Opinion ID: 2369265
Heading Depth: 1
Heading Rank: 1

Heading: Income during administration.

Text: Is the widow entitled to the entire gross income from the estate during the period of administration, unimpaired? If not, to what income is she entitled? In our opinion under E(1) the widow is entitled to the entire net income of the total estate from the death of the testator. We are not at this point concerned with the invasion of principal to meet required annual payments of $30,000 to the widow. By net income we mean the total or gross income from all sources including specifically income from property which has been used to pay debts, legacies and expenses, less all proper charges against income. The income arising in the administration of the estate and not otherwise disposed of passes without question with the residue. Under the plain terms of the will, the widow is entitled to the net income from the residue from the death of the testator. The principle has long been established that in the absence of intention otherwise expressed in the will the beneficiary is entitled to income from date of the testator's death. See Blair v. Blair, 122 Me. 500, 122 A. 902; Union Safe Deposit & Trust Co. v. Dudley, 104 Me. 297, 72 A. 166; Weld v. Putnam, 70 Me. 209. The real point in issue is whether that proportion of the net income derived from property subsequently used in payment of debts, legacies and expenses shall be considered income for the life beneficiary (the Massachusetts rule), or added to the principal of the residue (the New York rule). In 1957 our Legislature enacted in substance the Massachusetts rule, unless otherwise expressly provided by the will of a testator dying after the effective date of this act. R.S. c. 160, § 34 as amended by P.L.1957, c. 183. Mr. Swasey died in 1956 and accordingly the act does not control the present case. We must determine the applicable rule without the benefit of the statute. The difference in the rules arises from the treatment of the property used in payment of obligations of the estate, as stated above. Under the Massachusetts rule, the residue is formed at the death of the testator and the property so used is carved therefrom. The income is therefore income of the residue. Under the New York rule, such property is not considered to have been part of the residue. New York by statute has adopted in substance the Massachusetts rule. We are satisfied that the Massachusetts or income to life beneficiary rule represents the better view. It gives to the beneficiary income to which he unquestionably would have been entitled had not the property from which it was derived been expended in the administration of the estate. Further, as Professor Scott points out, the rule has the advantage of being simple and easy to apply. 3 Scott on Trusts § 234.4 (2d ed.). See also Treadwell v. Cordis, 5 Gray 341, 71 Mass. 341; Old Colony Trust Co. v. Smith, 266 Mass. 500, 165 N.E. 657; City Bank Farmers' Trust Co. v. Taylor, 53 R.I. 126, 163 A. 734 (Mass. rule); Wachovia Bank & Trust Co. v. Jones, 210 N. C. 339, 186 S.E. 335, 105 A.L.R. 1189 (Mass. rule); Williamson v. Williamson, 6 Paige, N.Y., 298; Proctor v. American Security & Trust Co., 69 App.D.C. 70, 98 F.2d 599 (New York rule). The most recent statement of the rule which has come to our attention is found in Restatement, Trusts 2d § 234 (1959). We quote at length: Except as otherwise provided by the terms of the trust, if property is held in trust to pay the income to a beneficiary for a designated period and thereafter to pay the principal to another beneficiary, (a) where the trust is created by will, the former beneficiary is entitled to income from the date of the death of the testator;       Comment g:  Income on property used in paying lagacies, debts and expenses. If the subject matter of the trust is the residue of the testator's estate, income received by the executor during the period of administration, including income derived from property which is subsequently used in paying legacies and discharging debts and expenses of administration, which has not been applied to the payment of interest on such legacies, debts and expenses, is payable to the trustee, and when received by him is payable to the beneficiary entitled to income. In some States it has been held that the income from property used in paying legacies, debts and expenses of administration is to be treated as principal. In some of these States this method of allocation has proved unsatisfactory and the rule has been changed by statute. The question apparently has not arisen in our Court. In the Blair case, supra, the entire net income of the executors appears to have been included within income of the residue from death of the testator. There is no suggestion of an apportionment of such income between income and principal. In the Weld case, supra, the Court cites with approval the Williamson case, supra, from New York and Massachusetts cases. There is nothing, however, in the case to suggest that our particular problem was under scrutiny. The issue in both Blair and Weld was whether income commenced at the death of the testator and not what was included within income. The 1957 statute did not in our view alter the law, but rather codified in substance the existing law.