Allow me to relay a story of a client who once had significant concerns about her son. Her son suffered from drug and alcohol dependency, but she didn’t want to deprive him of his inheritance. Tricia was distraught as she sat in my office conference room, directing me to prepare a trust that would disinherit her son, Antoine.
“I love Antoine, as he is my son,” she explained with tears in her eyes, “but I’m afraid whatever I leave him when I pass away will be wasted on drugs and alcohol. He’s had a terrible dependency problem his whole life, in and out of rehab. Because of his problems he can’t hold down a decent job – so he really needs an inheritance. I’m so conflicted – I don’t know what to do.”
I explained to Tricia that there is a way to provide Antoine an inheritance while preventing Antoine from wasting the money on drugs and alcohol. I told her that Antoine’s share could be held in a continuing trust rather than having money and assets distributed to him outright at Tricia’s demise.
“You would name an independent party – usually a bank or trust company is the best idea, to act as Antoine’s trustee. They would invest his inheritance to earn income, which they could distribute to pay for his food, clothing, shelter, health, and other needs.”
“Could I name my other son, Jeremey, to act as Antoine’s trustee?” Tricia asked. “I hate the idea of paying large bank fees to manage Antoine’s inheritance.”
“You could name Jeremey to act as trustee,” I answered, “but it would be against my advice. It’s never wise to name a son as the gatekeeper to his brother’s inheritance. Antoine is likely to resent Jeremey for having control over money that Antoine believes is rightfully his to control. And imagine a situation where Antoine approaches Jeremey for some money, Jeremey asks Antoine what the money is to be used for – suspecting that Antoine intends to buy drugs or something – and Antoine telling him that it’s none of his business. That could lead to some pretty nasty confrontations and acrimony.”
“So I should name a bank – but you didn’t answer my concern about fees,” Tricia said.
“The fees are usually quite reasonable when you consider everything that a trust company will do in this situation. They are going to professionally manage the weal and help Antoine create a budget so that the money will last for Antoine’s lifetime. They’ll file tax returns for the trust, and interact with me as the attorney for the file. They’ll also decide on the best way to make distributions.”
“Antoine is very charming,” Tricia said with a wry smile, “and he can fool the best of them that he’s not suffering from his addiction when he really is. How is the trust company to know that the money it is distributing to Antoine will really be used for his necessities?”
“I will build provisions into your trust that would allow the trust company to suspend distributions to Antoine if they had reason to believe that he was having a relapse. Instead of making distributions of cash to Antoine, the trust could pay his rent directly, his doctors and health care agents directly and even his credit card receipts for groceries. The document would allow the trust company to demand that Antoine consent to taking blood tests or having a urinalysis completed to verify his condition. The trust could also provide that should rehabilitation be necessary, the trust will pay for those services. There’s a lot that we can do to keep the money away from being used for drugs and alcohol.”
“That sounds so harsh,” Tricia said with a worried look on her face.
“Yes, it is in a way,” I replied. “But it’s all to protect him from himself. You’d be doing him a favor, really, leaving an inheritance that will last his lifetime, be professionally managed, and keep it from being used for self-destructive behavior.”
“I don’t know about entrusting all of these decisions to a faceless entity like a bank or trust company.” She said.
“This is where you can enlist the help of Jeremey or some other trusted family member or friend. You could name Jeremey to remove and replace the bank or trust company if they aren’t doing a good job, and you could direct, in the document itself, the trust company to consult Jeremey’s opinion on Antoine’s condition or on any discretionary distribution that Antoine may request.”
“I guess that it’s a good idea,” Tricia said thoughtfully. “Let me see the draft and look at the wording to see if I like it.”
These decisions are never easy. Typically the language used in the legal documents is first drafted, then read and discussed before being modified to meet the particular needs of a beneficiary’s situation. Since no two situations are ever the same, the documents will always be different – but the concern remains the same.
©2023 Craig R. Hersch. Learn more at www.floridaestateplanning.com