By Stuart D. Zimring, Esq., CAP, Fellow
Setting up a trust that's fair and manageable takes a holistic approach that combines your understanding of the law as well as a compassionate understanding of the motivations driving a client's needs.
The clients, Husband and Wife (Mom and Dad), are sitting in front of you. The three of you are discussing how they want their assets distributed upon the death of the survivor of them. They have three children. When you ask about the children, Dad’s facial expression changes and Mom’s eyes begin to well up with tears. Two of the three (all adult) children are “fine,” but their daughter, Susie, has a “drug problem.” Probing a bit further, you learn that Susie started smoking marijuana in junior high school, and over the years (she’s now in her 30s), they know she has used heroin, meth, and LSD. She’s been arrested, put in diversion programs, and rehab programs, but has not, in her Father’s words (spoken somewhat angrily), been able to “get it together for any period.” She stands to inherit significant money (possibly seven figures), and they don’t want her to “shoot it up her arm or snort it up her nose” (Dad, again angrily and loudly states). “What can we do?” they ask.
Unfortunately, this conversation could have occurred just as easily in the author’s office 45 years ago or last week. The need for attention has changed and expanded in scope over the years because of the items abused or the activities perceived as “addictive,” but the pain, anguish, frustration, and helplessness expressed by the clients do not change.
Determining What the “Real” Issues Are
In the hypothetical above, it seems there are two concerns (at least) being expressed by the clients: (a) concern for their daughter’s well-being, and (b) concern for preserving their estate for her benefit. In a sense, this case is “easy” because of the identification of the nature of the substance abuse, and possible responses are also clearly identifiable. The discussion of this scenario in greater detail is below.
The attorney should, at the outset, clarify what the client hopes to achieve in including language that conditions distributions to a beneficiary on compliance with restrictions in the trust. Is it behavior modification (for example, assisting and encouraging the beneficiary to achieve or maintain certain goals) or a lifestyle change? Or is it more punitive (for example, “punishing” the beneficiary for not conforming to the client’s expectations and desires)? The clients may not have a clear understanding themselves of their motivations. While we as attorneys are not psychologists, the more insight we can get regarding our clients’ motivations, the better we can do our jobs. We are drafting documents that conceivably could be operative for decades and have a serious impact on the lives of the trustees and beneficiaries.
As noted above, it is easy to identify some behaviors as “addictive” or “abusive” with drugs and alcohol being the most common. But even here, all is not black or white. Smoking tobacco is addictive but is not considered “substance abuse” by the Diagnostic and Statistical Manual of Mental Disorders (DSM-5). A client who is a teetotaler may consider a glass of wine to be inappropriate because “it could lead to alcoholism.”
The DSM-5 defines “substance abuse” as:
A maladaptive pattern of substance use leading to clinically significant impairment or distress, as manifested by one (or more) of the following, occurring within 12 months:
1. recurrent substance use failing to fulfill major role obligations at work, school, or home;
2. recurrent substance use where it is physically hazardous;
3. recurrent substance-related legal problems; and
4. continued substance use despite having persistent or recurrent social or interpersonal problems caused or exacerbated by the effects of the substance.
The Drafting Dilemma
In identifying behaviors that concern clients, it is easy to substitute gambling, hoarding, and other compulsive behaviors with the same negative impacts used to define substance abuse in the above definition. The concern here is that while it may be relatively easy for the attorney to draft language defining or identifying the behavior to be addressed, clearly setting out the criteria that enable the Trustee to carry out the mandated course of action is not so simple. The drafting attorney needs to devote as much attention to the guidance and direction given to the trustee as she does to identifying and addressing the behavior. A beautifully drafted document that is virtually impossible to implement because of its complexity; its inherent ambiguity due to the absence of “bright line,” non-subjective benchmarks; the cost of implementation; and/or the unmanageable time commitment placed on a non-professional, family-member Trustee, helps no one.
The First Step: Identify the Behavior
The first step is to identify this behavior. Is it “abuse” in the clinical sense or “use” in a manner of which the clients do not approve? Does any use of a controlled substance for other than its prescribed use constitute abuse?
