Passing on your assets to someone struggling with addiction

Are you planning to include someone with an addiction as a beneficiary of your assets? You may have seen them repeat patterns of compromised decisions, poor judgments, and subsequent results that are far from favorable.

Have a discussion with your estate attorney

Although this discussion can be uncomfortable, it can help you avoid the inadvisable disbursement of your family’s wealth.

The US Department of Health and Human Services estimated that 10.1 million people abused opioids and/or methamphetamine in 2019. During the same time, NIAAA reports recorded that 14.5 million people over the age of 12 have suffered from Alcohol Use Disorders.

If these situations apply to your family, it is advisable to take their addiction into account when establishing your trust. It’s certainly possible to set up a trust account that prevents money from being used to further contribute to addiction. It can be very complicated, but it can be done.

Suppose you want to protect your heirs or your beneficiaries from using their inherited funds to fuel their addiction. Your estate attorney will ask him or her for permission to consult a nursing professional. When you get the help of an addiction expert, your lawyer can make informed recommendations on your behalf.

Addressing the impact of addiction on setting up an estate

Here are a few suggestions to deal with the risks of allocating property, and the safety of your choices. 

1. Set up a trust account. People who are in recovery should be held accountable within boundaries. As such, you could set it up so that the money can only be disbursed inside certain parameters. The Trust can be monitored with the aid of a third-party on the beneficiary’s behalf. The third-party will usually authorize any distribution until the beneficiary has the means to responsibly manage their own inherited funds. Not all beneficiaries have the ability to be accountable with money, as it may be enticing to spend the money on matters that only contribute to and fuel their dependency. Find out if the inheritor has obtained financial counseling during their recovery, and determine if the beneficiary has the means to have complete management over his or her inheritance.

2. A “Special Needs Trust” is designed to provide for people who have mental illnesses or disabilities, however, those aren’t always suitable for beneficiaries who have a dependency. As such, it’s not likely to fulfill the desires and positively benefit an heir that suffers from addiction and doesn’t have a disability. These two circumstances can coexist, so it’s recommended to assess if the beneficiary is disabled outside of their addiction.

3. It is important that the funds placed in a Trust not be viewed as money that someone can only put toward recovery-related purposes. While the assets can be beneficial and support the beneficiary’s sobriety, making everything about the inheritor’s dependency can do more damage than good. People with addictions still need to pay for all of life’s expenses outside of recovery, so limiting their inheritance to recovery alone isn’t recommended.

4. Appoint someone as a Trust Protector to assure that decisions made are in the best interest of the beneficiary. A Trust Protector will regularly choose certified addiction counselors to help the beneficiary along the way while keeping certain family members updated on treatment progress. This can ensure that the trust assists the beneficiary in a manner that prioritizes recovery rather than interfering with it or sabotaging their sobriety. 

5. The Trust will contain specific instructions controlling when each distribution will be made and how much will be disbursed at a time. Clarify that the trust isn’t intended to be punishment for their addiction, rather, it’s designed to be a useful resource to help aid them in maintaining their recovery. When drafting the trust and all that it entails, be sure you incorporate some flexibility. You can enforce incentives to motivate the beneficiary to continue treatment or attain milestones.

6. Finally, a beneficiary with an addiction may benefit from Supplemental Security Income or Medicaid. These are considered government grants, not trust-related assets. Trusts should be created to identify government grants as a means of paying costs to beneficiaries rather than using the trust assets. Make sure that trust does not interfere with the beneficiary’s right to these government benefits.

Setting up an estate with your family’s circumstances in mind

Addiction has infiltrated many families and each situation is unique. Work closely with a knowledgeable legal professional to draft a plan that will protect your heirs and your legacy.

So you’ve finally made the decision to move forward with your estate plan and now you need to choose a trustee who will act on behalf of your heirs’ best interests. It can be a difficult choice, but there are a few notable factors in choosing the proper one that can make the process easier.

Some people begin by considering a family member or a close friend, but did you know there’s also the option to select a professional trustee such as an accountant, lawyer, trust company or corporate trustee?

A couple of notable things to keep in mind when making your decision to choose a trustee can ease the burden of choice.

Trustworthiness

A trustee’s duties include paying bills, making proper investments, keeping accounts and preparing tax returns. Therefore, a very close friend with their own unsteady financial problems may not be a good choice. Look for trustees among the financially astute, someone who is good with money; someone who is familiar with the basic concepts of investing is something to keep in mind.

