May is Mental Health Awareness Month and this year, more than ever, it is important to raise awareness and reduce stigma.  Mental illness can affect anybody, at any time.  Treating a mental health condition is rarely an easy task, and recovery is oftentimes not a straight line.  For some, a mental health condition and/or substance use disorder requires ongoing treatment and recovery for the person’s life.

When I work with clients who have a loved one impacted by mental illness and/or substance use disorder, a common concern is the beneficiary having unlimited access to their inheritance. Not only could these assets support their current struggles and/or addiction, but it could lead them down an even darker path. A friend of mine experienced this first-hand.  Her mother passed away and left assets to her and her brother.  Her brother was struggling with mental illness when their mother passed away and with the receipt of his inheritance quit his job, and spiraled into depression and substance abuse.  He was found deceased in a hotel room a few months after receiving his inheritance.

With intentional and well-drafted estate planning, it is entirely possible to leave assets to an individual in a manner that supports their mental health and recovery, and does not enable their illness.  One way to ensure that a child or family member is still taken care of in this manner, is to create a directed and/or incentive trust.  What individuals and families are able to do is encapsulate the boundaries and support systems they have in place, and pass it on to continue after they pass away, and continue in future generations.  When creating a trust of this nature, one has the ability to construct a limiting inheritance, without completely disinheriting the child.

When creating a trust with mental health challenges in mind, those contributing should think about the end goal. Does the trust want to focus on rehabilitation of the individual and/or their continued recovery? Does the trust want to fund treatment and medical bills, or distribute a monthly allowance to provide basic necessities for the individual?  I generally start by asking clients in what ways they support (financially or otherwise) their loved one when they are struggling with their mental health.  For example, some families may allow the trust to pay for items or make distributions generously when the beneficiary is active in recovery, but only want the trust to pay directly for recovery services and mental health resources should the individual experience a relapse.

There are many options that exist for this type of planning. Such examples of trust provisions, or goals, could be (but are not limited to) any of the following:

  • Outright distribution of the assets once the individual has been sober/in recovery for a certain period of time
  • Requiring or allowing random drug tests and/or UA’s to determine their status in recovery prior to making distribution
  • Requiring or encouraging continuous therapy or support groups
  • Limiting amount to be distributed to support/encourage the beneficiary in employment and recovery
  • Holding the assets in trust for the lifetime of the beneficiary

With this type of trust planning, it is important that the planning is thorough and well drafted.  The trust document should not only lay out the requirements and guidelines, but should also include powers and processes for the Trustee(s) to ensure it is possible to administer.  It is also important to choose who will act as Trustee carefully.  It may be ideal to name a professional/corporate Trustee, rather than a family member.  Working with an experienced estate planning attorney, who also understands mental illness, can empower families to take this intentional and beneficial approach to planning.

Along with serving families directly in my practice, I also work diligently to share this information within the community.  It is not uncommon that when I mention or discuss trust planning with mental health in mind, whether it be to potential clients or other attorneys, they have not heard about or considered this comprehensive approach to planning for families.  I hope this information will help support individuals, and their families, on their path in recovery.

Rachel T. Schromen is an estate planning attorney and owner of Schromen Law, LLC in St. Paul, MN.  She has been named a Top Three Best Rated Estate Planning Attorney in St. Paul annually since 2018, and voted Favorite Estate Planner by Women’s Press Magazine annually since 2017.  Ms. Schromen speaks frequently on the topic of Addiction and Mental Health Trust Planning, including providing trainings on the topic to attorneys in the Metro Area.

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