HB1471 EnrolledLRB101 06784 LNS 51811 b

1    AN ACT concerning civil law.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4
Article 1. General Provisions and Definitions.

 
5    Section 101. Short title. This Act may be cited as the
6Illinois Trust Code.
 
7    Section 102. Scope. Except as otherwise provided, this Code
8applies to express trusts, charitable or noncharitable, and
9trusts created pursuant to a statute, judgment, or decree that
10requires the trust to be administered in the manner of an
11express trust. This Code does not apply to any:
12        (1) land trust;
13        (2) voting trust;
14        (3) security instrument such as a trust deed or
15    mortgage;
16        (4) liquidation trust;
17        (5) escrow;
18        (6) instrument under which a nominee, custodian for
19    property, or paying or receiving agent is appointed;
20        (7) trust created by a deposit arrangement in a banking
21    or savings institution, commonly known as a "Totten trust"
22    unless in the trust instrument any of the provisions of

 

 

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1    this Code are made applicable by specific reference; or
2        (8) Grain Indemnity Trust Account or any other trust
3    created under the Grain Code.
 
4    Section 103. Definitions. In this Code:
5    (1) "Action", with respect to an act of a trustee, includes
6a failure to act.
7    (2) "Ascertainable standard" means a standard relating to
8an individual's health, education, support, or maintenance
9within the meaning of Section 2041(b)(1)(A) or 2514(c)(1) of
10the Internal Revenue Code and any applicable regulations.
11    (3) "Beneficiary" means a person that:
12        (A) has a present or future beneficial interest in a
13    trust, vested or contingent, assuming nonexercise of
14    powers of appointment;
15        (B) in a capacity other than that of trustee, holds a
16    power of appointment over trust property; or
17        (C) is an identified charitable organization that will
18    or may receive distributions under the terms of the trust.
19    (4) "Charitable interest" means an interest in a trust
20that:
21        (A) is held by an identified charitable organization
22    and makes the organization a qualified beneficiary;
23        (B) benefits only charitable organizations and, if the
24    interest were held by an identified charitable
25    organization, would make the organization a qualified

 

 

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1    beneficiary; or
2        (C) is held solely for charitable purposes and, if the
3    interest were held by an identified charitable
4    organization, would make the organization a qualified
5    beneficiary.
6    (5) "Charitable organization" means:
7        (A) a person, other than an individual, organized and
8    operated exclusively for charitable purposes; or
9        (B) a government or governmental subdivision, agency,
10    or instrumentality, to the extent it holds funds
11    exclusively for a charitable purpose.
12    (6) "Charitable purpose" means the relief of poverty, the
13advancement of education or religion, the promotion of health,
14municipal or other governmental purpose, or another purpose the
15achievement of which is beneficial to the community.
16    (7) "Charitable trust" means a trust, or portion of a
17trust, created for a charitable purpose.
18    (8) "Community property" means all personal property,
19wherever situated, that was acquired as or became, and
20remained, community property under the laws of another
21jurisdiction, and all real property situated in another
22jurisdiction that is community property under the laws of that
23jurisdiction.
24    (9) "Current beneficiary" means a beneficiary that on the
25date the beneficiary's qualification is determined is a
26distributee or permissible distributee of trust income or

 

 

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1principal. The term "current beneficiary" includes the holder
2of a presently exercisable general power of appointment but
3does not include a person who is a beneficiary only because the
4person holds any other power of appointment.
5    (10) "Directing party" means any investment trust advisor,
6distribution trust advisor, or trust protector.
7    (11) "Donor", with reference to a power of appointment,
8means a person that creates a power of appointment.
9    (12) "Environmental law" means a federal, state, or local
10law, rule, regulation, or ordinance relating to protection of
11the environment.
12    (13) "General power of appointment" means a power of
13appointment exercisable in favor of a powerholder, the
14powerholder's estate, a creditor of the powerholder, or a
15creditor of the powerholder's estate.
16    (14) "Guardian of the estate" means a person appointed by a
17court to administer the estate of a minor or adult individual.
18    (15) "Guardian of the person" means a person appointed by a
19court to make decisions regarding the support, care, education,
20health, and welfare of a minor or adult individual.
21    (16) "Incapacitated" or "incapacity" means the inability
22of an individual to manage property or business affairs because
23the individual is a minor, adjudicated incompetent, has an
24impairment in the ability to receive and evaluate information
25or make or communicate decisions even with the use of
26technological assistance; or is at a location that is unknown

 

 

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1and not reasonably ascertainable. Without limiting the ways in
2which incapacity may be established, an individual is
3incapacitated if:
4        (i) a plenary guardian has been appointed for the
5    individual under subsection (c) of Section 11a-12 of the
6    Probate Act of 1975;
7        (ii) a limited guardian has been appointed for the
8    individual under subsection (b) of Section 11a-12 of the
9    Probate Act of 1975 and the court has found that the
10    individual lacks testamentary capacity; or
11        (iii) the individual was examined by a licensed
12    physician who determined that the individual was
13    incapacitated and the physician made a signed written
14    record of the physician's determination within 90 days
15    after the examination and no licensed physician
16    subsequently made a signed written record of the
17    physician's determination that the individual was not
18    incapacitated within 90 days after examining the
19    individual.
20    (17) "Internal Revenue Code" means the Internal Revenue
21Code of 1986 as amended from time to time and includes
22corresponding provisions of any subsequent federal tax law.
23    (18) "Interested persons" means: (A) the trustee; and (B)
24all beneficiaries, or their respective representatives
25determined after giving effect to the provisions of Article 3,
26whose consent or joinder would be required in order to achieve

 

 

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1a binding settlement were the settlement to be approved by the
2court. "Interested persons" includes a trust advisor,
3investment advisor, distribution advisor, trust protector, or
4other holder, or committee of holders, of fiduciary or
5nonfiduciary powers, if the person then holds powers material
6to a particular question or dispute to be resolved or affected
7by a nonjudicial settlement in accordance with Section 111 or
8by a judicial proceeding.
9    (19) "Interests of the beneficiaries" means the beneficial
10interests provided in the trust instrument.
11    (20) "Jurisdiction", with respect to a geographic area,
12includes a State or country.
13    (21) "Legal capacity" means that the person is not
14incapacitated.
15    (22) "Nongeneral power of appointment" means a power of
16appointment that is not a general power of appointment.
17    (23) "Person" means an individual, estate, business or
18nonprofit entity, public corporation, government or
19governmental subdivision, agency, or instrumentality, or other
20legal entity.
21    (24) "Power of appointment" means a power that enables a
22powerholder acting in a nonfiduciary capacity to designate a
23recipient of an ownership interest in or another power of
24appointment over the appointive property. The term "power of
25appointment" does not include a power of attorney.
26    (25) "Power of withdrawal" means a presently exercisable

 

 

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1general power of appointment other than a power:
2        (A) exercisable by the powerholder as trustee that is
3    limited by an ascertainable standard; or
4        (B) exercisable by another person only upon consent of
5    the trustee or a person holding an adverse interest.
6    (26) "Powerholder" means a person in which a donor creates
7a power of appointment.
8    (27) "Presently exercisable power of appointment" means a
9power of appointment exercisable by the powerholder at the
10relevant time. The term "presently exercisable power of
11appointment":
12        (A) includes a power of appointment exercisable only
13    after the occurrence of a specified event, the satisfaction
14    of an ascertainable standard, or the passage of a specified
15    time only after:
16            (i) the occurrence of the specified event;
17            (ii) the satisfaction of the ascertainable
18        standard; or
19            (iii) the passage of the specified time; and
20        (B) does not include a power exercisable only at the
21    powerholder's death.
22    (28) "Presumptive remainder beneficiary" means a
23beneficiary of a trust, as of the date of determination and
24assuming nonexercise of all powers of appointment, who either:
25(A) would be eligible to receive a distribution of income or
26principal if the trust terminated on that date; or (B) would be

 

 

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1eligible to receive a distribution of income or principal if
2the interests of all beneficiaries currently eligible to
3receive income or principal from the trust ended on that date
4without causing the trust to terminate.
5    (29) "Property" means anything that may be the subject of
6ownership, whether real or personal, legal or equitable, or any
7interest therein.
8    (30) "Qualified beneficiary" means a beneficiary who, on
9the date the beneficiary's qualification is determined and
10assuming nonexercise of powers of appointment:
11        (A) is a distributee or permissible distributee of
12    trust income or principal;
13        (B) would be a distributee or permissible distributee
14    of trust income or principal if the interests of the
15    distributees described in subparagraph (A) terminated on
16    that date without causing the trust to terminate; or
17        (C) would be a distributee or permissible distributee
18    of trust income or principal if the trust terminated on
19    that date.
20    (31) "Revocable", as applied to a trust, means revocable by
21the settlor without the consent of the trustee or a person
22holding an adverse interest. A revocable trust is deemed
23revocable during the settlor's lifetime.
24    (32) "Settlor", except as otherwise provided in Sections
25113 and 1225, means a person, including a testator, who
26creates, or contributes property to, a trust. If more than one

 

 

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1person creates or contributes property to a trust, each person
2is a settlor of the portion of the trust property attributable
3to that person's contribution except to the extent another
4person has the power to revoke or withdraw that portion.
5    (33) "Sign" means, with present intent to authenticate or
6adopt a record:
7        (A) to execute or adopt a tangible symbol; or
8        (B) to attach to or logically associate with the record
9    an electronic symbol, sound, or process.
10    (34) "Spendthrift provision" means a term of a trust that
11restrains both voluntary and involuntary transfer of a
12beneficiary's interest.
13    (35) "State" means a State of the United States, the
14District of Columbia, Puerto Rico, the United States Virgin
15Islands, or any territory or insular possession subject to the
16jurisdiction of the United States. The term "state" includes an
17Indian tribe or band recognized by federal law or formally
18acknowledged by a state.
19    (36) "Terms of the trust" means:
20        (A) except as otherwise provided in paragraph (B), the
21    manifestation of the settlor's intent regarding a trust's
22    provisions as:
23            (i) expressed in the trust instrument; or
24            (ii) established by other evidence that would be
25        admissible in a judicial proceeding; or
26        (B) the trust's provisions as established, determined,

 

 

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1    or modified by:
2            (i) a trustee or other person in accordance with
3        applicable law;
4            (ii) a court order; or
5            (iii) a nonjudicial settlement agreement under
6        Section 111.
7    (37) "Trust" means a trust created by will, deed,
8agreement, declaration, or other written instrument.
9    (38) "Trust accounting" means one or more written
10communications from the trustee with respect to the accounting
11year that describe: (A) the trust property, liabilities,
12receipts, and disbursements, including the amount of the
13trustee's compensation; (B) the value of the trust assets on
14hand at the close of the accounting period, to the extent
15feasible; and (C) all other material facts related to the
16trustee's administration of the trust.
17    (39) "Trust instrument" means the written instrument
18stating the terms of a trust, including any amendment, any
19court order or nonjudicial settlement agreement establishing,
20construing, or modifying the terms of the trust in accordance
21with Section 111, Sections 410 through 416, or other applicable
22law, and any additional trust instrument under Article 12.
23    (40) "Trustee" includes an original, additional, and
24successor trustee, and a co-trustee.
25    (41) "Unascertainable beneficiary" means a beneficiary
26whose identity is uncertain or not reasonably ascertainable.
 

