Widow owes rejected adopted daughter millions, court says

Here's an interesting story with a happy ending. A wealthy couple from New York adopted a child. The father made a will sharing his $250million estate between his biological and adopted children. A few years after the father died, his widow basically gave the child back, and in fact the child was adopted by someone else.

Eventually it came to light that had the child not been "returned" by the widow, the child would have inherited millions of dollars from her first adoptive father. The new parents sued on behalf of the child and eventually the court ruled that the father intended this adopted child to share in the estate. He couldn't have foreseen that after he died, his wife would try to un-adopt the child.

To read about this story in more detail, click here to see an article from yahoo.com.

This is a really interesting precedent from a legal point of view. Usually the law is pretty clear that when someone is adopted, they are for all legal purposes the child of the adopting parents and are no longer connected to the original parents. If that rule were strictly followed here, it would mean that the child, being adopted by a second couple, would no longer have any entitlement to the estate of her first adoptive parents.

However, I completely agree with the court's findings in these very unusual circumstances. Circumstances changed after the father's death in a way that he could not have foreseen. Dickens himself couldn't have come up with a more heart-wrenching plot.

The potential consequences of adult adoption for inheritance

Have you ever thought about the effect adoption of your siblings or parents would have on your estate plan? Not many people have considered it. And what if your relative was adopted as an adult and not as a child? This article from http://www.verdict.justia.com/ tells the story of what happened when a woman from Virginia died without a will, but her closest living relative had been adopted out of the family at age 53. The article is American so the law cited won't necessarily be the same in Canada, but the underlying concept that adoption changes inheritance rights is the same. It makes interesting reading for anyone with an adopted relative in their extended family. Click here to read the article.

What happens to my child's inheritance if he or she dies before me?

I was asked this question at last week's seminar, and in fact I hear this question regularly. The real or underlying question is whether the child's inheritance will go to the child's spouse. Very few parents want a deceased child's inheritance to go to that child's spouse.

The answer is simple. What happens to the inheritance is what the parent says in the will. If a parent is concerned about the issue, then he or she had better put together a will that addresses it.

The arrangement favoured most often is that a deceased child's inheritance is split equally among his or her children, with the share of any minors being held in trust to a pre-determined age. For example, if William makes a will leaving his estate to his sons Tom and Joe, but Tom dies before his father does, William's will directs what happens with Tom's share. If William likes the most common arrangement, his will will say that Tom's share is to be divided among Tom's children.

From there, a parent such as William needs to clarify a few points. For example, does he want Tom's step-children to be included? What about the illegitimate child that Tom had in high school and currently has only a superficial relationship with?

William may leave some of Tom's share to Tom's wife if he wants to, though as mentioned above, this is fairly unusual. William must consider whether Tom's wife still gets a share if she and Tom were separated at the time Tom died. William also needs to think about whether Tom's wife should be the trustee of the money held in trust for Tom's children, and if not, who would be a good choice for that job.

Some parents choose that if one of their children has passed away before them, grandchildren don't get anything, nor does the spouse of the deceased child. The share of the estate would be given to the parent's other children. Using the family already described in this post as an example, Tom's share would be given to Joe instead. There could also be an arrangement whereby half (or some other portion) is given to Joe with the rest being given to Tom's children.

Another alternative is that a deceased child's share could be given to a charity.

All jurisdictions have laws in place that describe what will happen if a parent dies leaving a share to a child who has already passed away. These laws kick in if the person hasn't left a valid will. There is no guarantee that the legislated arrangement will be the same as what the parent would have chosen.  If the issue is important to the parent, he or she needs to make a will.

Guardianship in blended families

Any parent making a Will is encouraged to appoint someone to become the guardian of the minor children in the event that both parents pass away. This is true of separated or divorced couples, as well as married couples. If one parent dies, the surviving biological parent has the right of custody of the children, so the guardianship appointment is really a back-up in case of both parents should die.

What happens when one of the parents re-marries after a divorce? Let's say that Eloise, mother of Jamie (5) and Sonia (7) has just married again. Eloise's Will is revoked automatically so any guardianship appointment in it is also revoked. The fact that Eloise has remarried doesn't affect the right of Jamie and Sonia's father to be their guardian should Eloise pass away. If Eloise's new husband adopts Jamie and Sonia, then their father's right would be extinguished. However, in most blended families the children are not adopted, largely because the biological parent (in this case the kids' father) won't agree to it.

As Eloise's Will has been revoked, she has to make a new one. She should name a guardian in it to look after the children should she pass away (and her ex had also passed away). Should she name her new husband? When I ask newly remarried parents this question, the answer is usually "not yet". The parent wants the new spouse to be the guardian at some point, but feels that the point hasn't yet arrived. And when does it arrive? Parents are pretty vague about that, but are adamant that the new spouse can't be named as guardian until the children and their new step-parent have had time to forge a strong relationship.

In the meantime, parents say, they'd rather name someone else as guardian. Eloise, for example, could name her sister, brother or close friend. They want to choose someone that their children already know and love.

