STICKLEY v. STICKLEY


STICKLEY v. STICKLEY


February 27, 1998
Record No. 971244

DANIEL C. STICKLEY, JR., CO-EXECUTOR
OF THE ESTATE OF DANIEL C. STICKLEY, SR.,
DECEASED

v.

WILLIAM S. STICKLEY, CO-EXECUTOR
OF THE ESTATE OF DANIEL C. STICKLEY, SR.,
DECEASED, ET AL.

OPINION BY JUSTICE CYNTHIA D. KINSER
FROM THE CIRCUIT COURT OF ROCKINGHAM COUNTY

John J. McGrath, Jr., Judge
PRESENT: All the Justices


In this appeal, we determine whether an article in a will,
which directs all estate taxes and administration expenses to be
paid out of the residuary estate, avoids apportionment of the
remaining estate taxes upon depletion of the residuary estate.
Because the testator treated all debts the same, we conclude that
the estate taxes should not be apportioned and, therefore, will
affirm the judgment of the lower court.

I.

This case concerns the interpretation of Article One in the
Last Will and Testament of Daniel C. Stickley (the Testator), who
died on May 4, 1995. Article One of his will addresses the
payment of death taxes and administration expenses:

All estate, inheritance, and other death taxes including
interest and penalties together with the expenses of my last
illness and all administration expenses including an
appropriate marker for my grave, payable in any jurisdiction
by reason of my death,(including those taxes and expenses
payable with respect to assets which do not pass under this
will) shall be paid out of and charged generally against the
principal of my residuary estate. I waive any right of
reimbursement for or recovery of those death taxes and
administration expenses.

Pursuant to the will, Daniel C. Stickley, Jr., and William S.
Stickley, the Testator’s two sons, qualified as co-executors of
the estate on May 11, 1995. They are also the beneficiaries of
the residuary estate.

The Testator’s estate is solvent, but the residuary estate is
insufficient to pay all the administration costs, debts, funeral
expenses, and estate taxes as directed in Article One. A dispute
arose between the co-executors regarding the proper
interpretation of the will and whether the estate taxes should be
apportioned upon depletion of the residuary estate.

Daniel Stickley filed a bill of complaint in the court below
and asked the court to give aid and direction regarding the
interpretation of the will, particularly in regard to the issue
of apportionment of the estate taxes in excess of the funds
available in the residuary estate. After considering written
memoranda and oral arguments of the parties, the circuit court
held in a decree dated March 20, 1997, that "the proper
interpretation of the testator’s Will requires that estate taxes
shall not be apportioned in the event of insufficient funds in
the residuary estate." The court further found that all
estate taxes should be treated as a general charge against the
estate like the debts and costs of administration to be paid from
the assets in the probate estate. Daniel Stickley appeals.

I.

When an estate owes estate taxes, Code ? 64.1-161 requires
that such taxes be apportioned.[1]
This statute is "based on the principle that estate taxes
should be equitably apportioned among the taxable legatees."
Lynchburg College v. Central Fidelity Bank, 242 Va. 292,
296, 410 S.E.2d 617, 619 (1991). However, an individual may avoid
apportionment by making directions in a will "for the
payment of such estate taxes and . . . designat[ing] the fund or
funds or property out of which such payment shall be made."
Code ? 64.1-165.

In this case, the parties agree that the Testator, in Article
One of his will, exercised his right under Code ? 64.1-165 to
avoid apportionment of the estate taxes as otherwise would have
been required by Code ? 64.1-161(A). However, the dilemma for
the co-executors is that the administration costs, debts, funeral
expenses, and estate taxes exceed the residuary estate. They
disagree as to which fund or property should bear the burden of
paying the estate taxes after the residuary estate is exhausted.
Daniel Stickley asserts that the estate taxes that remain
outstanding after exhausting the residuary estate should be
apportioned. William Stickley, on the other hand, argues that the
Testator intended that the estate taxes be treated the same as
all other expenses and administration costs. Thus, he contends
that the remaining estate taxes should not be apportioned but
should be a general charge against the estate. We agree with
William Stickley.

Although Daniel Stickley argues otherwise, our decision in Lynchburg
College
is dispositive. In that case, the decedent’s will
directed that all debts and expenses of administration, including
any taxes levied against the estate, be paid as soon as
practicable. The decedent did not, however, specify any
particular fund out of which the expenses and taxes were to be
paid. The sole question on appeal was whether that provision in
the will was "sufficient direction to prevent the
application of Virginia’s apportionment statute, Code ?
64.1-161, or, stated differently, contains sufficient direction
to meet the requirements of Virginia’s anti-apportionment
statute, Code ? 64.1-165." Lynchburg College, 242
Va. at 295, 410 S.E.2d at 619. We answered the question in the
affirmative and concluded that, although the decedent did not
designate the fund out of which the taxes were to be paid, the
decedent, nevertheless, intended that the taxes be paid from the
same fund which bore the burden of the other debts and
administration expenses. In short, the decedent intended that the
estate taxes, debts, and administration expenses be treated as a
charge against the estate, thus avoiding apportionment of the
estate taxes.

We find the same intent in this case. The Testator, in Article
One of his will, directed that the estate taxes, debts, funeral
expenses, and administration costs be treated in the same manner
by specifying that they all be paid from the residuary estate. An
insufficient residuary estate does not change that intent. When
the Testator initially directed identical treatment of all these
expenses, he successfully invoked the anti-apportionment statute,
Code ? 64.1-165, and having done so, apportionment does not
apply, absent some direction to that effect by the Testator. See
Baylor v. Nat’l Bank of Commerce, 194 Va. 1, 5, 72 S.E.2d
282, 284 (1952) (finding that since decedent made no distinction
between debts, funeral expenses, and estate taxes, decedent
intended that these obligations "be treated alike and be
paid in the same manner and from the same fund").

Nor is it relevant that the Testator in this case designated a
particular fund out of which to pay the estate taxes and
administration costs while the decedents in Lynchburg College
and Baylor did not. The pertinent inquiry is not whether a
particular fund was identified but whether the Testator intended
that the debts, administration costs, and estate taxes be treated
alike. "The intent of the testator is the cardinal
rule," and must be fulfilled. Simeone v. Smith, 204
Va. 860, 863, 134 S.E.2d 281, 283 (1964). In the present case,
the Testator’s intent to avoid apportionment of his estate taxes,
even if the residuary estate is depleted, is further evidenced by
his waiver in Article One of any right of recovery of the estates
taxes.

For these reasons, we conclude that any estate taxes
outstanding after exhaustion of the residuary estate should not
be apportioned but should be charged generally against the
probate estate. The Testator satisfied the requirements of the
anti-apportionment statute, Code ? 64.1-165. Accordingly, we
will affirm the judgment of the circuit court.

Affirmed.

 

 

 

 

FOOTNOTES:

[1]
In pertinent part, Code ? 64.1-161(A) states the following:

Except as provided in subsection B of this section,
whenever it appears upon any settlement of accounts or in any
other appropriate action or proceeding that an executor,
administrator, curator, trustee or other person acting in a
fiduciary capacity has paid an estate tax levied or assessed
under the provisions of any estate tax law of the
Commonwealth, any other state or the United States heretofore
or hereafter enacted, upon or with respect to any property
required to be included in the gross estate of a decedent
under the provisions of any such law, the amount of the tax
so paid, together with any interest and penalty required by
the taxing authority to be paid, shall be prorated among the
persons interested in the estate to whom such property is or
may be transferred or to whom any benefit accrues.

 

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