 

 

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1    Section 104. Knowledge.
2    (a) Except as provided in subsection (b), a person has
3knowledge of a fact if the person:
4        (1) has actual knowledge of it;
5        (2) has received a notice or notification of it; or
6        (3) from all the facts and circumstances known to the
7    person at the time in question, has reason to know it.
8    (b) An organization that conducts activities through
9employees has notice or knowledge of a fact involving a trust
10only from the time the information was received by an employee
11having responsibility to act for the trust, or would have been
12brought to the employee's attention if the organization had
13exercised reasonable diligence. An organization exercises
14reasonable diligence if it maintains reasonable routines for
15communicating significant information to the employee having
16responsibility to act for the trust and there is reasonable
17compliance with the routines. Reasonable diligence does not
18require an employee of the organization to communicate
19information unless the communication is part of the
20individual's regular duties or the individual knows a matter
21involving the trust would be materially affected by the
22information.
 
23    Section 105. Default and mandatory rules.
24    (a) The trust instrument may specify the rights, powers,

 

 

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1duties, limitations, and immunities applicable to the trustee,
2beneficiary, and others and those terms, if not otherwise
3contrary to law, shall control, except to the extent
4specifically provided otherwise in this Section. The
5provisions of this Code apply to the trust to the extent that
6they are not inconsistent with specific terms of the trust.
7    (b) Specific terms of the trust prevail over any provision
8of this Code except:
9        (1) the requirements for creating a trust;
10        (2) the duty of a trustee to act in good faith;
11        (3) the requirement that a trust have a purpose that is
12    lawful and not contrary to public policy;
13        (4) the rules governing designated representatives as
14    provided in Section 307;
15        (5) the 21-year limitation contained in subsection (a)
16    of Section 409;
17        (6) the power of the court to modify or terminate a
18    trust under Sections 411 through 417;
19        (7) the effect of a spendthrift provision and the
20    rights of certain creditors and assignees to reach a trust
21    as provided in Article 5;
22        (8) the requirement under subsection (e) of Section 602
23    that an agent under a power of attorney must have express
24    authorization in the agency to exercise a settlor's powers
25    with respect to a revocable trust;
26        (9) the power of the court under subsection (b) of

 

 

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1    Section 708 to adjust a trustee's compensation specified in
2    the trust instrument that is unreasonably low or high;
3        (10) for trusts becoming irrevocable after the
4    effective date of this Code, the trustee's duty under
5    paragraph (b)(1) of Section 813.1 to provide information to
6    the qualified beneficiaries;
7        (11) for trusts becoming irrevocable after the
8    effective date of this Code, the trustee's duty under
9    paragraph (b)(2) of Section 813.1 to provide accountings to
10    the current beneficiaries of the trust;
11        (12) for trusts becoming irrevocable after the
12    effective date of this Code, the trustee's duty under
13    paragraph (b)(4) of Section 813.1 to provide accountings to
14    beneficiaries receiving a distribution of the residue of
15    the trust upon a trust's termination;
16        (13) the effect of an exculpatory term under Section
17    1008;
18        (14) the rights under Sections 1010 through 1013 of a
19    person other than a trustee or beneficiary; and
20        (15) the power of the court to take such action and
21    exercise such jurisdiction as may be necessary in the
22    interests of equity.
 
23    Section 106. Common law of trusts; principles of equity.
24The common law of trusts and principles of equity supplement
25this Code, except to the extent modified by this Code or

 

 

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1another statute of this State.
 
2    Section 107. Governing law.
3    (a) The meaning and effect of a trust instrument are
4determined by:
5        (1) the law of the jurisdiction designated in the trust
6    instrument; or
7        (2) in the absence of a designation in the trust
8    instrument, the law of the jurisdiction having the most
9    significant relationship to the matter at issue.
10    (b) Except as otherwise expressly provided by the trust
11instrument or by court order, the laws of this State govern the
12administration of a trust while the trust is administered in
13this State.
 
14    Section 108. Principal place of administration.
15    (a) Without precluding other means for establishing a
16sufficient connection with the designated jurisdiction, the
17terms of a trust designating the principal place of
18administration are valid and controlling if:
19        (1) a trustee's principal place of business is located
20    in or a trustee is a resident of the designated
21    jurisdiction; or
22        (2) all or part of the administration occurs in the
23    designated jurisdiction.
24    (b) A trustee is under a continuing duty to administer the

 

 

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1trust at a place appropriate to its purposes, its
2administration, and the interests of the beneficiaries.
3    (c) Without precluding the right of the court to order,
4approve, or disapprove a transfer, the trustee, in furtherance
5of the duty prescribed by subsection (b), may transfer the
6trust's principal place of administration to another State or
7to a jurisdiction outside of the United States.
8    (d) The trustee shall notify the qualified beneficiaries of
9a proposed transfer of a trust's principal place of
10administration not less than 60 days before initiating the
11transfer. The notice of proposed transfer must include:
12        (1) the name of the jurisdiction to which the principal
13    place of administration is to be transferred;
14        (2) the address and telephone number at the new
15    location at which the trustee can be contacted;
16        (3) an explanation of the reasons for the proposed
17    transfer;
18        (4) the date on which the proposed transfer is
19    anticipated to occur; and
20        (5) the date, not less than 60 days after the giving of
21    the notice, by which the qualified beneficiary must notify
22    the trustee of an objection to the proposed transfer.
23    (e) The authority of a trustee under this Section to
24transfer a trust's principal place of administration
25terminates if a qualified beneficiary notifies the trustee of
26an objection to the proposed transfer on or before the date

 

 

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1specified in the notice.
2    (f) Notwithstanding any other provision of this Code, the
3trustee has no duty to inform the beneficiaries, or any other
4interested party, about the availability of this Section and
5further has no duty to review the trust instrument to determine
6whether any action should be taken under this Section unless
7requested to do so by a qualified beneficiary.
8    (g) In connection with a transfer of the trust's principal
9place of administration, the trustee may transfer some or all
10of the trust property to a successor trustee designated in the
11terms of the trust or appointed pursuant to Section 704.
 
12    Section 109. Methods and waiver of notice.
13    (a) Notice to a person under this Code or the sending of a
14document to a person under this Code must be accomplished in a
15manner reasonably suitable under the circumstances and likely
16to result in receipt of the notice or document. Permissible
17methods of notice or for sending a document include first-class
18mail, personal delivery, delivery to the person's last known
19place of residence or place of business, or a properly directed
20electronic message.
21    (b) Notice otherwise required under this Code or a document
22otherwise required to be sent under this Code need not be
23provided to a person whose identity or location is unknown to
24and not reasonably ascertainable by the trustee.
25    (c) Notice under this Code or the sending of a document

 

 

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1under this Code may be waived by the person to be notified or
2sent the document.
3    (d) Notice of a judicial proceeding must be given as
4provided in the applicable rules of civil procedure.
5    (e) Subject to subsection (d), receipt by a beneficiary or
6other person of a trustee's notice, account, or other report is
7presumed if the trustee has reasonable procedures in place
8requiring the mailing or delivery of the notice, account, or
9report to the beneficiary or other person. This presumption
10applies to the mailing or delivery of a notice, account, or
11other report, including any communication required in writing,
12by electronic means or the provision of access to the
13information by electronic means so long as the beneficiary or
14other person has agreed to receive the information by
15electronic delivery or access.
 
16    Section 110. Others treated as qualified beneficiaries.
17    (a) A person appointed to enforce a trust created for the
18care of an animal or another noncharitable purpose as provided
19in Section 408 or 409 has the rights of a qualified beneficiary
20under this Code.
21    (b) The Attorney General has the rights of a qualified
22beneficiary with respect to a charitable trust having its
23principal place of administration in this State.
 
24    Section 111. Nonjudicial settlement agreements.

 

 

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1    (a) Interested persons, or their respective
2representatives determined after giving effect to Article 3,
3may enter into a binding nonjudicial settlement agreement with
4respect to any matter involving a trust as provided in this
5Section.
6    (b) The following matters may be resolved by a nonjudicial
7settlement agreement:
8        (1) Validity, interpretation, or construction of the
9    terms of the trust.
10        (2) Approval of a trustee's report or accounting.
11        (3) Exercise or nonexercise of any power by a trustee.
12        (4) The grant to a trustee of any necessary or
13    desirable administrative power if the grant does not
14    conflict with a clear material purpose of the trust.
15        (5) Questions relating to property or an interest in
16    property held by the trust if the resolution does not
17    conflict with a clear material purpose of the trust.
18        (6) Removal, appointment, or removal and appointment
19    of a trustee, trust advisor, investment advisor,
20    distribution advisor, trust protector, or other holder, or
21    committee of holders, of fiduciary or nonfiduciary powers,
22    including without limitation designation of a plan of
23    succession or procedure to determine successors to any such
24    office.
25        (7) Determination of a trustee's or other fiduciary's
26    compensation.

