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Fulp v. Gilliland - 998 N.E.2d 204 (Ind. 2013)

Rule:

Revocable trusts are popular estate planning tools and substitutes for wills because they allow settlors to avoid probate and guardianship, to have greater privacy, and to manage their assets. Like other trusts, a revocable trust is a fiduciary relationship between a person who, as trustee, holds title to property and another person for whom, as beneficiary, the title is held. Ind. Code § 30-4-1-1(a) (2004). A settlor creates a revocable trust by executing the trust agreement, at which time the trustee takes legal title to the property, and the beneficiary takes equitable title. Ind. Code § 30-4-1-1(a). But unlike other trusts, settlors of revocable trusts continue using the trust property during their lives and retain the power to revoke or amend the trust at any time. Unlike a will, upon the settlor's death, the trust property is not in the decedent-settlor's estate.

Facts:

Revocable trusts are popular substitutes for wills, intended to provide non-probate distribution 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.

Issue:

Was Ruth free to sell her farm as trustee for whatever price she desired, without breaching a duty to her children?

Answer:

Yes

Conclusion:

Under the terms of the revocable trust and Ind. Code § 30-4-3-1.3(a) (Supp. 2013), Ruth owed the beneficiaries, her children, no fiduciary duties and was free to sell her farm at less than fair market value to Harold Jr.; hence, Harold Jr. was entitled to specific performance of the sales agreement. Ruth did not effectively amend the trust under Ind. Code § 30-4-3-1.5(c)(2)(B) (Supp. 2013) by selling the farm.

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