New York Asset Protection Podcast with Ted AlatsasIf your child or grandchild is battling addiction, a sudden inheritance can unintentionally make things worse—by enabling relapse, attracting bad influences, or disrupting public benefits. In this episode of New York’s Asset Protection Round Table, attorney Ted and host Ben break down the key risks and practical estate planning strategies families use to protect a loved one while still providing support.

Key Takeaways

  • A lump-sum inheritance can increase relapse risk and unintentionally enable substance use (or other addictions like gambling).
  • Beneficiaries may be vulnerable to manipulation, poor money management, or harmful influences when they receive large distributions.
  • Leaving money outright can jeopardize public benefits if a beneficiary receives disability-related assistance.
  • Trust-based strategies—especially milestone-based distributions and special needs trusts—can provide support while reducing harm.

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What This Episode Covers

Why this is such a difficult planning situation

Ted explains the emotional conflict families face: you want to take care of someone you love, but you also don’t want to make it easier for them to continue destructive behavior. Beyond finances, families often worry about fairness, family harmony, and long-term stability.

The biggest risks of leaving money outright

Ted outlines several common issues that can come with a direct inheritance:

  • Enabling addiction: Giving someone unrestricted funds can make it easier to access drugs, alcohol, or other addictive behaviors (including gambling).

  • Higher relapse risk: Even if someone is in recovery, a sudden influx of money can create old temptations and increase the chance of relapse.

  • Vulnerability to outside influence: If the beneficiary is surrounded by unhealthy relationships or “bad influences,” a large inheritance can become a magnet for manipulation.

  • Lack of financial management experience: Even without addiction, some beneficiaries may not have the experience to manage a significant sum responsibly.

  • Impact on public benefits: If a beneficiary receives disability-related benefits, a direct inheritance could cause them to lose eligibility.

  • What happens when the money runs out: Families also worry about the long-term picture—what stability remains after the inheritance is spent.

Estate Planning Options to Consider

1) Disinheriting (cutting them off)

Ted notes that some families consider disinheriting a beneficiary entirely to prevent access to funds that could fuel addiction. He emphasizes it’s an option, but not always the best one—because it can create additional family and emotional consequences.

2) Smaller, predictable distributions over time

A common approach is creating a structure that pays out money in smaller installments rather than one large amount. This can provide support while reducing the risk that a beneficiary will have immediate access to a large sum.

3) Milestone-based distributions (conditional inheritances)

Ted explains that distributions can be tied to clear milestones, such as completing rehab or meeting other recovery-related conditions. This creates guardrails and aligns financial support with healthier progress.

4) A third-party trustee controls distributions

Instead of leaving decisions to family members—who may feel emotional pressure—Ted suggests using a trustee who can act more objectively and enforce the terms of the plan without getting pulled into emotionally charged situations.

5) Use the inheritance to provide controlled support through assets

Another approach is to use inheritance funds in ways that provide stability without giving unrestricted cash—for example, purchasing or managing certain assets in a controlled way.

6) Special needs trust (when public benefits are involved)

If the beneficiary is receiving disability or other needs-based benefits, Ted highlights the value of a special needs trust, which can help preserve benefit eligibility while still providing support for approved purposes.

Which approach is most commonly used?

Ted shares that, in his experience, the most common and effective approach tends to be:

  • Milestone-based trust planning, paired with

  • Incremental distributions, and when applicable,

  • Special needs trusts for beneficiaries already receiving benefits.

He also notes that cutting someone off “cold turkey” can be very difficult and may lead to other problems—so many families look for solutions that balance protection and support.

Full Transcript

Ben: If your child or grandchild struggles with addiction, a sudden inheritance could do them more harm than good. Today we’re going to talk about some of the risks of leaving money to a loved one battling substance abuse issues, and the options you have to help protect them without enabling their addiction.

Welcome in. This is New York’s Asset Protection Round Table, the Three Pillars of Protection Program. Good to have you on the show again, Ted. This is a serious topic—but one I’m sure more and more families are dealing with. It seems like substance abuse has been on the rise for a number of years.

Ted: Yeah, absolutely. It’s certainly something that’s becoming more challenging, and something we’re dealing with regularly.