 

 

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1        (8) Transfer of a trust's principal place of
2    administration, including, without limitation, to change
3    the law governing administration of the trust.
4        (9) Liability or indemnification of a trustee for an
5    action relating to the trust.
6        (10) Resolution of bona fide disputes related to trust
7    administration, investment, distribution, or other
8    matters.
9        (11) Modification of the terms of the trust pertaining
10    to the administration of the trust.
11        (12) Determining whether the aggregate interests of
12    each beneficiary in severed trusts are substantially
13    equivalent to the beneficiary's interests in the trusts
14    before severance.
15        (13) Termination of the trust, except that court
16    approval of the termination must be obtained in accordance
17    with subsection (d), and the court must find that
18    continuance of the trust is not necessary to achieve any
19    clear material purpose of the trust. The court shall
20    consider spendthrift provisions as a factor in making a
21    decision under this subsection, but a spendthrift
22    provision is not necessarily a material purpose of a trust,
23    and the court is not precluded from modifying or
24    terminating a trust because the trust instrument contains
25    spendthrift provisions. Upon termination, the court shall
26    order the distribution of the trust property as agreed by

 

 

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1    the parties to the agreement, or if the parties cannot
2    agree, then as the court determines is equitable and
3    consistent with the purposes of the trust.
4    (c) If a trust contains a charitable interest, the parties
5to any proposed nonjudicial settlement agreement affecting the
6trust shall deliver to the Attorney General written notice of
7the proposed agreement at least 60 days before its effective
8date. The Bureau is not required to take action, but if it
9objects in a writing delivered to one or more of the parties
10before the proposed effective date, the agreement shall not
11take effect unless the parties obtain court approval.
12    (d) Any beneficiary or other interested person may request
13the court to approve any part or all of a nonjudicial
14settlement agreement, including, without limitation, whether
15any representation is adequate and without material conflict of
16interest, if the petition for approval is filed within 60 days
17after the effective date of the agreement.
18    (e) An agreement entered into in accordance with this
19Section, or a judicial proceeding pursued in accordance with
20this Section, is final and binding on the trustee, on all
21beneficiaries of the trust, both current and future, and on all
22other interested persons as if ordered by a court with
23competent jurisdiction over the trust, the trust property, and
24all parties in interest.
25    (f) In the trustee's sole discretion, the trustee may, but
26is not required to, obtain and rely upon an opinion of counsel

 

 

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1on any matter relevant to this Section, including, without
2limitation:
3        (1) if required by this Section, that the agreement
4    proposed to be made in accordance with this Section does
5    not conflict with a clear material purpose of the trust;
6        (2) in the case of a trust termination, that
7    continuance of the trust is not necessary to achieve any
8    clear material purpose of the trust;
9        (3) that there is no material conflict of interest
10    between a representative and the person represented with
11    respect to the particular question or dispute; and
12        (4) that the representative and the person represented
13    have substantially similar interests with respect to the
14    particular question or dispute.
15    (g) This Section shall be construed as pertaining to the
16administration of a trust and shall be available to any trust
17that is administered in this State or that is governed by
18Illinois law with respect to the meaning and effect of its
19terms, except to the extent the trust instrument expressly
20prohibits the use of this Section by specific reference to this
21Section or a prior corresponding law. A provision in the trust
22instrument in the form: "Neither the provisions of Section 111
23of the Illinois Trust Code nor any corresponding provision of
24future law may be used in the administration of this trust", or
25a similar provision demonstrating that intent, is sufficient to
26preclude the use of this Section.
 

 

 

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1    Section 112. Rules of construction. The rules of
2construction that apply in this State to the interpretation of
3wills and the disposition of property by will also apply as
4appropriate to the interpretation of the trust instrument and
5the disposition of the trust property. This Code shall be
6liberally construed and the rule that statutes in derogation of
7the common law shall be strictly construed does not apply.
 
8    Section 113. Insurable interest of trustee.
9    (a) A trustee of a trust has an insurable interest in the
10life of an individual insured under a life insurance policy
11that is owned by the trustee of the trust acting in a fiduciary
12capacity or that designates the trust itself as the owner if,
13on the date the policy is issued:
14        (1) the insured is:
15            (A) a settlor or beneficiary of the trust; or
16            (B) an individual in whom a settlor of the trust
17        has, or would have had if living at the time the policy
18        was issued, an insurable interest; and
19        (2) the trustee determines the life insurance
20    proceeds:
21            (A) are for the benefit of one or more trust
22        beneficiaries that have an insurable interest in the
23        life of the insured; or
24            (B) will carry out a purpose of the trust.

 

 

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1    (b) If a trustee of a trust would have an insurable
2interest in the life of an individual insured as described in
3this Section, then the insurable interest includes the joint
4lives of such an individual and his or her spouse.
5    (c) Nothing in this Section limits or affects any provision
6of the Viatical Settlements Act of 2009.
 
7    Section 114. Gift to a deceased beneficiary under an inter
8vivos trust.
9    (a) If a gift of a present or future interest is to a
10descendant of the settlor who dies before or after the settlor,
11the descendants of the deceased beneficiary living when the
12gift is to take effect in possession or enjoyment take per
13stirpes the gift so bequeathed.
14    (b) If a gift of a present or future interest is to a class
15and any member of the class dies before or after the settlor,
16the members of the class living when the gift is to take effect
17in possession or enjoyment take the share or shares that the
18deceased member would have taken if he or she were then living,
19except that, if the deceased member of the class is a
20descendant of the settlor, the descendants of the deceased
21member then living shall take per stirpes the share or shares
22that the deceased member would have taken if he or she were
23then living.
24    (c) Except as provided in subsections (a) and (b), if the
25gift is not to a descendant of the settlor or is not to a class

 

 

HB1471 Enrolled- 24 -LRB101 06784 LNS 51811 b

1as provided in subsections (a) and (b) and if the beneficiary
2dies either before or after the settlor and before the gift is
3to take effect in possession or enjoyment, then the gift shall
4lapse. If the gift lapses by reason of the death of the
5beneficiary before the gift is to take effect in possession or
6enjoyment, then the gift so given shall be included in and pass
7as part of the residue of the trust under the trust. If the
8gift is or becomes part of the residue, the gift so bequeathed
9shall pass to and be taken by the beneficiaries remaining, if
10any, of the residue in proportions and upon trusts
11corresponding to their respective interests in the residue of
12the trust. Subsections (a) and (b) do not apply to a future
13interest that is or becomes indefeasibly vested at the
14settlor's death or at any time thereafter before it takes
15effect in possession or enjoyment. This Section applies on and
16after January 1, 2005 for any gifts to a deceased beneficiary
17under an inter vivos trust if the deceased beneficiary dies
18after January 1, 2005 and before the gift is to take effect in
19possession or enjoyment.
 
20    Section 115. Transfer of real property to trust. The
21transfer of real property to a trust requires a transfer of
22legal title to the trustee evidenced by a written instrument of
23conveyance.
 
24
Article 2. Judicial Proceedings.

 

 

 

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1    Section 201. Role of court in administration of trusts.
2    (a) The court may adjudicate any matter arising in the
3administration of a trust to the extent its jurisdiction is
4invoked by an interested person or as provided by law.
5    (b) A trust is not subject to continuing judicial
6supervision unless ordered by the court.
7    (c) A judicial proceeding involving a trust may relate to
8any matter involving the trust's administration, including a
9request for instructions.
 
10    Section 202. Jurisdiction over trustee and beneficiary.
11    (a) By accepting the trusteeship of a trust having its
12principal place of administration in this State or by moving
13the principal place of administration to this State, the
14trustee is subject to the jurisdiction of the courts of this
15State regarding any matter involving the trust.
16    (b) With respect to their interests in the trust, the
17beneficiaries of a trust having its principal place of
18administration in this State are subject to the jurisdiction of
19the courts of this State regarding any matter involving the
20trust. By accepting a distribution from such a trust, the
21recipient personally submits to the jurisdiction of the courts
22of this State regarding any matter involving the trust.
23    (c) Service of process upon any person who is subject to
24the jurisdiction of the courts of this State, as provided in

 

 

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1this Section, may be made by personally serving the summons
2upon the defendant outside this State, as provided in the Code
3of Civil Procedure, with the same force and effect as though
4summons had been personally served within this State.
5    (d) This Section does not preclude other methods of
6obtaining jurisdiction over a trustee, beneficiary, or other
7person receiving property from the trust.
 
8    Section 203. (Reserved).
 
9    Section 204. Venue.
10    (a) Except as otherwise provided in subsection (b), venue
11for a judicial proceeding involving a trust is in the county of
12this State in which the trust's principal place of
13administration is or will be located and, if the trust is
14created by will and the estate is not yet closed, in the county
15in which the decedent's estate is being administered.
16    (b) If a trust has no trustee, venue for a judicial
17proceeding for the appointment of a trustee is proper in a
18county of this State in which a beneficiary resides, in a
19county in which any real or tangible trust property is located,
20and if the trust is created by will, in the county in which the
21decedent's estate was or is being administered.
22    (c) At the election of the Attorney General, venue for a
23judicial proceeding involving a trust with a charitable
24interest is also proper in any county where the Attorney

 

 

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1General accepts and maintains the list of registrations under
2the Charitable Trust Act.
 
3
Article 3. Representation.

 
4    Section 301. Representation: basic effect.
5    (a) Except as provided in Section 602 and subsection (c):
6        (1) Notice, information, accountings, or reports given
7    to a person who may represent and bind another person under
8    this Article have the same effect as if given directly to
9    the person represented.
10        (2) Actions, including, but not limited to, the
11    execution of an agreement, taken by a person who may
12    represent and bind another person under this Article are
13    binding on the person represented to the same extent as if
14    the actions had been taken by the person represented.
15    (b) Except as otherwise provided in Section 602, a person
16under this Article who represents a settlor who is
17incapacitated may, on the settlor's behalf: (i) receive notice,
18information, accountings, or reports; (ii) give a binding
19consent; or (iii) enter a binding agreement.
20    (c) A settlor may not represent and bind a beneficiary
21under this Article with respect to a nonjudicial settlement
22agreement under Section 111, the termination or modification of
23a trust under subsection (a) of Section 411, or an exercise of
24the decanting power under Article 12.

 

 

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1    (d) If pursuant to this Article a person may be represented
2by 2 or more representatives, then the representative who has
3legal capacity, in the following order of priority, shall
4represent and bind the person:
5        (1) a representative or guardian ad litem appointed by
6    a court under Section 305;
7        (2) the holder of a power of appointment under Section
8    302;
9        (3) a designated representative under Section 307;
10        (4) a court-appointed guardian of the estate, or, if
11    none, a court-appointed guardian of the person under
12    subsection (b) of Section 303;
13        (5) an agent under a power of attorney for property
14    under subsection (c) of Section 303;
15        (6) a parent of a person under subsection (d) of
16    Section 303;
17        (7) another person having a substantially similar
18    interest with respect to the particular question or dispute
19    under subsection (a) of Section 304; and
20        (8) a representative under this Article for a person
21    who has a substantially similar interest to a person who
22    has a representative under subsection (b) of Section 304.
23    (e) A trustee is not liable for giving notice, information,
24accountings, or reports to a person who is represented by
25another person under this Article, and nothing in this Article
26prohibits the trustee from giving notice, information,

 

 

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1accountings, or reports to the person represented.
 
2    Section 302. Representation by holders of certain powers.
3    (a) The holder of a testamentary or a presently exercisable
4power of appointment that is: (1) a general power of
5appointment; or (2) exercisable in favor of all persons other
6than the powerholder, the powerholder's estate, a creditor of
7the powerholder, or a creditor of the powerholder's estate, may
8represent and bind all persons, including permissible
9appointees and takers in default, whose interests may be
10eliminated by the exercise or nonexercise of the power.
11    (b) To the extent there is no conflict of interest between
12a holder and the persons represented with respect to the
13particular question or dispute, the holder of a testamentary or
14presently exercisable power of appointment, other than a power
15described in subsection (a), may represent and bind all
16persons, including permissible appointees and takers in
17default, whose interests may be eliminated by the exercise or
18nonexercise of the power.
 
