PLANNING FOR THE DYSFUNCTIONAL FAMILY

GLEN A. YALE Stumpf Craddock Massey & Farrimond PC 112 E. Pecan, Suite 700 San Antonio, Texas 78205

State Bar of Texas 13th ANNUAL ADVANCED ESTATE PLANNING STRATEGIES COURSE April 19 - 20, 2007 Santa Fe, New Mexico

CHAPTER 1.1

Copyright 2007, Glen A. Yale. All rights reserved. Planning for the Dysfunctional Family Chapter 1.1

I.IDENTIFYING FAMILY DYSFUNCTION...... 1 A. Attorney role...... 1

B. CLIENT PERCEPTION...... 1 C. Attorney as educator ...... 1 D. Identifying limitations on ability to dispose ...... 1

II. BLENDED FAMILY ...... 1 A. Traditional family – typical plan ...... 1 B. Blended family – no guarantees...... 2 C. Blended family – the problem with trusts...... 2 D. Solutions ...... 2 1.Separate assets to spouse and children...... 2 2.Establish a unitrust...... 2 3.Gifts of family memorabilia and heirlooms...... 3

III. FAMILY THAT DOES NOT GENERALLY LIKE ONE ANOTHER ...... 3 A. Planning possibilities...... 3 1. Use of Revocable Living Trusts ...... 3 2. Separate assets ...... 3 a. Ranches ...... 4 b. Family business...... 4 B. Fiduciary appointments...... 4 1. Financial power of attorney ...... 4 2. Medical Power of Attorney...... 5 a. When there is no Medical Power of Attorney...... 5 b. Medical Power of Attorney Form ...... 6 (1). Co-Agents...... 6 (2). Agent Qualifications...... 6 (3). Revocation by Guardian...... 6 c. Directive to Physicians...... 6 (1). Absence of Directive ...... 6 (2). Statutory Form...... 6 d. Declaration of Guardian...... 7 (1). Guardians appointed...... 7 (2). Optional provisions ...... 7 (3). Disqualification ...... 8 (4). Priorities ...... 8 (5). Effect of declaration ...... 8 e. Agent for Remains...... 8

IV. CHILDREN – FAVORED AND DISFAVORED...... 9 A. Issues with the children ...... 9 1. Estranged children ...... 9 2. Health issues ...... 9 3. Lifestyle issues...... 10 4. Financial issues...... 11 B. Sinking the unequal disposition ...... 11 C. Disinheritance permitted...... 11 D. Nominal bequests to disinherited...... 12

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V. GRANDCHILDREN – FAVORED AND DISFAVORED ...... 12 A. Extended family dysfunction...... 12 1. Grandchildren disfavored ...... 12 2. Grandchildren favored ...... 12 3. Grandparents raising grandchildren...... 12 B.Planning opportunities ...... 12 1. Disinherit the child...... 12 2. Income interest to the child...... 12 3. Use a pot trust...... 13 4. Give shares...... 13

VI. SUBSTANCE ABUSE PROBLEMS...... 13 A. Abuse within the family...... 13 1. Family dynamics...... 13 2. The client and judgment ...... 13 3. Substance abusers as manipulators ...... 14 4. Substance abuse and mental illness ...... 14 B. Planning solutions...... 14 1. Disinherit the child...... 14 2. Permit or require drug testing ...... 14 a. Suspend payments...... 14 b. Terminate all payments...... 15 c. Suspend mandatory distributions ...... 15 d. False positives...... 15 3. Incarcerated...... 15 4. Power of appointment...... 15 5. Incentive trust ...... 15 6. Direct provision of necessities...... 15

ATTACHMENT A...... 16

ATTACHMENT B...... 17

ATTACHMENT C...... 18

ATTACHMENT D...... 19

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PLANNING FOR THE property as one might wish is set forth in Texas DYSFUNCTIONAL FAMILY Probate Code, § 58 (a):

(a) Every person competent to I.IDENTIFYING FAMILY DYSFUNCTION make a last will and testament may thereby devise and bequeath all the estate, A. Attorney role right, title, and interest in property the The attorney must identify what makes the person has at the time of the person’s family dysfunctional because the estate planning death, subject to the limitations for the family will vary depending upon the prescribed by law. specific types of dysfunction present. What are those limitations prescribed by law? B. Client perception One would be that upon death the family Clients will sometimes very adequately homestead must be made available for the identify the family problems that the estate plan surviving spouse or minor children. This must address: children from another marriage, obligation may limit the client’s ability to make family members who do not get along, family the desired testamentary dispositions. members with substance abuse problems, or A married client cannot dispose of the other beneficiaries with special needs. spouse’s separate property nor the other spouse’s The problem identified by the testator may interest in the community property without the be one of misperception. The client may think other spouse’s consent. Where property does not that one child does not like him or her because all go to the surviving spouse, the need presents another child says that is the case. Elderly clients itself to properly characterize the property of the may have one of several children as the primary marriage. or exclusive care giver and that child may be Pension benefits held in a qualified plan and telling the parent that the other children are subject to ERISA cannot be effectively ignoring him or her, all the while intercepting the designated for a beneficiary other than the attempted communication from the other siblings surviving spouse without the consent of the to the parent. surviving spouse. Beware of situations in which one child Beneficial interests in trusts might not be brings in an elderly parent for a will and an subject to a power of appointment and the client unequal distribution is proposed. Such adult has no ability to designate where the property child may be using undue influence to force the goes upon the death of the client. If the client parent to make such disposition. That extreme does hold a power of appointment, then there form of a dysfunctional family is not within the may be an inability to appoint the property to the scope of this article. donees of the client’s choice. Here again the attorney as advisor must C. Attorney as educator point out the limitations and how they work in Family dysfunction may not be properly the dysfunctional family. identified by the client and the attorney as counselor needs to bring it to the client’s II. BLENDED FAMILY attention. This frequently may arise in the The traditional family with one marriage and blended family. The client may like all of his all children from that marriage seems to be the family the same but it not occur to the client that exception. The blended family seems to be more when he or she is gone that the family may not typical: married with one or both spouses with like each other. The attorney should advise as to children from another marriage. the problems of such a plan. A. Traditional family – typical plan D. Identifying limitations on ability to dispose A typical plan for the traditional marriage Texas does not have forced share for would be everything to the surviving spouse and spouses nor for children, but there may be limits if no surviving spouse, then everything to the upon the client’s ability to dispose of property as children. Such a plan may be with or without he or she might wish. Freedom to dispose of trusts. Property in the traditional marriage might have all the property go to the surviving spouse and if there is no surviving spouse then

