Q: Are stepchildren automatically included in a stepparent's estate?

Does being raised by a stepparent make a difference? What happens if the child is adopted? If the adopted child inherits from the birth parent, will there be inheritance tax?

A: This reader's questions touch on several different issues. It's important to understand that stepchildren and adopted children are not the same thing. Don't confuse the two.

First, I'll address the issue of stepchildren inheriting from a stepparent. I think what you are asking is if a person dies without a Will, is the stepchild included in the decedent's intestate distribution? In other words, is the stepchild treated as a blood relative? The answer is no. If you have stepchildren and you fail to include a provision for them in your will or you fail to leave a Will at all, they will not inherit property from your estate.

Although stepchildren are not treated as natural born children under intestate code provisions, they are treated similar for inheritance tax issues.

Until a few years ago, in order to treat a stepchild as a child for inheritance tax issues, very strict conditions had to be met to establish "in loco parentis." Indiana has since changed the rules and stepchildren and lineal descendants of stepchildren are treated as class A beneficiaries, the same as natural born children.

Adopted children are different. When a child is adopted, he is treated as if he were the natural born child of the adopting parent and the child ceases to be treated as a natural child of the natural parent.

However, there are two exceptions to this rule. The first is if the adopting parent subsequently marries the natural parent. In that case the child is treated as a natural child of the natural parent, even though he has been adopted.

The second exception involves adoptions involving immediate families.

It provides, "if a person who is related to a child within the sixth degree adopts such child, such child shall, upon the occasion of each death in the child's family, have the right of inheritance through the child's natural parents or adopting parents, whichever is greater in value in each case."

An adopted child is treated as a natural born child of the adopting parent for inheritance tax purposes as long as the child was adopted prior to emancipation.

Finally, here is my favorite step-child story and why you should plan appropriately. Mom has two sons. Mom marries dad, who has one son. Mom raises dad's son. Mom's two sons move, but dad's son stays and helps mom.

One of mom's sons joins a cult. Mom writes a trust, leaving the residue of her trust equally to her other son and dad's son. But, she leaves the personal property to "her children." Stepson is not one of mom's children, so he is out of luck. But, the family entered into an agreement that allowed the trustee to include the stepchild in the personal property distribution.

Opinions expressed solely are those of the writer. Christopher W. Yugo is a member of the Indiana Bar and a vice president and senior trust officer for First National Bank's Trust Department. Address questions to Yugo in care of The Times, 601 W. 45th Ave., Munster, IN 46321.