19    Section 303. Representation by others.
20    (a) If all qualified beneficiaries of a trust either have
21legal capacity or have representatives under this Article who
22have legal capacity, an action taken by all qualified
23beneficiaries, in each case either by the beneficiary or by the
24beneficiary's representative, shall represent and bind all

 

 

HB1471 Enrolled- 30 -LRB101 06784 LNS 51811 b

1other beneficiaries who have a successor, contingent, future,
2or other interest in the trust.
3    (b) If a person is represented by a court-appointed
4guardian of the estate or, if none, guardian of the person,
5then the guardian may represent and bind the person.
6    (c) If an individual is incapacitated, an agent under a
7power of attorney for property who has authority to act with
8respect to the particular question or dispute and who does not
9have a material conflict of interest with respect to the
10particular question or dispute may represent and bind the
11principal. An agent is deemed to have authority under this
12subsection if the power of attorney grants the agent the power
13to settle claims and to exercise powers with respect to trusts
14and estates, even if the powers do not include powers to make a
15will, to revoke or amend a trust, or to require the trustee to
16pay income or principal.
17    (d) If a person is incapacitated, a parent of the person
18may represent and bind the person if there is no material
19conflict of interest between the represented person and either
20of the person's parents with respect to the particular question
21or dispute. If a disagreement arises between parents who
22otherwise qualify to represent a child in accordance with this
23subsection and who are seeking to represent the same child, the
24parent who is a lineal descendant of the settlor of the trust
25that is the subject of the representation is entitled to
26represent the child; or if none, the parent who is a

 

 

HB1471 Enrolled- 31 -LRB101 06784 LNS 51811 b

1beneficiary of the trust is entitled to represent the child.
 
2    Section 304. Representation by person having substantially
3identical interest.
4    (a) To the extent there is no material conflict of interest
5between the representative and the represented beneficiary
6with respect to the particular question or dispute, a
7beneficiary who is incapacitated, unborn, or unascertainable
8may, for all purposes, be represented by and bound by another
9beneficiary having a substantially similar interest with
10respect to the particular question or dispute.
11    (b) A guardian, agent, or parent who is the representative
12for a beneficiary under subsection (b), (c), or (d) of Section
13303 may, for all purposes, represent and bind any other
14beneficiary who is incapacitated, unborn, or unascertainable
15and who has an interest, with respect to the particular
16question or dispute, that is substantially similar to the
17interest of the beneficiary represented by the representative,
18but only to the extent that there is no material conflict of
19interest between the beneficiary represented by the
20representative and the other beneficiary with respect to the
21particular question or dispute.
 
22    Section 305. Appointment of representative.
23    (a) If the court determines that representation of an
24incapacitated, unborn, or unascertainable beneficiary might

 

 

HB1471 Enrolled- 32 -LRB101 06784 LNS 51811 b

1otherwise be inadequate, the court may appoint a representative
2for any nonjudicial matter to receive any notice, information,
3accounting, or report on behalf of the beneficiary and to
4represent and bind the beneficiary, or may appoint a guardian
5ad litem in any judicial proceeding to represent the interests
6of, bind, and approve any order or agreement on behalf of the
7beneficiary.
8    (b) A representative may act on behalf of the individual
9represented with respect to any matter arising under this Code,
10regardless of whether a judicial proceeding concerning the
11trust or estate is pending.
12    (c) If not precluded by a conflict of interest with respect
13to the particular question or dispute, a representative or
14guardian ad litem may be appointed to represent several persons
15or interests.
16    (d) In giving any consent or agreement, a representative or
17guardian ad litem may consider general family benefit accruing
18to the living members of the family of the person represented.
 
19    Section 306. Representation of charity. If a trust contains
20a charitable interest, the Attorney General may, in accordance
21with this Section, represent, bind, and act on behalf of the
22charitable interest with respect to any particular question or
23dispute, including without limitation representing the
24charitable interest in a nonjudicial settlement agreement
25under Section 111, in an agreement to convert a trust to a

 

 

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1total return trust under Article 11, or in a distribution in
2further trust under Article 12. A charitable organization that
3is specifically named as beneficiary of a trust or otherwise
4has a beneficial interest in a trust may act for itself.
5Notwithstanding any other provision, nothing in this Section
6shall be construed to limit or affect the Attorney General's
7authority to file an action or take other steps as he or she
8deems advisable at any time to enforce or protect the general
9public interest as to a trust that provides a beneficial
10interest or expectancy for one or more charitable organizations
11or charitable purposes whether or not a specific charitable
12organization is named in the trust. This Section shall be
13construed as declarative of existing law and not as a new
14enactment.
 
15    Section 307. Designated representative.
16    (a) If specifically nominated in the trust instrument, one
17or more individuals with legal capacity may be designated to
18represent and bind an individual who is a qualified
19beneficiary. The trust instrument may also authorize any person
20or persons, other than a trustee of the trust, to designate one
21or more individuals with legal capacity to represent and bind
22an individual who is a qualified beneficiary. Any person so
23nominated or designated is referred to in this Section as a
24"designated representative".
25    (b) Notwithstanding subsection (a):

 

 

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1        (1) A designated representative may not represent and
2    bind a current beneficiary who is age 30 or older and is
3    not incapacitated.
4        (2) A designated representative may not represent and
5    bind a qualified beneficiary while the designated
6    representative is serving as a trustee.
7        (3) Subject to paragraphs (1) and (2) of this
8    subsection (b), a designated representative may not
9    represent and bind a qualified beneficiary if the
10    designated representative is also a qualified beneficiary
11    of the trust, unless:
12            (A) the designated representative was specifically
13        nominated in the trust instrument; or
14            (B) the designated representative is the qualified
15        beneficiary's spouse or a grandparent or descendant of
16        a grandparent of the qualified beneficiary or of the
17        qualified beneficiary's spouse.
18    (c) Each designated representative is a fiduciary of the
19trust subject to the standards applicable to a trustee of a
20trust under applicable law.
21    (d) In no event may a designated representative be relieved
22or exonerated from the duty to act, or withhold from acting, in
23good faith and as the designated representative reasonably
24believes is in the best interest of the represented qualified
25beneficiary.
 

 

 

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1
Article 4. Creation, Validity, Modification, and Termination
2
of Trust.

 
3    Section 401. Methods of creating trust. A trust may be
4created by:
5        (1) transfer of property to another person as trustee
6    during the settlor's lifetime or by will or other
7    disposition taking effect upon the settlor's death;
8        (2) declaration by the owner of property that the owner
9    holds identifiable property as trustee; or
10        (3) exercise of a power of appointment in favor of a
11    trustee.
 
12    Section 402. Requirements for creation.
13    (a) A trust is created only if:
14        (1) the settlor has capacity to create a trust;
15        (2) the settlor indicates an intention to create the
16    trust;
17        (3) the trust has a definite beneficiary or is:
18            (A) a charitable trust;
19            (B) a trust for the care of an animal, as provided
20        in Section 408; or
21            (C) a trust for a noncharitable purpose, as
22        provided in Section 409;
23        (4) the trustee has duties to perform; and
24        (5) the same person is not the sole trustee and sole

 

 

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1    beneficiary.
2    (b) A beneficiary is definite if the beneficiary can be
3ascertained now or in the future, subject to any applicable
4rule against perpetuities.
5    (c) A power in a trustee to select a beneficiary from an
6indefinite class is valid. If the power is not exercised within
7a reasonable time, the power fails and the property subject to
8the power passes to the persons who would have taken the
9property had the power not been conferred.
 
10    Section 403. Trusts created in other jurisdictions. A trust
11not created by will is validly created if its creation complies
12with the law of the jurisdiction in which the trust instrument
13was executed, or the law of the jurisdiction in which, at the
14time of creation:
15        (1) the settlor was domiciled, had a place of abode, or
16    was a national;
17        (2) a trustee was domiciled or had a place of business;
18    or
19        (3) any trust property was located.
 
20    Section 404. Trust purposes. A trust may be created only to
21the extent its purposes are lawful and not contrary to public
22policy.
 
23    Section 405. Charitable purposes; enforcement.

 

 

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1    (a) A charitable trust may be created for any charitable
2purpose.
3    (b) If the terms of a charitable trust do not indicate a
4particular charitable purpose or beneficiary and do not
5delegate to the trustee or others willing to exercise the
6authority to select one or more charitable purposes or
7beneficiaries, then the court may select one or more charitable
8purposes or beneficiaries. The selection must be consistent
9with the settlor's intention to the extent it can be
10ascertained.
11    (c) The settlor of a charitable trust, among others, may
12maintain a proceeding to enforce the trust.
 
13    Section 406. Creation of trust induced by fraud, duress, or
14undue influence. If the creation, amendment, or restatement of
15a trust is procured by fraud, duress, mistake, or undue
16influence, the trust or any part so procured is void. The
17remainder of the trust not procured by such means is valid if
18the remainder is not invalid for other reasons. If the
19revocation of a trust, or any part of the trust, is procured by
20fraud, duress, mistake, or undue influence, the revocation is
21void.
 
22    Section 407. Evidence of oral trust. Except as required by
23a statute other than this Code, a trust need not be evidenced
24by a trust instrument, but the creation of an oral trust and

 

 

HB1471 Enrolled- 38 -LRB101 06784 LNS 51811 b

1its terms may be established only by clear and convincing
2evidence.
 