Ben: We’ll get into the issues and some options for passing along an inheritance. How are things in the office for you, Ted?

Ted: Everything’s fine. Summer’s here, warm weather has arrived, and we’re just dealing with it.

Ben: It’s been scorching. Hopefully you’re staying cool when you can. If you have questions for Ted, you can visit alatsaslawfirm.com. You can schedule a meeting and access resources on estate planning. You can also call 718-233-2903.

Let’s set the table. What are the major issues when you have this situation in your family and you’re trying to plan?

Ted: There’s the emotional tug of wanting to make sure you’re taking care of someone you love. But there’s also the concern that you don’t want to make it easier for them to engage in their habit—and make it worse for them over the long haul.

There are lots of things you want to think about. You’re trying to do what’s right, what’s fair, and also keep harmony in the family. So there’s a lot going on when you’re thinking about this.

Ben: Let’s go a little deeper. What are the risks you have to be aware of?

Ted: First and foremost, a large financial distribution to someone who’s addicted—whether drugs, alcohol, or even gambling—can enable that addiction. You want to avoid becoming an enabler.

Especially if they’re in recovery, you increase the risk of relapse if you enable them. You want to avoid old temptations and try to prevent that.

You also want to assess vulnerabilities. Are they vulnerable to bad influences? Are they surrounding themselves with people who increase the likelihood they’ll engage in dangerous behavior?

What experience do they have managing money? You don’t want to be in a situation where they don’t know how to manage that kind of money.

And if it’s more severe, giving money outright could impact public benefits. If they’re receiving public benefits because they’re disabled as a result of the illness or addiction, giving them money could affect eligibility.

And then there’s the question of: what happens if the money runs out? What kind of situation remains for them once the money is gone?

So these are risks you have to assess and acknowledge before creating an estate plan for a loved one dealing with addiction.

Ben: That’s a lot to consider. So let’s talk about options. People might understand the risks, but the big question is: what can you actually do?

Ted: One instinct is to consider disinheriting the individual—cutting them off completely and making it obvious your intention is to prevent access to funds that could enable behavior. That’s one option, though it’s not necessarily the best option. It depends on the person and the family.

Another option is setting up a distribution mechanism that provides money in smaller installments—predictable distributions over time—so there’s a stream of money, but not enough to dramatically increase risks.

You can also set conditions. You can make it clear that the beneficiary only receives inheritances or percentages based on completing certain things—whether it’s rehab or engaging in behaviors that prevent relapse.

You can have a third party control the inheritance—a trustee not necessarily a family member—someone who may be less susceptible to emotional entanglement and better able to be firm about distributions.

You can use the inheritance to purchase assets and control those assets so they don’t cause damage to the beneficiary.

And finally, if the person is receiving benefits or may need benefits, you can set up a special needs trust where the funds can only be used for certain purposes so they don’t lose benefits they’re receiving due to disability.

Those are the main options when you’re planning an estate and you have a beneficiary who may be addicted to something that can negatively affect their life.

Ben: Great breakdown. Everyone’s situation is different, and that’s why you work with an estate planning attorney who can help you choose the best approach. Reach out at alatsaslawfirm.com to talk through your situation.

Ted, is there one direction that’s used more than the rest?

Ted: Of the trusts we’ve created involving beneficiaries going through this, the milestone-based distribution in increments has been the most commonly used—and probably the most effective.

Cutting someone off completely is very difficult and can create other problems. So that’s probably the most prevalent approach. And if they’re already receiving disability benefits, then a special needs trust is common as well.

Ben: Every family situation is different, and when addiction is part of the picture, estate planning takes on a deeper level of complexity. The goal isn’t to punish or enable—it’s to protect your loved ones and your legacy.

If you’re facing this, reach out at alatsaslawfirm.com or call 718-233-2903. These decisions are tough, but you don’t have to make them alone.

Ted, appreciate your time as always. Stay cool out there.

Ted: You too, Ben. Thanks.

Want more practical guidance on protecting your family, your assets, and your legacy? Explore more episodes of New York’s Asset Protection Round Table and browse the estate planning resources at https://www.alatsaslawfirm.com/reports/new-york-asset-protection-podcast.cfm.

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