Setting up Trusts for Beneficiaries with Addictions

A recent article in the Star-Ledger discussed the dilemma a parent was having in creating an estate plan because one of the beneficiaries had a substance abuse problem. The parent did not want to leave the assets with ‘no strings attached’, concerned that this would only enable the heir to use the funds irresponsibly, including using the assets as a way to fund their drug addiction.

Setting up Trusts for Beneficiaries with AddictionsOne option for someone in this position to consider is to set up a trust for the individual. This allows the parent (or whoever is setting up the trust) to appoint someone as a trustee. The trustee will oversee and administer the assets. There can also be co-trustees appointed.

Qualities that a trustee should have include honesty, trustworthiness, conscientiousness, meticulous record keeping and good communication ability.  Ideally, the trustee should know about investments and taxes, but if not, they should be willing to hire people who do.  In addition, the trustee should be informed of the issues they could face while administering the trust in order to be prepared to handle their duties.

Trustees can be chosen from close family members or friends, banks, trust companies, attorneys or accountants.

Stipulations for how the money can be spent as well as requirements regarding employment, graduating from high school or college and other specifics can be added to the trust.  Another option is to specify the heir will receive a small monthly allowance. Both ways help decrease the risk that funds from the trust will be used for drugs.

These same conditions can also be put in place for a beneficiary who has a gambling addiction. If you have estate planning issues that concern you, consult with an Illinois estate-planning attorney to make sure that the estate you worked hard to build is protected and not squandered.

 

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