## Facts

- Miller Hart Cosby died in 2004; his will and codicil created a testamentary charitable remainder unitrust (CRUT) funded with his securities.
- The CRUT paid four named individual income beneficiaries annually the lesser of net income or 6% of trust value, in quarterly installments.
- After the last surviving income beneficiary’s death, the trust residue was to be distributed equally to two charities: Upper Caroline Volunteer Fire Department and Ladysmith Rescue Squad, Inc., if each qualified under the Internal Revenue Code at distribution.
- The will included a spendthrift provision limiting beneficiary control and creditor access until actual payment by the trustees.
- In ongoing estate/trust administration litigation, by April 2009 two income beneficiaries remained alive.
- The income beneficiaries and Upper Caroline moved the circuit court to (1) divide the CRUT into two separate trusts (one for each charity), and (2) terminate and “commute” the Upper Caroline trust immediately by paying the actuarial value of the remaining income interests to the income beneficiaries and distributing the remainder to Upper Caroline.
- Ladysmith objected, asserting the will did not authorize division or partial commutation and the proposal altered the dispositive plan.

## Issues

1. Whether a court may approve division and partial commutation of a testamentary CRUT over a charitable remainderman’s objection when the will does not authorize such changes.
2. Whether the proposed restructuring materially impaired a beneficiary’s rights or altered the trust purposes so as to exceed equitable authority absent statutory or cy pres grounds.

## Decision

- The Supreme Court of Virginia reversed the circuit court’s order and remanded.
- The Court held the division and partial commutation were improper because they materially changed the testator’s dispositive scheme and impaired Ladysmith’s remainder interest.
- The Court rejected reliance on actuarial fairness, administrative convenience, or near-unanimous beneficiary consent as sufficient grounds to modify the trust over a nonconsenting remainderman.
- The Court found no applicable statutory authority or cy pres basis because the trust remained workable as written and no impossibility, illegality, or comparable necessity was shown.

## Legal Principles

- A court’s role with testamentary trusts is to construe and supervise administration consistent with the testator’s intent; it may not reconfigure the dispositive plan without valid legal authority.
- Equitable power to modify a trust is limited and does not extend to changes that fundamentally alter timing, structure, or allocation of risk among beneficiaries contrary to the instrument.
- Actuarial equivalence does not substitute for the intent expressed in the will, particularly where restructuring changes who bears investment, expense, and longevity risk.
- A beneficiary’s rights cannot be materially compromised by an agreed modification among other beneficiaries when that beneficiary does not consent.
- Cy pres or comparable charitable-trust modification doctrines require a showing that the trust’s purposes cannot be carried out as written; acceleration or convenience alone is insufficient.

## Conclusion

The court concluded that the will established a single CRUT in which both charitable remaindermen shared equal timing and risk until the last income beneficiary’s death; dividing the trust and accelerating one charity’s remainder improperly rewrote that plan and materially disadvantaged the nonconsenting charity.


Ladysmith Rescue Squad, Inc. v. Newlin, 280 Va. 195, 694 S.E.2d 604 (Va. 2010)