## Facts

- Ruth E. Fulp created a revocable trust holding the family farm (about 254 acres), naming herself settlor, trustee, and sole lifetime beneficiary, and naming her three children as equal remainder beneficiaries at her death.
- The trust granted Ruth broad authority to alter, amend, or revoke the trust, and to use and dispose of trust assets for her own benefit, including by sale.
- After Ruth’s husband died, Harold O. Fulp, Jr. continued farming the land.
- As Ruth aged and moved to a retirement facility, she sought to fund her care and keep the farm in the family.
- Ruth entered into a purchase agreement to sell the farm to Harold Jr. for a below-market price.
- Nancy A. Gilliland objected that the bargain sale would reduce the remainder beneficiaries’ expected shares.
- Ruth resigned as trustee; Gilliland became successor trustee and attempted to rescind the purchase agreement.
- Harold Jr. sued for specific performance.
- The trial court found Ruth competent and the price sufficient but denied specific performance on the theory that Ruth, as trustee, breached fiduciary duties owed to the remainder beneficiaries by selling at a bargain price.

## Issues

1. While a revocable trust remains revocable and the settlor is alive, does the trustee owe fiduciary duties to remainder beneficiaries, or only to the settlor?
2. If duties are owed to remainder beneficiaries during the revocable period, did the trustee breach those duties by selling trust property to one remainder beneficiary for below fair market value?
3. Should such a sale be treated as trustee action authorized by the trust, or recharacterized as an amendment or revocation by the settlor?

## Decision

- The Indiana Supreme Court reversed the denial of specific performance and remanded for further proceedings.
- While the trust was revocable, the trustee’s duties ran only to Ruth as settlor and sole lifetime beneficiary, not to the remainder beneficiaries.
- Because no fiduciary duty was owed to the remainder beneficiaries during the revocable period, the bargain sale did not constitute a breach of duty to them.
- The court rejected the view that the sale had to be treated as an amendment of the trust; Ruth had authority to sell the farm as trustee under the trust’s terms and applicable trust law.

## Legal Principles

- During the period a trust is revocable and the settlor is alive (and retains the power to revoke), the trustee’s fiduciary duties are owed exclusively to the settlor.
- Remainder beneficiaries of a revocable trust have contingent, defeasible interests that do not entitle them to enforce trustee duties against actions taken for the settlor’s benefit while revocability continues.
- A trustee’s disposition of revocable trust property, when authorized by the trust instrument and consistent with the settlor’s retained control, is not treated as a breach of fiduciary duty to remainder beneficiaries merely because it diminishes their expected remainder.
- A sale of trust assets need not be recharacterized as a trust amendment when the trustee possesses express authority to sell under the trust’s terms.

## Conclusion

The court held that, while Ruth’s trust remained revocable, the trustee served only Ruth, not the remainder beneficiaries; therefore, a below-market sale of the farm to one child could not breach fiduciary duties to the other children, and the denial of specific performance based on such a duty was reversed.


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