Coordinated Counsel
Beneficiaries Struggling with Mental Health or Substance Abuse
Transcript
BARRY: Number 15 and number 16 are similar in the sense that we’re talking about, predominantly, after death. Most people don’t want their estate going to a beneficiary who is struggling or suffering from substance abuse.
CHAD: It’s a big hot topic right now in the country, obviously.
BARRY: It really is. And I think — you tell me — that’s often a manifestation of a mental health issue that I think is just the elephant under the rug– Elephant under the rug, that doesn’t make sense. Elephant in the room.
CHAD: We can use elephant under the rug.
BARRY: That was silly. I think mental health is a big deal that gets overlooked. People don’t respect psychology. They don’t respect mental health. And I think substance abuse is the byproduct of people being stuck at home, not working, not being able to see loved ones in this in environments
CHAD: Especially right now with everyone being stuck at home for as long as they are. It’s becoming more and more of an issue.
BARRY: Exactly. And even if the Covid environment wasn’t what it is, substance abuse and protecting beneficiaries from having access to money to buy more substances and not get the help they need was important already. So I would say the only way to deal with that problem is to not give them assets or use a trust. You leave it to statute, they might get the money and it will be gone.
CHAD: It’s somewhere in the top 10 earlier about intestacy. I know we touched upon that.
BARRY: Yeah, intestacy is the statutory default for what happens in most circumstances both during life and after death. It’s decided for you. Not good. Substance abuse is an important consideration.
Structuring Estate Plans to Support Loved Ones Struggling with Mental Health or Substance Abuse
By: Barry E. Haimo, Esq.
April 16, 2026
Estate planning is often framed as a financial exercise. Essentially, who gets what and when they get it. But for many families, there’s a more sensitive reality to consider: what happens when a loved one isn’t in a position to manage an inheritance responsibly?
Whether due to mental health challenges, substance abuse, or a combination of both, these situations require more than a standard plan. They require thoughtfulness, protection, and compassion.
The Risk of “No Strings Attached”
Leaving assets outright to a beneficiary may seem like the simplest approach. But in certain situations, it can do more harm than good.
Unrestricted access to funds can:
- Enable harmful behaviors
- Delay or derail recovery efforts
- Lead to rapid loss of assets
- Create additional stress or instability
What’s intended as support can unintentionally become a setback. That is not what you want.
Planning as a Form of Care
It’s important to reframe this conversation. Putting structure around an inheritance isn’t about mistrust — it’s about care.
A well-designed estate plan can:
- Protect a loved one during vulnerable periods
- Provide stability without overwhelming responsibility
- Ensure resources are used in ways that truly support their well-being
In many ways, it’s an extension of how you would care for them during your lifetime.
How Trusts Can Help
Trusts are one of the most effective tools for navigating these situations.
They allow you to:
- Control how and when distributions are made
- Appoint a trusted individual (or professional) to oversee funds
- Limit access to large sums of money
- Provide for specific needs like housing, healthcare, or treatment
You can even build in flexibility, allowing more independence as a beneficiary stabilizes over time.
Avoiding the Default Outcome
Without a plan, state laws determine how your assets are distributed. This often means direct, unrestricted inheritance regardless of a beneficiary’s circumstances.
That lack of protection can have serious consequences. Estate planning gives you the ability to make intentional choices instead of leaving those outcomes to chance.
A Difficult but Important Conversation
No one wants to think about these scenarios. They can feel uncomfortable, emotional, even overwhelming. But avoiding the conversation doesn’t eliminate the risk.
Addressing it head-on allows you to create a plan that reflects both your love for your family and the realities they may be facing. Because at its core, estate planning isn’t just about transferring wealth. It’s about protecting the people you care about when they need it most.
Want to talk about how to do that? Get in touch.
And if you’re interested in getting all of your advisors on the same page, get in touch with Kinnect Financial.
