Bird Anderson v. BNY
Mellon, N.A., No. SJC-11122 (Mass. Aug. 28, 2012)
Author:
Heidi A. Seely, Esq. – Pratt, Bator & Popov, LLP
In Bird Anderson v.
BNY Mellon, N.A., the Massachusetts Supreme Judicial Court held that the
2009 Amendment to G.L. c. 210, § 8 including adopted children in the definition
of “child” under trusts and wills cannot be applied retroactively to instruments
executed prior to 1958.
Facts: In
1941, Anna Child Bird (“Anna”) executed a will and testamentary trust for the
benefit of her son and issue (“ACB Trust”).
At the time the will was executed, G.L. c 210, § 8 (“Section 8”)
provided that, subject to clear intent to the contrary, adopted children were
excluded from the definition of “child” in testamentary instruments. In 1958, Section 8 was amended to provide
that the term “child” would include adopted children in all such instruments
executed thereafter (“1958 Amendment”). In
2009, Section 8 was further amended to provide that the word “child” would
include adopted children in all testamentary instruments, regardless of when
such instrument was executed (“2009 Amendment”).
Under the ACB Trust, the income of the trust is distributed
to Anna’s issue and, upon termination, all trust principal will be distributed
to Anna’s issue by right of representation.
Plaintiff Rachel Bird Anderson (“Rachel”), is Anna’s great-granddaughter. In 2007, Rachel began receiving a portion of
the income of the trust. Rachel’s two
adopted brothers, Marten and Matthew, did not receive income from the ACB Trust.
The Trust fell under the pre-1958 rule stating that adopted children were
excluded from the definition of “child” and, therefore, they were ineligible as
beneficiaries.
In 1981, Julia Bird (grandmother of Rachel, Marten and
Matthew), established a charitable lead trust.
Upon termination, the trust principal was distributed to Marten, Matthew
and Julia’s great-grandchildren, specifically including the children of Marten
and Matthew. Rachel was not a
beneficiary of this trust.
On July 19, 2010, the Trustees gave notice that in light of
the 2009 Amendment, Rachel’s adopted brothers, Marten and Matthew, were now
considered Anna’s “issue” for purposes of the ACB Trust and, therefore,
qualified as beneficiaries.
Analysis: The Court
dismissed arguments regarding the legislative history of the 2009 Amendment and
whether Section 8 is an evidentiary rule raising no constitutional concerns
when applied retroactively. The Court
focused its analysis on whether retroactive application of the 2009 Amendment
to pre-1958 trusts is unreasonable and therefore, unconstitutional.
The Court first considered the public interest of equalizing
the inheritance rights of adopted and biological beneficiaries motivating the
2009 Amendment. The Court questioned
whether that interest was reasonably served by the statute due to the fifty-two
year gap between the passage of the 1958 Amendment and the 2009 Amendment. This gap allowed grantors and testators time
to make compensatory plans to equalize their estates between adopted and
biological beneficiaries. The Court
inferred that such deliberate equalization prompted Julia Bird to establish the
charitable lead trust for the benefit of Marten and Matthew while specifically
excluding Rachel. The Court concluded
the 2009 Amendment only weakly served the public interest it sought to protect.
The Court then evaluated the nature of the rights
affected. As plaintiff, Rachel was
required to show she has a substantial, vested interest which was significantly
harmed by the retroactive application of the 2009 Amendment. In determining Rachel’s right as a
beneficiary, the Court followed the reasoning of Billings v. Fowler, 361 Mass. 230 (1972) and measured “the
likelihood that the person claiming a vested right will eventually come to
enjoy that right.” Where there is a
substantial likelihood of enjoyment, the Court considered the right vested even
if it could be defeated or diminished by biological events. Here, the Court found Rachel had a vested
interest in the ACB Trust even though it could be diminished by the birth of
siblings or destroyed by death. The
Court concluded that the retroactive application of the 2009 Amendment would
significantly harm Rachel’s vested interest in the ACB Trust by reducing her
share from 50% to 16 2/3% of the income and principal of the trust.
In addition to the vested interests of the beneficiaries of
the ACB Trust, the Court explored the rights of all testators, settlors and
grantors who had relied on the law in effect at the time they executed testamentary
instruments. The court reasoned it was
likely most testators and grantors are advised by council regarding current law
when executing such instruments. Retroactively changing any rule of
construction affecting property rights would significantly impact the rights of
such testators and grantors to rely on the law then in existence when creating
their estate plans.
Finally, the Court balanced the public benefit and the
significant harm to Rachel’s vested interest in the ACB Trust and the presumptive
reliance interests of Anna and Julia as testators due to the retroactive
application of the 2009 Amendment. The Court
acknowledged the goal of ensuring equality between biological and adopted
children, but found that the 2009 Amendment caused significant harm to Rachel,
Anna and Julia’s substantial rights and was therefore unreasonable.
The Court made two significant final points. First, the Court recognized that other states
have decided this issue differently, but pointed out that this case is in line
with Massachusetts common law. The Court indicated that the other Courts had
given insufficient weight to the substantiality of the interests held by
current beneficiaries and ignored the “bedrock principal” that a testator is
entitled to rely on the state of law at the time of execution of a testamentary
instrument. Second, the Court clarified
that given the uncertainty of the law caused by the 2009 Amendment, any Trustees
who either made distributions or declined to make distributions to adopted
beneficiaries in reliance on the 2009 Amendment had not abused their discretion
or acted in a manner inconsistent with their responsibilities as Trustees.
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