As a parent, your love for your kids does and would withstand many different poor choices and actions by your kids. That just goes along with parenting. You raised them and were there for all the amazing moments, and just because your kid(s) may have stumbled along the way, your love is unchanged. So when it comes to estate planning, you still want to include them in your planning, but some additional structures may be needed to benefit a child with a drug or alcohol dependency – and there’s nothing wrong with that. Proactive planning, in this case, is even more important.
Without estate planning in place, should you pass away you wealth may be divided and distributed to your kids in equal shares and outright (right away, immediate access). Generally allowing a child with poor spending habits or problems with addiction have access to a large sum of money “no questions asked” is not an ideal situation, and could be very harmful to them.
With proactive estate planning, you can set up a trust to receive assets on behalf of your child, and to hold those assets for his or her benefit for the remainder of their life (or until they have sufficiently proven that they have recovered from their dependency). This ensures that the child is supported, over and above their own means, for anything that they would need (within reason).
You may wish to still provide an outright, free-of-trust benefit to other children or grandchildren, and that’s totally fine, but whatever would have gone outright to the child with dependency issues would instead to the trust for his or her benefit. Generally the difficult decision here is who to appoint as the trustee. There’s really no “right answer” – but the relationship of the other siblings and family members to the child could drive that decision. Corporate or institutional trustee are usually great options for this sort of strategy. They take the burden off of other family members and they are immune to pressure from the child directly.
You generally don’t want to include children with dependency issues as fiduciaries in your planning documents: Executor, Trustee, Guardian, Financial Agent, or Health Care Agent. Some parents feel bad leaving one child out in favor of their other children for these roles, but this is a time to be “selfish” for your own planning. The dependency issues may make your child physically removed from your daily needs, or could make them totally unreliable when the need arises. This is more an issue of having an objective awareness of who would be best to serve you, not about playing favorites.
If your child is an adult, you’re generally going to be left out when it comes to making decisions for them. It’s generally a good idea to impress upon the child the importance of having powers of attorney and a HIPAA authorization/waiver in place appointing you as their agent for health care decisions (only in the instance of incapacity) and allowing you to be “in on the conversation” for health care purposes, including reviewing medical records and speaking directly to health care providers. This is, of course, ultimately up to your child, however. When added to a financial power of attorney, these documents work together to keep you “in the loop” and prevent the need for a guardianship to be created later in life if your child’s actions render them incapacitated and/or incompetent.
Ultimately the type of planning strategy that will be right for you and your family depends on a lot of variables, and is not something to take lightly if this article applies to you. It’s best to at least seek guidance from an experienced estate planning lawyer to assess your options.