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Judges split in adopted trust-beneficiaries matter

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In an issue of first impression regarding the retroactivity of a 2003 amendment to the state’s trust code, the Indiana Court of Appeals was divided on whether adopted children should have been included as beneficiaries of a trust.

Alex L. Taggart Jr. executed an irrevocable inter vivos trust in 1953, in which JPMorgan Chase Bank is now the trustee. When he created the trust, the entire income of the trust was to go to his son Henry Taggart, and upon Henry’s death, one-third would go to Henry’s widow with the rest divided equally among Henry's “surviving children.” At the time the trust was created, Henry wasn’t married and didn’t have any children.

Also in effect then was the stranger to the adoption rule, in which there’s a presumption a person doesn’t include adopted children in the provision in his will for a child or children of someone other than himself unless there is something in the will to rebut that presumption.

Henry later married and adopted two children, Gregory and Maria. He then divorced and had natural children Linda, Bonnie, and Brenda, by another marriage. Alex died in 1972 and Henry died in 2008. Henry’s second wife and five children survive him.

At issue in Bonnie E. Taggart Paloutzian and Linda M. Taggart v. Gregory A. Taggart and Belle Delint-Eaglesfield, No. 49A02-0908-CV-812, is whether the adopted children Gregory and Maria, now Belle Delinit-Eaglesfield, should be included as beneficiaries of the trust.

The trial court found the adopted children should be included because Indiana Code Section 30-4-2.1-2 can be applied retroactively. This 2003 amendment to the trust code abrogated the stranger to the adoption rule and placed adopted children on equal footing with natural children. It contains a retroactivity provision to apply to all trusts created prior to Sept. 2, 1971, unless doing so would adversely affect a right given to a beneficiary, give a right to any beneficiary he wasn’t intended to have when the trust was created, and other reasons not at issue in this appeal.

The natural children claimed application of the 2003 amendment adversely affects their rights and gives a right to the adopted children when they shouldn’t have one.

The majority applied the amendment to the date it went into effect in 2003 because that’s the day the adopted children received an interest in the trust. At that time, Henry was still alive and it was unknown who the surviving children would be. Therefore, the natural children couldn’t have been adversely affected by the retroactive application, wrote Judge Nancy Vaidik.

Also, there’s no evidence that Alex intended to include or exclude the adopted children based on the wording of the trust, and the natural children didn’t prove that Alex wanted to exclude any adopted children.

But because at the time the trust was executed, the stranger to the adoption rule was in effect, the court should have assumed that Alex knew of it and intended only natural children to be beneficiaries, wrote Judge Terry Crone in his dissent.

He also found the inclusion of any adopted children in 2003 adversely affected the rights of natural children from that time forward and only the extent of the adverse affect was unknown until Henry’s death.
 

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