If you have a potential beneﬁciary who has an addiction such as substance abuse or gambling, or one who has demonstrated that he or she can’t be trusted to handle money appropriately, you can still make provisions for him or her in your living trust. You can also make provisions for a mentally or physically challenged person without jeopardizing their beneﬁts under state or federal assistance programs. If you are facing the issue of providing for a difﬁcult beneﬁciary, don’t hesitate to discuss your options with an attorney because there are ways to properly provide for those with challenges.
The “spendthrift” provision common in many trusts is designed to provide some support to a loved one without giving him or her direct access to that support. For instance, you can stipulate that support may be given only for a speciﬁc, well-deﬁned purpose such as paying rent directly to the landlord. For young adults, it is common to set up an educational subtrust within the trust so that money will be used ﬁ rst and foremost for post-high school education.
Today there are so many different addictions that can lead to self-destruction. If you know that a loved one is suffering from an addiction, you can offer them some assistance in your living trust. For example, for a beneﬁciary with substance abuse problems, a living trust can be designed to require that a beneﬁciary get treatment and be sober or drug free for a period of time before he or she can receive distributions. This can be powerful motivation for your loved one to get help.
Some people making their estate plans are concerned that a beneﬁciary who has already shown signs of laziness will be further discouraged from ﬁnding productive activities. There may be a concern that even a person who is otherwise responsible will be tempted to engage in unsuitable lifestyle changes by receiving a windfall. In cases such as these, there are provisions that can restrict distributions. Distributions can be staggered over time, restricted to certain expenditures, or conditioned upon certain occurrences. For example, it is common for trusts to provide that a young adult beneﬁciary receive the inheritance in three payments spread over a ten year period. A trust can also provide that payments will only be made to match a beneﬁciary’s income. It is possible that by very strict provisions in a trust, a beneﬁciary can actually be motivated to get a job or to make solid plans for spending his or her inheritance wisely.
The keys are: 1) Be honest with yourself if you know your loved one is engaging in self destructive behavior — don’t pretend the problem doesn’t exist. 2) Don’t be ashamed to discuss the issue with your estate planning attorney. He or she deals with these issues every day and is legally bound to keep such discussions strictly conﬁdential. 3) No matter what the issue is, a trust can provide ﬂexibility and creativity concerning distributions which will allow you to do what’s best for your loved one under the circumstances.
© 2017 by Marlene S. Cooper. All rights reserved.
(Marlene S. Cooper, a graduate of UCLA, has been an attorney for over 35 years. Her practice
is focused entirely on estate planning, estate administration and probate. You may obtain further information at www. marlenecooperlaw.com, by e-mail at Marlene@ CooperLaw.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article).