Americans for the Arts v. Ruth Lilly Charitable Remainder Annuity Trust

855 N.E.2d 592 (2006)

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Americans for the Arts v. Ruth Lilly Charitable Remainder Annuity Trust

Indiana Court of Appeals
855 N.E.2d 592 (2006)

SC

Facts

Ruth Lilly’s estate plan created two charitable remainder annuity trusts, each with National City Bank of Indiana (the bank) (defendant) as trustee. Each trust named three charities as remainder beneficiaries: the Poetry Foundation, Lilly Endowment, Inc., and Americans for the Arts (collectively, AFTA) (plaintiffs). The trust permitted the bank to retain indefinitely any property it received as trustee. The trust also validated any investment that the bank made in good faith even if the investment did not comply with the Indiana Uniform Prudent Investor Act’s (PIA) requirement to diversify the trust’s assets. On January 18, 2002, the trusts were funded entirely with Eli Lilly and Company (Eli Lilly) stock. By October 2002, the bank had sold most of the Eli Lilly stock and fully diversified the trusts. In the interim, Eli Lilly stock had declined significantly in value, thus devaluing the trusts. In November 2002, the bank petitioned the court to approve its investment. AFTA objected to the petition, arguing that the bank was negligent, breached its fiduciary duty to the trusts’ beneficiaries, and violated the PIA by diversifying the trusts too slowly. The trial court granted the bank’s petition. AFTA appealed.

Rule of Law

Issue

Holding and Reasoning (Baker, J.)

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