If you have a child who is addicted to alcohol, gambling, or drugs, you may think that you have to disinherit him. You, likely, want to prevent the inheritance from being lost or wasted or being used to harm your child. Fortunately, disinheritance is not required; instead trust planning can both help and protect your addicted child.
What Happens with An Outright Inheritance
You are right to be concerned about an outright inheritance. If the money or investments are just transferred into your loved ones name, they can fuel the addiction, be wasted, or even kill your beneficiary.
There is an alternative and its not disinheritance.
What Happens when You Disinherit Your Loved One
Disinheriting a child can cause multigenerational anger, sibling discord, and also usually disinherits your grandchildren.
While we dont like to admit it, money equals love and if you disinherit a child, it will be interpreted as if you dont love that child.
The alternative is a trust.
What Happens with a Lifetime Trust
A lifetime trust can be set up to hold your childs inheritance. Because of the addiction problem, someone else such as a CPA, bank, or trust company serves as the trustee.
The trustee distributes assets for the benefit of your child, but not directly to him. For example, trust assets could be used to pay for rehab, rent, food, medical expenses, utilities, education, and the like.