3    Section 408. Trusts for domestic or pet animals.
4    (a) A trust for the care of one or more designated domestic
5or pet animals is valid. The trust terminates when no living
6animal is covered by the trust. A trust instrument shall be
7liberally construed to bring the transfer within this Section,
8to presume against a merely precatory or honorary nature of its
9disposition, and to carry out the general intent of the
10transferor. Extrinsic evidence is admissible in determining
11the transferor's intent.
12    (b) A trust for the care of one or more designated domestic
13or pet animals is subject to the following provisions:
14        (1) Except as expressly provided otherwise in the
15    instrument creating the trust, no portion of the principal
16    or income of the trust may be converted to the use of the
17    trustee or to a use other than for the trust's purposes or
18    for the benefit of a covered animal.
19        (2) Upon termination, the trustee shall transfer the
20    unexpended trust property in the following order:
21            (A) as directed in the trust instrument;
22            (B) to the settlor, if then living;
23            (C) if there is no direction in the trust
24        instrument and if the trust was created in a
25        non-residuary clause in the transferor's will, then

 

 

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1        under the residuary clause in the transferor's will;
2            (D) to the transferor's heirs under Section 2-1 of
3        the Probate Act of 1975.
4        (3) The intended use of the principal or income may be
5    enforced by an individual designated for that purpose in
6    the trust instrument or, if none, by an individual
7    appointed by a court having jurisdiction of the matter and
8    parties, upon petition to it by an individual.
9        (4) Except as ordered by the court or required by the
10    trust instrument, no filing, report, registration,
11    periodic accounting, separate maintenance of funds,
12    appointment, or fee is required by reason of the existence
13    of the fiduciary relationship of the trustee.
14        (5) The court may reduce the amount of the property
15    transferred if it determines that the amount substantially
16    exceeds the amount required for the intended use. The
17    amount of the reduction, if any, passes as unexpended trust
18    property under paragraph (2).
19        (6) If a trustee is not designated or no designated
20    trustee is willing and able to serve, the court shall name
21    a trustee. The court may order the transfer of the property
22    to another trustee if the transfer is necessary to ensure
23    that the intended use is carried out, and if a successor
24    trustee is not designated in the trust instrument or if no
25    designated successor trustee agrees to serve and is able to
26    serve. The court may also make other orders and

 

 

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1    determinations as are advisable to carry out the intent of
2    the transferor and the purpose of this Section.
3        (7) The trust is exempt from the operation of the
4    common law rule against perpetuities.
 
5    Section 409. Noncharitable trust without ascertainable
6beneficiary.
7    (a) Except as otherwise provided in Section 408 or by
8another statute, a trust may be created for a noncharitable
9purpose without a definite or definitely ascertainable
10beneficiary or for a noncharitable but otherwise valid purpose
11to be selected by the trustee.
12    (b) The trust may not be enforced for more than 21 years.
13If the trust is still in existence after 21 years, the trust
14shall terminate. The unexpended trust property shall be
15distributed in the following order:
16        (1) as directed in the trust instrument;
17        (2) to the settlor, if then living;
18        (3) if the trust was created in a non-residuary clause
19    in the settlor's will, then pursuant to the residuary
20    clause in the settlor's will;
21        (4) to the transferor's heirs under Section 2-1 of the
22    Probate Act of 1975.
23    (c) A trust authorized by this Section may be enforced by a
24person appointed in the trust instrument or, if no person is so
25appointed, by a person appointed by the court.

 

 

HB1471 Enrolled- 41 -LRB101 06784 LNS 51811 b

1    (d) Property of a trust authorized by this Section may be
2applied only to its intended use, except to the extent the
3court determines that the value of the trust property exceeds
4the amount required for the intended use. Property not required
5for the intended use must be distributed as provided in
6subsection (b).
 
7    Section 410. Modification or termination of trust;
8proceedings for approval or disapproval.
9    (a) In addition to the methods of termination prescribed by
10Sections 411 through 414, a trust terminates to the extent the
11trust is revoked or expires pursuant to the trust instrument,
12no purpose of the trust remains to be achieved, or the purposes
13of the trust have become unlawful, contrary to public policy,
14or impossible to achieve.
15    (b) A proceeding to approve or disapprove a proposed
16modification or termination under Sections 411 through 416, or
17trust combination or division under Section 417, may be
18commenced by a trustee or beneficiary or by the Attorney
19General for a trust with a charitable interest. The settlor of
20a charitable trust may maintain a proceeding to modify the
21trust under Section 413.
 
22    Section 411. Modification or termination of noncharitable
23irrevocable trust by consent.
24    (a) A noncharitable irrevocable trust may be terminated

 

 

HB1471 Enrolled- 42 -LRB101 06784 LNS 51811 b

1upon consent of all of the beneficiaries if the court concludes
2that continuance of the trust is not necessary to achieve any
3material purpose of the trust.
4    (b) A noncharitable irrevocable trust may be modified upon
5consent of all of the beneficiaries if the court concludes that
6modification is not inconsistent with any material purpose of
7the trust.
8    (c) The court shall consider spendthrift provisions as a
9factor in making a decision under this Section, but the court
10is not precluded from modifying or terminating a trust because
11the trust contains spendthrift provisions.
12    (d) Upon termination of a trust under subsection (a), the
13trustee shall distribute the trust property as agreed by the
14beneficiaries.
15    (e) If not all of the beneficiaries consent to a proposed
16modification or termination of the trust under subsection (a)
17or (b), the modification or termination may be approved by the
18court if the court is satisfied that:
19        (1) if all of the beneficiaries had consented, the
20    trust could have been modified or terminated under this
21    Section; and
22        (2) a beneficiary who does not consent is treated
23    equitably and consistent with the purposes of the trust.
 
24    Section 412. Modification or termination because of
25unanticipated circumstances or inability to administer trust

 

 

HB1471 Enrolled- 43 -LRB101 06784 LNS 51811 b

1effectively.
2    (a) The court may modify the administrative or dispositive
3terms of a trust or terminate the trust if, because of
4circumstances not anticipated by the settlor, modification or
5termination will further the purposes of the trust. To the
6extent practicable, the modification must be made in accordance
7with the settlor's probable intention.
8    (b) The court may modify the administrative terms of a
9trust if continuation of the trust on its existing terms would
10be impracticable or wasteful or impair the trust's
11administration.
12    (c) Upon termination of a trust under this Section, the
13court shall order the distribution of the trust property as
14agreed by the beneficiaries, or if the beneficiaries cannot
15agree, then as the court determines is equitable and consistent
16with the purposes of the trust.
17    (d) Notwithstanding any other provision in this Section, if
18the trust contains a charitable interest, the modification
19cannot diminish the charitable interest or alter the charitable
20purpose, except as would be permitted under Section 413, and
21upon termination of a trust under this Section, any charitable
22distribution shall be made in a manner consistent with the
23settlor's charitable purpose as determined by the court.
 
24    Section 413. Cy pres.
25    (a) Except as otherwise provided in subsection (b), if a

 

 

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1particular charitable purpose becomes unlawful, impracticable,
2impossible to achieve, or wasteful:
3        (1) the trust does not fail, in whole or in part;
4        (2) the trust property does not revert to the settlor
5    or the settlor's successors in interest; and
6        (3) the court may apply cy pres to modify or terminate
7    the trust by directing that the trust property be applied
8    or distributed, in whole or in part, in a manner consistent
9    with the settlor's charitable purposes.
10    (b) A provision in the terms of a charitable trust that
11would result in distribution of the trust property to a
12noncharitable beneficiary prevails over the power of the court
13under subsection (a) to apply cy pres to modify or terminate
14the trust only if, when the provision takes effect:
15        (1) the trust property is to revert to the settlor and
16    the settlor is still living; or
17        (2) fewer than 21 years have elapsed since the date of
18    the trust's creation.
 
19    Section 414. Modification or termination of uneconomic
20trust.
21    (a) After notice to the qualified beneficiaries, the
22trustee of a trust consisting of trust property having a total
23value less than $100,000 may terminate the trust if the trustee
24concludes that the costs of continuing the trust will
25substantially impair accomplishment of the purpose of the

 

 

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1trust.
2    (b) The court may modify or terminate a trust or remove the
3trustee and appoint a different trustee if it determines that
4the value of the trust property is insufficient to justify the
5cost of administration.
6    (c) Upon termination of a trust under this Section, the
7trustee shall distribute the trust property to the current
8beneficiaries in the proportions to which they are entitled to
9mandatory current distributions, or if their interests are
10indefinite, to the current beneficiaries per stirpes if they
11have a common ancestor, or if not, then in equal shares. The
12trustee shall give notice to the current beneficiaries at least
1330 days before the effective date of the termination.
14    (d) This Section does not apply to an easement for
15conservation or preservation.
16    (e) If a particular trustee is a current beneficiary of the
17trust or is legally obligated to a current beneficiary, then
18that particular trustee may not participate as a trustee in the
19exercise of this termination power; however, if the trust has
20one or more co-trustees who are not so disqualified from
21participating, the co-trustee or co-trustees may exercise this
22power.
23    (f) This Section does not apply to the extent that it would
24cause a trust otherwise qualifying for a federal or state tax
25benefit or other benefit not to qualify, nor does it apply to
26trusts for domestic or pet animals.
 

 

 

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1    Section 415. Reformation to correct mistakes. The court may
2reform the terms of a trust, even if unambiguous, to conform
3the terms to the settlor's intention if it is proved by clear
4and convincing evidence what the settlor's intention was and
5that the terms of the trust were affected by a mistake of fact
6or law, whether in expression or inducement.
 
7    Section 416. Modification to achieve settlor's tax
8objectives. To achieve the settlor's tax objectives, the court
9may modify the terms of a trust in a manner that is not
10contrary to the settlor's probable intention. The court may
11provide that the modification has retroactive effect.
 
12    Section 417. Combination and division of trusts.
13    (a) Subject to subsections (b), (c), and (d), after notice
14to the qualified beneficiaries, a trustee may:
15        (1) consolidate 2 or more trusts having substantially
16    similar terms into a single trust;
17        (2) sever any trust estate on a fractional basis into 2
18    or more separate trusts; and
19        (3) segregate by allocation to a separate account or
20    trust a specific amount or specific property.
21    (b) No consolidation, severance, or segregation may be made
22if the result impairs the rights of any beneficiary or
23adversely affects achievement of the material purposes of the

 

 

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1subject trust or trusts.
2    (c) A severance or consolidation may be made for any reason
3including to reflect a partial disclaimer, to reflect
4differences in perpetuities periods, to reflect or result in
5differences in federal or state tax attributes, to satisfy any
6federal tax requirement or election, or to reduce potential
7generation-skipping transfer tax liability, and shall be made
8in a manner consistent with the rules governing disclaimers,
9federal tax attributes, requirements or elections, or any
10applicable federal or state tax rules or regulations.
11    (d) A separate account or trust created by severance or
12segregation:
13        (1) shall be treated as a separate trust for all
14    purposes on and after the effective date of the severance
15    or segregation; and
16        (2) shall be held on terms and conditions that are
17    substantially equivalent to the terms of the trust from
18    which it was severed or segregated so that the aggregate
19    interests of each beneficiary in the several trusts are
20    substantially equivalent to the beneficiary's interests in
21    the trust before severance, except that any terms of the
22    trust before severance that would affect the perpetuities
23    period or qualification of the trust for any federal or
24    state tax deduction, exclusion, election, exemption, or
25    other special federal or state tax status must remain
26    identical in each of the separate trusts created.

 

 

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1    (e) Income earned on a severed or segregated amount or
2property after severance or segregation occurs shall pass to
3the designated taker of the amount or property.
4    (f) In managing, investing, administering, and
5distributing the trust property of any separate account or
6trust and in making applicable federal or state tax elections,
7the trustee may consider the differences in federal or state
8tax attributes and all other factors the trustee believes
9pertinent and may make disproportionate distributions from the
10separate accounts or trusts.
 
