People with valuable property generally want to pass what they have accrued to loved ones when they die. Many people can achieve that goal by simply drafting a will. Using a will as the primary testamentary instrument in an estate plan can be effective, but it does have certain drawbacks.
Beneficiaries generally have total control over what they inherit after the personal representative transfers the assets to them. Some people could misuse their inheritance. Substance abuse or addiction is a warning that a direct inheritance could do more harm than good. Trusts can be useful in such cases.
How does a trust help?
The assets provided for an individual’s benefit in a trust do not immediately become their property. Instead, the trustee manages those assets and distributes them in accordance with the instructions provided by the trustor.
People creating trusts for beneficiaries dealing with substance abuse may impose restrictions on the distribution of trust property. They may require that trustees make direct distributions to third parties instead of providing valuable assets or cash to the beneficiary.
Trustees can go even further than that by restricting the types of expenses that trust assets can cover. They could plan to pay for substance abuse treatment or educational expenses, for example.
The goal is to prevent the beneficiary from misusing resources to acquire drugs. A carefully-structured trust also prevents common financial complications, such as the loss of state benefits, stemming from a lump-sum inheritance.
Expanding an estate plan to include a trust can be beneficial for those worried about a loved one who struggles with addiction. People creating robust estate plans typically require support as they draft documents and find solutions for their unique challenges, and that’s okay.