‘I was pushed out of her life when she was 18’: My estranged daughter, 29, misuses drugs. Should I leave her my Roth IRA?

I would like to be able to get the full 10 years of growth for the Roth IRA.

Estranged Father

Related: My parents had drug and alcohol addiction. My ailing mother got sober, but now overspends and gambles. She wants to move in. What do I owe her?

Dear Estranged,

There is a vast space between life events and how we respond to them. 

In your case, you have filled that space with something ongoing that will hopefully bring stability to your daughter’s life, and demonstrate what a legacy of kindness, love and thoughtfulness looks like instead of a legacy of vengefulness, bitterness and respite. This is a good idea, and one that you can execute according to your own specifications.

This is a kind and helpful gesture that, I hope, reaffirms for your daughter that you wish to see her safe and healthy and happy, but also have enough money to pay the rent and put food on the table every month. Everything you plan for your daughter can be done, and it’s wise of you to plan now, a decade or more in advance.

The Substance Abuse and Mental Health Services Administration, a branch of the U.S. Department of Health and Human Services, aims to help families dealing with addiction issues. You can call SAMHSA’s National Helpline at 1-800-662-HELP (4357) or TTY: 1-800-487-4889, or text your zip code to 435748 (HELP4U), or use SAMHSA’s Behavioral Health Treatment Services Locator to get help. Read more here.

The right estate planning can ensure that your daughter’s inheritance is secure, which will give you peace of mind now and protect everyone involved. When your Roth IRA is placed in a trust on a designated date, you can instruct the trustee to release an income for your daughter. A trust, unlike a will, avoids probate and court proceedings and, as such, remains private.

Spendthrift trust

“A spendthrift trust is like any other trust except that it contains a spendthrift provision that tells the trustee how to take care of the beneficiary, who is your child with the drug problem,” according to the Law Office of Corey J. Rossi in Tonawanda, N.Y. You would have the power to instruct the trustee how the assets should be distributed to the beneficiary, it adds. 

“For instance, the grantor can stipulate that only a certain amount be distributed [on a] monthly or as-needed basis,” it says. “Another option is to set up contingencies based on the child’s adherence to a drug treatment program. When the child completes each step of the program, the trustee can reward the child with benefits other than cash.”

Choosing an able and trustworthy trustee, and how the funds are distributed, is critical. Will they pay your daughter directly, for instance, or pay for rent, utilities and groceries on their behalf? “It could be a family member, close friend, associate, or even a professional fiduciary,” the law firm notes. “Choosing the latter, however, will add to the expense of managing the trust.” 

Medicaid Asset Protection Trust

And while there is a five-year look-back rule for Medicaid eligibility, you may wish to consult a trust-and-estate lawyer about setting up a Medicaid Asset Protection Trust — an irrevocable income-only trust, which can protect the assets of the Medicaid applicant, as long as this is done before the required five-year look-back period.

To be eligible for Medicaid, a person must have no more than $2,000 in countable assets, which includes bank accounts and investments, and no more than $2,829 a month in income. If you are a Medicaid recipient and receive an inheritance, you must report it to your state Medicaid agency. “Medicaid will view the inheritance either as income and/or assets, depending on when the inheritance was received and how long it has been since receipt,” according to the American Council on Aging (ACA).

Mark Sunshine, an attorney who runs a charity, Sunshine Senior Help, in Boca Raton, Fla., says one way to get around the five-year look-back rule is to transfer the money to a pooled special needs trust run by a charitable organization. “Some pooled special needs trusts are large and run by national philanthropic organizations, foundations, and universities, and others are relatively small,” he says.

Now that you’re here and I have your attention, I have one final suggestion — one that you did not ask for in your letter. Unsolicited advice is, in most cases, a risky proposition, but given that your daughter is now 29 and you are both walking the planet at the same time, perhaps reach out to her and see if she is willing to build some kind of relationship.

Your Roth IRA may be the stepping stone for something wonderful and unexpected.

Related: My dad arrived at my brother’s Holy Communion high on cocaine. He punched the cab driver. Am I liable for his end-of-life care?

The Center for Motivation and Change published this book, “Beyond Addiction: How Science and Kindness Help People Change“ by Carrie Wilkens, Jeff Foote and Ken Carpenter. Robert Meyers, who has been working in the field of addiction for four decades, developed the CRAFT approach to encourage a family member to engage in treatment.

The Moneyist regrets he cannot reply to questions individually.

More columns from Quentin Fottrell:

‘It is hard to watch them buy a Mercedes’: My father left $600K to my stepmother. Her family put the money in a trust. Is my inheritance lost?

‘They are as different as day and night’: My son is upset that his brother got more financial support. Now it’s payback time. What should I do?

‘I want to enjoy the time we have left without going crazy’: I’m 68 and own 6 homes worth $1.8 million. I have $700K in a 401(k). Should I withdraw it?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter. 

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