Aug 28

            Two recent decisions in Florida have addressed the issue of adult adoption and how it may affect the laws of inheritance.

             In the case of Goodman v. Goodman, multi-millionaire John Goodman adopted his 42 year old girlfriend in a scheme designed to get her a 1/3 share of his $300 million trust fund in order to protect his assets from collection arising out of wrongful death case in which he was accused of the DUI/Manslaughter death of Patrick Wilson.  During pendency of the Wilson family’s wrongful death case against Goodman, he adopted his girlfriend, Heather Hutchens. By way of background, the trust fund was established by Goodman and his then wife Carroll for the benefit of their two minor children. However, by adopting his girlfriend, Goodman diminished the interests of his two children from 1/2 each to 1/3 each. As a result, Goodman’s former wife filed a lawsuit on behalf of her minor children to void the adoption on the grounds that they did not receive notice of the adoption, and the adoption amounted to a fraud upon the Court.

             This case brought to light potential for the nefarious use of Florida’s adoption laws, which permit adult adoptions, primarily because the probate code considers adoptees as descendants of their adoptive parents for inheritance purposes. In the majority of cases, people adopt for the right reasons, but as this case shows, adoption was used for purposes of greed. While the Court declined to consider any public policy argument against adult adoption for purposes of inheritance, the Court concluded that Goodman’s adoption of his girlfriend was void because Goodman’s conduct was tantamount to a fraud on the Court. The basis for the Court’s ruling was that Goodman intentionally failed to give notice of the adoption to his ex-wife, as guardian of their minor children. In other words, Goodman secretly adopted his girlfriend so that no one would be able to object to the adoption and he could theoretically protect and keep for himself millions of dollars. The adoption, therefore, was found to be void and of no effect.

             In the case of Dennis v. Kline, Thomas Gordon Dennis created a pour-over will that, upon his death, provided that his $15-16 million in assets would be placed in a trust for the benefit of his wife and children. The portion going to the children was called the “Family Portion.” The Family Portion was sub-divided into Family Trust A and Family Trust B. Both Family Trusts provided that Mr. Dennis’ children would receive income installments throughout their lifetime. However, the difference between the sub-trusts lies in a child’s ability to devise his or her interest on their death. 

             Under Family Trust B, the children are provided with a general power to direct the apportioned trust assets following his or her death. By contrast, Family Trust A does not provide for such a power of appointment, thus constraining distribution of the corpus to the Settlor’s (Mr. Dennis) issue.  As a result, under Family Trust A, once one of Mr. Dennis’ children dies, that child’s net trust corpus is divided per stirpes amongst that child’s issue; however, if the child dies without issue, the trust assets disburse “sideways” to Mr. Dennis’ other living children or his deceased children that are survived by issue.

             At the time of his death, Mr. Dennis had five children, including a son, “Tom Jr,” and a daughter, “Dianna.”  Mr. Dennis knew that Tom Jr. was infertile and had adopted an infant child.  Mr. Dennis also knew that Dianna was unable to bear children; however, thirteen years after Mr. Dennis’ death, Dianna adopted a 27 year old woman who was a known companion. If the adult adoption was valid, Dianna’s share under Family Trust A would pass to her adopted adult daughter, but if not, it would pass equally to her four other siblings. 

             Harriet, one of Mr. Dennis’ other daughters, filed an action challenging the adoptee’s status as a beneficiary of the Family Trust. Specifically, Harriett made two arguments against the adult adoption. Her first claim was that the Family Trust should be modified to prohibit adult adoption, and her second claim was that adult adoption for purposes of inheritance was against public policy. 

             As for modifying the Family Trust to eliminate an adoptee as an “issue” of Dianna, Harriet faced a tough battle because the definition of “issue” in the Family Trust included adoptees. Specifically, “issue” was defined as “lineal descendants forever,” with the provision that “words of relationship in any degree include legally adopted persons.”  Harriett tried to distinguish Tom Jr.’s adoption of an infant on the ground that Mr. Dennis knew about that adoption and approved of it, while he did not know about Dianna’s adult adoption, since it occurred after his death.  However, the appellate court found that a trial would be required to determine whether Mr. Dennis intended for an adult adoptee to be included as an “issue” for purposes of the Family Trust.

             The more important issue for estate litigation purposes is whether adult adoption for purposes of inheritance is against public policy.  In concluding that adult adoption for purposes of inheritance was not against public policy, the Court began by recognizing the fact that Florida law expressly permits the adoption of an adult, except in very few circumstances. Unlike in other states, once a valid adoption takes place, Florida law makes no distinction as to the extent to which an adult adoptee may be a beneficiary in probate proceedings, nor does Florida set a line of demarcation as to whether the “policy” favoring adult adoptions extends only to rights specifically identified by statute.  As a result, current Florida law treats adopted persons, whether a minor or an adult, as a biological child of their adoptive parents.

             In sum, there are some important lessons to take from both of these cases:

             1.         You must give notice of an adult adoption, especially if a trust is involved and the adoption will diminish someone’s share under the trust;

             2.         An adult adoption for purposes of inheritance is not, except in unusual circumstances, against public policy;

             3.         Unless your will or trust expressly excludes adult adoptees, you may be headed toward litigation as to whether the settlor “intended” for an adult adoptee to take under the will or trust;

             4.         The settlor of a will or trust should be specific in his or her documents as to whether they intend for adoptees to be regarded as descendants.  This can be accomplished by a separate “adult adoption clause” that clearly states whether or not adult adoptees are to be deemed descendants.