Guardians, Drugs, and Embezzlement

A Massachusetts man was appointed guardian of his niece and nephew when their parents died in a car crash in 2009. The man was recently indicted for allegedly stealing approximately $250,000 from their trust fund in the 11 months after he was released from rehab. He pleaded not guilty. 

Three very quick points: 

1. I always recommend that clients designate different individuals to serve as guardian and trustee. 

2.  If different people, the guardian should be able to ascertain if the trustee is stealing from the trust. 

3.  Embezzlers are smart enough to not use stolen funds to buy tangible property, but not smart enough to avoid being caught. Such is the lot of gambling and drug addicts.

Controlling From the Grave?

The WSJ has an article at the intersection of 2012 gifting opportunities and unique trust provisions.  I will repeat that the $5 million gift tax exemption for 2012 affords some people tremendous planning opportunities.  Whether they want to make those gifts with unique strings attached i.e. attending the donor's alma mater, spelling the family name a certain way, or marrying within the faith, is possible (and too controlling - at least in these examples).  

However, I include a clause in trusts for all of my clients that suspends distributions if a beneficiary has a drinking, drug, or gambling problem.  n.b. fantasy football and a bottle of wine with dinner do not rise to that level.