Saturday, December 27, 2008
In the case of In re Ray Ellison Grandchildren Trust, 261 S.W.3d 111 (Tex. App.—San Antonio 2008, pet. denied, rehearing filed), Settlor established a trust for the “descendants” of his children. A dispute arose as to whether descendants included the adopted children of his son who were adopted after reaching adulthood. The trial and appellate courts agreed that these individuals were not within the class of individuals who would qualify as descendants.
The appellate court began its analysis by holding that “descendants” is not an ambiguous term and recognizing that it is well established under Texas law that extrinsic evidence is not admissible when a term is unambiguous. The court also determined that merely because Settlor listed his descendants at the time he created the trust did not act to limit class membership to the listed individuals..
The court then turned its attention to whether adopted adults would be considered heirs under the intestacy statutes as they existed on the date Settlor executed the trust. The court determined that although it was not bound by these statutes, that they provided evidence of the meaning of the term “descendants.” Despite the fact that the statute provided that an adopted adult is the “son or daughter of the adoptive parents for all purposes,” the court held that this did not abrogate the “stranger to the adoption rule” because it lacked similar language contained in the statute governing the adoption of minors which stated that the term “descendant” includes adopted minors. (Note that this statement is in direct contravention of a prior ruling of the Texas Supreme Court in Lehman v. Corpus Christi Nat’l Bank, 668 S.W.2d 687 (Tex. 1984).)
Comment: The court’s opinion is puzzling and appears to distort the law to reach a decision which it thinks is “morally” correct. The settlor used a term, “descendants,” which has a well-established legal meaning and is, as stated by the court, “not an ambiguous term.” Id. at 118. Accordingly, the adopted children are part of the class gift. The court’s strained reading of historical statutes does exactly what the court states consideration of statutes cannot do, that is, to “control or defeat” the plain meaning of the terms of the trust. Id. at 121. However, because of allegations that the adoptions were done merely to give the adopted adults standing to demand an accounting, the court twists the law to exclude the children. The court should not rewrite a trust merely because the settlor did not address the issue of adult adoptions and the court “thinks” the settlor would have excluded them. As the court explained, but then did so nonetheless, “we must not redraft a trust instrument to vary or add provisions ‘under the guise of construction of the language’ of the trust to reach a presumed intent.” Id. at 117.
Dissent: The well-reasoned dissenting opinion of Justice Rebecca Simmons explains that this case is one where “bad facts make bad law” and that a court should not “neglect established precedent and impose [its] own intent” just because the adopted beneficiaries appear unworthy. Id. at 128. Justice Simmons recognized that even under the 1975 statute in effective in 1982, adopted adults were considered children for all purposes.
Moral: When making gifts to classes such as “children,” “grandchildren,” and “descendants,” settlors and testators should indicate whether adopted children are included and if adopted children are included, the age by which they need to be adopted to be included in the class.