Stickley v. Stickley

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

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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.

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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

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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

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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

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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.

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