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Friday, November 22, 2013

Ind. Decisions - SCOIND decides one today

In Harold O. Fulp, Jr. v. Nancy A. Gilliland, a 9-page, 5-0 opinion, Justice Rush writes:

Revocable trusts are popular substitutes for wills, intended to provide non-probate distri-bution of people’s estates after their deaths, allowing them to retain control and use of their assets during their lifetimes. Here, Ruth Fulp placed her family farm in a revocable trust, reserving the right to revoke or amend the trust and to use its assets—with any remaining trust assets going to her three children upon her death. A few years later, she decided to sell the farm to her son Harold Jr. for a low price, to pay for her retirement-home care and keep the farm in the family. Ruth’s daughter, Nancy Gilliland, argued that a bargain sale would breach Ruth’s fiduciary duty to her children and deprive Nancy of “her share” of the trust.

We granted transfer to address an issue of first impression in Indiana: while a revocable trust is revocable, whom does the trustee serve? Of course, Ruth as trustee owed a duty to herself as the trust’s settlor and primary beneficiary. But the trial court found Ruth also owed that same fiduciary duty to her children as remainder beneficiaries. We conclude, though, that neither the terms of Ruth’s trust nor the Indiana Trust Code require her to serve two masters—her duty as trustee was only to herself. Holding that trustees also owe a duty to remainder beneficiaries would create conflicting rights and duties for trustees and essentially render revocable trusts irrevocable. Ruth was free to sell her farm as trustee for whatever price she desired, without breaching a duty to her children. * * *

Conclusion. We conclude that under the terms of the Trust and the Trust Code Ruth owed her children no fiduciary duties and was free to sell her farm at less than fair market value; and that Harold Jr. is therefore entitled to specific performance. We also conclude that Ruth did not effectively amend the Trust by selling the farm. The judgment of the trial court is therefore reversed and remanded, with instructions to grant specific performance of the purchase agreement.

Posted by Marcia Oddi on November 22, 2013 12:28 PM
Posted to Ind. Sup.Ct. Decisions