Trusts, Beneficiaries and Disinheritance

Dear Len & Rosie,

I have a sister who is a drug addict and is usually out of contact with us. My other sister and my stepbrother and I are the beneficiaries of my step-father's living trust. Is there anything I can do ahead of time to ensure that we don't have to find her when my step-father dies?



Dear David

You don't have all that much to worry about, assuming that the trust was created solely by your step-father. When an ordinary revocable trust becomes irrevocable upon the deaths of the settlors  (the persons creating the trust), then the trustee is required to provide notice of the existence of the trust to certain persons, including all of the beneficiaries, other trustees, and the people who would inherit from the trust settlors had they died with no estate plan at all.

If your step-father's trust was created by him and your mother, then your drug addicted sister is entitled to notice of the trust under California Probate Code section 16061.7. But if the trust was created by your step-father after your mother's death, then she's not entitled to any notice unless she's named as a beneficiary. Step-children don't inherit unless they are named in a will or trust. Your sister won't have to be notified. If however, if the trust was created by both your mother and her husband, the solution to your problem would be for your step-father to create a new trust of his own.

It's difficult to deal with a drug addicted loved one in an estate plan. Frequently, it does more harm than good to leave a substantial sum of money to someone suffering from an addiction. There are generally two ways of dealing with this challenge. The easiest way is to disinherit the drug addicted child, but that can be harsh.

An alternative would be to leave an inheritance to the drug addicted beneficiary within a discretionary trust in which the trustee has the absolute right to withhold most distributions unless the beneficiary passes a drug screening test. The trust would be there to pay for drug rehabilitation, but not the drugs themselves. The problem with this alternative is that the person serving as trustee becomes his brother or sister's keeper. The trustee is the person who has to say no to the drug-addled demands of a suffering beneficiary.

That's why many families take the easy way out by disinheriting the drug addicted child, leaving everything to the other children, and rely on a legally unenforceable handshake promise from the family to help out the drug addicted child when it's appropriate.

Len & Rosie