1 Planning for the Dysfunctional Family Chapter 1.1 everything outright to the children. With trusts, of tension has been introduced into the situation. all the property might go in trust for the The children as remaindermen have an interest in surviving spouse with a remainder to the seeing that the trust assets are invested for long children or all to the children in trust if there is term gain rather than production of current no surviving spouse. income, while the trustee as income beneficiary will want current income and not be as B. Blended family – no guarantees concerned about growth of the principal. The blended family may not be very blended Further, there will be issues about the with little mutual love or affection in the family distributions from the trust. Discretionary and the dysfunction is present at the start of the distributions are certain to cause concerns by the engagement. But, even the very blended family children. Distributions for health, maintenance can become dysfunctional when the client as the and support, also present difficult questions as to one binding the family together dies. The whether a particular distribution is within or husband may love his second wife and his without the stated standard. While the instrument children from the first marriage, but there is no can provide whether or not other assets are to be reason to assume that when he is gone that his taken into consideration in determining income second wife and his children are going to love and principal needed for health, maintenance and each other. support, that provision does not completely In the blended family, say the estate plan eliminate the competing interests. provides everything outright to the surviving While such tensions are also present if the spouse and if there is no surviving spouse, then children remaindermen are the natural children everything to the children. Under such a plan, of the surviving spouse, many times the blood there is no guarantee that the property will ties hold in check the conduct of the trustee – eventually go to the children upon the death of beneficiary as well as the children. A child the surviving spouse. Even if there are mirror beneficiary has some interest in seeing that a wills, the surviving spouse can change his or her surviving parent has ample resources and a will and pass the property on to a new spouse or parent has some interest in passing on an other family members that he or she does not inheritance to his or her own natural children. In share with the first spouse to die. the blended family, the danger is that the Notice that this is not much different than surviving spouse and the children will become the situation that occurs in a traditional family. If strangers or worse still adversaries the will provides for everything to the surviving If the surviving spouse is not named as the spouse and if there is no surviving spouse, then trustee, even that does not fully address the everything to the children, again there is no tensions that are present due to competing guarantee that the property will eventually go to interests between the spouse and the children as the children upon the death of the surviving to investments and distributions. spouse. The surviving spouse might remarry and pass the property on to a new spouse or other family members that he or she does not share with the first spouse to die. The traditional and D. Solutions functional family can morph into a non- 1.Separate assets to spouse and children traditional and dysfunctional family upon the Give assets to the surviving spouse and death of the first to die. other assets to the children of the first to die. In the blended family, having the property of The first solution can be tailored to the the first spouse to die go to the surviving spouse particular family situation. Say that the client in trust with a distribution to the children upon wants to provide for the surviving spouse, the the death of the surviving spouse does give client’s own children, and children of the assurance that the property, to the extent surviving spouse and children in common. anything is left, goes to the children of the first The client could provide for the child or to die. A problem arises in giving the surviving children not in common with the surviving spouse and the first to die’s children competing spouse outside a trust for the benefit of the interests in the same asset. surviving spouse and the children of the surviving spouse. C. Blended family – the problem with trusts If the surviving spouse is named as both the 2.Establish a unitrust trustee and the income beneficiary, then a level

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Establish a unitrust for the surviving spouse While wills are favored in Texas because of with distribution to the children upon death of the availability of independent administration, the surviving spouse. and revocable trusts are not typically used to When there are insufficient assets to provide avoid probate, a family that does not get along for the children of the client apart from providing presents an exception and a revocable trust for the spouse, a unitrust can be established with should be used. a stated amount of distribution, such as 7% Where the children do not get along with the annually, to take away the question of parents or each other, the odds increase that there appropriateness of distributions. With the will be a will contest with allegations of lack of unitrust interest being paid from either income or testamentary capacity, undue influence or a principal, both the surviving spouse as the technical defect in the execution of the will. current beneficiary and the children as the It is generally regarded to be more difficult remaindermen have the same interest in seeing to set aside a revocable trust that the grantor has the trust principal increase in value. lived under during his or her life. Certainly it is more difficult to prove undue influence when the 3.Gifts of family memorabilia and heirlooms decedent accepted living under the instrument Consider suggesting to clients that they during life. This is particularly the case where include a provision in their will giving all family the grantor does not serve as trustee in favor of memorabilia with his or her first family to that an independent trustee and the trust was funded. family. The appropriateness of such a provision The more interaction between the independent will vary as will the items to be included. trustee and the grantor the more difficult to break Family memorabilia may include family the trust. photographs, holiday decorations, children’s art, With a will there is a race to the courthouse. souvenirs and trophies. The named executor wants to have the will Family heirlooms should also be considered admitted to probate and obtain letters as a gift to the first family. A client’s will might testamentary, so if a will contest arises, the cost also include first generation family heirlooms: of defending the will can come from the estate items that were gifts to the client from the and the executor can administer the estate while children of the prior marriage. the will contest is pending. When a contest to the will is filed before the will has been admitted to probate and the named Example: Richard Sample was married executor appointed, then the costs of defending to Mary for 30 years and raised a family. the will come out of the named executor’s own Mary died and gave all of her property to pocket, at least until the will can be successfully Richard. He remarried 20 years ago and admitted to probate or it can be proven that the has come to you for estate planning. He will was defended in good faith acknowledges that his children are not With a revocable living trust, upon the death particularly close. of the grantor the independent trustee (or any Plan: Suggest that Richard’s will include trustee other than the grantor) continues to serve. a provision giving family heirlooms from If a challenge is made to the trust instrument, the Mary and her family and family photos trust assets may be used to defend the trust prior to the second marriage to the With probate of a will there is a minimum children. ten day waiting period from when the will is offered for probate and when the hearing can be Example: Robert Sample was married to held. For a minimum of 10 days, the application Grace for 45 years and raised a family. to probate the will invites a will contest. Grace died, and he remarried a year ago With a revocable living trust, there is no and has come to you for estate planning. minimum ten day period before the successor Plan: Suggest that his will include a trustee can begin to serve and there is also no provision giving family memorabilia and filing at the court house to draw the contest. A his family heirlooms to his children. contest requires the contestant to initiate litigation. III. FAMILY THAT DOES NOT GENERALLY LIKE ONE ANOTHER 2. Separate assets A. Planning possibilities The family that that does not generally get 1. Use of Revocable Living Trusts along, seems to have an easy solution: give the

3 Planning for the Dysfunctional Family Chapter 1.1 children separate assets so they are not co- With a family business a succession plan tenants or co-owners of anything. If trusts are needs to be developed in which one child takes created, give them separate interests so that they the business and the others take cash. The need not be involved in one another’s business. preferable route is for the client to develop a Depending upon the family and depending succession plan for the business while living, but upon the degree to which the drafter thinks the the relatively young age of the client may mean interests need to be separated, consider having that the client is not ready to develop a plan and the interest of a child deceased before the trust is to cede control. exhausted and without surviving children go to If the will must be drafted before a charity rather than to the other siblings. A succession plan is developed, the trust must contingent remainder interest, no matter how provide the succession plan. remote may make the siblings or their families necessary parties to trust litigation to reform the Example: Hal and Mary Samples have a trust. family business of selling cars. They own While in concept it may be advisable to give two dealerships and both of their two separate interests to each child, some assets may children want to carry on the family make this difficult to implement: there may be a business. One dealership, goes to the ranch or business that is difficult to partition. older daughter and the other dealership goes to the younger daughter. a. Ranches It can be extremely difficult to partition a Example: Jim and Liz Samples have a ranch where the agreement of the co-tenants is family business that both of their children required. Co-ownership of a ranch virtually want to run. They give an option to the guarantees a family disagreement. one child, determined by lottery, to buy One solution is to give the independent the business at its appraised value. trustee authority to partition the ranch and then have separate portions of the ranch allocated to B. Fiduciary appointments the children based upon lottery. This solution is In the family that does not like one another, only available where the ranch is capable of care should be made in making the fiduciary partition and the ranch is large enough that the appointments. If the family does not get along, siblings can be if not good neighbors at least then it may be unfair to give control of the estate tolerable. or trust administration to one child. It is unfair to Where the ranch is incapable of division, a the other children to have the one sibling in possible solution is for the client to give one control and it is unfair to that child to owe child an option to buy out the other children’s fiduciary responsibilities to litigious parties. interest in the ranch. It may be best in such a situation to consider the appointment of a corporate trustee. Example: Tex Samples has a large ranch Care also must be taken in the that he does not want to partition among appointment of agents under a financial power of his three children. He knows his son attorney or a medical power of attorney wants the ranch and his daughter who lives in Ohio does not, so he gives his son 1. Financial power of attorney an option to buy the ranch at 50% of its Texas law permits an individual to name an fair market value. The trust will state agent to handle their financial matters by naming terms: interest rate, period to pay, and an agent in a power of attorney. Texas Probate period in which option must be exercised. Code §§ 481-506. Where the family gets along, usually there is Example: Marv Samples has a no problem in naming the children as individual recreational ranch that he knows each of agents to serve in succession or as co- agents. his three children want, but it cannot be If the power of attorney names co-agents and easily partitioned. His trust sets forth a they are to act together, then the following method by which one child, determined language should be included. by lottery, has an option to buy the ranch for 2/3 of its fair market value. The written or oral authorization of both of my agents shall be sufficient indication b. Family business of their authority to act.

