The opioid crisis in the United States presents a growing challenge for both clients and estate planners.  Opioids (such as OxyContin or Vicodin) are typically prescribed to treat pain following surgery or injury, or for health conditions such as cancer.  In recent years, there has been a dramatic increase in the acceptance and use of prescription opioids for the treatment of chronic pain, such as back pain or arthritis, despite addiction risks and the questionable effectiveness of the drugs.  Providers wrote nearly 250 million opioid prescriptions in 2013 – enough for every American adult to have their own bottle of pills.  In 2016, over 11 million people were considered to have misused prescription opioids; over 2 million people were diagnosed with an opioid use disorder.

General Planning Considerations For Beneficiaries With An Opioid Problem

The opioid epidemic impacts everyone, as it is not limited to certain members of a socioeconomic class or race.  In the context of estate planning, a person with a prescription painkiller problem is no different than a person with another drug or alcohol addiction.  Planning for beneficiaries with this type of problem is challenging because they may ultimately recover and therefore should not be treated differently than other beneficiaries.  For this reason, estate planning for these individuals should be flexible.  

Provisions For Beneficiaries With Substance Abuse Problems

Estate plans often include provisions for safeguarding assets in the event a beneficiary develops a substance abuse problem.  In this situation, a trust is created for the beneficiary that gives a trustee who is not the beneficiary discretion over distributing assets to or for the benefit of the beneficiary.  One of the key considerations in shaping the provision is what standard should be used in the trust for the trustee to make distributions to the beneficiary.  For example, a generic trust provision will typically state that the trustee shall distribute trust assets for the “health, education, maintenance and support” of the beneficiary.  Although that language is quite broad, that consideration qualifies as an “ascertainable standard” because for that specific beneficiary, a court could determine whether, given the beneficiary’s standard of living and health and education needs, a distribution of trust assets would be considered reasonable.  

The HEMS standard (i.e., “H”ealth, “E”ducation, “M”aintenance, “S”upport) can be tricky for a trustee to navigate in a situation where the beneficiary is misusing resources to support her addiction yet legitimately needs the trust assets for support or health.  The trustee now faces a tough dilemma.  Estate planners have developed a catch-all provision to give a trustee in these circumstances the power not to distribute assets to a beneficiary with an active opioid or other substance abuse problem.  In these situations, the asset distribution standard is switched from HEMS to a much more restrictive standard, giving the trustee the “sole, absolute and uncontrolled” discretion to withhold or distribute trust assets if the trustee feels the beneficiary has a substance abuse problem.  The catch-all provision is not perfect in practice.  If a beneficiary is one who will receive trust assets when she reaches a certain age, and when she reaches that age, the trustee refuses to distribute the trust assets because the beneficiary has an opioid problem, then the trustee is likely inviting litigation with the beneficiary.  That said, the existence of such a provision in a trust provides the trustee with some mechanism not to distribute assets to a beneficiary with a known drug problem.           

In planning instances where there is a beneficiary with a known existing substance abuse problem, it is common sense to create a Will or trust which does not distribute assets outright to the beneficiary.  If the client wants to give the trustee maximum control over the trust assets, with the ability not to distribute assets, the planner will likely not use the HEMS distribution standard.  Typically, the planner will use the “sole, absolute and uncontrolled” distribution standard so that the trustee can prevent trust assets from being used by the beneficiary for opioid abuse.  In other words, the planner wants to give the trustee the ability to turn the money spigot off.  Armed with this extended discretion standard, the trustee is still required to exercise good faith, but the known existence of an opioid problem is likely a valid reason not to make distributions to an addict.   

The use of a “sole, absolute and uncontrolled” discretion standard is useful also because in the event the beneficiary with an opioid disorder overcomes her problem, the client has language within the trust to allow the trustee to terminate the trust in favor of the beneficiary or make generous distributions.  The more discretion the trustee has, however, the tougher the trustee’s job. 

Unfortunately, in today’s world, almost everyone knows someone with a substance abuse problem.  It is crucial that clients with loved ones who suffer from addiction address what types of planning would work best for them.  For more information, please contact Douglas R. Brown (dbrown@brodywilk.com).