What is… the effect of adoption on my estate plan?
This question has arisen a few times recently. Depending upon the circumstances and your role, adoption can be a wonderful and difficult time. No matter your role in an adoption (whether current or past), it likely does affect your planning in important ways.
The primary way adoption affects planning is that the individual adopted legally is no longer considered a member of their prior family and legally is considered a member of their new family. This means that the adopted person is no longer legally a child of their prior parents (or descendant of their prior grandparents, etc.) and is now legally a child of their adoptive parents (and descendants of those parents’ parents, etc.).
If someone does not have a valid Will at the time of their death, their probate estate (all assets in their name at their death that do not pass by operation of law) passes under the applicable intestacy laws. Most states’ intestacy laws leave assets in some way to one’s descendants.
Many people have estate plans that reference leaving assets to “children,” “issue,” and/or “descendants.” Therefore, the adoption may impact these plans by either adding or removing the adopted person from them plan. State laws vary on how they defines these terms. Best practice is to define the term in the document, specifying if adopted individuals are to be included and in many cases adding an age limit for the adoption. There are a few reasons for limiting the age on the adoption. The two most important reasons for most plans are: a) retirement planning purposes (which is less common now that the SECURE Act is in effect) and b) to ensure that only those who grow up as part of the family are included. There are some interesting cases where an adult adoption is done for inheritance purposes, which many want to avoid.
Overall, it is highly important that not only the parents but also other relatives review and possibly update their estate planning following an adoption to ensure that the individuals they wish to include are included.
In a family where a stepparent is adopting a child, it is essential to look at the severing of the tie of the birth parent as well, where applicable. This should be discussed with your family law attorney as well as your estate planning attorney, as there can be a number of results that may or may not be what you want.
There are some cases where the biological parent(s) or other relatives wish to include the adopted individual(s) in their planning still. It is absolutely essential that this be discussed with your estate planning attorney to ensure that the appropriate identifying information is used – as the term “child” will not legally include the adopted person. Many struggle to find the right balance in this, which is a personal choice but one which is informed by the answers from your estate planning attorney.
Sometimes the misunderstandings as to how an adoption affects estate planning, which varies by state, lead to people not taking appropriate steps and thus their planning does not actually follow their wishes. Therefore, the best course of action when there is an adoption in your family, not matter when it occurred, is to speak with your estate planning attorney and be honest about the circumstances.
As a final note, as with all new parents, if you are adopting a minor child, I strongly recommend starting or updating your own estate planning, paying particular attention to the guardianship and conservatorship documents. If you have planning from before you became a parent, it likely does not name a guardian and conservator for your child. Your Will, trust, and other documents may need to be updated to ensure that your child is cared for in the event something happens to you, whether incapacity or death. I work with parents to put the appropriate planning in place, even if they are only able to put some documents in place now, because I know how important this can be from seeing what happens when it is not done. I recommend new parents consult their estate planning attorney to see what their options are based upon state law, the circumstances, and their wishes.