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TEXAS HEALTH AND SAFETY CODE If there is a family where they do not get along, §313.004(a). then the use of a revocable living trust with an independent trustee to hold the assets may be The inadequacies of the Consent to Medical best with the independent trustee also named as Treatment Act are clear. Consent can only be agent in the power of attorney. given when the client is in the hospital or a nursing home. Consent cannot be given for a 2. Medical Power of Attorney medical treatment decision made in a home or an Statutory Durable Powers of Attorney allow out-patient clinic. An adult child must obtain the designated agent or attorney-in-fact to waivers from the other adult children or a conduct financial and business affairs, but no majority of adult children must act together. It authority is granted to make medical decisions. may be difficult for one child to obtain these A Medical Power of Attorney allows the person waivers or for a majority to act together. It may designated as agent to make medical decisions not be obvious to physicians and others who the when the client is incapacitated and unable to adult children are, let alone how to locate them, make those decisions himself or herself. TEXAS or who is the nearest living relative other than HEALTH AND SAFETY CODE § 166.151 et seq. children and parents. The statute does not say The agent for health care can decide who will be what happens if the parents do not define what the attending physician, what hospital will be makes one who was “clearly indicated” by the used or what nursing home will be chosen. patient to make a treatment decision. A minister Consents to surgery and to drug therapies can or priest can make a decision if none of these also be given under a Medical Power of family members are available. Persons of all Attorney. sorts of religious persuasions may find that to be unsatisfactory. The statute does not say this is a. When there is no Medical Power of Attorney limited to any particular minister; the statute When a person is incapable of making a seems to give a priority to any minister. The medical treatment decision and there is no statute does not indicate who has priority within Medical Power of Attorney, sometimes family the class numbered (5), although it is assumed members and others can give consent for medical that the person clearly indicated would have treatment under the “Consent to Medical priority over the nearest relative and a member Treatment Act,” TEXAS HEALTH AND SAFETY of the clergy, and the nearest living relative CODE §313.00 et seq. would have priority over a member of the clergy, For a client in a hospital or nursing home but not over a person clearly indicated. Finally, who is comatose, incapacitated, or otherwise the consent act does not apply in emergency mentally or physically incapable of situations. (If a person is incapacitated and needs communication, a medical treatment consent can emergency surgery to save his or her life, the be given by a family member or others with physicians and hospital need not obtain consent.) decision-making capacity and reasonably The statute also appears to invite litigation when available after reasonably diligent inquiry, in the it states that any dispute as to the right of a party following order of priority: to act as a surrogate decision maker may be resolved only by a court with probate (1) spouse; jurisdiction. TEXAS HEALTH AND SAFETY CODE (2) an adult (18 years of age or older or §313.000(b). under 18 with disabilities of minority If the Consent to Medical Treatment Act does removed) child who has the waiver and not apply to a given situation, then the health consent of all other qualified adult care provider may not accept the consent of a children to act as the sole decision-maker; family member. Without a Medical Power of (3) a majority of reasonably available Attorney, it may be necessary for the family to adult children; request a court appointed guardian to make the (4) parents; or decisions. A guardianship is a costly procedure (5) the individual clearly indicated to act in Texas even if limited to guardian of the person for the incapacitated person before that to medical treatment decisions. Any person became incapacitated, or the guardianship involving the parent when the nearest living (adult) relative, or a siblings do not get along will be contentious. member of the clergy.

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A preferable way to handle these unfortunate A Directive to Physicians instructs the situations is to complete and sign a Medical physician to withhold or withdraw life-sustaining Power of Attorney before the onset of incapacity. treatment in the event of a terminal or Even if the Consent to Medical Treatment irreversible condition or it can also instruct that Act does designate someone to make a treatment such treatment be administered. TEXAS HEALTH decision, the persons designated to make a AND SAFETY CODE § 166.031. treatment decision may not be the incapacitated person's first choice. A Medical Power of Attorney lets a client designate who can serve (1). Absence of Directive and in what order of priority. It also permits If a client does not have a Directive to designation of non-family members to serve. Physicians, then the physicians will consult the patient's legal guardian or an agent under a b. Medical Power of Attorney Form medical power of attorney for a decision on (1). Co-Agents whether to remove life-sustaining treatment. There is one aspect in which the Medical TEXAS HEALTH AND SAFETY CODE §166.039(a). Power of Attorney is more limited than the In the absence of a directive, a legal guardian, or Consent to Medical Treatment Act. A majority an agent under a medical power of attorney, a of adult children may together make a decision treatment decision to withhold or withdraw life- regarding consent under the Consent to Medical sustaining treatment may be made by the Treatment Act, but the statute that provides for attending physician and one person, if available, Medical Power of Attorney seems to permit from one of the following categories: designation of individual agents to serve one at a time consecutively. No provision is made for a (1) the patient's spouse; group of people, family members or otherwise, (2) the patient's reasonably available adult to be designated as agents to serve concurrently. children; (3) the patient's parents; or (2). Agent Qualifications (4) the patient's nearest living relative. The agent designated must be an adult (18 TEXAS HEALTH AND SAFETY CODE years of age or older) or, if not yet 18, a person §166.039. who has had the disabilities of minority removed. TEXAS HEALTH AND SAFETY CODE The absence of a Directive to Physicians can §166.151(1) and (2). result in the emotional burden of making a decision being placed on the family. The statute (3). Revocation by Guardian invites litigation by providing that a family As discussed later, the Medical Power of member who desires to challenge a treatment Attorney may be revoked when a guardian is decision made by another family member must appointed and the court may consider the apply for a temporary guardianship. Id. (g). preferences expressed in the Medical Power of Interestingly, the statute does not issue the same Attorney. TEXAS HEALTH AND SAFETY CODE invitation to family members in disagreement §166.156(b). The statutory form may express the with a decision made under a directive or by a preference that the Medical Power of Attorney legal guardian or agent under the medical power not be revoked by the following: of attorney.

In the event a guardian is appointed for (2). Statutory Form me, I request that this Medical Power of State law provides a form for the Directive Attorney not be revoked and the agent to Physicians, TEXAS HEALTH AND SAFETY appointed hereunder be permitted to serve CODE §166.033, but specifically provides that as my agent. any form is permitted and a notarized document

cannot be required. Id. §166.036(a). c. Directive to Physicians The statutory Directive to Physicians Texas law permits a client to sign a Directive permits the declarant to nominate someone to to Physicians, a document sometimes referred to make a treatment decision, if the Medical Power as a “living will” or the “pull-the-plug thing.” of Attorney does not name an agent. It is TEXAS HEALTH AND SAFETY CODE, Subchapter assumed in the statutory form that if a Medical B, Title 2. Power of Attorney names an agent, the named

