach is probably best paired with funding for treatment (discussed
above), so there are resources to help with treatment and then benefits that can help to motivate
a beneficiary.
Lifetime Discretionary Trusts
Giving your loved ones their inheritance as a lump sum could end up enabling addiction or make
successful treatment more difficult. Luckily, there’s a better option. Lifetime discretionary Trusts
provide structure for an heir’s inheritance. If someone in your life is (or might eventually) struggle
with addiction, you can rest easy when you know the inheritance you leave can’t be accessed
early or make harmful addiction problem worse.
But addiction doesn’t always travel alone. In fact, 8.5 million American adults suffer from both a substance abuse disorder and a mental health disorder.
3 Ways Your Trust Can Help a Loved One with Mental Illness
In 2017-2018, 19% of adults experienced a mental illness. When a loved one suffers from a mental illness, one small comfort can be knowing that your Trust can help take care of them through thick and thin. There are some ways this can happen, ranging from the funding of various types of treatment to providing structure and support during his or her times of greatest need.
Let’s explore a few ways you can help take care of a loved one struggling with mental illness with the help of your estate planning attorney:
Trustees Can Help Watch Over Them
Selecting a Trustee isn’t always an easy feat. That’s one of many decision-making areas where
we’re more than happy to step in and walk you through the process. When you have a loved one
battling mental illness, your choice of a Trustee becomes even more of a nuanced decision.
We’ll help you deduce the perfect person to not only manage the assets contained within the
Trust but also keep a compassionate watchful eye on your loved one benefitting from the Trust.
An astute Trustee can look for early warning signs surrounding your loved one’s mental health
issue and make sure to get them connected to the care and services they need in no time.
Lifetime Trusts Provide Structure and Support
Most people probably consider an inheritance (small or large) as a blessing. But this may not be
the case when an individual is dealing with depression, anxiety, hoarding, or illnesses like
schizophrenia. Lifetime Trusts are an excellent way to take care of your loved one without
saddling them with a challenge on top of what they are already experiencing.
It Can Contribute to Voluntary Treatment
Similar to the loved ones struggling with addiction, your Trust can be designed to help cover
treatment for those living with mental illness. If your loved one is involved in an inpatient care
facility or an ongoing outpatient program, you can structure your Trust so that its disbursements
cover the costs of that treatment as time goes on. This also helps your loved one because it
relieves them of the responsibility of managing large sums of money on their own. They can rest
easier knowing that their care is covered without having to set up a complicated payment plan on
their own or enter into massive amounts of debt.
What probably affects even more families than the concerns noted above involve loved ones with questionable financial habits. Unlike addiction or mental health, there’s not a clear treatment program for this issue, however that doesn't mean there are no options in estate planning to address this concern.
Why a Spendthrift Trust Can Be a Great Solution for Your Heirs
A spendthrift Trust is commonly used to protect a loved one’s interest from creditors, a soon-to-be ex-spouse, or his or her own poor management of money. Generally, these Trusts are created for the benefit of individuals who are not good with money, might easily fall into debt, may be easily defrauded or deceived, or engage in some risky behaviors that may result in squandering of funds. While you may not want to seem like you’re trying to control your loved ones from The Great Beyond, protecting them from themselves provides comfort for you knowing they will have a safety net and a benefit for them—creating a safety net.
Spendthrift Trust Basics
Put simply, a spendthrift Trust is for the benefit of someone who needs additional assistance
managing or protecting his or her money.
The spendthrift Trust gives an independent Trustee complete control and authority to make
decisions on how the funds in the Trust may be spent and what payments to or for the benefit of
the beneficiary are necessary according to the Trust document. Under a spendthrift Trust, the
beneficiary is prohibited from spending the money before he or she actually receives distributions.
These restrictions prevent the beneficiary from squandering their entire interest or having it
garnished by the beneficiary’s creditors. The Trustee controls the assets in the Trust, including
managing and investing the funds once the Trust is made irrevocable. Most Trusts become
irrevocable after the grantor has passed, but some are irrevocable from the start.
Creating a Spendthrift Trust
A spendthrift Trust is created essentially in the exact same manner as any other Trust. However,
the vital difference of a spendthrift Trust is that the Trust instrument must contain the right
language to invoke the law’s protection. As a knowledgeable estate planning attorney, we can
provide guidance on how to best structure this provision, so it meets your family’s needs.
Navigating a loved one’s addiction, mental illness, or financial responsibility issues is more than
enough stress already without having to worry about what will happen after you pass away. Let
us take some of the burden off your shoulders by helping you build an estate plan that positively
impacts your loved one and doesn’t contribute to the struggles at hand. That way, you can get
some peace of mind that your loved ones will be taken care of after your passing and go back to
focusing your efforts on the solution. Call or email us today to see how Worley Elder Law can help.
941-448-1302 | Info@WorleyElderLaw.com
