Great-granddaughter adopted out of the family eligible for family trust
Creating a trust is one way to ensure that your assets are transferred to your family or other loved ones after your death. Trusts can help an individual control how his or her assets are handled, as well as offer tax benefits in some circumstances.
Trusts must be skillfully drafted, to ensure that many unexpected family situations are accounted for properly. For example, what if a descendent potentially eligible for assets is adopted by another family due to a remarriage?
The New York Surrogate’s Court of Erie County discussed this scenario in the case of Manufacturers and Traders Trust Co. v. Wilding.
An adoption by a step-father after a divorce
The testators in this case-the people who created the trust-were a husband and wife. The wife had passed away in 2002, and the husband in 2004. Each of the couple’s wills created a credit shelter trust and a residuary trust upon their death. Once both spouses had passed, the trusts were to be divided into two equal parts between their son and daughter.
One provision of the trust directed that both the children and their “issue”-their own children, in turn-could receive assets from the trust for reasons such as their health, support, comfort, welfare and education. The son of the deceased couple also had a son. That grandson of the deceased couple had three children, each from a different marriage.
One of those children-a great-granddaughter of the deceased couple-had been adopted by a stepfather, following her mother’s remarriage. Thus, the question arose, was the great-granddaughter still eligible to receive assets from the trust after she was “adopted out” of her deceased great-grandparents family?
Was she still “issue” after the adoption?
The question for the New York Surrogate’s Court of Erie County was whether the great-granddaughter still qualified as “issue” under the trust.
The New York Domestic Relations Law provides that the rights of an adoptive child to inheritance terminates upon an adoption, although there are exceptions. Fortunately, one of those exceptions applied when an inheritance “vested”-this is, had taken effect-prior to the adoption, regardless of when the adoption occurred.
Here, the great-granddaughter was born in 1997, while her great-grandparents died in 2002 and 2004, respectively. As a result, the great-granddaughter was a member of the class or “issue” described at the inception of the trusts because she was not adopted out until 2005.
Therefore, her right to receive discretionary distributions from the trusts was vested, at the latest, on the date of her great-grandfather’s death in 2004. She was entitled to this, notwithstanding her later adoption out of the family in December of 2005.
Guiding you through the process of estate planning
Whether you are having a will or a trust prepared, it is important that you hire an attorney experienced in estate planning who can take into account all your personal considerations, as well as the many contingencies that can arise in a family as situations change over the years. Seek an attorney who can explain the procedures involved in estate planning and successfully guide you through every step of the process.