6 Planning for the Dysfunctional Family Chapter 1.1 agent is to be consulted regarding removal of One interesting aspect of Texas law is that life-sustaining treatment. This appears to be a once a person is appointed as permanent limited reading of the statute itself, which states guardian, the guardian may revoke both the that the declarant may designate in the directive Statutory Durable Power of Attorney and the a person to make a treatment decision for the Medical Power of Attorney. The powers under a declarant when the declarant cannot. TEXAS durable power of attorney automatically are HEALTH AND SAFETY CODE §166.0392(c). terminated upon the qualification of the guardian The prior statutory form permitted of the estate. TEXAS PROBATE CODE §485. While nomination of one or more persons to make a suspension or revocation of the authority of the decision to remove life sustaining procedures. health care agent is optional with the court The problem with signing such a document is appointing the guardian, the guardian has sole that it placed upon the person nominated the health care decision-making authority while the emotional burden of making a decision to court's decision is pending. TEXAS HEALTH AND remove life-sustaining procedures. However, the SAFETY CODE § 166.156(a) and (c). The court is client may want to name someone to have the to consider the preferences of the principal as last word on making the decision as a check on expressed in the Medical Power of Attorney. A the decision making authority of the physicians. family member who is not satisfied with the If the client definitely believes that he or she does appointments made in either document can seek not want life sustaining treatment continued once to be appointed as the guardian, with the idea of unconscious and with a terminal condition, then canceling the appointments. the client should consider signing a Directive to Through a Declaration of Guardian, Texas Physicians that requests that such procedures be law permits a client to name the persons who removed rather than passing the responsibility to will serve as guardian. To prevent the powers of make a decision on to their family or friends. attorney from being canceled, the client should That will require additional language being name in his or her Declaration of Guardian as inserted in the directive as well as the Medical guardian of the estate the same person or persons Power of Attorney. named in the Statutory Durable Power of Attorney. The client also should name as d. Declaration of Guardian guardian of the person the same persons named A Declaration of Guardian, provided for in as agents in the Medical Power of Attorney. The TEXAS PROBATE CODE §679, is properly seen as Declaration of Guardian permits the naming of a backup document. It is there to make sure that guardians and alternate guardians to serve if the the other documents, Statutory Durable Power of prior named guardians are unable or unwilling to Attorney and Medical Power of Attorney, are not serve, just as successor agents may be named in unnecessarily canceled and to make sure that the Statutory Durable Power of Attorney form, persons the client does not want appointed are TEXAS PROBATE CODE §490, and in the Medical disqualified. Power of Attorney form, TEXAS HEALTH AND SAFETY CODE § 166.164. (1). Guardians appointed There are two types of guardians who (2). Optional provisions manage an incapacitated person's affairs. The An optional provision that the attorney may guardian of the estate is responsible for consider including is a provision stating that managing all assets, reinvestment, collection of simultaneously the declarant has executed a income, and payment of expenses. The guardian Statutory Durable Power of Attorney and a of the person handles personal affairs, such as Medical Power of Attorney and that the declarant where the ward will live. The same person wants the powers of attorney to be recognized usually serves as both guardian of the person and and no guardians appointed. Here is language guardian of the estate, but sometimes they are that might be used to accomplish this. separate. A guardianship is an expensive procedure, #. By separate instrument, I executed a and it is better to avoid a guardianship by Statutory Durable Power of Attorney providing a Statutory Durable Power of Attorney naming as my agents, the same persons and a Medical Power of Attorney, so there will listed above to serve as the guardian of be little or no need for a guardian, in the event my estate. I request that, if the actions the client becomes incapacitated. that need to be performed by me can be performed by my agent, the nominated

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guardian not seek a guardianship, and that to property adverse to the proposed ward, nor (v) any guardianship sought be a limited a person, who by reason of inexperience or lack guardianship and my Statutory Durable of education, or other good reason, is shown to Power of Attorney not be canceled. be incapable of properly and prudently managing and controlling the proposed ward or the #. By a separate instrument, I executed a proposed ward's property. Medical Power of Attorney naming the same persons I named above as guardians (5). Effect of declaration of my person. I desire that any guardian There are no reported cases on the appointed not request cancellation of my designation of guardian statute, but attorneys Medical Power of Attorney and that my involved in contested probate matters will agent there under be permitted to confirm that the existence of a declaration of continue to serve. guardian changes the dynamic of the case and gives a decided upper hand to the contestant (3). Disqualification designated in the declaration of guardian. Besides naming the guardians, what may be even more important for a client that is a member e. Agent for Remains of a contentious family, is that it is possible to For a family where the children do not get disqualify a person from serving as either along, the fisticuffs may begin at the funeral guardian of the person or as guardian of the home. Consider all the items over which the estate. If someone is disqualified, the probate children can disagree: burial, entombment, court is prohibited from appointing that person cremation, embalming, casket and final resting as guardian “under any circumstances.” TEXAS place. The Texas Health and Safety Code sets PROBATE CODE §679(b). The court need not forth who has a priority to dispose of a person’s appoint the person named as guardian, but the remains if the person does leave directions in court cannot appoint a person disqualified. writing. A client should consider explicitly disqualifying anyone whom the client does not Sec. 711.002. Disposition of Remains; want to serve, that might otherwise have a Duty to Inter. (a) . . . the following reasonable possibility of being appointed. This persons, in the priority listed, have the should be done even if it is probable that the right to control the disposition, including persons named in the Declaration of Guardian cremation, of the decedent's remains, shall will be able and willing to serve, because inter the remains, and are liable for the nomination in the Declaration of Guardian does reasonable cost of interment: not guarantee that the nominated person will be (1) the person designated in a written actually appointed by the probate court. The instrument signed by the decedent; court may give the appointment to someone with (2) the decedent's surviving spouse; a priority for the appointment, regardless of the (3) any one of the decedent's surviving nominations made in the Declaration of adult children; Guardian. Disqualification should be seriously (4) either one of the decedent's surviving considered for anyone that has a priority. parents; (5) any one of the decedent's surviving (4). Priorities adult siblings; or For appointment of guardians, Texas law, (6) any adult person in the next degree under TEXAS PROBATE CODE §677, gives first of kinship in the order named by law priority to the spouse. If the spouse does not to inherit the estate of the decedent. qualify or the client is not married, the appointment will go to the nearest kin, and Clearly when the children do not get along, failing the nearest kin to qualify then the subsection (3) encourages the children to appointment goes to any interested person. A fight it out. Certainly the client with person can qualify provided the person is not (i) children who do not cooperate should avail a minor, (ii) a person whose conduct is themselves of an opportunity to keep notoriously bad, (iii) a declared incompetent, (iv) disagreements to a minimum by providing indebted to a proposed ward unless the debt is who will make the funeral arrangements paid prior to appointment or asserting any claim and what arrangements the client wants.

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Subsection (b) of Section 711.002 A child may have profound mental contains a statutory form that a client can retardation such that the child is a ward of use to appoint an agent to control the the estate. disposition of his or her remains and eliminate a source of contention. Naming a ward of the estate as a beneficiary will result in the funds going to the state. It IV. Children – favored and disfavored makes much more sense to leave the funds to the A. Issues with the children other children and let them decide to benefit the 1. Estranged children disfavored child with the occasional luxury that It is not unusual to come across clients where the state will permit them to provide but the state one child is favored over another child. The does not provide. reasons for favoring one child over another one Some clients may have lost all contact with are not all negative. an institutionalized child while some will keep contact. The level of contact will change how There has been a divorce from the other they treat the matter. parent of the children and the client has resentment that one or more children The client may have more than one child, sided with the other spouse. but one child due to mental or physical condition is dependent upon the client for An effort to disinherit in these circumstances financial support. may be appropriate or they may be pure revenge. Care must always be taken if the favored The client may have a moral obligation to child is somehow participating in the estate favor the child that has been handed planning in this situation because you might disadvantages in life. have the child exercising influence that post death may be hard to disprove as undue The client’s child may have serious health influence. issues and is not expected to live much longer. A child may have left the family years ago and have disappeared. Where the child is childless, the client may want to look at giving the child an annuity that Naming such a child as a beneficiary, even can be satisfied out of the estate. inadvertently, could cause family tensions as Where the child with health issues may be well as difficulties for an executor to locate the the client’s only child, then the plan might beneficiary. Such a beneficiary might be include a testamentary charitable remainder trust inadvertently named as a beneficiary by simply or a pooled income fund with the client’s giving the residuary to the testator’s/testatrix’s favorite charity. children without excluding the child. The client’s child may have mental health The client may want to disinherit a child issues that can be controlled with because of false accusations made by the medication but sometimes there are child against the parent. periods of residential treatment.

