Many wealthy families struggle to deal with the issues of passing their wealth to the next generation, but others wrestle with the additional challenges of mental health issues. This could mean providing a lifetime of care for a child with autism spectrum disorder, brain seizures or developmental delays.
Other families are confronted with an adult child or grandchild’s issues, like depression, anxiety, schizophrenia, alcoholism or substance abuse. Traumatic events like a serious car accident or a violent crime may trigger mental or emotional problems like post-traumatic stress disorder (PTSD).
Yet, mental health disorders are seldom discussed by attorneys, accountants, family offices or financial advisers who focus on managing wealth and conveying assets to the next generation. In part, that is because there is still a stigma attached to mental health problems, unlike physical issues like heart, liver or kidney disease. Also, there may be no quick and easy solutions for problems such as addiction, substance abuse or PTSD.
However, wealthy families need to take these issues into account when planning for the future. One solution is to create a trust to cover the costs of providing lifelong care to a child with a permanent mental or emotional disability. Unfortunately, just being able to pay the bills is not enough to assure appropriate emotionally supportive care for a child or adult with special needs.
For instance, will anyone be monitoring the nurse or caregiver on a long-term basis to assess the heir’s quality of life? Is the person enjoying some type of daily activities or simply lying comatose in a bed? A system also should be put in place to be sure a caregiver is not taking advantage of someone who has inherited a significant stream of income.
Other challenges involve dealing with an older child who has had a psychotic episode, threatens suicide or engages in life-threatening substance abuse. The last thing you want to do for these individuals is provide unrestricted access to large sums of money. At best, those funds will quickly disappear, and at worse, the spending could feed their addiction leading to an overdose or suicide.
Unfortunately, many trusts are not structured to deal with episodic mental health problems, alcoholism or substance abuse – especially if the problem arises after the trust is created. If you have created an irrevocable trust, for instance, you may not be able to change the terms to adjust for the new challenge. An additional challenge is whether the Trustees are equipped to deal with such issues; this limitation exists with both private and corporate trustees. It has been our experience that some corporate trustees will shy from such responsibility.
There may not be easy answers to these highly personal issues, but an outside professional can provide valuable guidance to specific situations. While many wealthy families are wrestling with mental health challenges, unfortunately the common belief is that it is easier to pretend they do not exist.
Rather than sweeping mental health disorders under the rug, they need to be brought out in the open. Working as a team with an experienced professional can be the best way to identify potential solutions and avoid a tragic outcome.
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