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In this sharply worded opinion the 3d DCA struck down an order by Miami trial-court Judge Antonio Marin allowing embattled Palm Beach polo tycoon John B. Goodman to adopt his 42-year old girlfriend. The apparent intent behind the adoption was a ploy to qualify the girlfriend for a 1/3 share of a $300 million trust otherwise benefiting Mr. Goodman’s two minor children from a prior marriage. According to the 3d DCA, judge Marin prohibited the minor children’s mother/guardian from intervening in the adoption proceeding “because it would allow for endless intervention by the children to contest the judgment.” What?!

Case Study

Goodman v. Goodman, — So.3d —-, 2013 WL 1222944 (Fla. 3d DCA March 27, 2013)

Thankfully the 3d DCA saw things differently. Not only did the 3d DCA rule mom should have been permitted to intervene, rather than sending the case back to judge Marin, they summarily voided the adoption as a fraud (I’ll explain the fraud ruling in a moment).

Here’s an excerpt from a SunSentinal piece reporting on the 3d DCA’s ruling and the case’s “back-story” entitled Goodman can’t adopt 43-year-old girlfriend, court rules:

Embattled polo mogul John Goodman can’t adopt his 43-year-old girlfriend after all, an appeals court ruled Wednesday.

The adoption would have enabled girlfriend Heather Hutchins to claim a third of a $300 million trust fund established for Goodman’s two children, both younger than 18.

The 49-year-old multimillionaire’s bid to assume parental custody of Hutchins was voided because he didn’t notify his ex-wife Carroll Goodman, the mother of the children, until after the adoption appeals process had passed in January 2012, according to a Third District Court of Appeal ruling. …

It’s the latest episode in the ongoing legal saga surrounding Goodman, who was sentenced to 16 years in connection with the Feb. 12, 2010 death of Scott Patrick Wilson, 23. Goodman’s Bentley ran a stop sign and collided with Wilson’s Hyundai, killing Wilson.

Convicted of DUI/manslaughter in March 2012, Goodman remains on house arrest at his Wellington mansion on a $7 million appellate bond.

Earlier this year, he reached a $46 million settlement in a wrongful death lawsuit brought by Wilson’s parents Lili and William — whose attorneys have said Goodman’s adoption attempt was a brazen bid to shield his assets from the grieving parents.

The Wilsons, divorced since 2007, have been fighting in court over their late son’s ashes. In February, a county court judge denied William Wilson’s request to split up the ashes.

On Wednesday, the appellate court said Goodman’s adoption of Hutchins “constituted a fraud on the court” because he intentionally concealed the adoption from his wife, who was entitled to be made aware of the action because it “directly, immediately, and financially impacted the children.”

“Goodman’s concealment of the adoption proceeding deprived the children of an opportunity to address the trial court and present their objections,” the decision stated.

The adoption of Hutchins was approved in Miami in 2011, but the appeals court decided that because Carroll Goodman wasn’t notified, she had no opportunity to protect her childrens’ financial interests from being encroached upon by Hutchins.

Goodman, who founded the International Polo Club Palm Beach in Wellington, is heir to a multimillion-dollar Texas manufacturing fortune.

So why should trusts and estates lawyers care about adult adoptions?

To make sense of this case you need to keep two basic points in mind. First, many states, including Florida (F.S. 63.042), allow adult adoptions. These laws were primarily intended for situations like a stepparent adopting a stepchild later in life. Second, according to a rule of construction found in our probate code (F.S. 732.608), adoptees are automatically presumed to be descendants of their adoptive parents for inheritance purposes. Bottom line, if a will or trust benefits someone’s “descendants” as a class (i.e., without specifically naming them), that class of beneficiaries is presumed to include adoptees. This rule of construction opens the door to manipulation of multigenerational trusts via adult adoptions.

For example, unable to legally marry in most states, some same-sex couples have used the adult-adoption process to establish inheritance rights for their partners (for example, see Gay Man Adopts His Partner to Avoid Inheritance Tax). I previously wrote here about the last such case to make national headlines; it involved a claim by an adult adoptee to a share of the trust created by Thomas John Watson, Jr., of IBM fame.

Now back to the 3d DCA’s fraud ruling

The adult-adoption order at the center of the 3d DCA’s opinion wasn’t voided on substantive grounds (e.g., it was contrary to the settlor’s intent, or contrary to public policy, or otherwise per se illegal), it was voided for procedural reasons: Mr. Goodman’s intentional lack of notice to interested parties (i.e., the minor children’s mother/guardian). According to the 3d DCA, this intentional deception amounted to fraud upon the court.

Presumably Mr. Goodman knew his ex-wife wasn’t going to stand idly by as he diluted their children’s share of the family trust in favor of his girlfriend. Rather than face this objection head-on and honestly, Mr. Goodman kept the adoption proceeding secret until after the adoption order was entered and no longer subject to appeal. What’s scary about this case (and instructive for litigators) is that this ploy actually worked at the trial-court level?! Even after the trial-court judge was made aware of Mr. Goodman’s deception, he refused to do anything about it. Fortunately the 3d DCA was less willing to put up with this kind of gamesmanship.

