CPA INSIDER

How to help clients dealing with a loved one’s addiction

The financial burdens of addiction can be enormous.
By Taylor Knopf

More American families are struggling with the emotional and economic weight of substance abuse, and CPAs can help them navigate the financial side of these complicated situations.

The Centers for Disease Control and Prevention estimates that the "economic burden" of prescription opioid addiction alone has cost the United States nearly $78.5 billion a year in health care costs, addiction treatment, lost productivity in the workforce, and the extra weight on the criminal justice system. Nearly 750,000 Americans have died from a drug overdose in the last 20 years. Meanwhile, use of illegal stimulants — such as methamphetamine and cocaine — is on the rise as well.

"The financial burdens can be enormous. Addiction can tear up a family," said Mitchell Freedman, CPA/PFS, at MFAC Financial Advisors near Los Angeles.

In fact, a 2018 survey by True Link found 82% of those with a loved one with a substance abuse disorder experience "adverse financial effects" due to their addiction, and 65% said their loved one borrowed or asked them or others for money.

CPAs around the country have seen an increase in clients dealing with addiction issues in their families, and they shared some insight on how to approach this sensitive issue and strategies for assisting clients going through it.

Addressing stigma

The perception around drug use has shifted in recent years. More Americans now view addiction as a health issue, rather than a moral failing or behavior problem. But unfortunately, shame and stigma still follow the disease.

It's an illness, like heart disease or cancer, and needs to be recognized as one, said Leslie Iannucci, CPA/CFF, who runs her own accounting firm near Raleigh, N.C.

"Those who suffer from substance abuse feel shame because they feel inside that they have let their loved ones down," she said. "Shame and guilt play a large role in perpetuating the addiction."

Michael Lewis, a financial adviser with Tutor Financial Advisors LLC in Raleigh, said it's especially difficult for parents, who don't want to admit their child has a substance use problem because they see themselves as failures. And then when they get into financial trouble trying to help their child, they feel like even more of a failure, he said.

Lewis knows from personal experience. His son has a substance use disorder, and the long, arduous path to recovery was filled with emotional and financial challenges for his whole family.

"You need to realize that you're dealing with a family who is very raw and emotional," Lewis said. "You don't want to sugarcoat bad news, but you want to be realistic. As an adviser, you are responsible for the financial well-being of the client."

Freedman finds that his clients can be hesitant to bring up an addiction issue in the family, but a few leading questions can open up the conversation.

"How are the kids doing? Everything going OK? Is there anything else you might want our assistance on?" he asks clients.

Freedman said, "I just sort of prod and poke, because very often there is shame in the family about having a child, grandchild, or spouse with an addiction issue, and they are more likely to keep it in. But if you can find a way to open the door — in more cases than not, the information starts gushing out."

Setting financial boundaries

When advising a client with an addiction issue in the family, CPAs can help clients think about setting financial boundaries and safeguards. People caught in addiction sometimes steal to support their habit or ask their friends and family for money.

Freedman said he advises clients to secure their own belongings and assets when someone close to them struggles with addiction. It might be necessary to change passwords on joint bank accounts or an Amazon account, for example.

After supporting his son financially in different ways for years, Lewis finally got to a point where he stopped giving his son money. After a short rocky patch, Lewis said his relationship with his son improved significantly.

"A problem that I think people run into [is] this notion of providing a level of financial support that's kind of unbounded," Lewis said.

Iannucci said she has seen clients get "pulled into the vortex of manipulation" by a loved one's addiction.

"The clients just want to love them, and they think that by loving them, they need to give them more money," she said. "And it's a vicious cycle."

She suggests that if a client wants to financially assist someone with a substance use disorder, they should not enable them by giving money. Instead, she advises sending rent money directly to the loved one's landlord, for example.

A third party to help distribute funds could also be useful in this scenario as well. Freedman, who works with the affluent elderly and many in the entertainment industry, said he has been the trustee who handled the estates for clients in this position.

