What To Do, And How To Do It

I am often asked what to do when a child, grandchild, or other loved one is struggling with substance abuse. In many cases, the problem extends beyond drugs or alcohol to behavioral addictions such as gambling. As a result, families may spend years in emotional turmoil—and significant financial resources—trying to help a loved one recover.

Parents and grandparents in this situation frequently wrestle with how to address an addicted heir in their estate plan. Some wonder whether they should include the individual at all or whether disinheritance is the wiser choice. While they love their child or grandchild, they also recognize that leaving an addict a lump sum of money or easily liquidated assets can do more harm than good. Their concern—often justified—is that an inheritance could be quickly depleted to fund the addiction.

Some families ultimately decide to disinherit the child or grandchild. They may feel resigned to the situation and at peace with that decision. If this approach is chosen, it is important to take steps to minimize the risk of disputes or disruption to the rest of the estate plan. For example, you should confirm that the disinherited child is not named as a beneficiary on bank or brokerage accounts, retirement accounts, or life insurance policies.

Other parents and grandparents seek a more balanced approach. They want to provide for their addicted child while also protecting that child from poor financial decisions. Fortunately, this can often be accomplished by creating a properly structured trust with specific safeguards. In this arrangement, the child is named as a beneficiary of the trust, and assets are set aside to be managed on the child’s behalf.

First, you appoint a trustee to manage the trust assets and control distributions. The choice of trustee is critical. An addicted beneficiary is likely to resent anyone who controls access to money, which is why it is almost always a mistake to name one of your other children as trustee. A neutral third party—such as a bank, accountant, or attorney—is usually a better option. While professional trustees charge fees, they are far less susceptible to pressure or manipulation.

Second, you decide how much control to place on distributions. You may instruct the trustee to pay only for specific needs, such as housing, education, medical care, counseling, or rehabilitation programs. To prevent misuse, payments can be made directly to service providers rather than to the beneficiary. The trust should be flexible enough to adapt to changing needs over time.

Finally, you may include incentives and consequences – often for example, the trust might provide additional distributions if the beneficiary regularly attends counseling or treatment programs. This would require the beneficiary to sign a healthcare release so attendance can be verified. Conversely, missed sessions could result in reduced distributions. If the beneficiary demonstrates sustained recovery over a meaningful period of time, and that recovery is well documented, the trust terms can be adjusted to allow greater access or fewer restrictions.

Be Educated, Be Proactive