Present: All the Justices 

SUSAN JONES COOPER, TRUSTEE, ETC. 

OPINION BY JUSTICE ROSCOE B. STEPHENSON, JR. 

v. Record No. 960283 

 January 10, 1997 

SALLY H. BRODIE, ET AL. 

FROM THE CIRCUIT COURT OF ARLINGTON COUNTY 

William L. Winston, Judge 

 The principal issue in this appeal is whether the trial 

court erred in terminating a trust and ordering the trustee to 

distribute the assets of the trust before estate tax liability 

had been determined. Other issues presented are whether the 

court erred in denying the trustee her requested compensation for 

services as trustee and in ordering that the trustee be 

personally responsible for a portion of the legal fees and 

expenses incurred in this litigation. 

 I 

 On February 14, 1994, Sally H. Brodie and Margaret Jones 

(collectively, Brodie) filed a declaratory judgment suit against 

their sister, Susan Jones Cooper, in her individual capacity, as 

trustee of the Lucy P. Jones 1991 Trust (Lucy's Trust), and as 

Executrix of the Estate of Lucy P. Jones, her mother. Brodie 

asked (a) in Count I of the bill of complaint, that Lucy's Trust 

be terminated and its assets distributed to the beneficiaries; 

(b) in Count II, that Cooper be removed as executrix of Lucy 

Jones' estate; and (c) in Count III, for an award of at least 

$100,000 in damages against Cooper for alleged breach of 

fiduciary duties and, also, that Cooper be removed as trustee of 

Lucy's Trust. Brodie alleged that Cooper (1) failed to terminate 
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Lucy's Trust and to distribute its assets when Cooper had already 

provided for the payment of the estate tax by electing to utilize 

the installment payment provisions of § 6166A of the Internal 

Revenue Code; (2) breached fiduciary duties as executrix by 

misrepresenting the estate tax issue in order to fraudulently 

obtain a larger fee from the estate; and (3) breached fiduciary 

duties as trustee by failing to act in the best interests of the 

beneficiaries of Lucy's Trust because of conflicts of interest. 

 Following an ore tenus hearing, the trial court found that 

Cooper had not breached her fiduciary duties and that no cause 

existed to remove Cooper as executrix or as trustee. 

Accordingly, by decree entered March 3, 1995, the court dismissed 

with prejudice Counts II and III of the bill of complaint. At 

that time, the court continued the cause as to Count I (the 

termination of Lucy's Trust) because one of the partnerships held 

in the trust was in the process of closing a lucrative lease. 

The transaction, however, did not close because the required 

rezoning was not obtained. 

 By final decree entered November 13, 1995, the trial court 

ordered Cooper to terminate Lucy's Trust and to distribute its 

assets forthwith to its beneficiaries. The court further ordered 

that the beneficiaries shall not dispose of or encumber the 

assets received without paying their pro-rata share of the estate 

taxes due on those assets whenever Cooper reached a settlement 

with the tax authorities in a manner acceptable to at least one 
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of her sisters. 

 The trial court allowed Cooper to recover her attorney's 

fees and costs related to Counts II and III as a charge against 

Brodie's interests in Lucy's Trust. The court, however, divided 

the attorney's fees and costs related to Count I, charging 

Brodie's fees and costs to Lucy's Trust and Cooper's fees and 

costs one-half to her individual interest in the trust and onehalf to the trust. The court also denied Cooper's motion for the 

payment of a $500,000 fee for her services as trustee since the 

inception of Lucy's Trust. 

 II 

 On February 14, 1991, Lucy P. Jones executed her revocable 

inter vivos trust, naming Cooper as trustee. Lucy also had named 

Cooper as executrix of her will. 

 On August 1, 1992, Lucy died without revoking the trust, and 

the trust became irrevocable. The named beneficiaries of both 

Lucy's Trust and her will are her three daughters: Susan Cooper, 

Sally Brodie, and Margaret Jones.1

 At the time of her death, the 

value of Lucy's probate estate was approximately $800,000. The 

value of the assets in Lucy's Trust was approximately 

$12,000,000. 

