Saturday, April 01, 2017

Discretionary Trust Beneficiary Had No Standing to Challenge Adoption [Florida]

Since many estates and trusts define beneficiaries by description (e.g., “child” or “lineal descendant”) and it is a natural propensity for persons to gift or leave property to lineal descendants, the adoption of an individual can have a major impact on who benefits under a last will or a trust. Well drafted wills and trusts will typically contain provisions regarding adopting - such as whether an adopted person should be treated as a child or lineal descendant, and perhaps excluding persons who are adopted over a certain age from coming into those classes (so as minimize the risk of adoption being intentionally used to upset a dispositive scheme).

Ryan was a beneficiary of a trust established by his great-grandparents. His interest was discretionary only - distributions to him as a descendant were to be made only at the sole discretion of the trustees.

Ryan’s father adopted Brindley in 2004. This had the effect of making Brindley a beneficiary of the trust. When he was adopted, no notice was provided to Ryan. Ryan did not learn of the adoption until later, and in 2014 sought to challenge it, alleging fraud on the court because he did not receive notice and the opportunity to challenge it. After his adoption, Brindley received thousands of dollars from the trust as a beneficiary.

Under Stefanos v. Rivera-Berrios, 673 So.2d 12 (Fla. 1996) and the Florida Adoption Act, a person must show a direct, financial, and immediate interest in an adoption to be entitled to notice, or to have legal standing to vacate an adoption order. Applying this standard, the trial court ruled in favor of Ryan in allowing him to challenge the adoption order.

The 1st DCA reversed the trial court. Because Ryan’s interest as a beneficiary was only “contingent” since subject to the discretion of the trustee, Ryan was found not to possess a direct, financial and immediate interest in the trusts and thus in the adoption. Presumably, if Ryan’s interest was based on an ascertainable standard or provided for mandatory distributions that could be diluted by the addition of a new beneficiary, the Court would have ruled differently.

The Court distinguished Rickard v. McKesson, 774 So.2d 838 (Fla. 4th DCA 2000) from this case. In that case a contingent beneficiary of a trust was entitled to notice of an adoption proceeding because the adoption would divest the beneficiary of her interest in the trust. Since the adoption here would not result in divestment, Rickard did not mandate notice under the current facts, at least according to the 1st DCA.

Edwards and Kuiper v. Maxwell, 42 Fla.L.Weekly D742a (1st DCA, March 31, 2017)
Post a Comment