Hurst v. First Kentucky Trust Co.

• Decision Date: 10 January 1978
• Parties: Jane Ellen Boggess HURST, Movant, v. FIRST KENTUCKY TRUST COMPANY and Lucy Kavanaugh Beam et al., Respondents.
• Court: United States State Supreme Court — District of Kentucky

Page 819

560 S.W.2d 819

Jane Ellen Boggess HURST, Movant, v. FIRST KENTUCKY TRUST COMPANY and Lucy Kavanaugh Beam et al.,

Respondents.

Supreme Court of Kentucky.

Jan. 10, 1978.

Marvin J. Hirm, Greenebaum, Doll, Matthews & Boone, Louisville, for movant.

John P. Sandidge, Woodward, Hobson & Fulton, Louisville, for respondents.

PER CURIAM.

T. Jeremiah Beam died testate on May 2, 1977. The First Kentucky Trust Company and Lucy Kavanaugh Beam, his surviving spouse, were designated and qualified as co-executors of the estate pursuant to the terms of his last will and testament.

Jane Ellen Boggess Hurst, a niece of T. Jeremiah Beam, is a contingent beneficiary under his will in the event of the failure of Lucy Beam to exercise a power of appointment granted to her in the will. The contingent interest of Hurst, absent exercise of the power of appointment, consists of a fractional interest in what remains after the death of Lucy Beam, of the corpus of a trust created for her benefit during her lifetime. For this reason, the primary interest of Hurst concerns the method used in selecting assets to be allocated by the co-executors to the widow and to the trust in satisfaction of the bequests for these purposes.

Item IV of the will of T. Jeremiah Beam and the first literary paragraph of Item V of the will provide:

"Item IV. If my wife, LUCY BEAM, shall survive me, I bequeath and devise to her in fee simple absolute an amount equal to the difference between (a) one-half (1/2) of the value of my adjusted gross estate as determined for Federal Estate purposes and (b) the value of all property interests (included in my estate for Federal Estate Tax purposes) which pass or have passed to my wife under any other article of this will or otherwise in such manner as to qualify for the marital deduction under the Federal Internal Revenue Code.

"Whenever used in this article, the words 'adjusted gross estate,' 'marital deduction' and 'pass' shall have the same meaning as same words have under the provisions of the Federal Internal Revenue Code applicable to my estate.

"Only assets which qualify for the marital deduction shall be allotted to such fractional share. However, the Executor is authorized to satisfy such gift in money or in kind, or partly in money and partly in kind; and if wholly or partly in kind, to select, transfer and convey to said Trustee the specific assets or asset so selected, provided, that any assets transferred in kind to satisfy said gift shall be valued for that purpose at the respective values thereof as finally determined for Federal Estate Tax purposes. Subject to the foregoing, the decision of the Executor as to which assets shall be binding and conclusive on all persons, and this gift shall carry with it (as income and not as corpus) its proportionate part of the income of the estate from the date of my death.

"ITEM V. All the rest and residue of my estate, after the payment of the specific bequests made herein and the devises and bequests set forth to my wife, I give, devise and bequeath to THE KENTUCKY TRUST COMPANY of Louisville, Kentucky, in trust, for the following uses: * * *."

Hurst asserts that these provisions of the T. Jeremiah Beam will require that assets set over to the widow or to the trust must be distributed with reference to the value for federal tax purposes and without reference to their value at the date of distribution of the value on that date differs from the value for federal estate tax purposes.

The co-executors contend that even though the assets ultimately allocated to Lucy Beam outright and to the trust are of equal value for federal estate tax purposes these assets must also be of equal value when eventually distributed.

The trial court entered a judgment, supported by adequate findings of fact and conclusions of law, directing that the co-executors distribute estate assets in satisfaction of the bequests under Item IV and Item V of the T. Jeremiah Beam will in a fair, impartial, and equitable manner so that all distributions, including cash, shall be fairly representative of appreciation or depreciation in the value of all property, including cash, available for distribution.

The Court of Appeals affirmed. We granted Hurst's motion for discretionary review and now affirm the decision of the Court of Appeals and affirm the judgment of the Jefferson Circuit Court.

A resolution of the issues advanced by the parties to this proceeding requires a reexamination of the duties and obligations of a fiduciary (the co-executors) in dealing with the various beneficiaries named in the will of T. Jeremiah Beam. Of necessity, this requires an analysis of the pertinent clauses of the will correlated with the exercise of the duties of the fiduciary within the context and meaning of Item IV and Item V of the will.

The courts have consistently refused to restrict the right of a testator to decide who will be his beneficiaries and what part of his estate each will receive. However, when a fiduciary, in the exercise of his discretion, is vested with the authority to distribute the assets of an estate, he is required to exercise his discretion fairly.

It has been the duty of fiduciaries for centuries to deal fairly and impartially with all beneficiaries. This basic concept and rule is stated in Restatement of Trusts, 2d, Section 183, as follows:

"Where there are two or more beneficiaries of a trust, the trustee is under a duty to deal impartially with them."

The will of T. Jeremiah Beam clearly establishes his...