Leaving an inheritance when a child lives with mental illness or addiction

Parenting a child who lives with mental illness or addiction can be heartbreaking, challenging and exhausting for parents and other family members.

Once an adult, a child living with mental illness or addiction can create a lifelong emotional and financial commitment from the parents.

When engaging in estate planning, a parent with a child living with mental illness or addiction requires special planning considerations to protect the interest of their child, the ongoing care of the child and to protect their family from potential problems in the administration of the estate once the parent is gone.

It’s not unusual that special considerations for a child with mental illness or addiction sometimes come at the expense of other children who are impacted by having a sibling who requires special care and may be unpredictable, disruptive, or destructive. This disparity between children and their needs can add to existing family tension as well as the potential for disagreement between beneficiaries once a parent is gone.

Consequently, parents facing these challenges must be careful when deciding what to leave their child and the manner in which the assets are left to the child.

Individuals living with addiction and mental illness may not have the capacity to manage their money. They can be susceptible to people who prey on the vulnerable, they may engage in spendthrift behavior or they may spend funds on destructive behaviors causing them more harm than good.

Parents may also need to figure out how to support a child who might not be capable of supporting him or herself. If an individual is unable to work, the child may be eligible to receive disability benefits (from both provincial and federal funding and benefits sources). For these children, poor estate planning by a parent can jeopardize the child’s continuing receipt of these benefits if the child receives his or her inheritance outright.

When a child meets the definition of a person with disabilities, the good news is that parents can leave a substantial inheritance to the disabled child by utilizing a discretionary trust while preserving the child’s continued receipt of public benefits. A discussion of this planning is beyond the scope of this article, so to ensure that trust planning adheres to all applicable rules and laws, it’s best to work with an estate planning lawyer experienced with disability planning who can construct a trust carefully to protect the disabled person’s eligibility once the parents are gone.

When a child does not meet the definition of a person with disabilities, is undiagnosed, is in denial that they have a mental illness or addiction issue, or are active in their addiction, it may be even more important to ensure trust planning is in place to protect these children as well as their inheritances.

In either case, it’s often inappropriate to ask a family member or sibling to take on the responsibility of managing a trust for a child with mental illness or addiction issues whether or not that child accepts his illness and is working towards health and recovery, or is still active in his illness or addiction. It’s often best for both the child as well as any siblings, to appoint an independent third party, such as a professional trust company, to take on the role of managing the trust. This ensures that the necessary experience to coordinate trust payments in order to meet the government benefit provider requirements is met, as well as the authority to deal with tough situations and decisions that are in the best interest of the child are dealt with by a third party.

Many families choose to appoint both a trust company and a family member to work jointly to manage the trust which can offer the professional services of a trust company along with the personal care from a loving family member.

Another important consideration in planning for the care of your child living with mental illness or addiction is to secure, where possible, incapacity planning documents. Both a Representative Agreement (RA) and a Power of Attorney (POA) are important planning documents for parents to plan for temporary or permanent incapacity of a child with mental illness or addiction issues. An RA grants a parent authority to make medical and personal care decisions on behalf of a child. A POA grants authority to make financial and legal decisions. A child living with mental illness or addiction must hold the requisite mental capacity to execute this document. An estate planning lawyer can help you learn more about these agreements.