Estate Planning with Addiction in the Family
Substance use disorder can be lifelong, which is why it’s critical to put tools and strategies in place to protect your future and your loved one with addiction.
A person with a substance use disorder may often need a very different set of estate planning and inheritance tools and protections than other family members when it comes to planning for and protecting their future.
October is National Estate Planning Awareness Month, a time dedicated to highlighting the critical importance of having a comprehensive estate plan in place. Estate planning is not just about distributing assets; it’s about ensuring your wishes are carried out, protecting loved ones, and minimizing legal and financial complications.
Essential documents such as wills, trusts, healthcare directives, and powers of attorney provide peace of mind and safeguard your legacy. This National Estate Planning Awareness Month, here are some factors to keep in mind:
Power of Attorney
The establishment of Power of Attorney can be critically important because it enables you, as a responsible individual, to have the legal right to make decisions for your family members if they cannot do so themselves.
Because a drug-related fatality is a real danger, they may need someone who can make decisions about their medical care in a time of need or to access their accounts to pay their bills if they are in treatment.
Trusts
Trusts allow you to transfer some of your estate to your family member, which may ultimately be your goal. However, they allow you to put restrictions in place on how and when the funds can be accessed and even when a person can use those funds.
A third party can be put in charge of the trust, meaning someone else can ensure your wishes are met and your family member can’t use the funds in an inappropriate manner.
One example is a spendthrift trust. It allows your family member to have access to the funds they need to meet their ongoing needs but does not allow the beneficiary to sell or give away equitable interest in the trust property.
For example, if you have a family business, you may not want your family member to have the ability to simply hand over or sell your business because they are facing legal challenges due to their substance use disorder.
More so, the beneficiary of the trust is not able to control the property that you put within the trust, and any creditors they have cannot access those assets either. This works to protect your assets.
The extent and nature of the controls you place on distributions are up to you. You may want to allow your trustee to pay only for the addicted beneficiary’s room and board, education, medical care, drug counseling, and treatment programs.
Payments should be made directly to the service providers, or you may give the trustee broader discretion.
You may require the trustee to use only the income in the trust or to invade the principal under certain circumstances. The trust should be sufficiently flexible to allow for changing circumstances.
Legacy Giving
For those that wish to support the mission of groups such as Shatterproof, Tom Sullivan of The Sullivan Group, financial advisors in NY, recommends the following:
Retirement plans
As part of someone’s retirement plan, they can donate to a family foundation or charity. This means that you can designate a charity as the beneficiary of your retirement account, and when you pass away, the charity will receive the death benefit from your policy. You won't need to pay income tax on the distribution.
Bequests
You can also give a bequest, which is a gift of assets or property in a will or trust. This provides you with the option to give at a later date if you don’t feel financially confident giving now. The difference between a bequest and a retirement plan is a retirement plan is a savings account that provides income after retirement.
Charitable deductions
You may deduct charitable contributions of money or property made to qualified organizations if you itemize your deductions. Generally, you may deduct up to 50 percent of your adjusted gross income, but 20 percent and 30 percent limitations apply in some cases.
Charles McCullough, a hospitality accountant who identifies as a person in recovery, also agrees in ensuring that organizations, like Shatterproof, are listed in your will.
In addition, he recommends volunteering with treatment centers, so you have a full understanding and empathy for the disease of addiction.
Begin Your Legacy
Addiction is a very complicated component of any family relationship but there are available tools and strategies.
This month serves as a reminder to start conversations with family members, review existing plans, and consult professionals such as Estate Planning Attorneys or financial advisors, to guide you in creating a trust or other legal strategies that help ensure your loved one with addiction is properly taken care of.
This way, you can reflect your current priorities and leave a legacy.
Shatterproof has just announced the establishment of the Brian Mendell Legacy Giving Society to honor those who include Shatterproof in their estate plans. Brian was the son of Gary Mendell, founder and CEO of Shatterproof.
Shatterproof is grateful to an anonymous donor who recently pledged $5 million as part of their legacy planning, exemplifying the profound impact of our supporters.
By including Shatterproof in their planned giving, the Society's members demonstrate a deep, lasting dedication to fostering a future free from the stigma caused by addiction. Click below to learn more and begin your legacy with Shatterproof today.
