## Facts

- Edward G. Bradford, Jr. died in 1927, leaving a testamentary trust administered by Delaware Trust Company.
- The will directed the trustee to keep the trust property invested in good securities and to pay the net income to the widow, Helen S. Bradford, for life.
- The widow held a power of appointment over the trust property; in default of effective appointment, the corpus was to pass to Yale College upon specified trusts.
- The trust included vacant real estate purchased shortly before death for $5,000 and valued at $9,800 at death.
- The land was held from 1927 to 1947 and was completely unproductive, generating no income and requiring expenses totaling $403.98 paid from trust income.
- The trustee sold the land in 1947 for net proceeds of $18,997.63, producing substantial appreciation.
- The will authorized sale of real estate but did not specify how to allocate sale proceeds of unproductive property between income and principal.
- The trustee petitioned the Court of Chancery for instructions on allocating the proceeds and associated gain between the life income beneficiary and the remainderman.

## Issues

1. When a trust instrument is silent, how should net proceeds from the sale of long-held, unproductive trust property be allocated between the life tenant (income) and the remainderman (principal)?
2. Whether equity permits allocating part of the sale proceeds to income to compensate the life tenant for the asset’s prolonged unproductivity.

## Decision

- The Court of Chancery instructed that the net proceeds should be apportioned between income and principal rather than allocated entirely to principal.
- The court approved an equitable method that credits the life tenant with an amount approximating what the property should reasonably have earned during the period it produced no income.
- The balance of the proceeds, after the equitable income allocation, was to be treated as principal for the remainderman.

## Legal Principles

- If a trust instrument does not direct the treatment of proceeds from unproductive property, a court of equity may determine allocation between income and principal.
- Equitable apportionment can be used to balance the life tenant’s right to a reasonable income benefit with the remainderman’s interest in preserving principal.
- A common equitable measure is a hypothetical reasonable rate of return over the period of unproductivity, paid to the life tenant from sale proceeds, with the remainder allocated to principal.

## Conclusion

The court held that, absent controlling directions in the trust instrument, proceeds from the sale of long-held unproductive property may be equitably split between income and principal, compensating the life beneficiary for foregone reasonable income while protecting the remainderman’s principal interest.


Delaware Tr. Co. v. Bradford, 59 A.2d 212 (Del. Ch. 1948)