Jenny Rozelle, Host of Legal Tea
Cautionary Tales - Addictions & Estate Planning - Episode 87
Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle! Today’s episode of Legal Tea is a cautionary tale, where we talk about real-life cases with real-life clients with real facts – they’re things me or my office have worked on. For today’s episode, we’re going to be talking more about a general topic that seems to be coming up more-and-more frequently – the topic we’re going to be talking about is estate planning involving a beneficiary with an addiction. As many knows, addictions come in many different types and sizes, too. Like, it could be an alcohol addiction; drug addiction; opioid addiction, gambling addiction; etc. Regardless, for today, any addiction is at-issue as part of this episode – and it’s specifically applicable to how we handle beneficiaries with addiction issues when it’s time to #DoYourEstatePlan. I haven’t mentioned our hashtag in a while, have I? Anyway…
So, since this is a cautionary tales episode after all, I think to explain the takeaways that I want you to gain from this episode, I’ll share three real-life stories of where addiction and estate planning came head-to-head. For the first story, let’s name the client … Sandy.
About ten years ago, Sandy came to our office to have us help her with estate planning. Now, the very first meeting with our office for estate planning is with an attorney and I often jokingly call it a “blind date.” That meeting is to get to know each other and if we like each other well enough to spend more time together, which will involve getting to know each other. It really is a lot like dating, huh? Well, when Sandy came into that meeting, she shared that she was no longer married (actually, she was widowed, I believe, if I remember correctly) and she had one child – a son who was in his early 40s. Let’s name the son, Tony. Sandy further shared that Tony had battled an alcohol addiction for a better part of about ten years.
Through Tony’s battle, Sandy would constantly support him –mentally, emotionally and financially. Throughout the last ten years, Tony was not able to hold a steady job, a steady place to live, nor a steady balance in his checking account. As Sandy shared these things with us, our job, as the estate planning attorney, is to be a sponge and collect as much information as possible to create the best plan for Sandy and eventually Tony, down the road. It was quite clear that if something happened to Sandy, Tony was likely not in a position to hold any type of role like Executor or Trustee. But, in addition to that, Tony was also likely not going to be able to receive his inheritance … and be financially savvy with it. Or even, what if it, as a possibly worst case scenario, fueled his addiction?
Through Sandy’s estate planning process, we created a super great plan to eventually at Sandy’s passing support Tony. Like, at Sandy’s passing, Sandy designated her Accountant to serve as her Executor and Trustee – a great idea. An unbiased, professional to serve in those roles. Sandy’s estate plan, at her passing, created, what was called a Separate Share Trust, which was a Trust to support and benefit Tony – but instead of Tony managing his own inheritance, the Accountant stayed as “Trustee” (or manager) of Tony’s Trust. Sandy had thought long-and-hard about how she wanted Tony to inherit specifically … did she want a monthly stipend? An annual distribution? Distribution based on age? We went back-and-forth quite a bit.
Ultimately, she decided to have the Trust spit out a specific amount per month to Tony – and if the Accountant, the Trustee, suspected any evidence of his alcohol addiction, the Accountant could request Tony submit to an alcohol screening and if Tony failed the screening, he’d sacrifice a year of the monthly distributions and before the monthly distributions could restart (after the year), he’d have to submit to another screening. If he passed, monthly distributions would start back up; if he failed the screening, there would be no distributions for six additional months – at which, the process would start again. Screening. If pass, monthly distributions restart. If fail, six more months of no monthly distributions.
To me, the plan was setup beautifully. Absolutely beautifully. Sandy and my office worked really, really hard on putting together a great estate plan. I think Sandy’s story shows that if you or someone you know has someone near/dear to them with any type of addiction -and- it’s time for estate planning, be sure to carefully think about who-is-going-where, like who is in charge, how does that person inherit, etc. If you want to be able to leave them something, but do so in a way that will SUPPORT them and not HURT them, work with your estate planning attorney to come up with how to do just that. It’s possible – with a little extra thinking and work on your part!
For the second story, let’s name this client … Cliff and Carol.
Many years ago, my office helped Cliff and Carol create an estate plan. Through the estate planning process, we learned that Cliff and Carol had two children, specifically two girls, and one of the girls was doing fine-and-dandy. She was a hard-working professional, married, had a couple kiddos, etc. No issues with daughter #1. Daughter #2, we cautiously planned around – Just like Sandy and our last story, Cliff and Carol ended up sharing with the attorney that Daughter #2 had a severe alcohol addiction. Something “bad” would happen and Daughter #2 would get sober, usually through the support of rehab and Cliff/Carol. For this reason, just in case, they had created their plan to have Daughter #2 inherit through a Trust – that way, if she slipped, Daughter #1 would be there to manage #2’s inheritance.
