It is okay to not be okay.
Removing the stigma of mental health starts with realizing that many people—about one in five of all US adults–are affected by mental illness. Understanding this fact can lead to more people getting the help they require, not only by seeking guidance from a mental health expert, but also by planning for the future with mental health considerations in mind.
The odds are that you or somebody in your family is living with a mental health condition. Rather than ignoring what might be an uncomfortable topic, you should think proactively about the challenges of living with mental illness and set up an estate plan that addresses such challenges head-on.
Having beneficiaries who suffer from mental illness presents a different estate planning challenge. You must pass your legacy to them in a way that serves their best interests. Discretionary trusts and supplemental needs trusts are two ways you can look out for a mentally ill loved one even after you are gone.
Discretionary Trusts
If you are concerned that a family member’s mental illness will prevent them from spending their inheritance wisely, a discretionary trust is an option. With a discretionary trust, you choose a trustee who determines how to spend the money in the trust. The trustee can make sure that the money is used for the beneficiary’s necessities, and the beneficiary cannot squander it. This type of trust makes sense for somebody who is not receiving, and does not plan to receive, public assistance.
Third-party Special Needs Trust
As with a discretionary trust, a special needs trust has a trustee to make distributions for the beneficiary’s benefit. But in contrast to a discretionary trust, the money and property in a special needs trust do not go directly to the beneficiary. Instead, the money is used to pay for certain supplemental needs, such as personal care, therapy, and education. As a result, the money and property in the trust does not disqualify the beneficiary from becoming eligible for or receiving needs-based government benefits.
There is a significant difference between suffering from a severe mental illness, such as bipolar disorder or schizophrenia, and a more minor issue such as anxiety or depression. Some people’s mental health issues can come and go over the course of their lifetime. Others’ illnesses are prolonged or recurrent. In some cases, a person may be genetically predisposed to mental illness that has not yet manifested. Proper proactive estate planning can protect you and your loved ones from whatever type of mental disorder may be of concern to you.
These are some of the factors to consider when making estate planning decisions based on mental illness in your family. Every individual and every family is unique. Your estate plan should reflect what you know now and be updated to reflect changes in your life and the lives of your family members.