LADYSMITH RESCUE SQUAD, INC. V. NEWLIN 694 S.E.2d 604 (2010) CASE BRIEF

LADYSMITH RESCUE SQUAD, INC. V. NEWLIN

694 S.E.2d 604 (2010)

NATURE OF THE CASE: Ladysmith (D) appealed a decision by the lower court to authorize Donald H. Newlin and William J. Howell (P), trustees to divide a charitable remainder unitrust into two equal trusts under Va. Code Ann. 55-544.17 and to commute and terminate first beneficiary's charitable trust under Va. Code Ann. 55-544.12(A).

FACTS: Cosby died unmarried and with no descendants. His will gave all stocks, bonds and other securities to trustees, to hold in a charitable remainder unitrust as recognized by certain provisions of the Internal Revenue Code. The trustees to invest and manage those assets for the benefit of four named individuals (the income beneficiaries) who were to receive the net income earned by the trust, or 6% of the value of the trust assets, whichever is less. The income was to be distributed annually, divided equally among them and payable in quarterly installments. At the death of the last surviving income beneficiary, the trustees were to distribute the residue of the trust assets to two named charitable beneficiaries: The Upper Caroline Volunteer Fire Department (Upper Caroline) and the Ladysmith Volunteer Rescue Squad (Ladysmith), in equal shares for their general purposes, provided those entities were charitable organizations within the contemplation of the Internal Revenue Code at the time of distribution. The will appointed Donald H. Newlin and William J. Howell (P) as executors and trustees. After they qualified, Ps instituted this proceeding in the circuit court as a complaint for advice and guidance, asking the court to determine the assets of the estate that were the residue subject to payment of debts, taxes and costs of administration. The trustees pointed out that the will had designated its fourth article as the residuary clause but that the assets passing under that fourth article would be insufficient to pay the estate expenses. They asked the court to ascertain what other bequests should abate in order to pay those expenses. Several years of litigation ensued on the issues raised by Ps' complaint. In April 2009, two of the income beneficiaries, Gloria G. Essaye and William Welford Orrock, remained alive. The value of the trust corpus was between five and six million dollars. Ps, the two surviving income beneficiaries and Upper Caroline (the moving parties) moved the court to authorize Ps to divide the trust into two equal trusts, to be called the 'Upper Caroline Trust' and the 'Ladysmith Trust.' Ladysmith (D) objected to the division of the trust. The moving parties also moved the court to authorize Ps to commute and terminate the Upper Caroline Trust by paying the income beneficiaries in cash the commuted value of their interests in that trust based upon their life expectancies and distributing the remainder of that trust to Upper Caroline without awaiting the death of the last surviving income beneficiary. The motions asked that the proposed Ladysmith Trust continue in effect, to be administered in accordance with the testator's will. The common design was simply to enable Upper Caroline and the income beneficiaries to 'have [their] money today [rather] than wait.' D consistently objected to this common design on the ground that it would violate the testator's intent. The court granted Ps motion and D appealed.

ISSUE:

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LEGAL ANALYSIS:

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