## Facts

- Harold Inman created a revocable trust in 1994 holding roughly 189 acres of Washington County, Nebraska farmland.
- The trust provided life income interests in farm rental income to Inman’s daughter Elizabeth Peters (from 55 acres), then to grandson Robert H. Brackett after Peters’ death, and also provided Brackett income from the remaining farmland during his lifetime, with later division among other beneficiaries or their issue.
- The trust granted broad administrative powers, including authority to sell trust property and to retain property without regard to concentration, but did not expressly authorize the trustee to buy trust property.
- After Inman’s death, Brackett became successor trustee and later entered a purchase agreement to buy 42 acres (about 30 tillable) from the trust, with Brackett acting as trustee-seller and as individual buyer.
- Before seeking court approval, Brackett moved an older farmhouse onto the 42-acre parcel and intended to live there.
- Brackett petitioned the county court to approve the sale to himself for $84,000, supported by an appraisal stating the price was fair market value.
- Brackett testified the trust would earn a better return if sale proceeds were invested in financial assets; a finance expert testified the trust was undiversified and did not meet Nebraska Uniform Prudent Investor Act (NUPIA) standards.
- Multiple beneficiaries objected, asserting Inman intended the farmland to remain a shared family asset, that it had sentimental value to the family, and that the land already produced adequate income and could appreciate.

## Issues

1. Whether a trustee may purchase trust property for personal benefit when the trust grants broad powers to sell and retain property but does not expressly authorize self-dealing.
2. Whether NUPIA diversification considerations can justify or validate a trustee’s proposed self-dealing sale.
3. Whether the county court erred or abused its discretion by refusing to approve the trustee’s petition for the self-purchase.

## Decision

- The Nebraska Supreme Court affirmed the county court’s order denying approval of the sale.
- The proposed transaction was self-dealing, and the trust’s general power to sell and retain assets did not constitute express authority for the trustee to buy trust property.
- Diversification principles under NUPIA did not override the duty of loyalty or the need to act consistently with the settlor’s intent, particularly where beneficiaries objected.
- The county court had discretion to deny authorization, and the denial was not an abuse of discretion.

## Legal Principles

- A trustee owes a strict duty of loyalty and ordinarily may not enter transactions that place the trustee on both sides, including purchasing trust property for personal benefit, absent express authorization in the instrument, informed consent of all competent beneficiaries, or court approval.
- Trustee powers must be construed in light of the trust instrument as a whole and the settlor’s intent; broad administrative powers do not, without more, eliminate traditional restrictions on self-dealing.
- Under NUPIA, diversification is generally required as part of prudent investing, but the duty to diversify is applied in light of the trust purposes and may be limited by the trust’s terms, the character of the assets, and the settlor’s objectives.
- A court asked to approve a trustee’s conflicted transaction may deny approval when the transaction risks impairing the trust’s purposes or the interests of nonconsenting beneficiaries, even if the proposed price is supported by an appraisal.

## Conclusion

The court refused to permit a trustee’s self-purchase of trust farmland where the instrument did not clearly authorize self-dealing and beneficiaries objected, holding that prudent-investor diversification considerations cannot displace the duty of loyalty or the settlor’s apparent intent to preserve a shared family asset.


In re Trust Created by Inman, 269 Neb. 376, 693 N.W.2d 514 (Neb. 2005)