Familiarity with your family dynamics

The people closest to you such as family members or dear friends that understand your family’s dynamics could be beneficial. Family members probably won’t charge a trustee fee, although they are entitled to it. So, if you’re looking to cut costs you may go this route.

Professionals have expertise in trust administration and with that knowledge comes a price. A lawyer or accountant that is not within your family is more likely to treat everyone equally. Maybe consider a lawyer or accountant who’s been working with your family for a long time if you have one. They may bill for less than a trust company or a corporate trustee.

Professionals such as these are good at making difficult decisions and telling beneficiaries “no” when appropriate. If your heirs don’t get along and there are large sums of money involved, it might be worth the fee of a professional trustee. If you feel uneasy, you can give a family member or friend the power to remove and replace a corporate trustee.

There is also the option of a co-trustee arrangement where two entities manage your trust. For example; a sibling and a professional trust company. The professional can handle the technical work while the sibling has family knowledge. It’s just another option to consider if you feel uncomfortable appointing just one trustee.

Here are a few characteristics to keep in mind when choosing a trustee option.

Traditional Corporate Trustee

• Regulated
• Professional
• Rigid Policies
• Conservative
• Changing Personnel
• Accountable

Individual Trustee

• Sensitive and knowledgeable about family
• Flexible/Subjective – saying “no” is difficult
• Private
• Inexpensive
• Not Permanent
• Individual Fiduciary Liability
• Family Dynamics

Private Family Trust Company

• Confidential
• Permanent Trustee Solution
• Institutionalize the personal, business & investment matters for a family
• Personalized Service
• Liability Protection
• Flexibility in Managing Concentrated Positions

Depending on your values, one of these options could be the best one for you.
Whatever you choose, take into consideration that your trustee will likely be managing your trust for an extended time. Therefore, you’ll want someone you think will be around for a long while and has time to really devote to their trustee duties.

Don’t let the decision of who you should appoint your trustee prevent you from finalizing and signing your estate planning documents. Call around and speak to different trusted advisors, such as Chuck Bendig, to discuss your concerns and they can be worked through until you find the best solution for you and your family. You have the option to reevaluate your choice every few years.

If you want to ensure that your estate plan properly protects and provides for your heirs, it is essential that you thoroughly plan ahead.

To make sure it’s “smooth sailing”, here are some important estate planning mistakes to avoid.

• Failure to plan. Without a thorough estate plan, you’re risking the financial future of your estate and your loved ones.
• Not reviewing your documents. It is essential to make sure they’re exactly as you want them and also not out of date.
• Not discussing your plans with family. Sometimes even a brief conversation can shed some light on which of your wishes are likely to be controversial, giving you a chance to rethink certain plans.
• Don’t name just one beneficiary. Just in case your only heir dies before you, you’ll want to have a contingent beneficiary. According to Ohio State Law, here is the designation or qualification of a beneficiary.
• Don’t forget that your retirement plan accounts or life insurance can’t be included in Wills or Trusts. You’ll need a beneficiary designation form to name a revocable trust as the beneficiary.
• Don’t forget about a power of attorney or health care representatives. These professionals step in to make decisions if you become incapacitated. Typically, the roles dissolve on your death.
• Lack of a funeral plan. Lack of communication for your funeral plans places an extra burden on your already grieving family. Be sure to give some indication of what you’d like to happen at your funeral or with your burial arrangements. Let them know what they can do to honor you.
• Failure to include your digital assets. Include a digital estate plan that specifies how you want all your digital assets (i.e. social media accounts, online banking, email, etc.) handled upon your death, and name a digital executor to get it done.
• Not planning for all contingencies. A will often leave an estate to the testator’s “surviving children”, but that raises questions if one of the testator’s children dies. Does the money go to that child’s heirs or is it split among the survivors? Unthinkable as it may seem, your Will should plan for those possibilities.
• Failure to fund your trust. Simply put, a trust is useless unless it’s funded with your assets.
• Don’t forget about taxes. Understand the limits of potential state estate taxes or inheritance taxes before you write your Will or trust.
• Failure to properly store your estate plan. Even a perfect estate plan is absolutely useless if no one knows where to find it. Safes and safety deposit boxes are popular options, but it is vital to tell someone that it’s there and how to access it.

Get a qualified Estate Planning Attorney.

Help your family save money in unnecessary taxes and probate fees by sidestepping errors. By including an estate planning attorney such as Charles Bendig, you’ll have help in drafting your plan and making any changes you want to essentially carry out your wishes as you see fit.

