A testator gave the residue of his estate to trustees, to set apart a sum, the income of which was to accumulate till his grandson became twenty-one, then with the income of the accumulations to be paid to the grandson for life; and to hold the remainder of the residue in trust for the testator's children, with remainders over. No intention appearing to treat the sum to be set apart differently from the rest of the trust estates: Held, that the sum should, until actually set apart, share with the other trusts the income and taxes of the estate. The realty of the residue passed directly to the trustees. Held, that they should divide the net income proportionately among the trusts until the above named sum had been actually set apart, when the realty income should go to the testator's children. As to the personalty of the residue, Held, that the executors might retain its income until the estate was settled. Held, further, that from this income of personalty should be paid the taxes on the personalty, and also interest accruing after the first year of administration on all debts remaining unpaid. Held, further, that the executors, on settlement of the estate, should give the trustees an account of the accrued income and of the original capital of the estate, the former to be divided by the trustees among the cestuis for life, and the latter to be invested as a permanent fund.
DURFEE, C.J.
This is a case stated for the opinion of the court in regard to certain questions arising under the will of the late Caroline M. Brown. The will, after several specific bequests and dispositions, gives the residue of the estate, real and personal, to trustees on certain trusts, one of which is to set apart and invest the sum of $20,000, the income of which, subject to a certain life annuity, is to accumulate until a grandson of the testatrix arrives at twenty-one years of age, and then to be paid, along with the income of the accumulations, to him for life. If the grandson dies before he arrives at the age of twenty-one, the fund and its accumulations are given over to other persons. The remainder of the residue is to be on trust equally for the children of the testatrix for life, with remainders over.
The first three questions relate to the fund of $20,000, and are put for the purpose of ascertaining how and when the fund shall be chargeable with taxes, and how and when it shall draw interest or be entitled to participate in the income of the residue.
We do not discover anything in the language of the will which indicates that the testatrix intended that the trust for $20,000 should be less favored in the matter of income or interest, or more favored in the matter of taxes, than the other trusts of the residue. The life annuity for Clements charged on it indicates the contrary. We are of the opinion that in these respects all the trusts stand on the same footing, and consequently that the trust of $20,000 shall participate proportionately with the other trusts in the income of the residue, and bear proportionately the burden of the taxes, until such time as it shall be actually carried out and separated from the rest of the residue, after which time, of course, it will have its own income and pay its own taxes.
So much of the residue as consists of real estate passed, of course, under the will directly to the trustees, and it will remain in them unless needed by the executors for the payment of the debts. It will be their duty to collect the income and profits thereof, and, after paying taxes and expenses, to appropriate the net income proportionately among the trusts, until the trust of $20,000 is actually established, after which it will be apportionable equally among the children of the testatrix.
In regard to the residue of the personal estate our first impression was that the cestuis que trustent for life would have to wait until it passed to the trustees before they could have the income of it. We are convinced that this view, which we saw all along was liable to serious objections, is erroneous. The cases to which our attention has been directed make it very clear that the income, less the charges mentioned below, if not needed for the payment of the debts, should pass to the trustees as income, and be apportioned by them, in the manner above indicated, for the apportionment of the net income of the real estate. Minot v. Amory, 2 Cush. 377, 382; Lovering v. Minot, 9 Cush. 151; Sargent v. Sargent, 103 Mass. 297; Hewitt v. Morris, 1 Turn. R. 241; Cooke v. Meeker, 36 N.Y. 15; Hilyard's Estate, 5 W. Serg. 30.
The rule and the manner in which the rule is to be practically applied are laid down with great clearness in Lovering v. Minot, 9 Cush. 151. The court there holds that the cestuis que trustent for life are entitled to the whole income unless needed for the payment of debts. The court, however, says that while this is so, the executors may properly retain the accruing income until the estate is settled, because until then it may not be conclusively ascertainable that it will not be needed. The court adds that when, after the estate has been settled, the executors pay over the residue to the trustees, it will be their duty to render an account showing how much of it is accrued income and how much original capital, and it will be the duty of the trustees thereupon to divide the interest among the cestuis que trustent for life and invest the capital as a permanent fund. We think the rule as so applied should be qualified in two particulars: namely, by making the income chargeable, first, with the taxes on the personal estate; and, second, with interest, accruing after the end of the first year after letters testamentary are granted, on all debts remaining unpaid; for otherwise the income would profit, and might very unfairly profit, by the delay of payment at the expense of the capital. With these qualifications we approve the rule as applied, and adopt it.
In the statements of opinion above given we have in effect answered the fourth and only other question, which is, From what time shall the income or interest of the residue run for the benefit of the cestuis que trustent for life other than the grandson?