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Sunday, September 12, 2010

Can my Will do anything to protect my child who has an addiction?

I sometimes meet families where one of the children has an addiction to alcohol, drugs or gambling. The parents want to treat all of the children equally in the Will, but want to know whether there is anything they can and should do differently for a child with an addiction. Yes, there are things that the parents can do.

The basic goal is to ensure that the addicted child's share of the estate is maximized in a way that it gives the child the most benefit. The parents want to ensure first of all that inheriting money doesn't make the addiction worse, and secondly that the inheritance isn't wasted either on the addiction itself or on opportunists who take advantage of the addicted person.

A trust for the addicted child is often a good idea. In the parents' Wills, the share that goes to the addicted child is held by a trustee. The terms of the parents' Wills dictate how long the money is held, who holds it, how often the child gets payments, and the amount of those payments. The parents can choose to have a regular monthly income flow to the child, or may choose to have payments made only on an as-needed basis. Though this may sound complicated, it really isn't difficult for an experienced lawyer to draft a trust that will meet the parents' requirements. Each family and each situation is a bit different, so the trusts are individually drafted to include relevant details.

Something that I believe doesn't get enough thought in these cases is the naming of the trustee. Most of the time when I ask parents who will act as the trustee of the addicted child's trust, they automatically reply that one of their other children will take on the job. But let's think about that for a moment. Think about what it would be like to be a child who must always ask a sibling for money. And think about what it must be like to be the sibling who is in charge of the funds and who has to assume a managerial role over a troubled sibling. That can't be pleasant for either of them and it usually changes the relationship between the children in a negative way.

Another issue that arises is that of "what if he gets better?" This one is really tough for parents. After all, the point of the trust is to protect the addicted child, not to punish him or her. The parents often feel that it would be unfair to the child to keep a lock on his or her inheritance even if the child cleans up his or her act and gets free of the addiction. To deal with this, you might consider building flexibility and discretion right into the trust so that the trustee has the ability to collapse the trust and pay out all of the funds if it seems appropriate to do so. Keep in mind though, if the child should have a relapse, the trustee won't get the money back.

The parents also have the option of including a brief statement in the Will to the effect that the trust is in place because they love the addicted child and want to provide protection. This might offset any perception that the trust is "punishment" for bad behaviour.

Depending on the family's circumstances and the affects of the addiction, the parents might also consider giving the addicted child a part of his or her inheritance while the parents are alive, perhaps in the form of a place to live. If the addicted child has children of his or her own, you might consider leaving the child's inheritance to them instead.

Your estate-planning lawyer can help you talk through the possibilities to come up with something that will help deal with a difficult situation.

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