If you’re named an executor of an estate, part of your job is to oversee the valuation of assets. So, what does that entail? Finding out how much the estate is worth and how that value is distributed will determine not only your approach to probate, but also the allocation of the assets among the heirs, and how much the estate will pay in taxes. In the case of larger estates, valuation can be a huge responsibility. It may even require you to bring in experts to value antiques and other collectibles.

One thing to note is to expect to be challenged whenever you value assets, by the IRS, by heirs, by creditors or by the court. Be sure you’re valuing everything reasonably.

Certain types of assets are easy to value, such as the contents of a bank account or shares of stock in a publicly-traded company. To value stocks or precious metals, average the highest and lowest selling price for similar items on the date of the owner’s death. For mutual funds, use the closing valuation.

Other assets, such as a used car or collectible, don’t have such a definitive value. You estimate their value by using public references like collectible websites such as Worthpoint.com. When valuing real estate, you can check out the tax assessor’s valuation and talk to a real estate agent about comparable properties in the area.

Go with the pros

Some assets are really difficult to value, like artwork or a private business. For assets like these, you should hire a professional appraiser. Keep in mind that appraisers typically charge between $125 and $400 an hour, and often with an extra charge for visiting the site. It’s a good rule to avoid appraisers who charge based on a percentage of the asset’s value. This goes against the ethics of the Uniform Standards of Professional Appraisal Practice.

You should ask whether the appraiser has any certifications or memberships in professional organizations, and also ask them for a written estimate of the appraisal fee in advance. Among the items that can be listed as household contents are books, tools, and appliances, and you can ask for one overall valuation estimate for them. You may want to get an individual appraisal for any individual items that were specifically bequeathed in the will. The value of household items should be done based on what a buyer would pay for the items as-is.

Should the heirs decide to sell everything in an estate sale, use a reputable estate sale company. Since there are variations in quality and condition as well as changes in economic conditions and local demand, descriptions and values should be seen as general guidelines.

Lastly, a few keynotes as you proceed with the valuation,

1. Be aware of the pitfalls. Heirs could be upset if a particular asset doesn’t meet the value they expected.
2. Document your work in case there are questions later, and work closely with legal and financial professionals as you move forward.

When you’re ready to begin the probate process, call Charles Bendig. With over 40 years of experience practicing law before all Ohio state and federal courts, you can rest easy knowing you’re in good hands. I’ll walk you through every step of the process together.

If named the executor in a Will, you’ll be the final administrator of a deceased person’s estate and have many details to manage. Below is an estate executor checklist that can help you navigate the process while making sure none of your duties slip through the cracks:

Obtain copies of the death certificate. You’ll need them for a number of tasks:

• Filing life insurance claims
• Filing tax returns
• Accessing financial accounts
• Notifying organizations like the Social Security Administration

Ensure that the funeral arrangements are carried out according to the deceased wishes.

File a copy of the Will in probate court. Here’s how to go about it:

• Ask the court to confirm you as a personal representative. Probate court clerks will commonly answer basic questions about court procedures but won’t provide legal advice particular to your case.
• In some courts, staff lawyers will look over probate documents, pointing out errors in your papers and advising you on how to fix them.
• Send notice of the probate proceeding to the beneficiaries named in the will and to close relatives as a surviving spouse and children who would have been entitled to property had there been no valid will.

Locate and secure all assets and manage them during the probate process. This commonly takes about a year and could involve deciding whether to sell property or securities owned by the deceased, depending on the contents of the will as well as the financial condition of the estate.

Close out day-to-day finances:

• Terminate leases and other outstanding contracts
• Notify any government agencies, like the post office, the Social Security Administration, and the Department of Veterans Affairs, of the death
• Notify the bank and credit card company

Establish an estate bank account to hold any money owed, such as paychecks and stock dividends.

Pay any debts that are legally required to pay.

• Notify creditors of the probate proceeding
• Creditors then have a certain amount of time to file a claim for payment of any bills or other obligations you haven’t voluntarily paid
• As executor, it’s your job to decide whether a claim is valid

Supervise the distribution of property to those named in the Will. This includes any cash, personal belongings, and real estate.

An executor will then ask the probate court to formally close the estate when debts and taxes have been paid and all property distributed to beneficiaries. It is advised that you have support from an estate attorney, accountant, investment adviser, insurance agent, and others to file the necessary paperwork.

Some items to note:

• Continue to pay mortgage payments, utility bills, homeowners insurance premiums, and income taxes for the year the person died.
• You may even need to file an income tax return for the full year.

While possibly a bit overwhelming at times, you’ll find that being an executor is a labor of love and is about honoring the deceased and serving the heirs.