You may have found yourself in the position of having to adjust your estate planning for addiction. It’s not a pleasant subject, but an expert estate planning solicitor will be able to guide you through this difficult circumstance.

You may have an adult child who has struggled with addiction to drugs or alcohol. You may have been out of touch for long periods and then he or she resurfaces in time to ask for more money. You are deeply concerned that more funds will simply be used to feed his or her habit. You struggle not knowing whether you are the last hope to stay alive or the one person who needs to say “no” so that his disease might be brought under control. Accessing rehabilitation services is often very expensive with no guarantee that the addicted person will recover.

It is difficult enough to deal with these problems while you are alive and actively involved in decision making. It’s no surprise that you are also concerned that, on your death, or on your spouse’s death if you die first, an open-ended inheritance squandered on addiction. He or she, as an addict, could waste the inheritance early and might even kill himself or herself in the process. It’s fair to say that the last thing an addicted person needs is a windfall.

The good news is that you can adjust your estate planning for addiction.

Estate Planning For Addiction: You Don’t Have To Be Equal

estate planning for addiction, estate planning, testamentary discretionary trustLet’s say you have three children, one of whom is an addict. You don’t have to give them all an equal inheritance. Many parents assume it is necessary to treat all children who inherit equally and to distribute in the same way. Accredited Specialist in Succession Law (wills and estates) Bryan Mitchell says: Fair estate planning does not always mean that the beneficiaries are treated equally.”

Estate Planning For Addiction: You Don’t Have To Leave The Burden On Another Sibling

You may therefore decide that the oldest sibling can look after the addicted sibling once you’ve died, and that you can leave more of an inheritance to that sibling to take care of the addict’s needs. But this is a big burden, and you can’t always be sure that the oldest sibling will do what you’re expecting. The oldest sibling’s spouse may decide that the extra inheritance is fair game during their divorce proceedings – and the extra money will be lost.  The oldest sibling and the addicted sibling could become estranged, and those extra funds won’t be used for the addicted sibling.  Finally, there are no rules and there is no structure in place. The addicted child might pursue the oldest sibling who received the inheritance with the same insistence for money to feed their habit. Estate planning for addiction will remove the burden from your other children.

Estate Planning For Addiction: You Don’t Have To Cut The Addicted Child Out Of Your Will

Although it may be tempting, Section 41 The Succession Act 1981 (Qld) sets out the responsibilities of a will-maker in that adequate provision ought to be made to a spouse, children and other dependents. If adequate provision is not given, as in both cases listed above, the will may be challenged.

It is at the discretion of the court as to whether or not an eligible applicant will be further provided for under the Will.  The important thing to remember with a Family Provision claim is that the test is not to establish what the deceased intended under the will.  The court must simply decide whether or not provision ought to be made to the applicant based on a number of deciding factors.

What You Can Do: Create A Testamentary Discretionary Trust

estate planning for addiction, estate planning, testamentary discretionary trustThe best tool you can utilise for estate planning for addiction is a testamentary discretionary trust. A testamentary discretionary trust is a type of trust created under a will, comes into existence only upon the administration of the deceased estate and has four elements: the trustee(s), the assets, the beneficiaries and the discretion.

The trustee

The trustee is the person (or persons up to four) you designate to be in charge of the trust.  The trustee can be the person whom you wish to benefit under your will, or even one of the persons for whom the trust is established.  The trustee can also be a company.

Assets of the trust

A testamentary discretionary trust established under the will must receive assets under the will.  These can include cash, real estate, shares, cars, boats, art works or any chattels you wish.

Beneficiaries

Every testamentary discretionary trust must have beneficiaries who are those persons who may benefit under the trust.  There is usually a definition of beneficiaries in a discretionary trust, and could be the person you wish to benefit together with their children, grandchildren and any other specified persons or entities.

The Discretion

The trustee of a testamentary discretionary trust has to be given an absolute discretion in distributing some or all of the capital and/or the income of the trust from time to time in various proportions, amounts and categories to the beneficiaries of the trust.  In exercising this discretion the trustee decides who gets what and when. This could be important for tax reasons and in the case of proposed beneficiaries who may not be money-wise or who may be easily influenced to their detriment.

If you’re thinking about setting up a testamentary trust, common areas which require thought are:-

  • Whether to have one or several Trusts established under the Will
  • The selection of the trustee or trustees
  • The method of appointing replacement trustees
  • Whether the beneficiaries be limited to your descendants only or whether their spouses might be included
  • Whether some classes of beneficiaries are restricted to income and some to capital

In the case of spendthrift children/gambling difficulties/drug addiction, you can provide for such a child through a trust ensuring his/her share is kept intact.

The trustee will be tasked with managing and investing trust assets appropriately and making tough decisions with respect to distributions. Selecting a trustee to handle this job should not be taken lightly. A sibling or extended family member is often a poor choice, given the obvious conflict this can create in family relationships. By appointing a family member to act as trustee, there is potential for converting a loving and supportive relationship into something that could quickly turn bitter or adversarial. Another option is to appoint an independent person or corporate trustee, often an expert lawyer in wills and estates. Furthermore, an independent trustee will have the added benefit of experience in handling distributions to beneficiaries suffering from addiction.

For further information or assistance in establishing a testamentary trust, contact us today. You’ll need specialist advice in this area of succession law. We offer a FREE, 10-minute phone consultation.