Insight on Estate Planning - June/July 2013: Estate planning for adopted children and stepchildren

If you have adopted children or unadopted stepchildren, estate planning is critical to ensure that your property is distributed the way you desire. If you’re unmarried and in a long-term relationship with someone who has biological or adopted children, planning may be particularly important.

Adopted children

Adopted children are placed on an equal footing with biological children in most situations for estate planning purposes. Thus, adopted and biological children are treated the same way under a state’s intestate succession laws, which control who inherits property in the absence of a will.

In addition, adopted children generally are treated identically to biological children for purposes of wills or trusts that provide for gifts or distributions to a class of persons, such as “children,” “grandchildren” or “lineal descendants” — even if the child was adopted after the will or trust was executed.

Stepchildren

Stepchildren generally don’t have any inheritance rights with respect to their parents’ new spouses unless the spouse legally adopts them. If you have stepchildren and want them to share in your estate, you should either adopt them or amend your estate plan to provide for them expressly.

Of course, estate planning isn’t the only reason to adopt stepchildren. Adoption also gives you all of the legal rights of a parent during your life.

Before you adopt stepchildren, however, you and your spouse should consider the potential effect on their ability to inherit from (or through) their other biological parent’s relatives. In most states, when a child is adopted by a stepparent, the adoption decree severs the parent-child relationship with the other biological parent and his or her family.

That means the child can’t inherit from that biological parent’s branch of the family — and vice versa — through intestate succession. For example, if Tina is adopted by her stepfather, Mark, the adoption would terminate Tina’s intestate succession rights with respect to her biological father, Ed, and consequently, Ed’s family.

Most states provide an exception for certain “family realignments.” From the previous example, let’s suppose that Ed is deceased. Mark’s adoption of Tina wouldn’t sever the connection to Ed’s family. If, for example, Ed’s sister Emily dies intestate, Tina will be included in the class of heirs. In a state that doesn’t recognize a family realignment exception, however, Tina won’t be considered Emily’s heir.

If you wish to exclude stepchildren from your estate, in most cases it’s sufficient to do nothing. But some states permit stepchildren to inherit through intestate succession under certain circumstances.

And a handful of courts have invoked a doctrine of “equitable adoption.” Under this doctrine, if a deceased person has raised a child as his or her own but hasn’t legally adopted the child, a court may permit the child to inherit to prevent an “injustice.”

Second-parent adoptions

A growing minority of states now permit second-parent adoptions, in which an unmarried person adopts his or her partner’s biological or adopted children without terminating the partner’s parental rights.

Some of these states permit same-sex couples to perform second-parent adoptions, while some do not. And even in states that recognize second-parent adoptions, their intestate succession laws may not provide for a child to inherit from the “second parent.”

For unmarried couples who can’t obtain a second-parent adoption, or choose not to, estate planning is especially critical — if they want the “nonparent” to have custody of the child should the “parent” die or become incapacitated and if the nonparent wants the child to inherit from him or her.

First, the parent should consider using a power of attorney for parental authority and appointing the nonparent as a guardian to ensure that he or she can act on the child’s behalf and has priority over the parent’s blood relatives in the event the parent dies or becomes incapacitated.

Second, both partners should amend their wills. The parent’s will should name his or her partner as the child’s guardian, and the nonparent’s will should spell out any property to be inherited by the child.

Have a plan

To ensure your desired treatment of adopted children or unadopted stepchildren, the best strategy is for you and your spouse or partner to spell out your wishes in wills, trusts and other estate planning documents. As with most estate planning issues, relying on the laws of intestate succession can lead to unwelcome surprises.