Estate of Dennery

Citations: 52 Cal. App. 3d 393; 124 Cal. Rptr. 910Docket: 36875

Court: California Court of Appeal; October 22, 1975; California; State Appellate Court

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The Court of Appeals of California addressed the appeal by State Controller Kenneth Cory regarding the inheritance tax classification of Doreen Baumann, the granddaughter of the deceased Zella Dennery. The executor John F. Moran had objected to the classification, which the lower court had sustained, labeling Doreen as a Class A transferee under Revenue and Taxation Code section 13307, based on her status as a lineal descendant. However, the court found that Doreen's adoption by her stepfather before reaching adulthood severed her lineal status as a descendant of Dennery, according to the provisions of the newly enacted Revenue and Taxation Code section 13310.

The case established that adopted children are considered natural children of their adoptive parents and unrelated to their biological parents, unless specific conditions apply for those adopted after age 18. This ruling diverged from the precedent set in Estate of Zook, which allowed adopted grandchildren to retain Class A status unless adopted as adults. The case illustrates the strict construction of inheritance tax classifications in favor of the state, emphasizing the legal distinctions created by adoption and its implications for inheritance tax exemptions.

The Legislature amended sections 13307, 13308, and 13309 of the Revenue and Taxation Code, removing references to adopted children and enacting section 13310, which establishes that an adopted child is considered unrelated to their natural parents and the natural child of the adoptive parent. This change in language indicates an intention to alter previous legal interpretations, specifically severing the status of adopted children from their natural parents. The Controller contends that Doreen, adopted as a child, lost her status as a lineal descendant of the decedent due to this amendment. The executor disputes this, arguing that the changes do not affect testamentary devisees and that Doreen retains her lineal status despite the adoption. However, it is concluded that the legislative amendments intended to abrogate prior rulings, supporting the view that the adopted family wholly replaces the natural family of an adopted child. Consequently, since Doreen was adopted before reaching adulthood, her status as a lineal descendant of the decedent is severed under section 13310. The court's decision aligns with similar interpretations by other jurisdictions, leading to the reversal of the order appealed from.

Revenue and Taxation Code, section 13308 defines 'Class B transferee' as individuals who are either (a) siblings or descendants of siblings of the decedent, or (b) spouses of the decedent's children (wives of sons or husbands of daughters). The term 'descendant' includes adopted or acknowledged children under state law. Section 13309 defines 'Class C transferee' to include (a) siblings of the decedent's parents and (b) descendants of those siblings. 'Class D transferee' is defined in section 13310 as anyone not classified as Class A, B, or C; however, this section was repealed in 1967, reducing the classes of transferees. Section 13307 defines 'Class A transferee' as (a) the decedent's spouses or lineal relatives, (b) individuals who had a parent-like relationship with the decedent for at least ten years prior to the transfer if initiated before the transferee's 15th birthday, and (c) lineal descendants of those individuals. The Cottrell case pertains to deaths that occurred before the 1969 amendment, indicating that section 13310 was not a clarification but a change in the law as argued by the Controller.