Planning for our loved ones who struggle with mental illness and addiction

We all know and love someone that struggles with mental health illnesses, addiction, and/or other challenges. And while they hit close to home for nearly every family, there is often a hesitancy to discuss these issues openly and honestly. Planning for loved ones who face challenges in their everyday lives, be it mental health issues, addiction or other afflictions, is vitally important. Though when families sit down to meet with their advisors to discuss their estate and financial planning they are reticent to face these issues head on, often due to their own fears, how will this impact me, my children, my family, and my legacy? The reluctance to communicate these issues is often meant to protect our loved ones, but failure to openly discuss these matters when structuring your estate and financial plan can have dire consequences for those loved ones you are meaning to protect. In order to properly craft an estate plan and financial plan, it's critical for families to share the details of their lives and loved ones with their team of advisors, even if that means sharing their perceived "skeletons in the closet."

Transparency is key

Discussing your wealth and family with your team of advisors requires a great deal of trust. Of course many of our clients wish to keep certain aspects of their lives private, and thus they must be able to trust that their advisor will use the utmost discretion. This trust relies on empathy and a family's ability to view their trusted advisor not just as a highly knowledgeable expert but perhaps more importantly as a human being. An advisor who is willing to share their own experiences — whether firsthand or through helping other families — is better able to convey their knowledge of the myriad of ways mental health, addiction and other issues can impact families. Hence, a personal approach works best when talking to clients in this situation. Providing a more human element can help ease nerves and encourage open communication.

Studies show that wealthy family members with mental health issues cope better when they participate in family decisions and do not feel like they're being controlled or subjected to the whims of their wealthy parents or siblings. These beneficiaries may need to be protected from themselves, and others, but they also need to be confident that their advisors and fiduciaries will support them and have their best interests in mind.

An advisor cannot adequately plan for or determine the best way to navigate a beneficiary with mental health issues, addiction or other challenges if they're not aware that these concerns exist. Through open and transparent communication, the advisor can gain a better understanding of the family dynamics and needs. It is in the best interest of families, the matriarch and the patriarch, as well as the beneficiaries, to be as open and forthcoming with information, so the advisor has a 360-degree perspective of the situation. With certain details, such as their living situation and whether they receive state or federal benefits, the advisor can be sure the family creates a plan that will provide for and protect the beneficiary while aligning with the grantor's intentions.

Choice of fiduciary

When choosing a fiduciary (trustee, personal representative, conservator, etc.) people often designate a sibling, an adult child and/or a family friend. This may seem like a good idea, cost effective and more personal, however, when we need to administer assets for a loved one who struggles with mental health issues, addiction or other special circumstances it gets complicated. Placing a loved in this position may lead to difficulty gaining enough emotional distance to help the beneficiary obtain the most timely and appropriate treatment, and it could potentially encourage resentment by the loved one serving as a fiduciary, the beneficiary or both. Typically, parents do not want to place an undue burden on other children when they, as parents, are no longer available to mediate. Using a corporate fiduciary, an objective third party, removes the emotional and family dynamic concerns and alleviates the burden of placing a loved in one in trying circumstances.

Another option that many families in similar situations embrace is a hybrid approach where a family member and a corporate trustee act as co-fiduciaries. This works well when there's a sibling who really understands and can communicate easily with the beneficiary. The hybrid approach leverages this relationship while removing the significant time commitment and pressure of making decisions that could adversely impact the relationship. This approach allows the corporate trustee to do the heavy lifting while also having a family member on board to represent the family.

The importance of education

Education is critical. The more that individuals can engage with their family members in advance and educate their children and other beneficiaries about special planning circumstances and why they made the decisions they did, the easier it will be for everyone involved.

While families may believe that they're protecting their loved ones by keeping their secrets, not giving your team of advisors the information they need to properly plan for the beneficiary, whatever they may be struggling with, may result in inadequate planning and unintended and harmful consequences. The sooner families open up and start talking about addiction and mental health concerns, the less stigmatized the beneficiaries — and the entire family — can be. Even if the beneficiary challenges certain aspects of their care, open communication, explanations and planning will lead to a faster resolution.

Your SVB Private advisor can facilitate these conversations and help educate families throughout the entire process to ensure the generational wealth transfer objectives are met while supporting all family members per the grantor's vision.

The views expressed in the article are those of the author and/or person interviewed and do not necessarily reflect the views of Silicon Valley Bank, a division of First-Citizens Bank and First Citizens BancShares, Inc. The materials on this website are for informational purposes only, are subject to change and do not take into account your particular investment objective, financial situation or need. Since each client’s situation is unique, you should consult your financial advisor and/or tax planning professional before acting on any information provided herein.