Your author has dealt with the circumstance The child with mental health issues of a false accusation against the client from his sometimes present the same issues that are adult daughter that he had molested her as a involved with substance abuse. The child’s child. Through second hand another instance has situation is typically not one of the child’s own arisen of a parent wanting to disinherit a child for creation. But, the person with a mental health a false allegation. problem’s must want to get better and must take Sometimes these instances are temporary, medication. with the accusation later being withdrawn. Typically such a person’s inheritance should In some of these instances the child may be a be placed in trust and care taken in the choice of victim of incompetent counselors who have a trustee. If there is a family member than can caused their patient to develop a false memory. serve, it may be helpful to have someone to act as an advisor to the trustee or as co-trustee to 2. Health issues

9 Planning for the Dysfunctional Family Chapter 1.1 help monitor the situation to see that the The difficulties are particularly acute where beneficiary’s needs are met. the children are in Colorado where an anticipated inheritance from a parent is subject to division 3. Lifestyle issues by the court in the child’s divorce. In Texas we Children who have made lifestyle choices do not have that problem because an inheritance that are not appropriate. is separate property and not subject to division by the court in a divorce proceeding. Clients may want to send a message to a child who has walked out on his or her own The relationship may seem toxic only to the children and whose conduct is inappropriate. parent and may not be perceived that way to the Your author has encountered both sides of child in the relationship. Love is blind. this issue. In one instance a child was disinherited in favor of the client’s grandchildren A client may have a child who is gay, because the son left his wife and children. The lesbian, or transgender. son came to his senses and the will was revised several years later. Although there is more general acceptance of Your author encountered a son who was such lifestyles, one may encounter a client who disinherited by his father. While angry with what will want to disinherit entirely or at least limit happened at the time that it occurred, years later the gift made to such children. he said that it helped him realize that he was not What a parent may have no problem with is acting appropriately and his father did the right providing something for a GLTG child but not thing. providing sufficient wealth that the child channels funds to GLTG advocacy. Children who convert to another religion Your author would question the or who do not follow the religion. appropriateness of disinheriting a child because of sexual orientation alone and the attorney Disinheritance is sometimes a knee jerk participating in that. Disinheritance should be reaction by a parent when there is conversion or limited to objective reasons unrelated to sexual a child is not living a lifestyle that is consistent orientation. with their religion. Disinheritance is resorted to because it is an action that the parent can take The client may have a child who is when there are few other actions available. incarcerated. Such action may be counterproductive if the parent hopes the child we have a change in When dealing with the client with an lifestyle and return to the parent’s ways. Treating incarcerated child you are probably dealing with one child differently than another child may someone either embarrassed or incredibly result in animosity directed toward the parent’s disappointed in their child. But, sometimes you memory and religious beliefs. But, see above will find a parent who is easily manipulated by regarding children who made lifestyle choices his or her child. that are not appropriate. If the child will eventually be getting out of A different problem presents itself where prison, then consideration should be given to children become trapped in a religious cult. In giving that child a share in trust so that child will that instance, disinheritance may be appropriate have necessary funds when prison ends. because any inheritance will go to the cult and If the child is expected to be incarcerated for not to the child. life, then limited access to funds can provide for necessary legal services or for funds to make A client may have a child in a toxic purchases through the prison commissary. Just marriage or relationship. because the child gets provided “three hots and a cot” one should not expect there to be no need This might not be something that would for funds for “necessities.” cause a disinheritance of a child, but rather it Yet the ready availability of funds could also may cause the client to consider placing the be a problem for the child while incarcerated. If inheritance in trust with terms to prevent the that is known, the child could become subject to spouse or partner from getting the property or extortion and manipulation by the other having any control over the property. prisoners.

10 Planning for the Dysfunctional Family Chapter 1.1

Funds held in trust for an incarcerated child To obtain funds for gambling, a person can should not have mandatory distributions. The borrow money on credit cards and run up debt. If trust should only provide for discretionary the trust can be used to pay the credit cards, then distributions. the beneficiary will basically have unlimited Consider giving another family member a access to the funds in the account. power of appointment to appoint to the child in A spendthrift trust can only provide limit prison. Another possibility is to permit protection to the beneficiary while also providing discretionary distributions to a family member so distributions. A trust cannot totally save the gifts can be made to the incarcerated child. beneficiary from himself or herself. Your author heard from a long-time minister Depending upon how severe the creditor to prisoners that most prisoners are children in problem is, the client may want a spendthrift adult bodies. They act first and think later. That trust drafted for the child that permits the trustee is what got them into prison. to acquire and hold in the trust a residence for Many prisoners have serious mental health the child. While a homestead may be protected issues. If incarcerated for life, financial resources from creditors, the beneficiary with creditors will make no difference in the care the person may find it difficult to acquire a home on their receives, but if the child will eventually be set own. By holding the residence in trust it will be free from prison, then the same planning easier to sell the residence to acquire another considerations for children with metal health residence and move the transaction through a considerations apply. title company rather than if the residence was held individually. 4. Financial issues A client with a ranch may want to give it One child may already have more wealth, to children who have property already such as marrying well or being very because he thinks they are more likely to successful in business or investments. manage it and pass it to their children.

The other child may simply have a greater Your author has encountered this type of need for the inheritance. Some children that have situation. In planning such a disposition expect a significant wealth still see an inheritance from a will fight and consider making the gift in trust to parent as an entitlement and think it unfair that increase the ability to defend the effectiveness of he or she has received little. the disposition.

One child might have a greater need for B. Sinking the unequal disposition the assistance because that child has a When such uneven dispositions are made, special needs child that places a financial one should be careful to not state a particular burden on that family. reason, because that invites litigation over whether the reason is correct. See the discussion When a child is disinherited for one of the of “Mistake,” in Beyer, TEXAS LAW OF WILLS, previous two reasons, the client might consider §51.32 et seq. naming that child to receive a family heirloom of Also, a disinheritance provision should not sentimental as opposed to assets of significant invite a lawsuit for libel. Limit such a statement financial value. to “For good and sufficient reasons known to my family, my will does not make any disposition to A client may have children with creditor my daughter, Mary Jane, or her issue.” issues. C. Disinheritance permitted This situation may not be one that calls for Texas law permits disinheritance as to both disinheritance, but rather placing the inheritance an amount passing under a will and also as to in a spendthrift trust without mandatory intestacy. Texas Probate Code § 58(b) provides: distributions. But if the child has creditor problems because A person who makes a last will and of a gambling addiction, then the client might testament may: disinherit an heir; and want to consider disinheriting the child in favor direct the disposition of property or an of the grandchildren. interest passing under the will or by intestacy.

11 Planning for the Dysfunctional Family Chapter 1.1

where the parents do not like the choices that the If a child is to be disinherited, then child made in their marriage, divorcing a well inclusion of a provision disinheriting as to liked in-law, or do not care for life style choices interests by intestacy, will help limit any of the child but do not want to punish the unintended inheritance if the will does not grandchildren. dispose of all of the client’s property and there There will also be instances in which the is a partial intestacy. grandchildren by one child are to be favored over the grandchildren by another child. Your author D. Nominal bequests to disinherited has encountered instances where one set of In making a disinheritance of a beneficiary, grandchildren will inherit significant wealth from the client should consider making a nominal another grandparent while the other set of bequest to the child and include a no contest grandchildren will not have a prospect of a provision in the will. This will penalize the child significant inheritance from their other with loss of the nominal bequest if they grandparents. challenge the will. This presents disfavored children with a dilemma: accept the will with a 3. Grandparents raising grandchildren nominal amount and walk away or challenge the There is another situation occurring with will and run the risk of receiving nothing. If the more frequency, and that is grandparents raising challenge to the will is successful, then the child their grandchildren. will have the will set aside and may take a larger The reasons are varied, and the length of share under a prior will or by intestacy. time that the grandchildren are in the There is law to the effect that if a named grandparents’ home varies also. beneficiary accepts a benefit under a will that Where the grandchild or grandchildren beneficiary becomes estopped from latter receive their entire upbringing in the challenging the will under which the gift was grandparent’s home, an issue can arise as to how accepted. For this reason, the executor will want to divide the family share. to make that bequest as soon as the will is admitted to probate so as to have estoppel attach. Client and her husband raised their two Consider making such nominal gifts to the grandchildren from the age of toddlers. beneficiary if the beneficiary survives the Client divides the estate into thirds, one testator/trix by thirty (30) days or until the third each for her daughter, grandson and probate of the will, whichever occurs first. granddaughter.

