This post was authored by Salvatore M. Capizzi, Dunham's Chief Sales & Marketing Officer. If you have questions concerning today's topic, please call us at (858) 964 - 0500. Hold us to higher standards.

The potential for a child to succumb to substance abuse is a reality that parents face every day. We want to raise independent children to think for themselves and make their way in the world. However, opportunities for substance abuse and addiction are real hazards that exist in their social circle.

Many parents will name children as beneficiaries of their IRAs, but when one of those children has had a substance abuse problem, estate and inheritance planning becomes complex.

Plopping a large sum of taxable dollars in their lap, especially if it is at the wrong time of their addiction, could lead to poor tax choices, squandering of the money, and unknowingly contributing to their harmful lifestyle.

This situation is where an IRA owner can use the DTC IRA Special Situations Trust® from Dunham Trust Company.

This trust is explicitly created for IRAs and allows the IRA owner to set guardrails on how the IRA beneficiary can receive these assets. Working with their financial advisor, the IRA owner can create precise solutions customized for a specific beneficiary.

The IRA owner's financial advisor can help them identify the purpose and function of the trust's creation. They can help clarify the role they want the trust to play in their beneficiary's life and the IRA owner's wishes regarding the care for the beneficiary.

If the child is recovering but relapse remains a fear, or if they are unlikely to recover, the IRA owner can still take care of them through the use of this trust. The trust will provide guardrails for the IRA assets left for the benefit of the child. The IRA owner's wishes and what they want for the child will determine these guardrails.

For instance, trust distributions made for the child's immediate support, plus, at the trustee's discretion, an amount over-and-above the monthly stipend for the child's health, education, maintenance, and support that could improve the child's quality of life, making it more pleasant and gratifying.

If the parents want, Dunham Trust Company can pay certain expenses directly, limiting the amount of money in the child’s control. Dunham Trust Company also works with TrueLink, which acts as a debit card where the trustee will reload amounts of money available to their child and limit where they can use it. TrueLink helps control transaction types and the vendors where they spend money.

Parents can require drug tests before the child receives “pocket money” to encourage good behavior.

The IRA owner can direct the trustee to work proactively with the child’s treatment team, paying for the costs of the rehabilitation facility, services of rehab professionals, the child’s therapists, and the medical care team.

It may provide comfort for parents to place sensible restrictions on a loved one. For a beneficiary affected by substance abuse challenges, providing these guardrails may be the most decisive act of love the IRA owner can give.

With proper planning, it may be possible to encourage responsible use of assets and rehabilitation programs to address addiction.

Planning for Multiple Generations

If you would like to receive more information about how you and your clients may benefit from utilizing the DTC IRA Special Situations Trust®, contact us today. We look forward to talking with you soon.

Financial Advisors: To receive an E-Folder with the DTC IRA Trust Trilogy® White Papers and Case Study Videos, fill out this form.


This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Risk Associated with all three trusts in the DTC IRA Trust Trilogy®:

Current tax environments are subject to change at any time and no one can predict with certainty what Congress or the IRS may do.

Dunham Trust Company does not guarantee the investments in the DTC IRA Trust Trilogy® as investments are subject to risk and market fluctuation, including possible loss of principal. Dunham Trust Company does not guarantee that your investment objectives will be achieved.

Fees Associated with all three trusts in the DTC IRA Trust Trilogy®:

To maintain a DTC IRA Trust Trilogy® you may incur fees and expenses. Generally, there are no administrative fees associated with the DTC IRA Special Situations Trust® and DTC IRA  Charitable Trust® until the IRA owner passes, at which point the trust administration fee schedule published at the time will apply.

However, the fees related to the DTC IRA Replacement Trust® will be subject to the published fee schedule at the time the trust is established.

Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA / SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc. Trust services offered through Dunham Trust Company, an affiliated Nevada Trust Company.