What if A Beneficiary Becomes An Addict?

Since the beginning of sheltering-in-place in response to the pandemic, there have been concerns about the impact the response has had on drug and alcohol recovery programs and their clients. This is to the extent where some are seeing substance abuse as a “pandemic within a pandemic”. Filling the gap in available treatment is a policy issue that has to be addressed by society, but trusts can be drafted so as to increase the likelihood of long term (2+ years) recovery from less than 25% to 92%. 

           Although most trusts have asset protection provisions, the so called “spend-thrift clause,” trusts must go beyond preventing the beneficiary’s creditors from reaching the assets. The Trustee must be authorized, by the term of the trust, to use financial leverage early, maintain that pressure for many months, find and use qualified experts and provide  a support even when some financial benefits are cut. This includes paying for housing, support for the spouse and children, and paying for private therapy. The Trustee must be free to require that the beneficiary agrees to open communication, including drug testing, medical information releases, meetings and other required conduct in their recovery plan. This way, beneficiaries are never completely cut off, but they recognize that harmful behavior has immediate and significant effects.

           I would like to assure my clients that they will never have a beneficiary who has a substance abuse problem. Statistically, however, it is likely that, sooner or later, a present or future beneficiary of a trust will fall victim to this disease and will need three things: family support, access to expertise, and accountability for their behavior. Trusts need to be drafted in such a way that a Trustee can provide that accountability through leveraging access to the financial benefits. Consider it as insurance, you may never need it, but if it’s needed, it could save someone’s life. 

For more details, please see my article in the Family Firm Institute Practitioner

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