Many parents of children struggling with addiction or mental illness are focused on caring for their children and some may have thought about who will care for them after they’re gone. The New York Times article “For Parents with Troubled Adult Children, Financial Hurdles Abound” looks at a few of the concrete steps parents of addicted children can take that won’t unintentionally enable an addiction.
Several advisors and attorneys in the article agree on the biggest hurdle: making sure parents understand their addicted children may never recover. While many may struggle to let an advisor know about a struggle with addiction even in a privileged attorney-client conversation, parents can’t let the stigma surrounding addiction and mental illness affect estate planning. While it may be easier to just say that a child has taken a break from schooling, you shouldn’t minimize the struggle with your estate planning attorney. It could lead to an estate plan that enables addiction by giving the addicted child easy access to funds.
One possible way to avoid this, suggests the article, is a special-purpose trust. These trusts have a number of advantages and can be customized to deal with each unique family situation. These trusts can provide a semblance of the life the child might have had were it not for the addiction, but with some safeguards. Parents can include language that gives trustees the latitude to deal with both good and bad years, incentivizing the child to meet certain requirements to receive a distribution from the trust. That could be a drug test or a certain length of time sober or staying on a medication.
However, one advisor made sure to warn against certain common planning practices. Lori Wolf, a New Jersey attorney, says she strongly recommends against including language giving children full access to funds in trust at a certain age or after a certain amount of time. She said she reminds clients that while parents should always hope for a full recovery, a relapse is always a possibility. Clients should consider the “rules” for making distributions carefully and think about what will take care of their child.
If your child has an UTMA account in the wings, parents of a child struggling with addiction may be concerned about the access they will have to that money once they reach adulthood. Once a child turns 21, an UTMA account will terminate and the funds will be distributed to the account owner. However, at Family Estate Planning Law Group, we help parents do some early planning to prevent a child from using those funds to feed an addiction. Prior to the child’s 21st birthday, the UTMA custodian can invest in a limited partnership, limiting the child’s access to these assets. This is definitely not a do-it-yourself project, however, so make sure to work with an experienced estate planning attorney.
Estate planning is all about taking care of the family and planning ahead for them, but that can be difficult with an addicted child. When creating an estate plan, you should be thinking about the possibilities of your child’s future, but circumstances can change. That’s why it’s so important to work with an estate planning attorney who will meet with you regularly to review your plan and update it to address your family situation as it changes. Here at Family Estate Planning Law Group, as part of our ongoing maintenance for our clients, we regularly meet with clients to discuss the changes and their life and make any necessary updates.
For parents with a family history of addiction or mental illness, parents should consider having your attorney put together a health care proxy and HIPAA release for any children 18 or older as they head off to college. These documents could allow you to help your children in the midst of a crisis, when without them you wouldn’t have the legal right to speak with doctors and discuss medical records and decisions.
As one advisor says in the article, “addiction can be powerful.” Parents should work with an experienced estate planning attorney to think through their options and determine what is best for their child. Accepting the situation and planning ahead can encourage the best possible outcome.
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Reference: New York Times (August 28, 2015) “For Parents with Troubled Adult Children, Financial Hurdles Abound”