Lindsay Shetterly, CIMA®, CES™

Lindsay Shetterly, CIMA®, CES™

Lindsay is a passionate advocate for clients and this quality transcends every aspect of her role as a Principal and a Client Advisor for Glassman Wealth. For the past decade, she has advised high-net worth families and foundations, constantly fine-tuning their investment and financial plans to take advantage of ever-changing opportunities.

For many, the idea of legally adopting another adult sounds like an odd concept.  Under what circumstances could something like that actually make sense?  In reality, there are a variety of scenarios where one might consider adult adoption.  Some cases include if you want to formalize a family relationship or care for someone of diminished capacity; however, the most common reason is to establish inheritance rights as an estate planning strategy.

This article will explain when and why adopting another adult could make sense, and some of the complexities behind it.

What does adult adoption do?

First, it’s important to understand that an adult adoption creates a parent-child relationship, and the adoptee will therefore inherit assets in the same way as if he or she was a natural child.  In most instances, the legal adoption will also sever the ties between the adopted adult and his or her biological family.

Each state has its own legislation regarding adult adoption.  While some states are rather lax, only requiring the voluntary consent of the adult adoptee, others have additional requirements such as the age differential between the adopting party and adoptee, proof of diminished mental capacity, or spousal consent.  As such, before moving forward with the adult adoption process, it is highly recommended that all parties involved seek counsel from both an adoption expert and an estate attorney in the state where they reside in order to fully understand the options and potential ramifications.

Inheritance rights and estate planning

So what are the some of the instances where one might consider an adoption solely from an inheritance perspective?

Let’s say your parents have created a trust which dictates that their assets should be distributed to their two children and their descendants.  You have no heirs but your brother has three children, and the trust is designed to apply your share directly to your brother and his descendants should you pass without a spouse or offspring.  As you do your estate planning, you may desire that your share be disbursed to another individual (a significant other, a close friend, etc.) rather than having it go to your sibling and his children.  If you chose to adopt that other person, you could create a way for a portion of the assets to transfer according to your wishes as opposed to following the default path of the trust.

Clearing up a foggy situation

Another situation where adult adoption may be quite relevant is when you have drafted your will in a way that may seem illogical or unnatural to others.  Once you are gone, there may be multiple individuals who believe they are entitled to a larger portion of your estate, and they may challenge your will.  To protect against this vulnerability during your estate planning, you may choose to adopt an individual during your lifetime, which will effectively move that person to the front of the line for inheritance purposes.

Not for the faint of heart

While the above reasons sound quite logical, do not enter into this type of an arrangement lightly because unlike a marriage, an adoption is very difficult to reverse.  Take time to consider all of the potential problems that could arise, such as:

  • The relationship ends between the adopter and adoptee. Although, the original intention was for the adopted adult to share in an inheritance, your wishes may change.
  • The adopted adult and their own descendants are often no longer entitled to an inheritance from their own biological family, as those legal ties have been severed.
  • Family discord could result, as relatives battle for their own inheritance rights.

If, after seeking expert counsel and weighing the potential pitfalls, adult adoption sounds like the best course of action for inheritance purposes, strongly consider informing your family members about your intentions.  While you are not necessarily required to do this, it may avoid a lot of confusion, hurt, and anger later on.

At Glassman Wealth, we are constantly searching for the most up-to-date and unique strategies to recommend to our clients.  Although this certainly fits into the “unique” category, it could be appropriate in rare situations.

To learn more about the importance of proper estate planning,