V. Grandchildren – favored and disfavored Clients have three children and raise their A. Extended family dysfunction oldest grandchild since birth. The only 1. Grandchildren disfavored have temporary custody of the Your author has encountered persons who grandchild, but the child will stay with are willing to give to their children but do not them until they are adults. They sign wills like the grandchildren. One client did not like the giving each of the three children and the way in which his grandchildren had treated him. oldest grandchild a one-fourth share. His solution was to give his children interests in a pooled income fund at his favorite charitable B.Planning opportunities organization, so the interests will last for the life 1. Disinherit the child of each of his children but will terminate upon Disinherit the child in favor of the their deaths. grandchildren. See the caution above regarding Another mother did not want to give her nominal bequests instead of complete daughter a share of the family farm because the disinheritance. If the child is estranged from his daughter was divorced and the daughter’s son or her own children, then the child may not think was homosexual and had contracted AIDS. She that a gift to his or her own children is sufficient was concerned that her daughter would want to to prevent a challenge to the will. sell her interest. 2. Income interest to the child 2. Grandchildren favored Limit the child to an income beneficiary of a The opposite has been encountered where trust and give the grandchildren the remainder clients don’t like the children but have no interest. problem with the grandchildren. This may come

12 Planning for the Dysfunctional Family Chapter 1.1

If the child is estranged from the bottom as a soft landing and not have the arrival grandchildren, the conflicting interests between at the bottom to mean the death of the child. the child as income beneficiary and the There is an uneasy tension between not being an grandchildren as remaindermen may create enabler yet not setting the child on a course of family disharmony. The problems are similar to events leading to death. the discussion above regarding using a trust for a The substance abuser has a different way of blended family. thinking and dealing with issues. When under the influence this might be considered even non- 3. Use a pot trust. thinking, all the while trying to give the Put the child and the grandchildren in a pot impression that the abuser understands what is trust that terminates upon the death of the child. being communicated. Your author’s wife observed that when our daughter was on drugs, 4. Give shares between talking to a brick wall and talking to our Give a share to a child and another share to daughter, we were better off talking to the brick the grandchildren. wall, because we knew at least the brick wall was not listening. VI. Substance Abuse Problems Another aspect is that persons who use Children with drug problems present one of illegal substances buy their drugs from some the more difficult planning situations for the unsavory characters. When the substance abuser client and the attorney. The client will approach lives in the home that abuser decreases the the task with frustration and anger and both the degrees of separation between the family client and attorney will find that there is members and the unsavory providers. The abuser difficulty in crafting a workable solution. is in the circle of the family and the abuser’s relationship with the drug provider brings that A. Abuse within the family person into the family circle. The attorney needs to understand the level The abuser is also bringing his or her drug of the client’s affection for the child or lack abusing friends into the family circle. The anger thereof. Substance abuse families have some expressed by the parents in bringing such recurring trends but they are not exactly alike. persons within the family circle, many times provides a benefit to the abuser in finding 1. Family dynamics another way to strike back at the family. The client may want to do everything The relationship and the perception of the possible to help the child with the drug problem, problem may not be the same for both clients but more often than not the parent has burned his when representing a couple. The father may want or her bridges with the child and is fed up with to sever the relationship while the mother is the situation. stilling willing to make heroic efforts to save the The latter client may have attempted child, and vice versa. Your author knows of one everything they could do to provide a loving instance in which the couple moved out of the upbringing and impart good values only to be home because the child was doing drugs – and repaid with numerous failed attempts at rehab the wife promptly divorced the husband for and the loss of wealth for rehab, attorneys’ fees, being too soft on the son and causing their bail bonds, and theft from the house for the effective eviction. purchase of drugs. Numerous schemes will be When the drug abuser is one of several deployed to get money from parents. Such children, there are also the perceptions of what is parents feel used and abused and they approach fair to the other children in how they are treated the relationship, such that remains, with a compared to the abuser. There may be combination of frustration and anger. The resentment if all the children are treated equally, frustration comes from the inability to control because of the emotional and financial damage the situation or to affect the situation to bring a done to the family resources by the abuser. good result. The anger comes from the child’s choices and the economic damage done to the 2. The client and judgment family’s resources. A sure way to lose a client is to be Yet that heroic parent should not be judged judgmental about the client. They have yet to as an enabler. All the while recognizing that the right the handbook on how to act as the parent of user may need to hit bottom before they will a substance abuser. So the attorney as counselor change, the parent wants the child to hit the

13 Planning for the Dysfunctional Family Chapter 1.1 cannot say that the parent’s conduct is right or See the discussion above about making a wrong. nominal gift to such a child so as to avoid a challenge to the effectiveness of the will. One thing the parents of substance abusers have received is judgment: they must not have 2. Permit or require drug testing been very good parents because they have a child There are several issues that need to be on illegal substances. addressed in taking this approach. If the substance abuse started when the child was a minor they have encountered counselors Will drug testing be permitted or required? who think that the first thing to be done is to fix the parents. A corporate trustee might accept a trust that The client wants planning choices and permits testing, but reject a trust that requires implementation, not judgment. drug testing. That raises an important point regarding a 3. Substance abusers as manipulators drug clause. A corporate trustee may refuse to Clients with a child with a drug problem do accept a trust because of the particulars of the not want to see the funds that will be left to the substance abuse clause, so any such clause child turn into drug money. Most drug users are should be reviewed carefully with corporate very good at manipulating their parents into drug trustee during the drafting of the trust instrument. funds. Even funds left in trust with discretionary Even if a corporate trustee will accept a trust distributions should expect manipulation of the that permits testing for drugs, they might have a trustee by the beneficiary. policy of not testing. Determine from the trustee how they will use the authority to request a drug 4. Substance abuse and mental illness test. There is another aspect to drug abuse that fuels many of the attitudes by clients toward What substances will be covered? drug abusing children. Many drug abusers are self medicating because they have serious mental If it is limited to illegal substances you need health problems. The core of the drug abuser’s to have some definition of what is illegal. What problem that lands many of them in jail, or is illegal in the jurisdiction that the client lives homeless on the street, is mental illness. To an may not be illegal in the jurisdiction that the extent some drug abusers come to their abuse beneficiary resides. The client may also want to honestly, because they are seeking an include alcohol abuse. But, in making any inappropriate solution to a problem for which definition, can we anticipate what will be abused they are not responsible for creating. in the future? A person with mental health problems must want to get better, yet there is a vicious cycle that What kind of testing will be permitted or must be broken in which the mental health of the required? person leads them to think they don’t need help and they do not need medication. Legitimate It is hard to get an effective method of drug mental health care is avoided as unneeded while testing that cannot easily be manipulated as to the self-medication with illegal substances results. Probation offices are not shy about continues. having a substance abuser provide a sample in front of an attendant. A corporate trustee is B. Planning solutions unlikely to require such on site testing. 1. Disinherit the child While a little extreme disinheritance does What is the consequence of a positive test satisfy a client’s urge to settle past scores and for drugs? does not result in any funds going to drugs. This attitude is usually accompanied with an attitude a. Suspend payments by the client that enough has already been done One consequence could be a suspension of to rescue the child and he or she does not deserve distributions. Attached as Attachment A is a anymore. form that provides for cutting off funds in the Beware that attempting to talk the client out event of drug use, in the discretion of the trustee. of this approach may result in loss of a client.

