This week's question: My husband and I are thinking about drawing up a living trust and leaving some money to our grandchildren. This money will be managed by our son, our Successor Trustee, after we are gone, while the children are under 25. With so many children getting into illegal drugs these days, is there any way we can deal with that unfortunate possibility?
/s/Victoria V., Almaden Valley
Dear Victoria: You and your husband are smart to think about your living trust and some of its provisions. And you are wise to consider possible substance abuse as it may affect your grandchildren in the future. It is very workable to have some paragraphs in your living trust that deal with substance abuse. The Successor Trustee, after you and your husband are gone, will manage the money set aside for your grandchildren, including the enforcement of the substance abuse provisions.
Here are some ideas that may be helpful, not necessarily in any order of priority. If the Successor Trustee, also called "the Trustee", reasonably believes that a beneficiary of the trust routinely or frequently uses or consumes any illegal substance so as to be physically or psychologically dependent upon that substance, or is clinically dependent upon the use or consumption of alcohol or any other legal drug or chemical substance that is not prescribed by a board certified medical doctor or psychiatrist in a current program of treatment supervised by such doctor or psychiatrist, then certain provisions apply.
Those provisions would also apply if the Trustee reasonably believes that as a result the beneficiary is unable to care for himself or herself, or is unable to manage his or her financial affairs. In those events, all mandatory distributions (including distributions upon termination of the trust) to the beneficiary, all of the beneficiary's withdrawal rights, and all of the beneficiary's rights to participate in decisions concerning the removal and appointment of Trustees will be suspended.
In those events, the following provisions will apply: (1) The Trustee may request the beneficiary to submit to one or more examinations (including laboratory tests of bodily fluids) determined to be appropriate by a board certified medical doctor and to consent to full disclosure to the Trustee of the results of all such examinations. The Trustee shall maintain strict confidentiality of those results and shall not disclose those results to any person other than the beneficiary without the prior written permission of the beneficiary. The Trustee may suspend all distributions otherwise required or permitted to be made to that beneficiary until the beneficiary consents to the examination and disclosure to the Trustee.
(2) Treatment and cost thereof. If, in the opinion of the examining doctor, the examination indicates current or recent use of a drug or substance as described above, the examining doctor will determine an appropriate method of treatment for the beneficiary. For example, counseling or treatment on an in-patient basis in a rehabilitation facility may be arranged that is acceptable to the Trustee. If the beneficiary consents to the treatment, the Trustee shall pay the costs of treatment directly to the provider of those services from the suspended distributions.
(3) Resumption of Distributions. The Trustee may resume other distributions to the beneficiary (and the beneficiary's other suspended rights will be restored) when, in the case of use or consumption of an illegal substance, examinations indicate no such use for 12 months. Distributions may also resume when the Trustee in his or her discretion determines that the beneficiary is able to care for himself or herself and is able to manage his or her financial affairs.
(4) Disposition of Suspended Amounts. Your living trust may also go on to state that when other distributions to the beneficiary are resumed, the remaining balance, if any, of distributions that were suspended may be distributed to the beneficiary at that time. Also, if the beneficiary dies before distribution of those suspended amounts, the Trustee shall distribute the balance of the suspended amounts to the persons who would be the alternate beneficiaries of that beneficiary's share (or beneficiaries through the exercise of a power of appointment) as otherwise provided in the testator's Will or the Trust Agreement.
(5) Exoneration. Your living trust may also have provisions that protect the Trustee for any actions of the beneficiary and that protect any doctor employed by the Trustee.
(6) Tax Savings Provision. Special technical provisions would also be included that pertain to mandatory distributions and/or withdrawal rights that may be required for tax purposes.
So there you have some ideas, Victoria. Although some of the wording is a bit formal and perhaps too much jargon is used, this is the kind of material you might be thinking about for your new living trust. Of course, you will want to discuss this with your own attorney in some detail. Only he or she can guide you in the right direction.
/s/Donald J. DeVries, Almaden Valley
Donald J. DeVries is an attorney practicing law in the Almaden Valley. Past Almaden Times articles since 1986 can be accessed through his web site: www.almadenvalleylawers.com. If you would like him to answer your question in his next Almaden Times column, you can reach him by email at don@almadenvalleylawyers.com, with "Almaden Times" in the subject line, fax at (408)268-6502, telephone at (408)268-9500, or mail at DeVries & Horowitz, 6475 Camden Avenue, Suite 200, San Jose, CA 95120. Your matters are personal and private, so of course, he will not disclose your identity or any details about your situation. Mr. DeVries writes this column to provide you with general information about important legal matters affecting California residents-not to give you legal advice about your specific matter. No attorney-client relationship is created by these articles. The law is complex and constantly changing and varies from state to state. So you should consult an attorney before taking any action that would affect your personal or business matters.