 In Article I(C) of the trust agreement, Lucy provided that 

 

 1On April 30, 1993, Cooper disclaimed a fractional share of 

her one-third share of Lucy's Trust in favor of her daughters, 

Sally Hart Hunt and Carolyn C. Snare. Hunt and Snare were added 

as parties to this suit. 
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"the assets held at [her] death and other assets received by 

[her] Trustee by reason of [her] death, after payment of any 

charges under Article II, shall be distributed in accordance with 

the provisions of Article III." Article II of the trust provides 

as follows: 

 At my death my Trustee may pay to or upon the 

order of my Executor, or may pay directly, funds needed 

to pay my legally enforceable debts, my charitable 

pledges, funeral and burial expenses, costs of 

administration, death taxes and cash bequests under my 

Will. My Trustee may rely upon my Executor as to the 

amount of the charges. The decision of my Trustee 

whether to provide funds shall be final. 

Article III of the trust provides, in pertinent part, the 

following: 

 Upon my death and after the payment or provision 

for the payment of the debts, taxes and other charges 

described in Article II, the then remaining Trust 

Estate shall be divided per stirpes into equal shares 

. . . . Each share for a child of mine . . . shall be 

distributed to such child.[ ]2

 Under Article V of Lucy's Trust, Cooper was granted the 

powers set forth in Code § 64.1-57. Cooper also was granted "the 

power to enter into partnership agreements and act as a partner 

to the same extent that [Lucy] could [have done] if acting 

individually." Article V further provided that Cooper "shall be 

entitled to receive reasonable compensation for her services." 

 The assets of Lucy's Trust constitute approximately 95% of 

 

 2Lucy Jones' will likewise directed Cooper, as Executrix, to 

pay estate and inheritance taxes, debts, and costs of 

administration and, then, to distribute the remainder of her 

estate in equal shares to her three daughters. 
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Lucy Jones' estate. The majority of these assets (approximately 

60%) are interests in partnerships that own real estate and are 

closely held businesses, and they include a one-third interest in 

the George H. Rucker Company, a one-half interest in the Jones & 

Jones Partnership, and a one-third interest in the Marye's 

Heights Apartments in Fredericksburg. Lucy's Trust also holds 

1,850 shares of stock in Geo. H. Rucker Realty Corporation, a 

closely held family corporation. 

 On October 29, 1993, Cooper, as executrix, filed the federal 

estate tax return and reported the value of the gross estate to 

be $12,639,567. The return showed deductions of slightly over 

$759,000. 

 The value of the partnership interests as reported in the 

federal estate tax return was based on appraisals by qualified 

professional appraisers. The Internal Revenue Service (IRS), 

however, was having its own appraiser value those interests.3

 

Therefore, when the trial court terminated Lucy's Trust and 

ordered the distribution of its assets to the beneficiaries, the 

IRS audit was pending, and the amount of the federal estate tax 

had not been determined.4

 3According to the estate tax counsel for Lucy's Trust, "it 

is almost a certainty the IRS will assert greater values for 

those interests than reflected on the Federal Estate Tax Return, 

and claim more Federal estate tax than reflected on that return." 

 4To avoid late payment penalties, Cooper exercised her right 

to make a discretionary election under § 6166 of the Internal 

Revenue Code and Code § 58.1-905(B), which allow installment 

payments of estate and inheritance taxes due on family business 

interests. 
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 III 

 The first question presented is whether the trial court 

erred in terminating Lucy's Trust and ordering distribution of 

its assets to the beneficiaries. To answer this question, we 

look to the trust agreement in order to ascertain Lucy's intent. 

 In Article III of the trust agreement, Lucy Jones directed 

that the assets shall be distributed equally to her three 

daughters "after the payment or provision for the payment of the 

debts, taxes and other charges." This article makes clear, 

therefore, that Cooper must either pay the estate tax or make 

provision for its payment before she is authorized to distribute 

to the beneficiaries "the then remaining Trust Estate." 

