Today I’m going to tackle a most difficult subject - when a beneficiary of one’s estate has a dependency problem. The dependency may be related to alcohol, gambling or drugs (either prescription or illegal). The issue when one has a spouse, child or grandchild who struggles with these problems is how to deal with them within the estate planning documents.

The danger, of course, is that one’s estate plan may serve as an “enabler” resulting in a continuing downward spiral along with the loss of any assets or property left to the dependent beneficiary. Obviously, one should not leave amounts or properties outright to someone that suffers from these issues.

The alternative to leaving amounts outright would include creating an ongoing trust for the dependent beneficiary. The continuing trust would provide how the money, assets or property are to be held and distributed for the beneficiary. Deciding to hold the assets and property in trust is only the beginning, however.

First, one must decide who the trustee would be. This trustee would act as the gatekeeper to the dependent beneficiary’s inheritance. Naming a sibling or other close family member as the sole trustee over this share is the surest way to breed animosity between the family members. It may be important to have a family member in a position of authority to provide the human element to the plan, but the dependent beneficiary is sure to plead with the gatekeeper for access to the funds. When the pleas fail, arguments or worse could follow.

In these situations it might prove helpful to name a corporate trustee (bank, brokerage firm or trust company) as a co-trustee with the relative or family member. The corporate trustee can take on the role of “bad cop” to ensure that the trust assets are protected and are used for the benefit of the dependent beneficiary, rather than as wasted assets fueling the bad habits.

Second, the terms of the trust may very well be drafted to include provisions requiring counseling, drug tests or other means to ensure that the dependent beneficiary remains “clean”. If the beneficiary fails the tests, then distributions may be suspended, although the trustee can continue to pay for health and rehabilitative care expenses. These provisions should be carefully drafted to give the trustee the maximum amount of discretion. Many dependent beneficiaries possess the uncanny ability to fool those around them into believing that they are reformed, so to protect them from themselves the trustee should have enough discretion to suspend distributions even if there isn’t obvious proof that the beneficiary has “fallen off the wagon.”

Clearly there are subjective decisions involved. The trustee will need safeguards and protection when making judgment calls. While drug tests may objectively indicate whether a beneficiary has been taking drugs, how does a trustee verify whether a gambling problem persists? Where’s the line between alcoholism and social drinking? The documents can provide backup in these situations by naming a committee that the trustee can poll. If the committee members believe that the beneficiary is not free of the problem, then the committee can make a nonbinding recommendation that distributions should be suspended.

A third consideration rests with various “what ifs”. What if the dependent beneficiary is clean for several years? Should they be entitled to shed the gatekeeper trustee or is the dependency likely to return leaving them vulnerable to losing the inheritance and living out their days in abject poverty? What if the dependent beneficiary has children of his or her own? Should the trustee have the ability to assist the children for their needs? If so, can the trustee invade or even exhaust the trust for these purposes?

Can the trustee make mortgage payments? What if the dependent beneficiary opens a home equity line indirectly using the mortgage payments to fuel the bad habits? Should the trustee therefore let the beneficiary’s home go into foreclosure? Must the trustee force the beneficiary to deed the home into the trust to prevent this end-around?

Should the dependent beneficiary have the legal right to accountings of his trust share? Under new Florida law, one can name a surrogate called a “designated representative” to receive information on behalf of the beneficiary. Otherwise the trustee has a legal duty to provide annual accountings to the beneficiary. Should the beneficiary be kept in the dark indefinitely as to how much his trust share contains?

What if the dependent beneficiary dies at a young age? The unfortunate reality is that dependent beneficiaries often have shorter life expectancies. What should happen to any unconsumed assets if early death occurs? If the previously mentioned committee members deciding whether to suspend distributions from the trust are the remainder beneficiaries to the dependent beneficiary’s share, is there not a conflict of interest evident?

Protecting those we love who have dependency problems is often a difficult exercise. If someone you care for falls into this category, take the time to think through these very serious issues.