In Re: Trust B of Wells; Apl of: V.M.I. Foundation (majority)
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A case in the Supreme Court of Pennsylvania involved a dispute over the termination of a charitable trust. The trust was established by Richard H. Wells in 1965 for the sole benefit of his alma mater, the Virginia Military Institute (VMI), with the Virginia Military Institute Foundation (the “Foundation”) named as the beneficiary. Since its inception, the Trust has been managed by an independent corporate trustee, PNC Bank. The Foundation sought to terminate the Trust and receive the assets outright, arguing that it could manage the Trust with fewer expenses and higher returns.
The lower courts denied the termination, concluding that the burdens of the Trust did not meet the statutory criteria for termination under Section 7740.3(e) of the Uniform Trust Act. The Foundation appealed to the Supreme Court of Pennsylvania, arguing that the lower courts erroneously considered Wells’ intent to create a trust, which the Foundation claimed was not relevant under the statute.
The Supreme Court of Pennsylvania affirmed the lower courts’ decision. The court held that the Foundation failed to satisfy the statutory standard under Section 7740.3(e) of the Uniform Trust Act, which requires a showing that the administrative expenses or other burdens of the trust are unreasonably out of proportion to the charitable benefits. The court concluded that the expenses and burdens of the trust, including an annual excise tax and mandatory annual distribution under the Private Foundation Rules of the Internal Revenue Code, were not unreasonably out of proportion to the trust's charitable benefits.
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