It is extremely difficult to deal with a family member who is struggling with addiction issues. This is particularly true if the family member is an adult child and the parents have had to make fraught decisions regarding whether to help support their child or to cut him or her off. This tension is compounded when the parents engage in estate planning. They often fear that leaving the child his or her share of inheritance will result in them frivolously spending the money on a drug or alcohol spree or gambling it away. Leaving him or her nothing may result in the child living on the streets.

Estate Planning professionals can help parents create an incentive trust for adult children struggling with alcohol or drug dependence or a gambling addiction. The goal of an incentive trust is to encourage clean living and prevent inherited estate assets from fueling the child’s addictions. With the help of an experienced estate planning attorney, you can create an incentive trust that achieves these goals through a highly personalized trust creation process.

If you have questions about incentive trusts or any other area of estate planning, call experienced San Jose and San Francisco Bay Area attorney Linda J. MacKay today at 408-379-9600.

Mistakes Parents Make Regarding Inheritance and an Addicted Adult Child

Gifts—Many parents simply make a lump sum gift to their child. This often has disastrous consequences, as the child ends up using the money to fuel their addiction, pay off debts to those who fuel their addiction, or gamble it away.

Gifts to Siblings and Other Family Members—Some parents try to create an informal trust, giving their addicted child’s inheritance to another family member to distribute or to a close family friend. This places a horrible burden on the selected family member or friend, and rarely works according to plan. Often the funds end up being given to the child even though they have not proven their ability to handle them wisely or get spent by the other recipients over time. Without the formal legal framework created by a trust document, a layperson is unlikely to have either the skill or determination necessary to adhere to your wishes.

Disinheritance—Disinheritance achieves one goal, preventing your child from wasting your money on their addiction. It has several other negative side effects, however. Specifically, it does nothing to encourage your child to conquer his or her addiction. It also may result in them being destitute or homeless or plaguing other family members with requests for financial help.

How Incentive Trusts Work

A “trust” is an allocation of assets given to a third party, the “trustee,” to hold on your behalf. The trustee allocates the assets to your “beneficiaries” (i.e. children, charities, friends) according to your direction upon your death. For example, you may instruct your trustee to pay out $1,000 per month to each of your children for life, to provide them with a beloved piece of art once they get married, and to provide them with a $25,000 lump sum at the time they close on their first home. In essence, a trustee is a person you direct to distribute your assets according to your instructions.

An incentive trust is a variety of a traditional trust. Instead of distributing funds and assets according to a timeline, it creates incentives and prohibitions on the distribution of funds and assets based on the beneficiary’s ability to remain sober. It often also only allows for the distribution of funds to third parties on behalf of the beneficiary, to prevent him or her from having the cash to fuel their addiction. This solves the twin problems routinely facing parents dealing with an addicted child—they do not want their child to be destitute and living on the street but also do not want their hard-earned money going to a drug dealer or bookie.

San Jose Incentive Trust Lawyer — Santa Clara County Attorney

An incentive trust works like a standard trust, except that your adult child has to prove that he or she is meeting certain milestones to attain any funds. Further, it usually does not pay funds directly to the child and, instead, pays directly for necessary living costs to prevent funds from being used to fuel addiction. As a result, it achieves two goals, keeping your child free of his or her addiction while also making sure his or her basic living requirements are met.

Standard provisions of incentive trusts include that the beneficiary submit to random drug testing on a regular basis; that no funds are distributed directly to the adult child but are instead used to pay for their ongoing costs such as mortgages, rent, and groceries; that the Trustee never makes cash payments to the adult child beneficiary; that the Trustee is often a professional trust company that will not give in to emotional appeals or field late night phone calls from an addicted person seeking quick cash; that the Trust can make unlimited payments for treatment and other rehabilitative programs.

If You Need Estate Planning Help, Call San Jose Attorney Linda J. MacKay Today

An experienced estate planning attorney must carefully draft incentive trusts and other estate planning tools if they are going to meet their intended goals. Attorney MacKay has the experience to help you through this challenge and to guide you around pitfalls that snare people who try to handle these issues alone. Contact the Law Offices of Linda J. MacKay today at 408-379-9600. We are standing by to help you with your estate planning questions.