When a significant inheritance is involved, Freedman recommends setting up a special trust where somebody else controls the money, provides a stipend for the beneficiary, and designates it for specific purposes. Even when someone is in addiction recovery, an influx of cash can trigger someone to relapse.

The True Link survey found that 77% of people who have a loved one with a substance use disorder are concerned that access to cash could cause them to relapse. 

High cost of treatment

It's difficult for families to decide how much financial support to give their loved one with a substance use disorder. Freedman said his clients often ask him what to do and if they should pay for rehabilitation centers or other types of recovery.

"If you have a child or loved one who continues to relapse, do you risk your retirement?" Freedman said.

The knee-jerk reaction for the family is to send the person dealing with substance abuse to a rehabilitation center as quickly as possible. Local recovery advocacy groups can be a helpful place to start when looking for the program that will be the best fit. The health insurance network Blue Cross Blue Shield has a map with substance abuse treatment resources by state as well. But inpatient treatment centers can cost tens of thousands of dollars, and they're not always effective or covered by health insurance.

These are very personal decisions. And as a CPA/PFS, Freedman said he will not make a value judgment for clients. "But we will offer suggestions as to how they may do things, and what the impact of those decisions might be to the family," he said.

Lewis said one of the biggest mistakes someone can make is to push their loved one into rehab without considering the cost or whether the person is ready and wants to go.

"With respect to recovery, if someone is not ready to receive treatment, you can put them in the best program in the country and he's going to come out the way he came in," Lewis said.

Iannucci has also attempted to help a loved one with a substance use disorder and knows how overwhelming it can be.

"They need to put the oxygen mask on themselves first before they can help their loved one," Iannucci said.

She said clients, especially parents, will give every dollar they have in the name of doing the "right thing" for their loved one. But there's a fine line between helping someone you love and hurting yourself, according to Iannucci.

Grandparents becoming parents again

At his firm in eastern Kentucky, Geoffrey Griffith, CPA/ABV/CFF, CGMA, said he's seen a significant increase in elderly clients who have become the sole caregivers for their grandchildren due to addiction issues in the family.

Financial challenges can arise because these clients didn't figure the costs of raising young children into their retirement budgets. He said many have to balance higher withdrawals from retirement accounts with maintaining proper tax withholding so they don't face an unmanageable tax burden at the end of the year.

Griffith lives in a rural area just miles from the Ohio and West Virginia borders. The Appalachian states were hit particularly hard by the opioid crisis. Griffith said the increase in drug use coincided with the high unemployment rates in the area as coal and steel manufacturing plants closed.

"Once the jobs went away, it seemed the addiction problem increased dramatically," he said.

At his firm, Griffith said his team helps their older clients who are raising children again find ways to maintain a budget and prevent them from draining their retirement savings.

He advises them to connect with the school system and other community resources to find out what services might be available to relieve some of the financial burden of their new dependents. For example, do they qualify for the free lunch program at school? In states that have expanded Medicaid eligibility, such as Kentucky, he said there are some newly available insurance options for these clients' children. A child may also qualify for the Children's Health Insurance Program in states without expanded Medicaid eligibility.

Because addiction is a life-consuming problem, the financial aspect is just one piece that needs to be addressed. Griffith said he takes a team approach by looping other professional advisers into the conversation.

Maybe a client is working with an attorney to adjust their will and estate in light of the new changes. Or they might have a financial broker they work with. He initiates the team approach through a conference call with the relevant participants and then a follow-up email chain.

"Let's get the team together to make sure everybody is giving advice in conjunction for the greatest good," Griffith said. "I think it's probably too broad of an issue for one person to take the full lead on."

As clients struggle under the weight addiction brings into a family, CPAs are well positioned to walk them through their financial options amidst these new challenges.

Taylor Knopf is a freelance writer based in North Carolina. To comment on this article or to suggest an idea for another article, contact Chris Baysden, a JofA associate director, at Chris.Baysden@aicpa-cima.com.

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