The family of the man who built IBM into an international computer empire is being torn apart after his daughter’s estranged lesbian lover claimed a share in their fortune — because she had been legally adopted by her partner.

The battle over how to divide the multimillion-dollar trust fund set up by Thomas J. Watson Jr has been triggered by an extraordinary legal question now before an American courtroom: is his daughter’s former lover also his grandchild in the eyes of the law?

The dispute has arisen because of a move made by Olive Watson 15 years ago — before civil unions or gay marriage — to adopt Patricia Spado to ensure that she would be provided for in the event of her death.

Under the law in Maine, where the legal move took place, Ms Watson became Ms Spado’s mother — even though she was a year younger. Ms Watson, who was 43 at the time, hoped that this would make Ms Spado her father’s 19th grandchild and as such a beneficiary to his estate.

Mr Watson Jr, who turned IBM from the machinery-focused company founded by his father into an international computer group, died in 1993, unaware of his daughter’s unusual adoption. His wife, who died in 2004, knew of it.

With the death of both parents, the trust’s beneficiaries — the 18 grandchildren — became eligible for cash payouts when they turned 35.

Ms Spado emerged as a 19th beneficiary when her lawyer informed the trust, headed by Thomas J. Watson III, that his sister’s former lover was also a legal granddaughter and entitled to an immediate payout. The claim was not received warmly by Mr Watson III.

He challenged it successfully in probate court in Connecticut, where his father lived at the time of his death. Ms Spado has appealed against that decision. Mr Watson is now seeking to have the adoption annulled in Maine. Ms Watson and Ms Spado lived together for 14 years before the emergence of civil unions in America, the legal device now available in many states giving gay couples the same financial rights as married husbands and wives.

The couple separated in 1992, a year after the adoption was approved. Under an agreement Ms Watson paid Ms Spado about $500,000 (£255,000) in exchange for relinquishing her claim to some real estate.

But she stated explicitly in a letter “our agreement that I have not and that I shall at no time initiate any action to revoke or annul my adoption of you”. Gay activists say that the case shows how far same-sex couples will go to attain financial and inheritance protections that married couples take for granted.

“It shows what people are driven to when they don’t have access to marriage and the conventional way of forming a family,” Mary Bonauto, a gay-rights lawyer, said.

The court in Maine has heard a claim by the family trust that the judge who approved the adoption did not know that Ms Watson and Ms Spado had a sexual relationship.

New York, where the couple had been living at the time, barred the adoption of a homosexual partner, but Maine had no such restriction. Nor did it have a provision like Connecticut’s that prohibits a person from adopting someone older.

Family business

— Tom Watson joined IBM, then know as the Computing-Tabulating-Recording Company (C-T-R), in 1914

— Within 11 months he had become its president

— He was America's highest paid chief executive in the 1930s

— By the 1940s the company’s gross annual income was $60 million

— Watson handed over presidency of IBM to his son Tom Watson, Jr in 1952

Sources: Times archives; IBM archives

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