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Today we’re going to talk about estate planning when you have a family member or a beneficiary with an addiction issue. These addictions can be from what we commonly think of drugs, alcohol, gambling, or even just spending. There are two main ways that you can deal with these addiction problems. First, you can just disinherit them, give them nothing. They get nothing, none of your money will be able to further their problem, but that’s not really the best solution to the problem. A better solution would be to create a trust, and have a trust so it limits how much funds they can get at any one time, so it doesn’t magnify or exacerbate the problem of their addiction.

There are three types of trusts you can use in this situation. One of them is a staggered trust, where you still give them money but at different intervals, such as 25 years old, 30 years old, 35 years old, 40 years old. With that, it spreads out the distributions over time, so they never have a huge lump sum to deal with. Just a little bit over time. Another one you can use, it is an incentive-based trust. With this, you give incentives, such as finishing high school, finishing college, continuous employment, passing drug tests. When they hit these incentives, the trustee is allowed to give them funds, but only when they meet these incentives.

Another one is a wholly discretionary trust. These discretionary trusts give the trustee total discretion on when to pay out money to the beneficiary. You could write it so the trustee is allowed to pay out basic support expenses directly to places like a landlord, the electric company, the phone company, so the beneficiary never actually receives any money, but they’re getting a benefit from the trust. This is typically good when they have a lot of problems with money and it’s a severe addiction, but over time as they get better with their addiction and they begin to overcome it, hopefully, the trustee can give them more money and at some point potentially even give them money themselves to spend it.

When you’re using a trust, one of the important choices is who to use as a trustee. With a wholly discretionary trust or really any of these trusts that has any amount of discretion or any incentive, you really don’t want to use a family member or a sibling. The reason is, this is going to be a tough spot for that trustee to be in. They’re going to be most likely saying, “No,” more often than not to an addicted beneficiary. This is something that can create real family conflict and real turmoil, and not really be a solution for the addiction problem you’re trying to protect them from and help solve.

A better choice is to use a corporate trustee or a trusted attorney to act as the trustee. Yes, that will cost more money. There are fees associated with it, but it’s better than creating huge family conflict after you’re gone, while you’re trying to protect that family member. If you have questions about this or any other estate planning topics, you can reach out to me by phone, (802) 442-9800 or schedule an appointment online.

William C. Deveneau is an attorney practicing in Southern Vermont, including Bennington and Manchester, and New York, including Albany, Colonie, Hoosick Falls, and Troy.