Addressing Beneficiaries With Addictions In Your Estate Plan

By Jeremy A. Wechsler, Esq.
Estate Planning & Elder Law Attorney

Does a loved one have an addiction that you need to consider when drafting your estate plan? There is a balancing act when trying to help a family member with an addiction by leaving them financially better off, but to restrict the use of those funds so that they don’t contribute to the addiction.

First, here are some sobering statistics:

  • National Survey on Drug Use and Health (NSDUH), 19.7 million American adults (12+) battled substance use disorder in 2017. According to Addictioncenter.com, 21 million Americans have at least one addiction. These figures translate into about 6 in every 100 adults in the USA having a substance abuse addiction.
  • 8.5 million American adults suffer from both a mental health disorder and substance abuse disorder.
  • According to the North American Foundation for Gambling Addiction Help, an estimated 10 million people have a gambling addiction in the USA. Add those figures to the numbers above, and the total number of people in the USA with addictions is around 9 in every 100 adults, or almost 10% of the adult population.

When it comes to measuring these statistics, consider that these numbers are dated and a lot has changed in a few years. Drug and alcohol use during COVID has reportedly climbed, and the accessibility of legal gambling online has rapidly increased.

Planning can be tricky for a loved one with an addiction. The starting premise is generally to use a trust fund with restrictions so that the inheritance can be used for purposes to help the individual, such as paying rent, paying for education, etc. But questions to consider are the following:

  • Is there a point in time when the individual is recovered and able to take direct control of his or her inheritance? How is that point in time determined? Or should the trust continue for the entire life of the beneficiary?
  • Who will control the trust? Often times, putting another family member in the position of Trustee creates a challenging situation for that person and could easily lead to conflict if the beneficiary feels the Trustee is too rigid, or that the Trustee should bend the rules.
  • What type of assets are you leaving in the trust? If a good portion of your estate is retirement accounts, such as IRA’s or 401(k)’s, then there are additional considerations for trust planning, as these types of assets generally lead to more complex planning issues.
  • Is the beneficiary receiving any public benefits, or is there a good possibility that the beneficiary receives benefits in future? This could also be a factor in how the trust is crafted.

Addictions aren’t going away, and more and more families are having to face the reality of caring for a loved one, including them in their estate plan, but not creating a situation where the person has money to spend on an addiction. There are no cookie cutter plans, and it’s important to work with an experienced estate planning attorney to craft a plan that addresses the issues.