11
Article 5. Creditor's Claims; Spendthrift and Discretionary
12
Trusts.

 
13    Section 501. Rights of beneficiary's creditor or assignee.
14Except as provided in Section 504, to the extent a
15beneficiary's interest is not subject to a spendthrift
16provision, the court may authorize a creditor or assignee of
17the beneficiary to reach the beneficiary's interest by
18attachment of present or future distributions to or for the
19benefit of the beneficiary or other means. The court may limit
20the award to such relief as is appropriate under the
21circumstances.
 
22    Section 502. Spendthrift provision.
23    (a) A spendthrift provision is valid only if it prohibits

 

 

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1both voluntary and involuntary transfer of a beneficiary's
2interest.
3    (b) A term of a trust providing that the interest of a
4beneficiary is held subject to a "spendthrift trust", or words
5of similar import, is sufficient to restrain both voluntary and
6involuntary transfer of the beneficiary's interest.
7    (c) A beneficiary may not transfer an interest in a trust
8in violation of a valid spendthrift provision and, except as
9otherwise provided in this Article, a creditor or assignee of
10the beneficiary may not reach the interest or a distribution by
11the trustee before its receipt by the beneficiary.
12    (d) A valid spendthrift provision does not prevent the
13appointment of interests through the exercise of a power of
14appointment.
 
15    Section 503. Exceptions to spendthrift provision.
16    (a) In this Section, "child" includes any person for whom
17an order or judgment for child support has been entered in this
18or another state.
19    (b) A spendthrift provision is unenforceable against:
20        (1) a beneficiary's child, spouse, or former spouse who
21    has a judgment or court order against the beneficiary for
22    child support obligations owed by the beneficiary as
23    provided in the Income Withholding for Support Act, the
24    Non-Support Punishment Act, the Illinois Parentage Act of
25    2015, the Illinois Marriage and Dissolution of Marriage

 

 

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1    Act, and similar provisions of other Acts that provide for
2    the support of a child;
3        (2) a judgment creditor who has provided services for
4    the protection of a beneficiary's interest in the trust;
5    and
6        (3) a claim of this State or the United States to the
7    extent a statute of this State or federal law so provides.
8    (c) Except as otherwise provided in this subsection and in
9Section 504, a claimant against which a spendthrift provision
10cannot be enforced may obtain from a court an order attaching
11present or future distributions to or for the benefit of the
12beneficiary. The court may limit the award to such relief as is
13appropriate under the circumstances. Notwithstanding this
14subsection, the remedies provided in this subsection apply to a
15claim for unpaid child support obligations by a beneficiary's
16child, spouse, former spouse, judgment creditor, or claim
17described in subsection (b) only as a last resort upon an
18initial showing that traditional methods of enforcing the claim
19are insufficient.
 
20    Section 504. Discretionary distributions; effect of
21standard.
22    (a) As used in this Section, "discretionary distribution"
23means a distribution that is subject to the trustee's
24discretion regardless of whether the discretion is expressed in
25the form of a standard of distribution and regardless of

 

 

HB1471 Enrolled- 51 -LRB101 06784 LNS 51811 b

1whether the trustee has abused the discretion.
2    (b) Regardless of whether a trust contains a spendthrift
3provision, and regardless of whether the beneficiary is acting
4as trustee, if a trustee may make discretionary distributions
5to or for the benefit of a beneficiary, a creditor of the
6beneficiary, including a creditor described in subsection (b)
7of Section 503, may not:
8        (1) compel a distribution that is subject to the
9    trustee's discretion; or
10        (2) obtain from a court an order attaching present or
11    future distributions to or for the benefit of the
12    beneficiary, except as provided in Section 2-1403 of the
13    Code of Civil Procedure.
14    (c) If the trustee's discretion to make distributions for
15the trustee's own benefit is limited by an ascertainable
16standard, a creditor may not reach or compel distribution of
17the beneficial interest except to the extent the interest would
18be subject to the creditor's claim were the beneficiary not
19acting as trustee.
20    (d) This Section does not limit the right of a beneficiary
21to maintain a judicial proceeding against a trustee for an
22abuse of discretion or failure to comply with a standard for
23distribution.
 
24    Section 505. Creditor's claim against settlor.
25    (a) Whether or not the terms of a trust contain a

 

 

HB1471 Enrolled- 52 -LRB101 06784 LNS 51811 b

1spendthrift provision, the following rules apply:
2        (1) During the lifetime of the settlor, the property of
3    a revocable trust is subject to claims of the settlor's
4    creditors to the extent the property would not otherwise be
5    exempt by law if owned directly by the settlor.
6        (2) With respect to an irrevocable trust, a creditor or
7    assignee of the settlor may reach the maximum amount that
8    can be distributed to or for the settlor's benefit. If a
9    trust has more than one settlor, the amount the creditor or
10    assignee of a particular settlor may reach may not exceed
11    the settlor's interest in the portion of the trust
12    attributable to that settlor's contribution.
13        (3) Notwithstanding paragraph (2), the assets of an
14    irrevocable trust may not be subject to the claims of an
15    existing or subsequent creditor or assignee of the settlor,
16    in whole or in part, solely because of the existence of a
17    discretionary power granted to the trustee by the terms of
18    the trust, or any other provision of law, to pay directly
19    to the taxing authorities or to reimburse the settlor for
20    any tax on trust income or principal that is payable by the
21    settlor under the law imposing the tax.
22        (4) Paragraph (2) does not apply to the assets of an
23    irrevocable trust established for the benefit of a person
24    with a disability that meets the requirements of 42 U.S.C.
25    1396p(d)(4) or similar federal law governing the transfer
26    to such a trust.

 

 

HB1471 Enrolled- 53 -LRB101 06784 LNS 51811 b

1        (5) After the death of a settlor, and subject to the
2    settlor's right to direct the source from which liabilities
3    will be paid, the property of a trust that was revocable at
4    the settlor's death is subject to claims of the settlor's
5    creditors, costs of administration of the settlor's
6    estate, the expenses of the settlor's funeral and disposal
7    of remains, and statutory allowances to a surviving spouse
8    and children to the extent the settlor's probate estate is
9    inadequate to satisfy those claims, costs, expenses, and
10    allowances. Distributees of the trust take property
11    distributed after payment of such claims; subject to the
12    following conditions:
13            (A) sums recovered by the personal representative
14        of the settlor's estate must be administered as part of
15        the decedent's probate estate, and the liability
16        created by this subsection does not apply to any assets
17        to the extent that the assets are otherwise exempt
18        under the laws of this State or under federal law;
19            (B) with respect to claims, expenses, and taxes in
20        connection with the settlement of the settlor's
21        estate, any claim of a creditor that would be barred
22        against the personal representative of a settlor's
23        estate or the estate of the settlor is barred against
24        the trust property of a trust that was revocable at the
25        settlor's death, the trustee of the revocable trust,
26        and the beneficiaries of the trust; and

 

 

HB1471 Enrolled- 54 -LRB101 06784 LNS 51811 b

1            (C) Sections 18-10 and 18-13 of the Probate Act of
2        1975, detailing the classification and priority of
3        payment of claims, expenses, and taxes from the probate
4        estate of a decedent, or comparable provisions of the
5        law of the deceased settlor's domicile at death if not
6        Illinois, apply to a revocable trust to the extent the
7        assets of the settlor's probate estate are inadequate
8        and the personal representative or creditor or taxing
9        authority of the settlor's estate has perfected its
10        right to collect from the settlor's revocable trust.
11        (6) After the death of a settlor, a trustee of a trust
12    that was revocable at the settlor's death is released from
13    liability under this Section for any assets distributed to
14    the trust's beneficiaries in accordance with the governing
15    trust instrument if:
16            (A) the trustee made the distribution 6 months or
17        later after the settlor's death; and
18            (B) the trustee did not receive a written notice
19        from the decedent's personal representative asserting
20        that the decedent's probate estate is or may be
21        insufficient to pay allowed claims or, if the trustee
22        received such a notice, the notice was withdrawn by the
23        personal representative or revoked by the court before
24        the distribution.
25    (b) For purposes of this Section:
26        (1) during the period the power may be exercised, the

 

 

HB1471 Enrolled- 55 -LRB101 06784 LNS 51811 b

1    holder of a power of withdrawal is treated in the same
2    manner as the settlor of a revocable trust to the extent of
3    the property subject to the power; and
4        (2) upon the lapse, release, or waiver of the power,
5    the holder is treated as the settlor of the trust only to
6    the extent the value of the property affected by the lapse,
7    release, or waiver exceeds the greater of the amount
8    specified in Section 2041(b)(2) or 2514(e) of the Internal
9    Revenue Code.
 
10    Section 506. Overdue distribution.
11    (a) In this Section, "mandatory distribution" means a
12distribution of income or principal that the trustee is
13required to make to a beneficiary under the trust instrument,
14including a distribution upon termination of the trust. The
15term does not include a distribution subject to the exercise of
16the trustee's discretion even if (1) the discretion is
17expressed in the form of a standard of distribution, or (2) the
18terms of the trust authorizing a distribution couple language
19of discretion with language of direction.
20    (b) Whether or not a trust contains a spendthrift
21provision, a creditor or assignee of a beneficiary may reach a
22mandatory distribution of income or principal, including a
23distribution upon termination of the trust, if the trustee has
24not made the distribution to the beneficiary within a
25reasonable time after the designated distribution date.
 

 

 

HB1471 Enrolled- 56 -LRB101 06784 LNS 51811 b

1    Section 507. Personal obligations of trustee. Trust
2property is not subject to personal obligations of the trustee,
3even if the trustee becomes insolvent or bankrupt.
 
4    Section 508. Lapse of power to withdraw. A beneficiary of a
5trust may not be considered to be a settlor or to have made a
6transfer to the trust merely because of a lapse, release, or
7waiver of his or her power of withdrawal to the extent that the
8value of the affected property does not exceed the greatest of
9the amounts specified in Sections 2041(b)(2), 2514(e), and
102503(b) of the Internal Revenue Code.
 
