442 B.R. 481
Bankr. W.D. Va.2010Background
- Debtors executed the Claude M. DelFosse Living Trust on June 6, 2001, appointing themselves as co-trustees.
- Claude is the primary beneficiary; Genevieve and the Debtors' dependent children are first residuary beneficiaries.
- The Debtors, as trustees, acquired fee simple title to the Property via a 2002 Trust Deed-In from Blue Ridge Lumber.
- Property is approximately 318.35 acres in Nelson County, Virginia, Tax Map Parcel # 24-A-25.
- BB & T contends the Trust is a Virginia land trust; Debtors contend it is a revocable living trust.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Trust type: land trust vs. revocable living trust | Trust is a Virginia land trust. | Trust is a revocable living trust. | Trust is a revocable living trust. |
| Whether the Trust Deed-In amends the Trust | Deed-In amends the Trust terms. | Deed-In does not amend the Trust. | Deed-In cannot amend because executed by trustee, not settlor. |
| Effect of trust structure on estate inclusion | Structure creates a land trust excluding property from estate. | Structure does not create a land trust. | Structure does not create a Virginia land trust; treated as revocable living trust. |
| Property as part of Debtors’ estate | Property not estate property if trust is land trust. | Property remains part of estate if trust is revocable living trust. | Property is property of the Debtors’ estate under 11 U.S.C. § 541(a)(1). |
Key Cases Cited
- Harbour v. SunTrust Bank, 278 Va. 514 (Va. 2009) (grantor intent governs trust construction; plain language controls)
- Huaman v. Aquino, 272 Va. 170 (Va. 2006) (intent governs trust interpretation; avoid extrinsic considerations)
- Clark v. Strother, 238 Va. 533 (Va. 1989) (trust instrument language governs unless ambiguity)
- Schmidt v. Wachovia Bank, 271 Va. 20 (Va. 2006) (plain meaning of grantor's words determines validity)
- Frazer v. Millington, 252 Va. 195 (Va. 1996) (trust construction principles and intent)
- Boyd v. Fanelli, 199 Va. 357 (Va. 1957) (interpretation of trust language and operations)
- McKinsey v. Cullingsworth, 175 Va. 411 (Va. 1940) (early trust construction guidance)
- Austin v. City of Alexandria, 265 Va. 89 (Va. 2003) (trust structure and transfers; distinction of trustee/settlor roles)
- In re Veatch (Peyton v. First Citizens Corp.), 232 B.R. 346 (Bankr. E.D. Va. 1999) (land trust status and estate implications discussed)
- In re Arnold, 369 B.R. 266 (Bankr. W.D. Va. 2007) (revocable living trust treated as estate property)