Estate planning with a drug addicted child – a trust
- Sharing reader feedback I received from a sibling who acts as trustee for her drug addicted sister
- Explaining how a trust has significant benefits over an annuity
I’m learning that unicorns do exist – in the context of finding a caring trustee for a drug addicted adult child.
Last week, I introduced the use of an annuity as an estate planning tool to avoid an unmanageable, or possibly destructive, windfall of inheritance money getting into the hands of a vulnerable beneficiary (the “addict”).
You can direct your executor to use the addict’s inheritance to purchase an annuity structured so that:
- It’s locked in, preventing the addict from being able to cash it in for a lump sum,
- Protections are put in place to prevent the addict from borrowing against it, and
- The addict benefits from their inheritance by receiving a consistent monthly payment.
I dismissed the prospect of setting up a trust for the addict, suggesting that finding a caring trustee (the person in charge of the purse strings of the inheritance) able to deal with the addict’s condition would be like finding a unicorn.
Side note – if you are unsure about what I mean by a “trust”, I invite you to read my column published October 26th, 2025. I received this compliment from a reader about my explanation that made me blush: “I am a semi-retired CPA – I wanted to thank you for explaining trusts in the most basic and concise terms – better than I have ever done over my career- informative enough for those interested to pursue and not overly complicated to cause eye rolls for the non legal/accountant types.”
I live for pats on the back. Feel free to send e-mails like that to me!
I don’t have direct, personal experience with drug addiction. The unicorn reference was based on my understanding that it’s an extremely difficult condition that can cause the addict to put an unmanageable amount of manipulative pressure on anyone controlling access to cash.
At the end of last week’s column, I invited readers to share their own experiences with estate planning mechanisms for addicts. Thank you to Jacqueline (not her real name) who took me up on my invitation.
Jacqueline is trustee for her sister’s inheritance.
As trustee, she has the inheritance invested to earn a level of capital gains and dividend income that allows her to provide much more financial support to her sister than an annuity would have provided.
My concern about manipulation? She’s not susceptible. She knows her sister’s addiction patterns all too well, having lived through them for decades.
The beauty of the trust is that it allows for a level of flexibility unavailable with a locked in annuity:
- If her sister has a significant financial need, dental work for example, Jacqueline can provide those funds directly to the service provider,
- If her sister becomes ready for an expensive addiction care facility, the money is available, and
- In the beautiful circumstance of her sister beating her addiction, Jacqueline can provide greater or even complete access to her inheritance.
Jacqueline has been acting as her sister’s trustee without any financial compensation, avoiding one of the significant cost factors associated with trusts. I would do the same for my brother if he had the need, and I suspect Jacqueline and I are not uncommon.
She has also managed to find a low-cost way to deal with the other significant cost – the separate tax return that must be filed by the trust. Jacqueline has found a retail tax preparation chain that charges in the range of only $350.00 for the trust returns, far less than what is typically charged by a CPA.
Every family is different. An estate plan that works for one might be completely unworkable for another. I don’t provide estate planning consultations as a rule, focusing instead on the estate administration (probate) aspect of my practice. But I can refer you to excellent local lawyers who can help you.
