Adult Adoptions: A Method of Manipulating Inheritance Rights


Written on July 28, 2016 – 6:15 am | by Malcolm Burrows

This blog is by Natalie Rouse, Scotiatrust, Scotia Wealth Management.


Imagine this scenario: you are the beneficiary of a trust set up under your Mother’s estate. You are entitled to the net income of the trust during your lifetime, with the residue to your children at your death. You have a partner, but no children. The trust states if you do not have children there is a gift-over to your siblings, but you don’t get along with your siblings.  Your own estate will be modest, so you worry that your partner will not be properly provided for after your death. What do you do?

How about adopting your partner?  Although this option is unlikely to be your first thought, it is a method that has been used over the years, particularly in the United States, as a way to solve certain inheritance problems.

Generally, those adopted are considered to have the same legal rights as your bloodline. As such, in jurisdictions where adult adoptions are legal, adopting your partner (or another individual of your choosing) could effectively manipulate the distribution of trust funds. This could have an effect on a large portion of trusts, as children/issue are typically the primary choice of capital beneficiary. Another situation where this could ensure a certain individual inherits is in the case of an intestacy.

In many jurisdictions, an unmarried couple is not entitled to a division of each other’s property on intestacy. Adopting your partner could ensure that they would inherit (as if they were your child) in case you die without a valid Will. In addition, in some States same-sex marriage is still not legal. With a lack of options available, this strategy could be used as a substitute for marriage to ensure that your partner inherits under an intestacy. It goes without saying that you cannot adopt your legal spouse.

There are potential pitfalls with adult adoption.  Adoptions are incredibly difficult to reverse, and courts will only annul an adoption in very limited circumstances.  If the relationship falls apart, dissolution of the adoption may be impossible and a stranger inherits your family’s wealth.

Adopting another adult also interferes with the testator’s original estate plan. Individuals who were intended to benefit could be cut out. Going back to the example above, let’s say instead your siblings were only set to inherit as capital beneficiaries of the trust on your death (ie they did not receive other funds from your Mother’s estate).  Changing the distribution could completely strike out their interests. This is a situation that is begging for litigation.

The concept of adult adoptions  still has limited validity or application in Canada. With our aging population and the value of the pending wealth transfer, there may be increased interest in changing the flow of inherited funds.

An adult adoption should never be pursued without considering all of the potential consequences.  Seek independent legal advice and speak to an estate lawyer or  estate/financial planner about other options.

 

 

 

 

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Testamentary Capacity and Insane Delusions


Written on July 27, 2016 – 10:12 am | by Dr. Richard Shulman

The criteria for testamentary capacity developed from the case of Banks v Goodfellow (1870)[i] include: …that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties – that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not have been made.

But what exactly is an insane delusion and what causes a person, particularly an older person, to suffer insane delusions? The legal definition of delusion was elaborated by Sedgewick J. in Skinner v. Farquharson (1902)[ii] “… Delusion is insanity where one persistently believes supposed facts (which have no real existence except in his perverted imagination) against all evidence in probability and conducts himself however logically upon the assumption of their existence.”

In more modern times, Justice Cullity’s decision in Banton v. Banton (1998)[iii] provides clarity on understanding the legal view on insane delusions in paragraph [62]: “As the second of these passages indicates, “insane” delusions are not limited to beliefs that are so bizarre that their content, by itself, evidences mental disorder. Such delusions include beliefs whose extreme improbability is apparent only when the surrounding facts are known. These are obviously the more difficult cases. Delusions with respect to the behaviour and attitudes of the deceased’s relatives are relatively common in the reported cases and they often fall into this category. In all cases where delusions of this kind are alleged to exist there will be a question whether the belief should be characterized merely as quite unreasonable, on the one hand, or as something that, in the particular circumstances, no one “in their senses” could believe: Macdonell, Sheard and Hull on Probate Practice (4th ed., by Rodney Hull, Q.C., and Ian Hull, 1996) at pp. 33-34. …

From the clinical psychiatric perspective, the recently released DSM-5[iv] defines delusions (in Schizophrenia Spectrum and Other Psychotic Disorders) as the following: Delusions are fixed beliefs that are not amenable to change in light of conflicting evidence. Delusions are deemed bizarre if they are clearly implausible and not understandable to same-culture peers and do not derive from ordinary life experiences. The distinction between a delusion and a strongly held or over-valued idea is sometimes difficult to make and depends in part on the degree of conviction with which the belief is held despite clear or reasonable contradictory evidence regarding its legitimacy.

In regards to testamentary capacity, the distinction between immoral yet permissible overvalued ideas and delusional beliefs that nullify the will validity can be difficult to define. Delusions and non-delusional beliefs are best conceptualised as a spectrum rather than a dichotomous phenomenon. A person may hold over-valued ideas which are sustained beliefs maintained with less than delusional intensity but potentially capable of poisoning affections if pervasive and persistent. While delusions are usually ‘false’ beliefs (and can often be diagnosed as such by their very implausibility), they are not invariably so, and thus the distinction of being false was dropped from DSM-5. Rather, their hallmark is that they are not arrived at through normal processes of logical thinking, are held on inadequate grounds, are resistant to conflicting evidence, and most importantly are not bendable to reason.[v] That is they are held with absolute 100% probability without even 1% of doubt. Delusions may arise in many forms of mental illness in seniors, most commonly in dementia, including the milder less obvious stage, as well as in delirium, depression, mania and schizophrenia.

However delusions may also occur in people without a recognized major mental illness[vi] [vii] making it quite challenging to evaluate the testator with seemingly unnatural or immoral decisions such as to disinherit a natural beneficiary. Such cases are a cause for consideration for an expert clinical psychiatric contemporaneous evaluation of testamentary capacity regarding the reasoning behind any such unnatural or immoral decisions.

Nevertheless, an expert evaluation may still be limited because of the testator who desires secrecy of the contents of the will until his passing. Clinical assessments in geriatric psychiatry typically require corroborative third-party evidence to provide a thorough and complete assessment. Particularly when there are changes made to bequests to natural beneficiaries, a complete understanding of the reasoning behind such changes may not be apparent without corroborative information from family members and/or beneficiaries, including especially those who are subject to the unnatural decisions and not just the favoured beneficiary who most likely will be the one to accompany the testator to the assessment – but who actually may be the one who has precipitated and/or perpetuated the delusions in the first place in keeping with being the perpetrator of unrecognized undue influence!

[i] Banks v Goodfellow (1870) L.R. 5 QB 549

[ii] Skinner v. Farquharson (1902), 32 S.C.R. 58 (S.C.C.)

[iii] Banton v. Banton, 1998 CanLII 14926 (ON SC),

[iv]. American Psychiatric Association: Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition. Arlington, VA, American Psychiatric Association, 2013. Web. [access date: 1 June 2013]. dsm.psychiatryonline.org.

[v] Bortolotti, L. (2010). Delusions and other irrational beliefs. Oxford University Press.

[vi]Johns, L. C., & Van Os, J. (2001). The continuity of psychotic experiences in the general population. Clinical psychology review, 21(8), 1125-1141.

[vii] Van Os, J., Linscott, R. J., Myin-Germeys, I., Delespaul, P., & Krabbendam, L. (2009). A systematic review and meta-analysis of the psychosis continuum: evidence for a psychosis proneness–persistence–impairment model of psychotic disorder. Psychological medicine, 39(02), 179-195.

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