This of course means that the Will is going to need amendment at some time in the future, but that is a small price to pay for the peace of mind of naming the right guardian.

How does adoption affect the right to inherit?

Many Wills express the testator's wish that his or her estate be shared among his or her children. In some families, it's obvious who is meant by the word "children", while in other families it is less so. In this post I'm going to look at the legal rights of adopted children when a parent - biological or adoptive - passes away.

As with all general rules about what is meant by certain legal words or phrases, remember that if the person's Will says something contrary to the general rule, the Will must be followed.

When an adoptive parent passes away, an adopted child has exactly the same legal status as a biological child born to that parent. When the Will makes a gift to "my children", adopted children will be treated the same as biological children when it comes to inheriting. Every province and territory in Canada has legislation in place that creates that right.

What if the biological parent of a child who has been adopted should pass away? If the biological parent leaves a Will that divides the estate among his or her children, this will not include the child who has been adopted by someone else. According to the law, the child is no longer that person's child, because of the adoption. If the biological parent wanted to leave something to a child who was adopted, he or she could do so by specifically mentioning that child's name in the Will.

It's important to note that when I say "adopted" children, I'm referring to children who have been legally adopted under provincial or territorial law. On occasion, a child will be raised in a family that treats the child as its own, but never formally adopts the child. The child might not know one or both of the biological parents, and may have a strong family bond with the new family. In a case like that, the child is not considered legally adopted. The child is still the child of its biological parents, not the parents who voluntarily raised him or her.

This sometimes creates interesting situations for blended families, and is one of the reasons I always urge the parents of blended families to spend some time with an estate-planning lawyer to make sure their Wills are going to create the outcome they want.

What do people in a second marriage have to consider when making a Will?

Because I get so many questions about second marriages, and because it's so tricky to get estate planning right for individuals in this situation, I thought I'd talk a bit about some of the issues that specifically apply to people in second marriages. I'm not going to cover issues that apply to ALL married individuals, but only those that crop up with second or subsequent marriages.

Firstly, in some provinces, getting married automatically revokes an existing Will. If you made a Will after your divorce to look after your children, that Will was revoked when you re-married.

You'll realize when you start discussing your estate planning that you're going to have to carry out a balancing act between the various people in your life. You owe an obligation of financial support to certain people, including your spouse (married spouses in all provinces, common law spouses only in certain provinces), your minor children, and your children who are adults but who cannot earn a living due to a disability. This gets tricky for people in subsequent marriages because they often have two sets of children - one from each marriage.

I talked a bit more about that balancing act in a post here.

There are some other issues as well. For example, have you adopted your step-children? Typically people going into a second marriage only adopt their step-children if the children are quite young, but that varies. Understand that for the purposes of estate planning, non-adopted step-children have quite a different legal status than adopted step-children. If you don't make a Will at all, or the Will you have made is found to be invalid, this will make a huge difference to their rights.

If you do not make a valid Will, and your estate is to be divided among your spouse and your children, the word "children" here only includes blood or adopted children, and not step-children.

Also consider the beneficiary designations you've made on your life insurance policies and RRSPs. If you bought those items during your previous marriage, they probably designate your ex-spouse as the beneficiary. Perhaps that's what you still want, or what you are obligated to do as a result of your divorce settlement. In that case you don't have to change anything.

Most people, however, want to update their beneficiary designations to name their current spouse or perhaps the children. Do not assume that your divorce decree or your separation agreement changes those designations, because they do not. In some cases (a minority) the divorce or separation paperwork will specifically refer to a certain policy or account and talk about how it's to be dealt with; most do not. The generic wording of releasing all claims against the other's estate does NOT change beneficiary designations. You'll have to do that yourself if you want to change it.

Guardianship of minor children can also be an issue. You may have two sets of minor children who will likely have two different guardians. When you pass away, the children's other biological parent automatically has a right to custody, so you have to word any guardianship appointments for the children of your first marriage properly. I talked more about this in a post here.

For some people, leaving money in trust for the children of a previous marriage is an issue because they don't want their ex-spouse to have access to that money.

Finally, think about how the Dower Act might affect you. Most provinces in Canada have abolished the Dower Act but it's still in effect (for now, at least) in Alberta. This law gives a married (but not common law) spouse a right to live in the matrimonial home until he or she dies, moves out permanently or signs away that right. This can cause complications for someone with a current spouse who is trying to pass on property to children of a previous marriage.

If you are in, or soon to be in, a second (or subsequent) marriage, I strongly urge you to talk to an experienced estate planning lawyer to have an appropriate Will made. It's not a simple document but if properly done it will definitely save money and headaches for the people left behind after you pass away.

answering your question - adoption

Recently a reader left me a question which I haven't posted due to its length, but I still want to give the reader my comments on it. The gist of the question was whether a person's (let's say Frank) child who was legally adopted by another family, gets a share of Frank's estate should Frank die without a Will. Assuming that Frank died after the child was adopted by someone else, then no, the child would not get a share of Frank's estate. The child is considered the child of the adoptive family now and is entitled to a share of the adoptive parents' estates.