Spendthrift Trusts and Leaving Assets to Children with a Substance Abuse Disorder
As September is National Recovery Month, sponsored by the Substance Abuse and Mental Health Services Administration, it can be a good time to discuss estate planning for parents of children with substance abuse disorders. One of the important concepts highlighted by national recovery month is that substance abuse disorders are a recognized medical disease, requiring medical treatment. There is no cure per se. A person with a substance abuse disorder will work their whole lifetime to achieve and maintain sobriety, likely including alternating periods of both.
When parents of a child with a substance abuse disorder create an estate plan, have you considered that one of their primary concerns may be that the money will be blown during a relapse, or in a more macabre light, possibly result in an overdose? On the other hand, a child with a substance abuse disorder can typically be the one who needs the most financial assistance, and a parent may wish to leave him or her resources. Creating a spendthrift trust can allow for the balancing of these concerns in the following ways:
- Require approval of disbursements: A spendthrift trust designates a trustee, who must approve all disbursements from the trust. Accordingly, if a child beneficiary with a substance abuse disorder is in relapse, the trustee can deny access to the funds.
- Does not allow transfer of interest: The child beneficiary will be blocked from transferring interest.
- Creditors cannot reach the assets of the trust: If the child beneficiary has a judgment against them or gets into financial trouble, creditors cannot reach the trust. The trustee can discontinue disbursements from the trust, so long as the judgment is out there.
- Allow child beneficiary to maintain eligibility for government programs: Assets in a spendthrift trust will not be considered, when the child beneficiary applies for government benefits, such as Medicare or Medicaid, which may be a vital resource to obtain treatment services.
Our office can assist you in the drafting of a spendthrift trust, which can provide for your child with a substance abuse disorder, while providing peace of mind. Contact us today to schedule a time to meet.