End-of-life planning can be painful for every family. It’s easy to postpone it indefinitely and avoid thinking about what will happen when we pass away.
However, it’s incredibly important to start thinking about it and get the process out of the way sooner rather than later.
If you wait until it becomes urgent, it might be too late. These are monumental decisions you want to be able to reflect on and think about carefully.
This already stressful but essential step of estate planning becomes both more painful and more necessary when the family is facing the challenges of addiction. If one of your children is addicted to drugs or alcohol, the stakes are even higher.
As a parent, you want to be able to provide for their care and support after you’re gone, but you also don’t want to enable them with access to your wealth and cause more harm than good.
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How to Leave Money to a Child With an Addiction
Putting Money in a Spendthrift Trust
If you’re worried about your child staying afloat without your continued financial support, but you don’t want to give them money directly, your best option is to establish a trust with what would have been their inheritance. Putting that money in a trust can provide a way to get needed support to your child without exposing the money to their debt obligations or encouraging reckless spending.
With a spendthrift trust, you will need to assign a trustee to administer the trust and decide when to release funds. They will be responsible for managing that money after you pass away. This is a flexible, effective option, but it requires careful selection of a trustworthy person who can handle the responsibility.
While you might be tempted to choose a sibling or another family member, it’s often a safer choice to choose a lawyer you trust. Being the trustee for your family member can strain relationships and cause enormous amounts of stress, while someone outside the family will be able to make independent, responsible decisions without considering the personal relationship.
Incentive Trusts
Another option if you don’t have a trusted lawyer or you don’t like the idea of a spendthrift trust is to open an incentive trust. Instead of putting the power of disbursing funds in the hands of an individual, you get to set the rules beforehand for an incentive trust. This sort of trust will release the inheritance to your child according to specific preconditions that you set.
The conditions you set for an incentive trust allow for your child to eventually claim full control of the inheritance- if they meet your requirements. You could stipulate that they must go through rehab for their addiction and stay drug-free for a specified period. It’s also possible to set it up to release the funds incrementally as your child reaches different milestones in their recovery.
The danger in this situation is that you are limited in your ability to plan for changing circumstances in the future. You can require your child to continue staying clean to receive installments of the inheritance into the future, but if you allow them to take control of the full trust at any point, there is no way to ensure they don’t return to using drugs afterward. You will need a trustee, however, prior to the child become the trustee.
Disinheritance
If no other options are feasible, or your child has irreparably burned their bridges with you and the rest of the family, your last option is to exclude them from your will. As hard of a decision as it is, it is sometimes the only solution. Make sure you have witnesses and a lawyer at hand when you disinherit your child, as this will make it harder for your child to challenge the will later on.
Remember that disinheritance is final. If you change your mind before you pass, you will have to rewrite your will. Otherwise, your son or daughter will be forever written out of your will, no matter what happens in the future. Your other family members would naturally have the option of using their inheritance to help the struggling child in the future, but that would be up to them.