From BryanCaveFiduciaryLitigation.com

When it comes to so-called ‘rejected’ adopted children, many of us are most familiar with the outrage in 2010 when a Tennessee woman sent her adopted son back to Russia on a one-way flight after claiming the 7-year-old had bouts of violence.  But what about the inheritance rights of these adopted children?  Do they have any?

We previously looked at the inheritance rights of biological children adopted out of a family.  Today we’ll turn to the inheritance rights of adopted children who are adopted out of a family in the Matter of Svenningsen, a case of first impression in New York.

In 1996, John and Christine Svenningsen adopted a child from China, Emily Fuqui Svenningsen.  The adoption agreement provided that the Svenningsens would not abandon Emily, transfer Emily, or have Emily re-adopted.  The adoption agreement also expressly provided that Emily would be deemed a biological child and have the right to inherit the estate of John and Christine.  At the time they adopted Emily, the Svenningsens had four biological children.  After they applied for Emily’s adoption but before the adoption was finalized, the Svenningsens had one more biological child.

John was a party good magnate who created two irrevocable inter vivos family trusts for his children.  The first trust specifically included adopted children in the definition of “children.”  This 1995 trust was executed before Emily was adopted, but after John and Christine had discussed the “concept of adoption.”

The second trust was created in 1996 and specifically named Emily as a beneficiary of the trust.  In fact, this 1996 trust identified Emily as the sole beneficiary of her separate irrevocable trust created under the 1996 trust, the “Emily Fuqui Svenningsen Trust.”

John also executed a will in 1997 in which his children were provided rights to take in his estate.  In the will, John specifically defined his issue as including all children who have been legally adopted at the date of his death.

John died in 1997.  Christine, his executor, named Emily as one of John’s six children in the petition for probate.

In 2003, however, Christine brought Emily to a boarding school for children with special needs.  A year later, Christine voluntarily terminated her parental rights with the understanding that Emily would be adopted by the Assistant Executive Director of Emily’s school and her husband.  During Emily’s second adoption proceedings, the terms of John’s will and his trusts were not disclosed to Emily’s new adoptive parents.

Emily’s new adoptive parents found out that John had arranged for funds to pay for Emily’s educational and medical needs.  Christine tried to get the new parents to consent to separate Emily’s interests in John’s estate from John’s biological children through the creation of a spray trust.  Christine provided an estimate of Emily’s interests in the 1995 and 1996 trusts, which she alleged was $842,397.  But when the new parents examined surrogate’s court files, they found that, according to the federal estate tax return, John’s estate was worth more than $250 million.

The new parents filed a petition for accounting relating to the trusts.  In addition to claiming that the new parents lacked standing to compel an accounting, Christine and the trustee claimed that Emily’s contingent interest in the trusts was terminated upon her second adoption.

The court, however, ruled it didn’t.

The surrogate’s court found that John’s estate plan made clear that he intended to provide equally for each of his children, including adopted children.  Even though Emily wasn’t specifically named in the 1995 trust or the marital trust created under John’s will, Emily had fully assimilated into the family and was held out as a member of the family for years after John’s death.  Thus, Emily’s interests under John’s will and the 1995 trust fully vested subject only to the condition of her survival as provided under those instruments.  Importantly, at the time of John’s death Emily was not adopted-out and there was no reason to believe that after his death his wife would adopt out Emily.

This was a case of first impression under New York law.  While the New York courts and legislature have addressed the inheritance rights of children adopted out by their biological parents, they have never addressed the rights of children who are adopted out by their adoptive parents.  In affirming the surrogate court’s decisions, the appellate court reaffirmed New York’s public policy that adopted children stand equal with biological children within their adoptive families, with all incidental property rights.