I’m always curious to see how remote the conclusion of a case involving application of a probate rule is to the legislative intent of the rule at the time of it becomes law. One such case recently surfaced in New England where the court’s application of a Rhode Island intestacy statute resulted in what may be considered an unjust and bizarre result.
In Fleet Nat’l Bank v. Hunt 944 A.2d 846 (R.I. 2008) the court faced the estate administration of Art Hadley, a self-made entrepreneur and successful New England businessman, who died in 1941; survived by his wife, Frances and his two children, Thomas and Sarah.
After Art Hadley’s death, Thomas married Betty, who had two children from prior relationships: Janet Hunt and Lucille Foster. A few years after Frances died, Thomas formally adopted Janet Hunt and Lucille Foster, both of whom were over eighteen years old. In 1993, Thomas died, having no biological children but survived by Betty and his two adopted daughters, Janet Hunt and Lucille Foster.
Art Hadley’s other child, Sarah, died childless and unmarried on January 3, 2002. Her death triggered the distribution of two Hadley trusts. At the time of her death, Art Hadley had no surviving children, or biological grandchildren, or biological issue. However, Thomas’s two adopted daughters, Janet Hunt and Lucille Foster, were living.
The Living Trust
As part of his estate planning Art Hadley established both a living trust and a testamentary trust. The Art Hadley Living Trust established a trust for the benefit of Art Hadley and his wife, Frances. According to the trust’s terms, upon Frances’ death, the trust income was to be paid, in the trustees’ discretion, for the benefit of Art Hadley’s two children, Thomas and Sarah, and upon the death of the last survivor of Art Hadley’s children or his wife, the trust would terminate and the corpus would be distributed in fee simple to the children and issue then living of his two children, in equal shares per stirpes. If, however, Thomas or Sarah left no surviving issue, the trust contained a failure provision. That provision instructed:
“In case of the total failure of all of the trusts hereinbefore provided for with respect to the final disposition of the principal of the trust estate or any shares thereof, the Trustee shall transfer, convey and pay over the then principal of the trust estate, or such shares, as the case may be, discharged of these trusts, to and among those persons who would then be entitled to the personal estate of the Settlor under the laws of said State of Rhode Island had he then died intestate, a domiciled inhabitant of said State, according to the statutes of distribution then in force in said State, and in the shares and proportions provided by said statutes.”
The Testamentary Trust
The Art Hadley Testamentary Trust provided that upon the death of the survivor of Art Hadley and his wife, Frances, the trust was to continue for the benefit of his children, Thomas and Sarah. The trust was to terminate upon the death of the last survivor of his children, at which time the corpus was to be distributed in fee simple to the children and issue then living of his two children, in equal shares per stirpes. The Testamentary Trust did not contain a failure provision.
The successor trustee of both the Living and Testamentary Trusts, Fleet Bank, was uncertain what to do with regard to distribution of the trusts and the adult adoptions of Janet Hunt and Lucille Foster by Thomas. The probate court ruled that the two adopted adult daughters stood to inherit under the failure provision of the Living Trust. With respect to the Testamentary Trust, however, the probate court ruled that Janet Hunt and Lucille Foster were not lawfully the “issue” of Thomas and were, therefore, not entitled to the amount specifically designated for Thomas issue under the trust.
Get in Line
A long line of distant relatives who would have taken under the intestacy laws appealed the decision and the case worked its way through the court system to the Supreme Court of Rhode Island. That Court first examined the Living Trust language and observed that it provided for the final distribution of the trust estate to the living “issue” of Art Hadley’s two children, Thomas and Sarah, but didn’t define “issue.” Next, the Court looked to Black’s Law Dictionary which defines issue as “lineal descendants; offspring.” Thus, because neither Thomas nor Sarah had any biological children, the only individuals who potentially could qualify as “issue” were Thomas adopted adult daughters, Janet Hunt and Lucille Foster.
The Court concluded that the legislature intended the term “child” to mean “son or daughter of a parent, regardless of age, and that there was no distinction intended between the inheritance rights of a ‘child’ adopted as a minor and ‘persons’ adopted as adults.” Janet and Lucille could then inherit as adult adopted children of Thomas through the terms of the Living Trust. The Testamentary Trust, however, did not contain a failure clause, and thus the distribution necessitated application of the Rhode Island intestacy statute.
The Court noted that it historically required that heirs be determined at the date of the testator’s death, unless the testator made it clear in the instrument that he or she intended that the heirs be determined at some other time (like the date of the trust’s failure). Under the intestacy law, a gift in an instrument to children or issue of adoptive parents does not include a person over the age of 18 at the time of adoption. Therefore, because the adopted adult daughters were no issue of their parents under the statute, the testamentary trust failed and was distributable to Art Hadley’s survivors at the time of his death: Frances, Thomas, and Sarah. Under the laws of intestacy, one half of Art Hadley’s estate should be distributed to the estate of his spouse, Frances, and the remaining is to be divided equally among the estates of his children, Thomas Hadley and Sarah Hadley.