The language used in our office as a starting point in defining “abuse” and establishing what the Trustee’s immediate response should be reads:
If the Trustee has probable cause to believe that any beneficiary of any trust established under this Agreement uses or consumes any illegal drug or other illegal substance or is clinically dependent (as defined in the most current version of the Diagnostic and Statistical Manual of Mental Disorders (DSM-5)), upon the use or consumption of alcohol or any other legal drug or chemical substance that is not prescribed by a board-certified medical doctor or psychiatrist, in a current program of treatment supervised by such doctor or psychiatrist, and if the Trustee reasonably believes that as a result of such use or consumption the beneficiary is incapable of caring for himself or herself or is likely to dissipate his or her financial resources, the Trustee shall request the beneficiary to submit to one or more examinations (including laboratory tests of bodily fluids, hair analysis, and other tests) determined to be appropriate by a board-certified medical doctor or psychiatrist specializing in substance use disorders selected by the Trustee. The Trustee shall request the beneficiary to consent to full disclosure by the examining doctor or facility to the Trustee of the results of all such examinations. The Trustee shall maintain strict confidentiality of those results and shall not disclose those results to any person other than the beneficiary without the prior written permission of the beneficiary.
Note that the concern here is not necessarily the well-being of the Beneficiary, but the dissipation of the Trust corpus by the Beneficiary. From this perspective, a beneficiary who is a compulsive gambler, online shopper, or hoarder might also be subjected to similar treatment by a concerned Settlor/Trustor.
The Second Step: Determine the Client’s Goal
Having defined the behavior about which the client is concerned, the next question is, what does the client want to do about it? What is the client’s goal here? Is it to create an opportunity for rehabilitation and treatment, or is it punitive? Where there is a history of substance abuse, there may be valid concerns about what the beneficiary will do with his or her inheritance. In other cases, the client, looking over the current cultural landscape, might fear what a young beneficiary might do and wants to give the Trustee guidance and tools with which to address a potential future issue. Finally, sometimes, the history of abuse may be so frustrating and painful to the client that the client feels, “If it happens one more time, that’s it — she gets nothing!” and wants to cut off the beneficiary entirely.
Our response as elder and special needs law attorneys needs to be a combination of compassion and pragmatism. Using our holistic approach, we need to listen, not just to what the client is saying, but the emotions behind the words.
Sometimes, we need to counsel the client who, having lived through several episodes of abusive behavior/rehabilitation/abusive behavior/rehabilitation, is frustrated to the point of saying, “Enough! No more chances!” The client may be right. If, however, there is no history, but there is a fear of potential future misconduct, it may be appropriate to ask the client what kind of message the client is sending to the beneficiary in terms of the client’s confidence in the beneficiary’s ability to make good choices.
Finally, Is the Client Fair to the Trustee?
Finally, and possibly more important than anything else in terms of creating a workable document, it is incumbent on the attorney to ask the client whether the client is fair to the Trustee in giving the Trustee this authority/burden/responsibility?
Further, it is incumbent on the attorney to insist that the client discuss the trust terms with the Trustee (or authorize the attorney to do it for the client). Is the Trustee willing to spend the time and energy required by the clause quoted above? If the Trust then mandates rehabilitation and treatment, is the trustee willing/able to obtain rehabilitation and treatment and to monitor it? If not, the client needs to know this up-front, or else the trust language, for all its good intentions, is useless. With that thought in mind, should one consider a “simpler” approach and “simply” advise the client to be very mindful in choosing the Trustee, give the Trustee broad discretionary powers to “do the right thing” and leave it at that? In the author’s opinion, where there is a known history of abuse, it is appropriate for the client to respond to the issue head-on and forcefully if that is the client’s goal. In other situations, where there is only concern about future possibilities or vague suspicions, giving the Trustee broader discretion may be more appropriate. In either case, following the guidance of the NAELA Aspirational Standards for the Practice of Elder and Special Needs Law, Section A.1 that:
In applying a holistic approach to legal problems, the elder and special needs law attorney works to consider the larger context, both other legal consequences as well as the extra-legal context in which the problems exist and must be solved.
The attorney should take the broad view and recognize an obligation to all the players: the client, the beneficiary, and the trustee, in creating a document that will effectively carry out the client’s wishes, the reason why the client came to you.
About the Author
Stuart D. Zimring, Esq., CAP, is a NAELA Past President, a NAELA Fellow, and Chair of the NAELA Foundation. His firm, the Law Offices of Stuart D. Zimring, is located in Encino, Calilfornia. He is an adjunct professor at Stetson University College of Law.