Should a beneficiary with an
addiction to drugs, alcohol and/or gambling receive an outright inheritance?  In most cases the answer is clearly, “no”.  Doing so would likely enable the self
destructive addiction.  Instead, holding
the inheritance in further trust, managed by a responsible trustee, may prove
more beneficial.    For discussion purposes, let’s consider some basic
questions regarding how the trust might work.



            How long is an ongoing trust?  An ongoing trust may last for years up to the
entire lifetime(s) of one or more beneficiaries.  It may be terminated when the beneficiary is
rehabilitated, dies, or the trust is no longer feasible to maintain. 



            When is the trust established?  Usually the trust is established at death of
a parent, spouse or other relative wishing to leave an inheritance.  Alternatively, they may establish the trust
during their lifetime.  The trust might
then be available to receive contributions from other caring people who wish to
make responsible gifts to the same beneficiary.



            Would the trust distribute money to
the beneficiary?  Preferably no
distributions of money are made to a beneficiary while still an addict.  At most a minimal cash allowance might be
allowed as pocket money; even pocket money should be at the trustee’s
discretion or on condition that the beneficiary not abuse the allowance.



            How would the beneficiary be
assisted?  Depending on the terms of the
trust, the trustee might be allowed to use the assets in the following ways:  (1) To help rehabilitate the beneficiary through
counseling or a rehabilitation program; (2) to make direct payments to third
parties in furtherance of the beneficiary’s health, education, maintenance or
support; and (3) to pay for travel, recreation and entertainment. 



            Would there ever be any distributions
to the beneficiary?  If and when the
beneficiary proves to be rehabilitated for a sufficient time period, typically six
consecutive months, then direct distributions to the beneficiary, including perhaps
monetary distributions, could either be allowed, at the trustee’s discretion,
or else required.  Otherwise, until then,
only direct support payments to providers and non cash assets, like furniture
and furnishings, would be allowed.



            How would the trustee evaluate a
beneficiary’s addiction?  The trust would
require the beneficiary both to take drug and/or alcohol tests and to sign all
legal waivers needed to by trustee to receive confidential information.  Failure to cooperate would be a bar to
receiving distributions.



            Who should manage the trust
distributions?  The trustee needs to be
someone who can say “no” to the beneficiary and who can do what is right.  Often family members either do not want to
serve or are not well suited to serve.
Thus, provided sufficient resources, a professional private fiduciary or
a bank can be utilized.



            When is this feasible?   The
trust needs to have the resources to afford professional management and to
assist the beneficiary.  Typically this
means liquid assets worth above one-hundred thousand dollars. 



            What control does the family have
when a third party acts as trustee?  The
trust may allow for a family member to act either as a trust advisor or as a
trust protector.  A trust advisor is
someone whom the trustee either may or must consult regarding
distributions.  A trust protector is
someone who has the power to remove and replace a trustee, often without
cause.  A trust protector is not involved
with daily management but oversees the trustee’s performance with regards to
asset management and beneficiary distributions.



            People with addictions cannot
control certain impulses.  For this
reason it is important that any inheritance left to them be given with
safeguards.  Naturally, before reaching
any conclusion regarding any particular person’s own estate planning, consult
with a qualified estate planning attorney.

“Serving Lake and Mendocino Counties for nineteen years, the Law Office of Dennis Fordham focuses on legacy and estate planning, trust and probate administration, and special needs planning. We are here for you. 870 South Main Street Lakeport, California 95453-4801. Phone: 707-263-3235.”