11    Section 509. Trust for beneficiary with a disability.
12    (a) As used in this Section:
13        (1) "Discretionary trust" means a trust in which the
14    trustee has discretionary power to determine distributions
15    to be made under the trust.
16        (2) "Resources" includes, but is not limited to, any
17    interest in real or personal property, judgment,
18    settlement, annuity, maintenance, support for minor
19    children, and support for non-minor children.
20    (b) A discretionary trust for the benefit of an individual
21who has a disability that substantially impairs the
22individual's ability to provide for his or her own care or
23custody and constitutes a substantial disability, is not liable

 

 

HB1471 Enrolled- 57 -LRB101 06784 LNS 51811 b

1to pay or reimburse this State or any public agency for
2financial aid or services to the individual except to the
3extent the trust was created by the individual or trust
4property has been distributed directly to or is otherwise under
5the control of the individual, except that this exception does
6not apply to a trust created with the property of the
7individual with a disability or property within his or her
8control if the trust complies with Medicaid reimbursement
9requirements of federal law. Notwithstanding any other
10provisions to the contrary, a trust created with the property
11of the individual with a disability or property within his or
12her control is liable, after the reimbursement of Medicaid
13expenditures, to this State for reimbursement of any other
14service charges outstanding at the death of the individual with
15a disability. Property, goods, and services purchased or owned
16by a trust for and used or consumed by a beneficiary with a
17disability shall not be considered trust property distributed
18to or under the control of the beneficiary.
19    (c) Except as otherwise prohibited by law, the court or a
20person with a disability may irrevocably assign resources of
21that person to either or both of: (i) an ABLE account, as
22defined under Section 16.6 of the State Treasurer Act; or (ii)
23a discretionary trust that complies with the Medicaid
24reimbursement requirements of federal law. A court may reserve
25the right to determine the amount, duration, or enforcement of
26the irrevocable assignment.
 

 

 

HB1471 Enrolled- 58 -LRB101 06784 LNS 51811 b

1
Article 6. Revocable Trusts.

 
2    Section 601. Capacity of settlor of revocable trust. The
3capacity required of the settlor to create, amend, revoke in
4whole or in part, or add property to a revocable trust is the
5same as that required to make a will.
 
6    Section 602. Revocation or amendment of revocable trust.
7    (a) The settlor may revoke a trust only if the trust
8instrument expressly provides that the trust is revocable or
9that the settlor has an unrestricted power of amendment. The
10settlor may amend a trust only if the trust expressly provides
11that the trust is revocable or amendable by the settlor.
12    (b) If a revocable trust has more than one settlor:
13        (1) to the extent the trust consists of community
14    property, the trust may be revoked by either spouse acting
15    alone but may be amended only by joint action of both
16    spouses;
17        (2) to the extent the trust consists of property other
18    than community property, each settlor may revoke or amend
19    the trust only with regard to the portion of the trust
20    property attributable to that settlor's contribution; and
21        (3) upon the revocation or amendment of the trust by
22    fewer than all of the settlors, the trustee shall promptly
23    notify the other settlors of the revocation or amendment.

 

 

HB1471 Enrolled- 59 -LRB101 06784 LNS 51811 b

1    (c) The settlor may revoke or amend a revocable trust
2instrument:
3        (1) by substantially complying with a method provided
4    in the trust instrument; or
5        (2) if the trust instrument does not provide a method
6    or the method provided in the terms is not expressly made
7    exclusive, by a later instrument in writing other than a
8    will, signed by the settlor and specifically referring to
9    the trust.
10    (d) Upon revocation of a revocable trust, the trustee shall
11deliver the trust property to the settlor or as the settlor
12directs.
13    (e) A settlor's powers with respect to revocation,
14amendment, or distribution of trust property may not be
15exercised by an agent under a power of attorney unless
16expressly authorized by the power and not prohibited by the
17trust instrument.
18    (f) A guardian of the estate of the settlor, if any, or a
19guardian of the person of the settlor may not exercise a
20settlor's powers with respect to revocation, amendment, or
21distribution of trust property unless ordered by the court
22supervising the guardianship.
23    (g) A trustee who does not know that a trust has been
24revoked or amended is not liable for distributions made and
25other actions taken or not taken on the assumption that the
26trust had not been amended or revoked.
 

 

 

HB1471 Enrolled- 60 -LRB101 06784 LNS 51811 b

1    Section 603. Settlor's powers; powers of withdrawal.
2    (a) To the extent a trust is revocable by a settlor, and
3the settlor personally has capacity to revoke the trust, a
4trustee may follow a direction of the settlor that is contrary
5to the terms of the trust. To the extent a trust is revocable
6by a settlor in conjunction with a person other than a trustee
7or person holding an adverse interest, and the settlor and such
8other person personally have the capacity to revoke the trust,
9the trustee may follow a direction from the settlor and the
10other person holding the power to revoke even if the direction
11is contrary to the terms of the trust.
12    (b) To the extent a trust is revocable by a settlor, and
13the settlor personally has capacity to revoke the trust, rights
14of the beneficiaries are subject to the control of, and the
15duties of the trustee are owed exclusively to, the settlor.
16    (c) While a trust is revocable by a settlor but the settlor
17does not personally have the capacity to revoke the trust, the
18duties of the trustee are owed only to the settlor and current
19beneficiaries. If the settlor is a beneficiary, the settlor's
20interests as a beneficiary take priority over the interests of
21all other beneficiaries.
22    (d) Except as provided in subsection (e), only the settlor,
23a representative of the settlor under Article 3 during the
24settlor's lifetime if the settlor is incapacitated, and the
25representative of the settlor's estate after the settlor's

 

 

HB1471 Enrolled- 61 -LRB101 06784 LNS 51811 b

1death have standing to contest, challenge, or bring any
2proceeding in any court regarding any action of the trustee of
3a revocable trust taken or not taken while the trust is
4revocable.
5    (e) An individual who is or was a current beneficiary
6during the settlor's lifetime, a representative of such an
7individual under Article 3 or the representative of such
8individual's estate after the individual's death, has standing
9to contest, challenge, or bring any proceeding in any court
10regarding any action of the trustee of a revocable trust while
11the trust is revocable but the settlor does not personally have
12capacity to revoke the trust, but only to the extent the action
13of the trustee affects the interest of the individual as a
14current beneficiary of the trust during the lifetime of the
15settlor while the settlor does not personally have the capacity
16to revoke the trust.
17    (f) The holder of a non-lapsing power of withdrawal, during
18the period the power may be exercised, has the rights of a
19settlor of a revocable trust to the extent of the property
20subject to the power.
 
21    Section 604. Limitation on action contesting validity of
22revocable trust; distribution of trust property.
23    (a) A person may commence a judicial proceeding to contest
24the validity of a trust that was revocable at the settlor's
25death only within the earlier of:

 

 

HB1471 Enrolled- 62 -LRB101 06784 LNS 51811 b

1        (1) 2 years after the settlor's death; or
2        (2)(A) in the case of a trust to which a legacy is
3    provided by the settlor's will that is admitted to probate,
4    the time to contest the validity of the settlor's will as
5    provided in the Probate Act of 1975; or
6        (B) in the case of a trust other than a trust described
7    in subdivision (A), 6 months after the trustee sent the
8    person a copy of the trust instrument and a notice
9    informing the person of the trust's existence, of the
10    trustee's name and address, and of the 6-month period
11    allowed for commencing a proceeding.
12    (b) Nine months after the death of the settlor of a trust
13that was revocable at the settlor's death, the trustee may
14proceed to distribute the trust property in accordance with the
15trust instrument. The trustee is not subject to liability for
16doing so unless:
17        (1) the trustee knows of a pending judicial proceeding
18    contesting the validity of the trust; or
19        (2) a potential contestant has notified the trustee of
20    a possible judicial proceeding to contest the trust and a
21    judicial proceeding is commenced within 60 days after the
22    contestant sent the notification.
23    (c) A beneficiary of a trust that was revocable at the
24settlor's death that is determined to have been invalid is
25liable to return any distribution received and all income and
26appreciation associated with the distribution from the date of

 

 

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1receipt until the date of return of the distribution.
 
2    Section 605. Revocation of provisions in revocable trust by
3divorce or annulment
4    (a) As used in this Section:
5        (1) "Judicial termination of marriage" includes, but
6    is not limited to, divorce, dissolution, annulment or
7    declaration of invalidity of marriage.
8        (2) "Provision pertaining to the settlor's former
9    spouse" includes, but is not limited to, every present or
10    future gift or interest or power of appointment given to
11    the settlor's former spouse or right of the settlor's
12    former spouse to serve in a fiduciary capacity.
13        (3) "Trust" means a trust created by a nontestamentary
14    instrument executed after January 1, 1982.
15        (4) Notwithstanding the definition of "revocable" in
16    Section 103, a provision is revocable by the settlor if the
17    settlor has the power at the time of the entry of the
18    judgment or judicial termination of marriage of the settlor
19    to revoke, modify, or amend the provision, either alone or
20    in conjunction with any other person or persons.
21    (b) Unless the trust instrument or the judgment of judicial
22termination of marriage expressly provides otherwise, judicial
23termination of marriage of the settlor of a trust revokes every
24provision that is revocable by the settlor pertaining to the
25settlor's former spouse in a trust instrument or amendment

 

 

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1executed by the settlor before the entry of the judgment of
2judicial termination of marriage of the settlor and any such
3trust shall be administered and construed as if the settlor's
4former spouse had died upon entry of the judgment of judicial
5termination of marriage.
6    (c) A trustee who has no actual knowledge of a judgment of
7judicial termination of marriage of the settlor is not liable
8for any action taken or omitted in good faith on the assumption
9that the settlor is married. The preceding sentence is intended
10to affect only the liability of the trustee and shall not
11affect the disposition of beneficial interests in any trust.
12    (d) Notwithstanding Section 102, this Section may be made
13applicable by specific reference in the trust instrument to
14this Section in any (1) land trust; (2) voting trust; (3)
15security instrument such as a trust deed or mortgage; (4)
16liquidation trust; (5) escrow; (6) instrument under which a
17nominee, custodian for property or paying or receiving agent is
18appointed; or (7) trust created by a deposit arrangement in a
19bank or savings institution, commonly known as "Totten Trust".
20    (e) If provisions of a trust are revoked solely by this
21Section, they are revived by the settlor's remarriage to the
22former spouse.
 
23
Article 7. Office of Trustee.

 
24    Section 701. Accepting or declining trusteeship.

 

 

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1    (a) Except as otherwise provided in subsection (c), a
2person designated as trustee accepts the trusteeship:
3        (1) by substantially complying with a method of
4    acceptance provided in the trust instrument; or
5        (2) if the trust instrument does not provide a method
6    or the method provided in the trust instrument is not
7    expressly made exclusive, by accepting delivery of the
8    trust property, exercising powers or performing duties as
9    trustee, or otherwise indicating acceptance of the
10    trusteeship.
11    (b) A person designated as trustee who has not yet accepted
12the trusteeship may decline the trusteeship. A designated
13trustee who does not accept the trusteeship within 120 days
14after receiving notice of the designation is deemed to have
15declined the trusteeship.
16    (c) A person designated as trustee, without accepting the
17trusteeship, may, but need not:
18        (1) act to preserve the trust property if, within 120
19    days after receiving notice of the designation, the person
20    sends a declination of the trusteeship to the settlor or,
21    if the settlor is deceased or incapacitated, to the
22    qualified beneficiaries; and
23        (2) inspect or investigate trust property to determine
24    potential liability under environmental or other law or for
25    any other purpose.
26    (d) A person acting under subsection (c) is not liable for

 

 

HB1471 Enrolled- 66 -LRB101 06784 LNS 51811 b

1actions taken in good faith.
 
