Welcome to our series on “Generational Wealth Planning”. In this edition, we will further our discussions around the “7 Ages of High Networth Individuals (HNW) and Family” and our focus would be on Age 3: Teenager, dealing with addiction / mental health issues.
Wealthy individuals and families are not immune from addiction and mental health challenges.
In 2017, The World Drug Report estimated that a quarter of a billion people worldwide use drugs, with 29.5 million being addicted, and that two billion people globally consume alcohol, with 76 million affected by alcohol abuse.
When there are issues with addiction and mental health, they present significant risks to family wellbeing and wealth preservation. Hence addiction readily becomes a family disease.
It’s often difficult for wealthy families to contend with the fact that there may be addiction and mental health contend affecting family members, often times even when information pertaining to such issues are brought to attention of family members, they are often dismissed and not treated on the merits with the messenger often viewed as being meddlesome and an alarmist.
Some ways in which family members can ascertain for themselves and determine if there are matters arising are when family members exhibit some behaviours such as:
a. Absence from or disruptive presence at social gatherings, business meetings, philanthropic discussions, and other family events
b. Isolation and disconnection from siblings and parents; lack of a social network
c. Overspending
d. Inability to commit to completing any activity – school, work, philanthropic, and recreational endeavors
e. Legal issues
f. Medical problems that are commonly the result of addiction such as pancreatitis or liver ailments
g. Job or school suspensions
h. Overreaction to challenges; lack of coping skills.
It’s pertinent to note that governance and succession planning becomes very difficult when there are issues around addiction (e.g. substance abuse) and mental health within a family system.
Trusts can be drafted in a way that increases the likelihood of long-term (2+ years) recovery for beneficiaries with addiction challenges.
As Matthew Erskine noted
“For beneficiaries of a trust, the possibility of losing access to income or principal from the trust can be key to the recoverer’s accountability.
Although most trusts have asset protection provisions — the so-called “spend-thrift clause” — trusts must go beyond preventing the beneficiary’s creditors from reaching the assets. The trustee must be authorized, by the term of the trust, to: (a) use financial leverage early; (b) maintain that pressure for many months; (c) find and use qualified experts, and (d) provide support even when some financial benefits are cut. This support could include paying for housing, providing support for the spouse and children, and paying for private therapy.
Additionally, the trustee must be free to require that the beneficiary agrees to open communication, including drug testing, medical information releases, meetings, and other conduct required in his or her recovery plan.
This way, beneficiaries are never completely cut off, but they recognize that harmful behavior has immediate and significant effects.” (See Article on “Preparing for a Trust Beneficiary’s Addiction Issues by
Matthew Erskine. Family Firm Institute Practitioner Magazine publication).
Where families are concerned about preserving their wealth and resources. It is important that they seek professional support to deal with the addiction and mental health challenges of family members. Families are also encouraged to be patient and supportive of a loved one’s involvement with a treatment professional.
Addiction is a chronic disorder that needs long-term planning and care, the same with mental health issues.
The best outcome in dealing with addiction challenges is to use professionals, professional resources, and knowledgeable Advisors who can provide support and accountability services for a minimum of two years.
We would be examining the other Ages of High Networth Individuals (HNW) and Family in subsequent editions of this Newsletter.
In the mean time, our following newsletters will be insightful to you:
1. Generational Wealth Planning – Operational Insights In Utilising Trust
2. Generational Wealth Planning: Use Of Trusts
3. Professionalizing the Family Business
As part of our Private Client services, we have experienced Trust and Estate Planning Advisors ready to assist you to develop an estate plan that protects, preserves and sustains you and your family’s wealth for generations.
Get in touch with one of our professionals today by sending a mail to contact@fiduciaryservicesltd.com