14 Planning for the Dysfunctional Family Chapter 1.1

Attachment B is a provision from Lawgic releasing the trustee from liability is probably that provides for a permissive suspension of sufficient to make the clause workable. distributions for drug use or failure to obtain testing, but releases the trustee from liability for 3. Incarcerated suspending or not suspending payments. Provide for suspension of payments if incarcerated for illegal drug use. That is b. Terminate all payments permitted in Attachment A. Attachment C is a substance abuse provision that requires an affirmative finding by the 4. Power of appointment trustee, with reliance on experts, that the Give a power of appointment to another beneficiary is not abusing substances for the family member whereby they can suspend beneficiary to receive distributions and a payments if the beneficiary is using drugs. This termination of the trust for that beneficiary if could be a useful provision where the use is on substance abuse occurs. This provision appears again and off again. It can also be useful where to be directed towards the prospective the child otherwise has no other assets for beneficiary who has a history of substance abuse support. known to the testator. This provision is for a testamentary instrument. 5. Incentive trust Henry Christensen III, the author of this Draft the trust as an incentive trust. provision likens this to a classic in terrorem Distributions can be made at a multiple of an clause that says that if the beneficiary challenges amount stated on a W-2 or a check stub from an the will the beneficiary gets nothing. If the child employer. The problem with this approach is that does not stay off of substances or gets back on drug users can be very resourceful and can easily then the beneficiary gets nothing and the produce documents that look authentic but are in property goes to the abuser’s children. fact forgeries. c. Suspend mandatory distributions 6. Direct provision of necessities Attachment D provides for suspension of Include in the trust authority for the trustee mandatory distributions. This substance abuse to make direct payment of rent, or provide provision would be a standard provision for groceries by directly paying the grocery store. A inclusion in all trust instruments including wills corporate trustee will not want to be in the creating testamentary trusts. If substance abuse is position of being a babysitter and the resourceful determined or the beneficiary refuses to submit substance abuser will find ways to turn what is to drug testing, then mandatory distributions are provided into cash for drugs. suspended but discretionary distributions are permitted. The potential problem with this approach is that the beneficiary may manipulate the trustee to provide enhanced discretionary distributions to make up for lost mandatory distributions. At least, it sets up the trustee to be the target of such manipulation. d. False positives One difficulty with testing is that sometimes the tests give a false positive for illegal substances. For example, eating a poppy seed roll may cause a person to test positive for drugs, even though no illegal substances have been used. The more severe the consequence of testing positive, the more important it is to build in some due process for the possibility of a false positive. If the consequence is a change from one type of distribution to another that is not so severe to the beneficiary, and a provision

15 Planning for the Dysfunctional Family Chapter 1.1

ATTACHMENT A

3. SUSPENSION AND RESUMPTION OF PAYMENTS: a. Suspension of Payments: Notwithstanding the foregoing provisions of Article IV, Article V and paragraphs 1 and 2 of this Article VI, the Trustee shall suspend distributions to or for the benefit of any beneficiary or issue:

i. Who the Trustee reasonably believes or suspects is dependent upon or addicted to illegal drugs, any controlled substance (including controlled prescription drugs or other controlled pharmaceuticals), alcohol, or gambling. Such beneficiary or issue, as the case may be, shall submit to a drug test or other test approved by the Trustee and shall consult with such physician as reasonably requested by the Trustee in the case of illegal drugs, controlled substance or alcohol. If the result of such test or tests indicate that the beneficiary or issue is free of illegal drugs, controlled substances and alcohol dependence, or in the case of a gambling addiction the Trustee believes such beneficiary or issue has not participated in any gambling activity for a period of at least one (1) year, the Trustee may then make distributions in accordance with the provisions of Article IV, Article V or paragraph 1 of this Article VI, as the case may be. If any such test or physician detects the presence of any illegal drug or controlled substance in any quantity, or detects alcohol dependency, or if the Trustee is aware of gambling activity participation, and the Trustee reasonably believes or suspects the beneficiary or issue is dependent upon or addicted to such illegal drug, controlled substance, alcohol or gambling activity, or the beneficiary or issue refuses to take such a test, then the Trustee shall suspend any distribution to such beneficiary or issue, until such beneficiary or issue successfully completes a rehabilitation program of the beneficiary's or issue's choice that successfully eliminates such dependency or addiction. Successful completion of a rehabilitation program shall be determined in the sole discretion of the Trustee whose decision shall be final and binding;

ii. Who is affiliated with any religious or other cult including but not limited to any terrorist organization and the Trustee believes that it is reasonably likely that the beneficiary or issue, as the case may be, will give, convey, pledge, or transfer to such religious or other cult any significant portion of the money or property which such beneficiary or issue would receive from any trust established pursuant to Article IV, Article V or paragraph 1 of this Article VI, as the case may be. Any distributions to such beneficiary or issue shall be suspended until such time as the beneficiary or issue disassociates with such religious or other cult.

The determination of what constitutes a religious or other cult and whether the beneficiary or issue is affiliated with such a religious or other cult shall be determined in the sole discretion of the Trustee. The Grantors intend that the term "religious or other cult" shall refer to a religious or other cult that has not been generally recognized as a formal religion for more than one hundred (100) years or that commits or instigates threats or acts of aggression or terrorist acts. The Trustee may seek advice from any organization or entity that is recognized as possessing knowledge of religious and/or other cults such as a Council of Churches, in making such determination. Furthermore, the Trustee shall be entitled to rely upon such advice;

iii. Who is deemed, by a court of competent jurisdiction at the petition of the Trustee or other interested person, incapacitated as to the estate of such beneficiary or issue, as the case may be, so that such beneficiary or issue is at significant risk of financial harm based upon a demonstrated inability to adequately manage property or financial affairs. The Trustee shall suspend any distribution directly to any beneficiary or issue who has been so adjudicated until such time as the adjudication is vacated. Provided however, that during the time such beneficiary or issue is so adjudicated, the Trustee may continue to make distributions or payments for the benefit of or on behalf of such beneficiary or issue; or

iv. (A) Who has been convicted or entered a plea of nolo contendere for a felony, or (B) who is deemed by a court of competent jurisdiction at the petition of the Trustee, to be living a lifestyle of moral turpitude. Any distribution to such beneficiary or issue, as the case may be, shall be suspended until such time as the beneficiary or issue is no longer imprisoned in the case of (A) above or until a court of competent jurisdiction determines such beneficiary or issue is no longer living a lifestyle of moral turpitude in the case of (B) above.

16 Planning for the Dysfunctional Family Chapter 1.1

b. Resumption of Payments: If after any suspension of payments pursuant to subparagraph 3(a) of this Article VI the Trustee subsequently determines that any mandatory and discretionary payments are to resume, the Trustee shall pay as soon as practicable any previously suspended mandatory payments and shall resume any discretionary payments as the Trustee deems advisable in accordance with the other provisions of Article IV, Article V or paragraph 1 of this Article VI, as the case may be.

******************************** The above language was provided by: Stephen L. Pruss Ahrens & DeAngeli, p.l.l.c. Seattle, WA Boise, ID

ATTACHMENT B

Article X

Substance Abuse

If the Trustees reasonably believe that a beneficiary of any trust:

(1) routinely or frequently uses or consumes any illegal substance so as to be physically or psychologically dependent upon that substance, or

(2) 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, and if the Trustees reasonably believe that as a result the beneficiary is unable to care for himself or herself, or is unable to manage his or her financial affairs, 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 that event, the following provisions will apply:

A. Testing. The Trustees 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 Trustees of the results of all such examinations, as well as of all opinions and suggested treatments by the beneficiary's treating physician, on an ongoing basis. The Trustees 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 Trustees may totally or partially suspend all distributions otherwise required or permitted to be made to that beneficiary until the beneficiary consents to the examination and disclosure to the Trustees.

B. Treatment. 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) that is acceptable to the Trustees. If the beneficiary consents to the treatment, the Trustees shall pay the costs of treatment directly to the provider of those services from the distributions suspended under this article.

C. Resumption of Distributions. The Trustees 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 and, in all cases, when the Trustees in their

17 Planning for the Dysfunctional Family Chapter 1.1 discretion determine that the beneficiary is able to care for himself or herself and is able to manage his or her financial affairs.

D. Disposition of Suspended Amounts. 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. If the beneficiary dies before distribution of those suspended amounts, the Trustees shall distribute the balance of the suspended amounts to the persons who would be the alternate takers of that beneficiary's share (or takers through the exercise of a power of appointment) as otherwise provided in this Trust.

E. Exoneration. No Trustee (nor any doctor retained by the Trustees) will be responsible or liable to anyone for a beneficiary's actions or welfare. The Trustees have no duty to inquire whether a beneficiary uses drugs or other substances as described in this article. The Trustees (and any doctor retained by the Trustees) are to be indemnified from the Trust Estate and held harmless from any liability of any nature in exercising their judgment and authority under this article, including any failure to request a beneficiary to submit to medical examination, and including a decision to distribute suspended amounts to a beneficiary.

F. Tax Savings Provision. Despite the provisions of this article, the Trustees cannot suspend any mandatory distributions or withdrawal rights that are required for that trust to become or remain a Qualified Subchapter S Trust (unless the Trustees elect for the trust to be an Electing Small Business Trust), or to qualify for any federal transfer tax exemption, deduction, or exclusion allowable with respect to that trust.