 A prominent former law professor, recognized as an authority 

in trust and estate law, testified that, before a trustee can 

provide for the payment of estate taxes, the amount of the tax 

must be determined. We agree. 

 When the trial court terminated Lucy's Trust and ordered 

distribution of its assets, the amount of the federal estate tax 

had not been ascertained. Thus, there was no way for Cooper to 

provide for the payment of the tax or to determine what would 

constitute "the then remaining Trust Estate." Consequently, we 

conclude that the trial court erred in this ruling. 

 IV 

 We next consider the trial court's ruling regarding Cooper's 

claim of compensation for her services as trustee. 
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 The trust agreement, in Article V, provides that Cooper 

"shall be entitled to receive reasonable compensation for her 

services." On April 28, 1993, Cooper wrote a letter to Sally 

Brodie explaining her claim for compensation. In the letter, 

Cooper stated that, after consulting with her attorneys, she 

"[had] decided to set [her] trustee and executor's fee at 

$120,000." She further stated that "[the] commission will cover 

[her] time until the estate is audited and finally closed by the 

IRS" and that the commission also might be viewed "as relating 

partly to the work [she had] done as trustee for [her mother and 

father] for the past five years." Thereafter, Cooper included 

the sum of $120,000 as a deduction on the federal estate tax 

return, representing her compensation for services as both 

executrix and trustee. 

 At the time the trial court ruled that Cooper had not 

breached her fiduciary duties and that no cause existed for her 

removal as executrix or as trustee, the court was aware that 

Cooper had reported her compensation as $120,000 and that Cooper 

 felt the sum was fair and reasonable for her services as 

executrix and as trustee. The court also knew that Cooper had 

been receiving substantial annual compensation for her work with 

the several entities in which Lucy's Trust had an undivided 

interest. 

 After the trial court ordered termination of Lucy's Trust, 

Cooper requested the court to award her $500,000 for her services 
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as trustee. The court properly denied the request. 

 We think it is clear from the record that the court 

previously had determined, based upon Cooper's representation, 

that $120,000 was a reasonable sum to compensate Cooper for her 

services as both executrix and trustee, and we cannot say the 

court abused its discretion. Accordingly, Cooper's compensation 

for her services as executrix and as trustee shall be fixed at 

$120,000 and paid from funds in Lucy's Trust. 

 V 

 Finally, we consider the trial court's ruling with respect 

to attorney's fees and costs. As previously noted, the court 

allowed Cooper her attorney's fees and costs related to Counts II 

and III of the bill of complaint as a charge against Brodie's 

interests in the trust; however, the court divided the attorney's 

fees and costs related to Count I, charging Brodie's fees and 

costs to the trust and charging one-half of Cooper's fees and 

costs to the trust and one-half to her individual interest in the 

trust. 

 As trustee, Cooper had a duty to defend the suit. See

Willson v. Whitehead, 181 Va. 960, 966, 27 S.E.2d 213, 216 

(1943). When a trustee has a good faith basis for defending a 

suit, the attorney's fees and costs incurred should be charged to 

the trust estate. See Cohn v. Central Nat'l Bank, 191 Va. 12, 

23, 60 S.E.2d 30, 35 (1950). 

 In the present case, Cooper had a good faith basis for 
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opposing the trust's termination and her removal as both 

executrix and trustee. She prevailed in the trial court on the 

removal counts and prevails on appeal regarding the termination 

count. In the circumstances of this case, therefore, we conclude 

that the trial court erred in charging a portion of Cooper's 

attorney's fees and costs to her individual interest in Lucy's 

Trust; that portion should be charged to the trust. 

 VI 

 Accordingly, we will affirm in part and reverse in part the 

trial court's judgment and remand the case for further 

proceedings. 

Affirmed in part, 

 reversed in part, 

and remanded.