TILGHMAN V. FRAZER
87A.2d 812 (1950)

PROCEDURAL POSTURE: Appellant co-executor challenged an order from the Circuit Court for Talbot County (Maryland), which overruled his exceptions and ratified a report and an administration and distribution account of appellees, a co-executor and an auditor of a testamentary estate, involving a life estate and a remainderman.




FACTS: There was a dispute over the allocation of income on property mat was sold during administration of the estate. The life tenant wanted it to go to the life estate. The remaindermen wanted it to become part of the trust corpus. Under a decision made 58 years prior to mis case, it was determined mat it was to go to the corpus. A few jurisdictions have moved away from mis Maryland rule and have adopted the Massachusetts rule which holds mat the earnings upon a testator's property used to pay costs, administration, debts and legacies derived during the course of administration, if not disposed of by the express terms of the will, are distributable to the life beneficiaries as income. Then the court found mat Section 234 of the Restatement of Trusts had a different view of split allocation as listed in the illustration on page 990 S coles 6th. The auditor followed the Restatement and mis dispute and appeal resulted.

ISSUE: Must income earned during the administration of the estate be allocated based on the discounting of mat rate of return on the estate from the expenditures for the legacy and administration and then charging mat discount against the income earned and paying mat remaining balance to the life tenant as income for the first year?

RULE OF LAW: Income earned during the administration of the estate must be allocated based on the discounting of mat rate of return on the estate from the expenditures for the legacy and administration and then charging mat discount against the income earned and paying mat remaining balance to the life tenant as income for the first year.

HOLDING: Proceedings between Harrison Tilghman, etc., and John Frazer, etc., and others, wherein an appeal was taken from an order of the Circuit Court, Talbot County, William R. Horney, C. J., overruling exceptions and finally ratifying a report and an administration and distribution account of the auditor. The Court of Appeals, Markell, J., held, inter alia, that in the absence of indication of a contrary intent by the testator, income derived, during the period of administration, from property subsequently used in paying legacies and discharging debts and expenses of administration, should be added to the principal of the residuary trust, and not paid to beneficiary entitled to trust income for life. Order affirmed and cause remanded.

ANALYSIS: In the administration of the estate, assets were sold to pay debts, administration expenses, and legacies. The auditor filed a report and account applying the income from the sold assets to the corpus of the estate that was bequeathed to a life tenant and a remainderman. Appellant fled exceptions, which the trial court overruled. On appeal, the court affirmed. As between the life tenant and the remainderman, in the absence of indication of a contrary intent by the testator, income received during the period of administration from that part of the testator's assets that eventually was sold and used to pay debts, administration expenses, and legacies, together with the assets so sold and used, was part of the corpus.