From Lawgic. www.Lawgic.com

ATTACHMENT C

Copyright 2007, Henry Christensen III, all rights reserved. Used with permission.

Sample Substance Abuse Clause for Testamentary Trust

Whenever in this Will I have directed that an amount or a share of my estate be held, administered and disposed of as provided in this Part (C), I direct my Trustees to hold, manage, invest and reinvest such share as follows:

I direct my Trustees to appoint a person of suitable expertise and experience (hereinafter referred to as “the expert”) in a field or fields related, without limitation, to social work, sociology, criminology, psychology or psychiatry, for the purpose of but do not direct, that my Trustees solicit for this purpose [Name] the present medical advisor to [Name]. If for any reason the expert so appointed shall fail to make such determination, then I authorize my Trustees to appoint such additional expert or experts as shall complete the determination herein required. The selection of an expert or a successor expert shall be in the sole discretion of my Trustees and neither the identity of the person so selected nor their judgment that such person possesses the relevant knowledge or experience shall be subject to challenge.

The expert so appointed shall have sole discretion to determine, and shall so certify such determination in writing to my Trustees no later than the tenth anniversary of my death, whether [Beneficiary Name] has demonstrated that, for a period of at least five years prior to such determination (which may include a period prior to my death), he is a recovered alcoholic who is no longer drinking, and he has not ingested drugs in any manner or of any kind other than as prescribed by a physician as medically necessary; and that is gainfully employed or, if unemployed for any interval as a result of circumstances which do not bear on the aforesaid conditions, is earnestly seeking employment for which he is able. No distributions shall be made to or for the benefit of [Beneficiary Name] until and unless the expert shall determine that he has met the conditions set forth above, provided that the Trustees may make distributions of current and accumulated income for the benefit of [Beneficiary Name] by direct payment of (i) medical or other bills associated with his institutionalization and treatment for alcohol and drug abuse relating to no more than two such institutionalizations or treatments during the trusts’ terms, (ii) child support obligations

18 Planning for the Dysfunctional Family Chapter 1.1 of [Beneficiary Name] which have been ordered by a court of competent jurisdiction, and (iii) reasonable rent for a modest apartment for his personal use.

No later than the tenth anniversary of my death, if and when it be the determination of the expert that [Beneficiary Name] has met the conditions set forth above, and the expert has so certified this determination to my Trustees, then I authorize and direct my Trustees to begin distributing the net income of the trust, currently, to [Beneficiary Name]. In such event, the trust shall continue for the balance of his life, or until and unless he shall again abuse drugs or alcohol or in any way again fail the conditions set forth above.

Upon the earliest to occur of: (i) [Beneficiary Name]’s death, (ii) the passage of ten years from the date of my death without the expert so appointed by my Trustees having made the certification set forth above, or (iii) [Beneficiary Name] having once met the conditions set above, again abusing alcohol or drugs or in any way again failing the conditions set forth above in the opinion of the expert engaged by my Trustees, this trust shall terminate. My Trustees shall thereupon pay over and distribute the remaining principal and income thereof, to [Beneficiary Name]’s issue then living, or if none, to my issue then living, or in none, to [Charity].

ATTACHMENT D

Copyright 2007, Henry Christensen III, all rights reserved. Used with permission.

Alternate Substance Abuse Clause

The following provisions apply to all trusts created under this Trust Agreement, except as expressly provided to the contrary in this Article entitled “Substance Abuse:”

A. Dependence. If the Trustees reasonably believe that: (1) a beneficiary of any trust created under this Trust Agreement (i) routinely or frequently used or consumes any illegal drugs or other illegal chemical substance so as to be physically or psychologically dependent upon that drug or substance, or (ii) is clinically dependent upon the use or consumption of alcohol or any other legal drug or chemical substance that is not prescribed by a licensed medical doctor or psychiatrist in a current program of treatment supervised by that doctor or psychiatrist; and (2) as a result of such use or consumption, the beneficiary is incapable of caring for himself or herself or is likely to dissipate the Beneficiary’s financial resources: then the trustees must follow the procedure set forth below.

B. Testing. The Trustees will request the Beneficiary to submit to one or more examinations (including laboratory tests of hair, tissue, or bodily fluids) determined to be appropriate by a licensed medical doctor or psychiatrist selected by the Trustees. The Trustees will request the Beneficiary to consent to full disclosure by the examining doctor or facility to the Trustees of the results of all the examinations. The Trustee will maintain strict confidentiality of those results and will not disclose those results to any person other than the Beneficiary without the Beneficiary’s written permission. The Trustees may totally or partially suspend all distributions otherwise required or permitted to be made to that Beneficiary until the Beneficiary consents to the examination and disclosure to the Trustees.

C. Treatment. If, in the examining doctor or psychiatrist’s opinion, the examination indicates current or recent use of a drug or substance as described above, the Beneficiary will consult with the examining doctor or psychiatrist to determine an appropriate method of treatment for the Beneficiary. Treatment may include counseling or treatment on an in-patient basis in a rehabilitation facility. If the Beneficiary consents to the treatment, the Trustees will pay the costs of treatment directly to the provider of those services from the income or principal otherwise authorized or required to be distributed to the Beneficiary.

D. Mandatory Distributions Suspended. If the examination indicates current or recent use of a drug or

19 Planning for the Dysfunctional Family Chapter 1.1 substance as described above, all mandatory distributions and all withdrawal rights from the trust estate with respect to the Beneficiary during the Beneficiary’s lifetime (including distributions upon termination of the trust for reasons other than the death of the Beneficiary) will be suspended until:

1. in the case of use or consumption of an illegal drug or illegal substance, examinations indicate no such use; and

2. in all cases of dependence, until the Trustees, in the Trustees’ judgment, determine that the Beneficiary is fully capable of caring for himself or herself and is no longer likely to dissipate his or her financial resources.

E. Discretionary Distributions. While mandatory distributions are suspended, the trust will be administered as a discretionary trust to provide for the Beneficiary according to the provisions of the trust providing for discretionary distributions in the Trustees’ discretion (other than an Interested Trustee) and those provisions of the trust relating to distributions for the Beneficiary’s health, education, maintenance and support.

F. Resumption of Mandatory Distributions and Withdrawals. When mandatory distributions to and withdrawals by the Beneficiary are resumed, the remaining balance, if any, of the mandatory distributions that were suspended may be distributed to the Beneficiary at that time and the balance of any rights of withdrawal by the Beneficiary shall be immediately exercisable by the Beneficiary. If the Beneficiary dies before mandatory distributions or rights of withdrawal are resumed, the remaining balance of the mandatory distributions that were suspended will be distributed to the alternate beneficiaries of the Beneficiary’s share as provided herein.

G. Other Prohibitions During Mandatory Suspension of Benefits. If mandatory distributions to a Beneficiary are suspended as provided above in this Article, then as of such suspension, the Beneficiary shall automatically be disqualified from serving, and if applicable shall immediately crease serving, as a trustee, Trust Protector, or in any other capacity in which the Beneficiary would serve as, or participate in the removal or appointment of any trustee or Trust Protector hereunder.

H. Exoneration Provision. It is not the Grantor’s intention to make the Trustees (or any doctor or psychiatrist retained by the Trustees) responsible or liable to anyone for a Beneficiary’s actions or welfare. The Trustees have no duty to inquire whether a Beneficiary uses drugs or other substances. The Trustees (and any doctor or psychiatrist retained by the Trustees) will be indemnified from the trust estate for any liability in exercising the Trustees’ judgment to submit to medical examination and including a decision to distribute suspended amounts to a Beneficiary.

I. Tax Savings Provisions. Not withstanding the provisions of the preceding subparagraphs or any other provision of this Trust Agreement, the Trustees shall not suspend any mandatory distributions required for a trust to qualify, in whole or in part, for any Federal or state marital deduction or charitable deduction or as a qualified subchapter S trust. Finally, nothing herein shall prevent a distribution mandated by the provisions hereof relating to the Maximum Duration of Trusts.

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