For most parents, deciding how to distribute their estate is typically rather straightforward. Usually, estate assets are divided amongst the children and gifted to them outright if they are adults. What happens though, if one of your adult children struggles with addiction? A Port St. Lucie trust attorney at Kulas Law Group discusses how to protect the inheritance you pass down.
Addictions Are Expensive
Drug addiction is a problem that knows no boundaries, striking the wealthy and the poor, the educated and uneducated, the famous and not so famous in equal proportions. If you have a child who is struggling with a drug or alcohol addiction, you are hardly alone. The Federal Reserve’s Report on the Well-Being of American Households in 2017 reveals that one in five Americans knows someone who is addicted to opioids or prescription painkillers – and that accounts for only one class of addiction. One of the realities of addiction is that addictions are typically not cheap. In fact, addicts often spend a considerable amount of their time trying to fund their addiction. Consequently, inheriting a large sum of money can do more harm than good for someone struggling with addiction. The story of banking heir Matthew Mellon illustrates all too well what can happen when an addict is handed a large sum of money.
The Story of Matthew Mellon
Mellon was an heir to one of the country’s biggest banking dynasties. His father committed suicide just before his high school graduation, which led to Matthew inheriting a total of $25 million from several trusts when he turned 21 years old. By then, Matthew had already been diagnosed with bipolar disorder and been through several rehab programs. For the next three decades, Matthew struggled with addiction, most recently to the prescription drug Oxycontin. At one point, Mellon said he was taking as many as 80 pills a day at a cost of $100,000 per month. Thanks to his inheritance, however, he could afford such an expensive addiction. Sadly, Mellon flew to Cancun, Mexico, purportedly to check into yet another rehab facility, but was found dead in his hotel room.
Protecting Your Child’s Inheritance
Watching your child struggle with an addiction is never easy. You still love them though, and disinheriting them doesn’t sit well with you. Deciding how to handle that person within your estate plan is even more difficult. You may be reluctant to just gift them a large inheritance for fear it will be squandered on the addiction. At the same time, setting them up to squander their entire inheritance doesn’t seem like a good idea. What can you do? The he following tips may help:
- Be realistic an objective – step back and look at the situation realistically. Is gifting assets directly to the beneficiary in question too much of a risk? If the answer is “yes” then do not do it.
- Think about using a trust to protect the inheritance –pass down your child’s inheritance using a trust instead of handing down a large sum of money. A trust can protect the assets and even protect your child from his/her own self-destructive behavior.
- Choose your Trustee wisely – one of the biggest benefits of using a trust to pass down the inheritance is that a Trustee administers the trust. Choose your Trustee wisely as he/she may be responsible for discretionary decisions, such as whether to disburse trust assets to the beneficiary in question.
- Stagger distributions – only disburse small amounts at a time to the beneficiary. This could be a monthly “maintenance” amount or smaller amounts every few years.
- Use the trust terms to create conditions – here is where the benefits of a trust can really be seen. Using the trust terms you can create all kinds of conditions, if you choose to do so. You could require completion of a rehab program, monthly drug testing, or any other condition you wish to include as long as it is not something illegal or unconscionable.
Contact a Port St. Lucie Trust Attorney
To learn more, please download our FREE solid estate plan checklist. If you have additional questions or concerns about the best way to protect the inheritance of a child with an addiction, please contact an experienced Port St. Lucie trust attorney at Kulas Law Group by calling (772) 398-0720 to schedule a consultation.