## Facts

- Dorothy S. Gutsgell created and amended a revocable trust naming herself as settlor and sole lifetime beneficiary; after her husband’s death, the residue was to pass to her niece, Lucy Brundage.
- The trust made specific gifts of American Home Products (AHP) stock: 6,000 shares each to four relatives (the Brundages) and 3,000 shares to a godson.
- After a 1995 AHP stock split, Dorothy amended the trust to double the stock gifts (12,000 shares each to the Brundages; 6,000 to the godson).
- A second stock split occurred in 1998, but Dorothy did not amend the trust to increase the specified share amounts.
- In 2001, seeking estate-tax savings, Dorothy resigned as trustee and Bank of America and Lucy became co-trustees.
- With Dorothy’s direction, the co-trustees transferred most trust assets to a family limited partnership (FLP) in which the trust held 99.5% of the interests; only 54,000 AHP shares remained titled in the trust.
- After Dorothy’s death, the co-trustees distributed the 54,000 AHP shares held by the trust to the Brundages pursuant to the specific bequests.
- The Brundages claimed entitlement to an additional 54,000 shares attributable to the 1998 split and alleged breach of fiduciary duty based on alleged self-dealing and Dorothy’s alleged incapacity when directing the FLP transfers.
- The trial court entered declaratory relief against the Brundages, dismissed the fiduciary-duty claim, and excluded evidence of Dorothy’s alleged incapacity.

## Issues

1. Whether beneficiaries of a specific stock bequest were entitled to additional shares attributable to a later stock split when the trust was not amended after the split and the additional shares were not held in the trust at the settlor’s death.
2. Whether the trustee of a revocable trust owed fiduciary duties to remainder beneficiaries during the settlor’s lifetime sufficient to support a breach claim challenging transfers made at the settlor’s direction.
3. Whether evidence of the settlor’s mental capacity to direct or consent to the transfers was admissible and material to the fiduciary-duty claim.

## Decision

- The appellate court affirmed the declaratory judgment denying additional AHP shares beyond the 54,000 shares held by the trust at Dorothy’s death.
- The appellate court reversed the involuntary dismissal of the breach-of-fiduciary-duty claim and remanded for further proceedings.
- The court held the trial court erred by excluding evidence concerning Dorothy’s alleged incapacity because it was relevant to whether the trustees properly acted on her directions.

## Legal Principles

- In a revocable trust where the settlor is the sole lifetime beneficiary, the trustee’s fiduciary duty during the settlor’s lifetime runs primarily to the settlor, not to contingent remainder beneficiaries whose interests may be divested before the settlor’s death.
- A specific stock bequest is generally satisfied from the shares actually held by the trust at the settlor’s death; absent a contrary manifestation of intent, later corporate actions do not require an increased distribution when the additional shares are not part of the trust estate at death.
- A trustee’s reliance on a settlor’s directions may be subject to challenge where there is a material question about the settlor’s capacity; excluding capacity evidence can be reversible error when it prevents adjudication of a pleaded fiduciary-breach theory tied to the validity of the settlor-directed transactions.

## Conclusion

The court upheld the distribution of only the AHP shares titled in the trust at the settlor’s death but required further litigation of the fiduciary-duty claim because the trial court improperly barred evidence bearing on whether the trustees acted on directions from a settlor who may have lacked capacity.


Brundage v. Bank of Am., 996 So. 2d 877 (Fla. 4th DCA 2008)