[T]he guardian and Carroll were entitled to notice. It is undisputed that neither the guardian nor Carroll received timely notice of the adoption proceeding. Goodman notified them of the adoption proceeding in January 2012, after the period to appeal the Final Judgment of Adult Adoption had expired.[FN1] The adoption converted [Goodman’s girlfriend] into an immediate beneficiary of the trusts and entitled her to one-third of the corpus of the trusts. It hardly could be said that this conversion did not threaten the financial interests of the minor children, whose interests decreased from one-half to one-third. Thus, we hold that . . . the guardian and Carroll were entitled to notice of the adoption proceeding, pursuant to section 63.182(2)(a).

FN1. This lack of notice can only be viewed as none other than an act of concealment, an act which Goodman purposefully instituted to suppress circumstances he knew fully well ought to have been made known to the guardian and Carroll. As we shall discuss further, Goodman committed fraud on the court in doing so. …

The guardian and Carroll correctly pointed out that this lack of notice violated the minor children’s due process rights. We reiterate that Hutchins’ adoption directly, immediately, and financially impacted the children. Goodman’s concealment of the adoption proceeding deprived the children of an opportunity to address the trial court and present their objections. . . .

Furthermore, we determine that the judgment entered in the adoption proceeding is void. This Court previously has stated that “[a] violation of the due process guarantee of notice and an opportunity to be heard renders the judgment void.” . . . This Court also has ruled that the failure to give due process notice and the failure to grant a necessary party’s motion to intervene are defects that can render a judgment void. …

We therefore set aside the Final Judgment of Adult Adoption because Goodman’s deliberate failure to provide notice of the adoption to the guardian and Carroll constituted a fraud on the court. In Florida, a decree of adoption may be set aside based on fraud in the proceedings. . . . Goodman committed extrinsic fraud on the court when he failed to give notice of the adoption to the appellants until after the appeals period had expired. See Richard v. McKesson, 774 So.2d 838, 839 (Fla. 4th DCA 2000) (holding that contingent beneficiary to a trust had standing to challenge the adoption had she known about and was not precluded from collaterally attacking the adoption).

The only other Florida appellate decision involving an adult adoption in the trust context I could find was the 4th DCA opinion cited above by the 3d DCA: Richard v. McKesson, 774 So.2d 838 (Fla. 4th DCA 2000). In that case the adult adoption was also intended to give the adoptee inheritance rights under a pre-existing trust. As in this case, the adult adoption proceeding was kept secret from the pre-existing beneficiary of the trust. As in this case, that adoption order was subject to attack on fraud-upon-the-court grounds.

What about settlor intent?

But what if Mr. Goodman had given his ex-wife notice of the adoption proceeding? Would the result have been the same? Maybe, but not for the same reasons. It seems to me that regardless of whether or not the adoption is valid, the issue of settlor intent remains. At the time of the trust’s creation, was it intended to benefit future adult adoptees? If the answer to that question is NO, then regardless of whether or not the adoption is valid, the adult adoptee gets nothing under the trust. That’s what happened in a DNA case I wrote about here: no matter what the DNA science proved, settlor intent remained the outcome-determinitive question for trust-administration purposes. Same thing for adult adoptions: no matter how legally valid the adoption might be, settlor intent remains the outcome-determinitive question for trust-administration purposes.

Most courts that have addressed the issue in terms of settlor intent have ruled against the adult adoptee. See, e.g., Cross v. Cross, 177 Ill.App.3d 588, 126 Ill.Dec. 801, 532 N.E.2d 486 (1988) (Adoption of adult solely for purpose of making him heir of an ancestor under terms of testamentary instrument known and in existence at time of adoption is act of subterfuge, does great violence to intent and purpose of adoption laws, and should not be permitted.) But sometimes adult adoptees do win these cases. See, e.g., In re Trust Created by Nixon, 277 Neb. 546, 763 N.W.2d 404 (Neb. Apr 10, 2009) (Adult adopted by trust settlor’s daughter was daughter’s child, and thus adoptee became the sole beneficiary of trust upon daughter’s death, under trust document which provided that, upon daughter’s death, the trust was to be divided among her living children, where trust settlor’s will did not specify that the term “children” was to exclude adopted children.)

How would a Florida appellate court rule in this scenario? Who knows. There are no Florida appellate opinions on point.

Lesson learned?

First, the law in Florida is now clear on at least one point in cases involving trusts and adult adoptees: you can’t get these orders in secret, you must provide notice and an opportunity to be heard to all other pre-existing beneficiaries of the trust pursuant to section 63.182(2)(a).

Second, this type of case cries out for a drafting solution at the estate planning phase. Including a simple adoption clause in a client’s will or trust should spare all involved the stress and financial strain inherent to any form of inheritance litigation. Here’s the clause we use in my office, I’m sure there are lots of good alternate clauses floating around out there. Just pick one and use it.

Sample Adoption Clause:

Effect of Adoption. A legally adopted child (and any descendants of that child) will be regarded as a descendant of the adopting parent only if the petition for adoption was filed with the court before the child’s eighteenth birthday. If the legal relationship between a parent and child is terminated by a court while the parent is alive, that child and that child’s descendants will not be regarded as descendants of that parent. If a parent dies and the legal relationship with that deceased parent’s child had not been terminated before that parent’s death, the deceased parent’s child and that child’s descendants will continue to be regarded as descendants of the deceased parent even if the child is later adopted by another person.