When one thinks of a “trust fund baby“, images of a lavish lifestyle supported by family wealth probably come to mind. But with the images likely comes the sad realization that such a lifestyle will not be enjoyed be you; either you are born into such wealth or you are not. But is this necessarily true? Could you be adopted into a trust, and with it adopt the lifestyle of a trust fund baby? If a trust has been set up which provides that the beneficiaries of the trust are to be the issue (i.e. children) of a specific individual, if such an individual legally adopts you, would you become a beneficiary of the trust?
In Ontario, the legal status of adopted children is governed by the Child and Family Services Act (the “CFSA“). Section 158(2) of the CFSA provides that, for the purposes of the law, upon an adoption order being granted the adopted child becomes the child of the adoptive parent and ceases to be the child of the person who was his or her parent before the adoption order was granted.
With respect to the question of whether an adopted child gains status under any will or trust, section 158(4) of the CFSA provides:
“In any will or other document made at any time before or after the 1st day of November, 1985, and whether the maker of the will or document is alive on that day or not, a reference to a person or group or class of persons described in terms of relationship by blood or marriage to another person shall be deemed to refer to or include, as the case may be, a person who comes within the description as a result of an adoption, unless the contrary is expressed.” [emphasis added]
Simply put, so long as the will or trust deed does not specifically preclude adopted children from becoming included as part of any class of persons described by relationship by blood or marriage, an adopted child would be treated no differently than a biological child in determining who forms part of such a class. As a result, presuming that the trust in question does not bar adopted children from becoming beneficiaries, should the wealthy individual contemplated in the hypothetical above legally adopt you, you would become a beneficiary of the trust.
Your dreams of living as a trust fund baby may not be over yet. Thank you for reading.
According to a CNBC report, only half of millionaire baby boomers think that it’s important to leave money to their kids. A third of them would rather leave their money to charity rather than their kids.
For example, Warren Buffett has reportedly given 85% of his wealth to charity (the Melinda and Bill Gates Foundation). “My kids were elated when I told them. They knew my views on inherited wealth and shared them. … I believe in equality of opportunity. … They should not inherit my position in society, based on the womb that they were born from.”
One reasons for this given in the article is parents wanting their kids to learn the lessons of struggle and hard work, and the joys of self-earned success. Another reason cited is that parents may not think that their kids can handle a substantial legacy.
Yet another reason parents may not want to leave their kids a lot of money is to avoid having their kids appear in “Rich Kids of Instagram” (twitter: #rkoi). The site, whose by-line is “They have more money than you and this is what they do”, features pictures of young people enjoying, to the extreme, the richer things in life.
As stated by Andrew Carnegie when he wrote on the very topic of passing on an estate in “The Gospel of Wealth” in 1889, “I would as soon leave my son a curse as the almighty dollar.”
Have a great weekend. Spend it wisely.
Paul Trudelle – Click here for more information on Paul Trudelle.