February 15, 2013
Authored by: Linsey Glosier and Steve Dawson
It is no secret that when it comes to inheriting money, people have been known to dream up some creative schemes to get rich. Recently, however, an Illinois Appellate Court nixed the idea that marrying a man and persuading him to adopt—at the age of 94—your 50-plus year-old children could be a successful means to that end.
In November, the court in Dixon v. Weitekamp-Diller held that to allow the four adult adoptees, at least one of whom was a grandmother, to inherit under several trusts created to benefit descendants of the settlor would be to give judicial approval to an act of “subterfuge.” Where an adult adoption is undertaken solely to make the adoptee an heir or a beneficiary of a trust, the court ruled, the adoptee will not be permitted to inherit.
At issue in the case were three trusts created by ancestors of William Hughes Diller, Jr. (“Hughes”). Under the terms of each trust, upon the death of Hughes, the trust corpus was to be distributed, in part, to Hughes’ children. If Hughes died without any children, the shares of the trusts for his children would instead be distributed to the children of his two sisters. Hughes had no biological children of his own. At his death, his only purported children were the four daughters of Barbara Weitekamp (“Barbara”), who Hughes married in 2004, when he was 87 years old and she was 71 years old. In 2010, at the age of 94, Hughes adopted Barbara’s daughter Judith, then 55 years old. The next year, he adopted Barbara’s three other daughters, Brenda, Margaret, and Susan, all of whom were also in their 50s. At the time of the latter three adoptions, Hughes was in an assisted living facility. He died just two months after those adoptions were completed.
It is not clear whether the court believed the adoption of four adults at Hughes’ advanced age of 94 was alone sufficient to find that the adoptions were acts of “subterfuge.” However, additional suspicious circumstances detailed by the court appear to have left no doubt on that point. The court describes how, prior to their marriage, Barbara charged Hughes up to $150 an hour to visit him at the hospital after he was injured in a fire, how she thwarted several attempts by Hughes’ family to see him while he was hospitalized in Florida, and how Hughes’ long-time family attorney and other advisors were terminated after voicing suspicions about Barbara’s actions in relation to Hughes’ health and financial dealings. Additionally, just two months after the adoption of Judith by Hughes, Barbara and her daughters sought a court order to establish that Judith’s adoption had eliminated any inheritance rights of Hughes’ sisters’ children under the three trusts. Unsurprisingly, Hughes’ sisters’ children challenged that assertion and this case was born.
Based on those circumstances, the court had no difficulty finding that Hughes adopted Barbara’s daughters “for the sole purpose of making them beneficiaries of the trust.” The court went on to reason that, under Illinois law, when it is clear that the intent of the trust settlor was to have the trust property remain in the family (i.e. because the trust is for the benefit solely of descendants, as was the case here), to allow the adoptees to inherit under the trust would be to thwart the intent of the settlor. Permitting the daughters to inherit would condone the use of the adoption process to commit “subterfuge,” the court concluded. As a result, the adopted daughters were precluded from inheriting from the three trusts, and the trust property was instead divided among the children of Hughes’ two sisters.
The rule of law articulated in Dixon applies only to wills and trusts executed prior to 1998. The law applicable to wills and trusts executed on or after January 1, 1998 is virtually the same but has been codified as a part of the Illinois Probate Act. Under the Probate Act, a person who is adopted after turning 18 and who never lived with the adopting parent(s) before his or her 18th birthday can inherit from the adopting parent, but cannot inherit from the kin of the adopting parent.
Although in some instances, as in Dixon, the motivation for adopting an adult is to make that adoptee an heir, or even to prevent some other family member from inheriting, adult adoptions also occur because the adoptee is genuinely viewed as a member of the family. In the former case, most people likely would not want the adoptee to inherit their money, but in the latter case, many people would want the adoptee to be treated the same as any other child. The problem is that the law as to the inheritance rights of adult adoptees varies from state to state, and usually treats all adult adoptees the same, regardless of the motivation behind the adoption.
The best way to avoid uncertainty as to your desires, and, ultimately, to avoid a potential protracted legal battle, is to define what categories of people you want to benefit under your trust or will. If your trust, for example, is for the benefit of your “descendants,” make sure the trust defines whether an adult adopted by your children, grandchildren, etc. will be treated as their child under the terms of your trust. You can even exclude an adult adopted after a certain age—21, for instance—but not an adult adopted at a younger age. Also, if there is a particular adult adoptee that you do want to be treated as a beneficiary, be sure to name that person specifically in the trust. Keep in mind that after you are gone, a trustee, personal representative, or court attempting to interpret your will or trust does not know what you intended unless it was written in the document.