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    TRUSTS & ESTATES: Creation of Beneficial Interests Through Adult Adoption

    Posted by Gale Burns on Mon, Jan 28, 2013 @ 12:01 PM

    The Lawletter Vol 37 No 11

    Matt McDavitt, Senior Attorney, National Legal Research Group

    The situation occasionally arises wherein one or more parties interested in a decedent's estate or trust challenge the right of certain other beneficiaries to take via the will or trust on the ground that these other beneficiaries were allegedly recently adopted through adult adoption for the express purpose of creating a beneficial interest in the estate or trust.  Two recent opinions reveal the factors reviewing courts examine to resolve such claims, which, if proven true, would amount to fraudulent interference with a gift or inheritance.

    In Otto v. Gore, 45 A.3d 120 (Del. Super. Ct. 2012), for instance, a woman with three children from her former marriage adopted her 65-year-old ex-husband as her fourth "child."  This adult adoption potentially created an interest in the ex-husband in a family trust created by the woman's parents, a trust granting shares to the settlors' "grandchildren."  The court observed, however, that an ambiguity existed in the trust instrument because, while the descriptor "children" was defined as including adopted children, no such definition was included regarding "grandchildren," so extrinsic evidence was properly examined to determine whether the settlors intended adult adoptees to take.  To find this intent regarding the adoption of grandchildren, the court referenced a letter sent by the settlors to their drafting attorney, which the court interpreted as indicating settlor intent that the class of grandchildren was to include solely minors who had a parent-child relationship with their parents.

    The Otto court concluded that the adult adoption at issue had been effectuated specifically to create an interest in the trust and that, as this intention would have thwarted the settlors' intent to benefit only minor grandchildren in a true parent-child relationship, equity would intervene to prevent the ex-husband's taking under the trust, despite the fact that the adoption complied with state law.

    A contrary result was reached in In re Estate of Fenton, 901 A.2d 455 (N.J. Super. Ct. App. Div. 2006).  Whereas the court in Otto examined the timing and impact of the adult adoption to determine whether an ulterior motive demanded that equity prevent that adoption from creating a beneficial interest in the subject trust, the court in Fenton refused to speculate regarding the motives of the adoptive child and/or parent, instead relying on the adoptive mother's own statements in court indicating that she had effectuated the adoption of her 37-year-old second cousin in order to create a close family.

    The Fenton court noted that the adoption was valid under the applicable state law and that the adoption statutes do not demand inquiry as to the purpose of the adoption.  The adult adoption in Fenton created $30,000 in annual income in the adoptee for life.  The court noted that the plaintiffs had failed to offer evidence of an ulterior motive, aside from the circumstantial evidence that the adoption created a substantial interest in the trust, although evidence was developed indicating that the adoptive mother had, prior to the adoption, specifically written to the trustee to see if the adoption would create an interest in her new daughter.

    In the end, the Fenton court concluded that the trust language creating the class of beneficiaries expressly included adopted children, so there was no conflict between settlor intent and the outcome at hand.  The plaintiffs in Fenton asked the court to annul the adoption, not interpret the trust to exclude the adult adoptee, but given the court's stated rationale that the trust terms allowed adopted children to take, the result seemingly would not have been different had the plaintiffs requested more appropriate relief.

    Topics: legal research, The Lawletter Vol 37 No 11, Matt McDavitt, estates, beneficial interests through adult adoption, Otto v. Gore, Delware Superior Court, ambiguity in trust instrument required inquiry, In re Estate of Fenton, NJ Superior Court, trust language not ambiguous

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