Recent Virginia Fiduciary Case – Harbour v. SunTrust Bank

December 16, 2009

In a suit for aid and guidance brought by SunTrust Bank as trustee, the Supreme Court of Virginia in Steven Harbour, et al. v. SunTrust Bank, et al., 2009 Va. LEXIS 101 (Va. Nov. 5, 2009) reversed the circuit court’s holding and concluded that certain remainder interests in a trust vested at the date of the testator’s death.

The testator, Mrs. Johnson, executed an inter vivos trust for her benefit during her lifetime, and upon her death, for the benefit of her husband, if he survived her. Mrs. Johnson directed that following her husband’s death any remaining trust funds would be distributed in four equal shares to her three siblings and one charity. Mrs. Johnson was survived by her husband and two siblings, however, neither of the siblings survived Mrs. Johnson’s husband.

At issue in the case was the meaning of Mrs. Johnson’s direction that “[i]f any of my brothers or sister shall fail to survive me, his or her share shall lapse and such share shall be added to the trust fund for [the charity].” The charity argued that the siblings’ shares should be added to the charity’s share because the siblings failed to survive Mrs. Johnson’s husband.

The descendants of Mrs. Johnson’s siblings argued that, based upon the plain language of the trust instrument, the siblings’ shares vested upon the date of Mrs. Johnson’s death, and that there was no requirement for the siblings to be alive at the date of distribution.

As trustee, SunTrust Bank filed a suit for aid and guidance regarding the interpretation of the trust agreement and distribution of trust assets. The circuit court held that the shares of the deceased siblings had lapsed, because none of the siblings were alive at the time of the husband’s death.

The Supreme Court of Virginia reversed on appeal. The court initially reviewed the general rule of construction favoring the early vesting of remainder estates, but ultimately held that it was unnecessary to apply such rule because the trust document was unambiguous. Based on the plain language of the trust agreement, the court found that the testator intended that the remainder interests vest at the time of her death, and not at that of her husband.

This opinion emphasizes the court’s jurisprudence regarding the interpretation of a trust document. Finding no ambiguity in the document, the court applied the plain meaning of the language used in the trust document to effectuate the testator’s intent.

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