An important component of building a comprehensive financial plan is determining how clients distribute their wealth at the time of their passing among their loved ones and preferred charitable causes.

Families are so often full of changing dynamics and relationships. When a loved one is dealing with substance misuse, it can increase the complexity of creating a successful estate plan.

Challenging conversations around addiction continue to emerge frequently among investors and, by extension, their beneficiaries. A report from Pew Research Center found that 46% of Americans have a family member or close friend who at some point has experienced substance use issues or has been diagnosed with substance use disorder.

It’s not an easy topic to confront, and planning for it financially does not come with a straightforward playbook.

While navigating areas of sensitivity, I’ve experienced situations where a client’s goals are broad and emotionally charged.

Some concerns may be that their assets pass to the next generation to be used in a way that enables destructive or addictive behavior, certain addictions may cause capacity issues that hinder their beneficiaries’ ability to manage money appropriately, or an heir’s susceptibility to undue influence by ill-intentioned individuals may spark privacy concerns.

The role of both the drafting attorney and financial planning professional is often to identify these concerns and then help narrow the focus of a client’s goals to create a strong estate plan that properly weaves in beneficiaries who have substance use issues.

The inclusion, or exclusion, of certain provisions can help ensure whatever assets are left to loved ones are used to their benefit and not to their detriment. But family breakdown is a key fear for investors.

In response to a recent survey of wealthy investors conducted by Raymond James, 60% of respondents said that maintaining family harmony is extremely important when it comes to their intergenerational wealth transfer plan. Understandably, families want to tread carefully. (Survey respondents are investors with a minimum of $500,000 in investable assets.)

However, overly simplistic planning should be avoided when it comes to heirs who struggle with addiction, such as completely disinheriting a beneficiary because of addiction or leaving the responsibility to another sibling or relative with a “handshake deal” that this person will take care of the individual who is confronting those challenges.

No matter how well-intentioned a sibling or relative is, taking a reductive approach can create problems of its own.

An estate plan in its entirety can be seen as a collage of important documents. It consists of a financial power of attorney, healthcare power of attorney and the last will – which comprises the basic estate plan. For more complex estate plans, especially ones that include peripheral issues such as substance use and addiction, a trust is generally introduced.

Issues With Trusts
A trust can be a good vehicle for bequeathing assets that lead to positive outcomes for the beneficiary. For the grantor, choosing the right trustees to serve in a fiduciary capacity, ensure that assets are invested prudently and follow the terms of the trust is essential to success.

The trustees can be an individual qualified to serve based on state trust or probate laws, a corporate entity, or a combination of both where the individual serves as a form of “boots on the ground” for the corporate trustee communicating directly with the beneficiary.