PRESENT: All the Justices
DANIEL C. STICKLEY, JR., CO-EXECUTOR
OF THE ESTATE OF DANIEL C. STICKLEY, SR.,
DECEASED
OPINION BY
v. Record No. 971244 JUSTICE CYNTHIA D. KINSER
February 27, 1998
WILLIAM S. STICKLEY, CO-EXECUTOR
OF THE ESTATE OF DANIEL C. STICKLEY, SR.,
DECEASED, ET AL.
FROM THE CIRCUIT COURT OF ROCKINGHAM COUNTY
John J. McGrath, Jr., Judge
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
2
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,
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.
3
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
4
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
5
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
6
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.
7