Fast forward a number of years and we hear from Cliff and Carol again. They wanted to come in for a general review of things and possibly to make some changes too. At the meeting, they shared that Daughter #2 was finally … done with the battle. She had been sober for years at this point and actively worked to ensure it stayed that way. So, after weighing pros/cons and discussing how to setup, they ultimately decided they no longer wanted to burden Daughter #1 and since Daughter #2 had been sober for a number of years, they wanted to remove the piece about Daughter #2 inheriting a Trust. Therefore, at Cliff and Carol’s passing, Daughter #2 would receive her inheritance totally free-of-trust and no-strings-attached. She’d have full control. I’m sure you know where this story is going…
Fast forward a number of years again, Cliff passed away … and then Carol passed away. Their plan was left as we last talked … 50/50 between Daughter #1 and Daughter #2 …
they’d both get their inheritance, what is called, “outright” meaning that they’d get it no strings attached. Well, unfortunately and tragically (and whatever additional words we could use), Daughter #2 had slipped and had started abusing alcohol again. In the first meeting following her parents passing, the only one that came to the meeting was Daughter #1 and she asked the question, “Is there anything we can do to get my sister’s inheritance back into the Trust … to protect her from herself?” I explained there MAY be some solutions, but they’d cost a little bit and someone would have to take the lead. As much as Daughter #1 adored her sister as a human, as a sister, as a friend – she simply couldn’t commit herself to that level of time, energy, and emotions … so she didn’t push forward with any of my proposed solutions. She let Daughter #2’s inheritance go … outright.
To this day, any time I think of Cliff, Carol, and their daughters, I wonder what happened to Daughter #2’s inheritance. Did she save it? Did she blow it? Did something happen to her? I occasionally will think of them and, it’s very sad of me to say this out loud, but I’ll google her name and “obituary” to see if something has happened. Last time I checked, I didn’t find anything. That’s, sort of, where this story ends actually…
Finally, story #3 is much shorter … let’s name this client, Tom…
Tom’s story is just a touch different, but a good thing to know and learn. When we met with Tom, he chose, for whatever reason, to not share with us about his son, who had a pretty severe gambling addiction. I’m sure he had his reasons – he either thought it wasn’t pertinent, he was maybe embarrassed, he maybe didn’t want to air his “dirty laundry” to the lawyer, etc. Who knows. Nonetheless, he didn’t tell us about his son. I’ll never understand why people don’t share – there are so many things we can do, tools in our toolbelt that can and will support unique circumstances – like an addiction.
Anyway so, at Tom’s passing, his son received a portion of Tom’s estate. It wasn’t until we were working with Tom’s other child, a daughter, when we heard about her brother who spent many evenings and weekends at the casino and doing online betting. Had Tom shared that with us, we could have, like Sandy and Cliff/Carol, had his inheritance go into a Trust to be managed/monitored by someone else – to protect Tom from myself. We could have had it distribute X amount per month or something … rather than plop a chunk of change on the guy and watch him gift it to a local casino. Because that’s likely exactly what happened with Tom and his son.
From these three stories, I hope it’s clear that sometimes careful planning is needed. Anytime I have clients bring up these types of situations, I think they’re a little embarrassed, sad, etc. and they’re, of course, not exactly thrilled to share – well, I guess Tom didn’t share in my last story at all! But, what I can promise you, what I can tell you is that MOST families and clients have an “elephant in the room” type-of-thing to talk about. Actually, when clients are like, “No all my kids, all my beneficiaries are fine and dandy!” I’m a little skeptical ONLY because it’s fairly infrequent that there’s truly nothing we need to thoroughly discuss and carefully plan around. Whether it involves an addiction, whether it involves an in-law we don’t care for, whether it involves a pending divorce, lawsuit, or even creditor problems, etc. 99% of the time, there are estate planning options to support those people. But, estate planning attorneys are not mind-readers, you have to share those concerns with us, so we can appropriately plan for them. We’d love to help you … help them. That’s what we’re here for.
Alrighty … let’s wrap this episode up and shift to a sneak peak of next week. We are back to the current events/current trends topic – where we talk about something I’ve seen or run across, maybe on the news or social media, that I think would be interesting on here. During next week’s episode, we are going to be talking about a story out of New Jersey that I stumbled upon on Twitter – that is about a gentleman who started a company to help nursing home residents get qualified for Medicaid. Well the New Jersey legislators are coming down on these companies – and, as I’ve discussed before on here, for probably good reasons. Anyway, we’re going to talk about that next Tuesday, Legal Tea Listeners. So until then, take care and be well!