For years state legislatures and their corresponding court systems have struggled with laws affecting the property rights of illegitimate and adopted children. Laws generally lagged behind public sentiment that increasingly favored including these individuals under intestacy laws and in class gifts under wills and trusts. During the past 20 or so years, there has been a sea change toward more favorable treatment, usually as a result of equal protection constitutional challenges to the old laws. Illegitimate children have ever greater claims to their biological families’ fortunes; adopted children, to their adopted families’ riches.
But there is a flip side to this coin. "Adopted-out" children (that is, children given away for adoption) may or may not have rights to their biological families’ estates. The trend seems to be toward excluding them. At least that’s what happened to a would-be heir to the JELL-O fortune.
New York’s highest court, the N.Y. Court of Appeals, ruled in In the Matter of the Accounting by Fleet Bank, as Trustee of the Trust f/b/o Barbara W. Piel, 2008 WL 656471 (N.Y.), 2008 N.Y. Slip Op. 02082, March 13, 2008, that a direct descendant to the JELL-O fortune, born out-of-wedlock and given away for adoption, is not entitled to a multi-million dollar share of two family trusts. The decision ends a five-year roller-coaster ride for the descendant, Elizabeth McNabb of Longview, Wash., who went from a lower court ruling that she wouldn’t see a penny from the fortune to an appellate ruling entitling her to about $3.5 million to this final ruling leaving her nothing.
Molding a FortuneIn 1889, Orator Francis Woodward purchased the rights to JELL-O gelatin for $450. In 1926 and 1963, his daughter Florence created two irrevocable trusts for the lifetime benefit of her daughter, Barbara Woodward Piel, and upon Barbara’s death, for the benefit of Barbara’s “descendants” and “living “child[ren]”.
Barbara died in July of 2003. In October 2004, Fleet Bank instituted proceedings for judicial settlement of the trusts’ final accounts. The total amount of trust principal at stake was about $9.7 million.
Barbara had three daughters. The first, Elizabeth McNabb, was born out-of-wedlock in 1955—the result of an affair with a married man. Within days of the birth, Barbara relinquished her parental rights and consented to Elizabeth’s adoption by strangers. (There was no evidence presented that the grandmother Florence Woodward knew of Elizabeth’s birth or adoption.) Barbara’s other two daughters, Stobie Piel and Lila Piel-Pullman, were born of her marriage to Michael Piel.
According to news reports about the case, Elizabeth began her quest to locate her birth family in 1974. She finally uncovered her birth mother’s identity, Barbara Woodward of Rochester, New York, in 1988 when she located a copy of her birth certificate. She then telephoned every Woodward in a Rochester telephone book, ultimately locating her mother’s cousin who provided Elizabeth with her mother’s married name. Elizabeth contacted Barbara, and they developed a relationship. After Barbara’s death in 2003, Fleet Bank contacted Elizabeth and requested proof of her relationship with Barbara. But the bank apparently later decided that Elizabeth was not entitled to a share of the trusts benefiting Barbara’s children.
As a result, Fleet Bank included Stobie and Lila in the October 2004 proceedings but failed to include Elizabeth and her children as interested persons.
In November of 2004, Elizabeth requested permission to intervene and object to the accounts because they failed to provide her with a one-third distribution of principal and income. The parties filed cross-motions for summary judgment.
In December of 2005, the trial court held that as a child adopted out shortly after her birth, Elizabeth was not a “descendant” or “child” of her birth mother and was therefore not an intended beneficiary.
In March of 2007, the appellate court reversed based on the fact that the trusts in question were executed prior to a change in the law that eliminated an adopted person’s right to inherit from the biological parents as well as the adoptive parents. This holding effectively gave Elizabeth a $3.5 million share of the two trusts.
A year later, New York’s highest court reversed and held that Elizabeth was not entitled to any share of the two trusts.
In its ruling against Elizabeth, the Court of Appeals cited a 1985 case, Matter of Best that relied upon strong public policy considerations in its conclusion that a non-marital child adopted out of the family by strangers did not presumptively share in a class gift to the biological parent’s descendants under a trust established by the child’s biological grandmother.
The court emphasized the public policy considerations underlying Best of “fully assimilating the adopted child into the adoptive family and . . . the importance of keeping adoption records confidential.”
The court also expressed concern regarding the “lurking possibility” of “secret out-of-wedlock” children compromising the finality of judicial verdicts. Whereas, in this case, Elizabeth proactively intervened in the trustee’s accounting action, in other cases, the family might not know of the adopted child, thereby placing an “onerous” burden on a trustee to search out unknown potential beneficiaries.
The court said its ruling did not depend on Elizabeth’s status as a non-marital child and therefore did not implicate any equal protection concerns. It also said that to side with the appellate court would create two classes of adopted persons: those that could inherit from both biological and adoptive parents because the instrument was executed prior to 1964 when state law changed, and those cut off from the biological family because the instrument was executed after that date.