2    Section 702. Trustee's bond.
3    (a) A trustee shall give bond to secure performance of the
4trustee's duties only if the court finds that a bond is needed
5to protect the interests of the beneficiaries or is required by
6the terms of the trust and the court has not dispensed with the
7requirement.
8    (b) The court may specify the amount of a bond, its
9liabilities, and whether sureties are necessary. The court may
10modify or terminate a bond at any time.
11    (c) A corporate fiduciary, as defined in Section 1-5.505 of
12the Corporate Fiduciary Act, qualified to do trust business in
13this State need not give bond, even if required by the terms of
14the trust.
 
15    Section 703. Co-trustees.
16    (a) Co-trustees who are unable to reach a unanimous
17decision may act by majority decision after prior written
18notice to, or written waiver of notice by, each other
19co-trustee.
20    (b) If a vacancy occurs in a co-trusteeship, subsection (b)
21of Section 704 applies.
22    (c) A co-trustee must participate in the performance of a
23trustee's function unless the co-trustee is unavailable to
24perform the function because of absence, illness,

 

 

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1disqualification under other law, or other temporary
2incapacity or the co-trustee has properly delegated the
3performance of the function to another trustee.
4    (d) If a co-trustee is unavailable to perform duties
5because of absence, illness, disqualification under other law,
6or other temporary incapacity, and prompt action is necessary
7to achieve the purposes of the trust or to avoid injury to the
8trust property, the remaining co-trustee or a majority of the
9remaining co-trustees may act for the trust.
10    (e) A trustee may delegate to a co-trustee for any period
11of time any or all of the trustee's rights, powers, and duties.
12Unless a delegation was irrevocable, a trustee may revoke a
13delegation previously made.
14    (f) Except as otherwise provided in subsection (g), a
15trustee who is not qualified to participate in an action or who
16does not join in an action of another trustee is not liable for
17the action.
18    (g) Each trustee who is not an excluded fiduciary under
19Section 808 shall exercise reasonable care to:
20        (1) prevent a co-trustee from committing a serious
21    breach of trust; and
22        (2) compel a co-trustee to redress a serious breach of
23    trust.
24    (h) A dissenting trustee who joins in an action at the
25direction of the majority of the trustees and who notified any
26co-trustee of the dissent at or before the time of the action

 

 

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1is not liable for the action unless the action is a serious
2breach of trust.
 
3    Section 704. Vacancy in trusteeship; appointment of
4successor.
5    (a) A vacancy in a trusteeship occurs if:
6        (1) a person designated as trustee declines the
7    trusteeship;
8        (2) a person designated as trustee cannot be identified
9    or does not exist;
10        (3) a trustee resigns;
11        (4) a trustee is disqualified or removed;
12        (5) a trustee dies;
13        (6) a guardian is appointed for an individual serving
14    as trustee; or
15        (7) an individual serving as trustee becomes
16    incapacitated.
17    (b) If one or more co-trustees remain in office, a vacancy
18in a trusteeship need not be filled and the remaining
19co-trustees or trustee may act for the trust. A vacancy in a
20trusteeship must be filled if the trust has no remaining
21trustee, or if the existing vacancy impairs the administration
22of the trust as determined by the remaining trustees.
23    (c) A vacancy in a trusteeship of a trust that is required
24to be filled must be filled in the following order of priority:
25        (1) by a person designated in accordance with the trust

 

 

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1    instrument to act as successor trustee;
2        (2) by a person appointed by a majority of the
3    beneficiaries who are distributees or permissible
4    distributees of trust income; or
5        (3) by a person appointed by the court.
6    (d) If a trust contains a charitable interest, then the
7appointment of a successor trustee provided under paragraph (2)
8of subsection (c) shall not take effect until 30 days after
9written notice is delivered to the Attorney General's
10Charitable Trust Bureau. The Attorney General may waive this
11notice requirement.
 
12    Section 705. Resignation of trustee.
13    (a) A trustee may resign:
14        (1) upon notice to the settlor, if living, to the
15    beneficiaries who are distributees or permissible
16    distributees of trust income, and all co-trustees; or
17        (2) with the approval of the court.
18    (b) In approving a resignation, the court may issue orders
19and impose conditions reasonably necessary for the protection
20of the trust property.
21    (c) Any liability of a resigning trustee or of any sureties
22on the trustee's bond for acts or omissions of the trustee is
23not discharged or affected by the trustee's resignation.
 
24    Section 706. Removal of trustee.

 

 

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1    (a) A settlor, a co-trustee, or a qualified beneficiary may
2request the court to remove a trustee, or a trustee may be
3removed by the court on its own initiative.
4    (b) The court may remove a trustee if:
5        (1) the trustee has committed a serious breach of
6    trust;
7        (2) lack of cooperation among co-trustees
8    substantially impairs the administration of the trust;
9        (3) because of unfitness, unwillingness, or persistent
10    failure of the trustee to administer the trust effectively,
11    the court determines that removal of the trustee best
12    serves the purposes of the trust and the interests of the
13    beneficiaries; or
14        (4) there has been a substantial change of
15    circumstances or removal is requested by all of the
16    qualified beneficiaries, the court finds that removal of
17    the trustee best serves the interests of all of the
18    beneficiaries and is not inconsistent with any material
19    purpose of the trust, and a suitable co-trustee or
20    successor trustee is available.
21    (c) Pending a final decision on a request to remove a
22trustee, or in lieu of or in addition to removing a trustee,
23the court may order such appropriate relief under subsection
24(b) of Section 1001 as may be necessary to protect the trust
25property or the interests of the beneficiaries.
 

 

 

HB1471 Enrolled- 71 -LRB101 06784 LNS 51811 b

1    Section 707. Delivery of property by former trustee.
2    (a) Unless a co-trustee remains in office or the court
3otherwise orders, and until the trust property is delivered to
4a successor trustee or other person entitled to it, a trustee
5who has resigned or been removed has the duties of a trustee
6and the powers necessary to protect the trust property.
7    (b) A trustee who has resigned or been removed shall
8proceed expeditiously to deliver the trust property within the
9trustee's possession to the co-trustee, successor trustee, or
10other person entitled to it.
 
11    Section 708. Compensation of trustee.
12    (a) If the trust instrument does not specify the trustee's
13compensation, a trustee is entitled to compensation that is
14reasonable under the circumstances.
15    (b) If the trust instrument specifies the trustee's
16compensation, the trustee is entitled to be compensated as
17specified, but the court may allow more or less compensation
18if:
19        (1) the duties of the trustee are substantially
20    different from those contemplated when the trust was
21    created; or
22        (2) the compensation specified by the trust instrument
23    would be unreasonably low or high.
 
24    Section 709. Reimbursement of expenses.

 

 

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1    (a) A trustee is entitled to be reimbursed out of the trust
2property, with interest as appropriate, for:
3        (1) expenses that were properly incurred in the
4    administration and protection of the trust; and
5        (2) to the extent necessary to prevent unjust
6    enrichment of the trust, expenses that were not properly
7    incurred in the administration of the trust.
8    (b) An advance by the trustee of money for the protection
9of the trust gives rise to a right to reimbursement with
10reasonable interest.
 
11
Article 8. Duties and Powers of Trustee.

 
12    Section 801. Duty to administer trust. Upon acceptance of a
13trusteeship, the trustee shall administer the trust in good
14faith, in accordance with its purposes and the terms of the
15trust, and in accordance with this Code.
 
16    Section 802. Duty of loyalty.
17    (a) Subject to the rights of persons dealing with or
18assisting the trustee as provided in Section 1012, a sale,
19encumbrance, or other transaction involving the investment or
20management of trust property entered into by the trustee for
21the trustee's own personal account or that is otherwise
22affected by a conflict between the trustee's fiduciary and
23personal interests is voidable by a beneficiary affected by the

 

 

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1transaction and a trustee must disgorge to the trust any profit
2from such transaction if voided, unless:
3        (1) the transaction was authorized by the trust
4    instrument or applicable law;
5        (2) the transaction was approved by the court or by
6    nonjudicial settlement agreement in accordance with
7    Section 111;
8        (3) the beneficiary did not commence a judicial
9    proceeding within the time allowed by Section 1005;
10        (4) the beneficiary consented to the trustee's
11    conduct, ratified the transaction, or released the trustee
12    in compliance with Section 1009; or
13        (5) the transaction involves a contract entered into or
14    claim acquired by the trustee before the person became or
15    contemplated becoming trustee.
16    (b) A sale, encumbrance, or other transaction involving the
17investment or management of trust property is presumed to be
18affected by a conflict between personal and fiduciary interests
19if it is entered into by the trustee with:
20        (1) the trustee's spouse;
21        (2) the trustee's descendants, siblings, parents, or
22    their spouses; or
23        (3) a corporation or other person or enterprise in
24    which the trustee, or a person that owns a significant
25    interest in the trustee, has an interest that might affect
26    the trustee's best judgment, except as otherwise

 

 

HB1471 Enrolled- 74 -LRB101 06784 LNS 51811 b

1    authorized by law.
2    (c) A transaction between a trustee and a beneficiary that
3does not concern trust property, that occurs during the
4existence of the trust and from which the trustee obtains an
5advantage, is voidable by the beneficiary unless the trustee
6establishes that the transaction was fair to the beneficiary.
7    (d) A transaction not concerning trust property in which
8the trustee engages in the trustee's individual capacity
9involves a conflict between personal and fiduciary interests if
10the transaction concerns an opportunity properly belonging to
11the trust.
12    (e) An investment by a trustee in securities of an
13investment company or investment trust to which the trustee, or
14its affiliate, provides services in a capacity other than as
15trustee is not presumed to be affected by a conflict between
16personal and fiduciary interests if the investment otherwise
17complies with the prudent investor rule. In addition to its
18compensation for acting as trustee, the trustee may be
19compensated by the investment company or investment trust for
20providing those services out of fees charged to the trust so
21long as the total compensation paid by the trust as trustee's
22fees and mutual fund or other investment fees is reasonable.
23    (f) In voting shares of stock or in exercising powers of
24control over similar interests in other forms of enterprise,
25the trustee shall act in the best interests of the
26beneficiaries.

 

 

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1    (g) This Section does not preclude the following
2transactions, if fair to the beneficiaries:
3        (1) an agreement between a trustee and a beneficiary
4    relating to the appointment or compensation of the trustee;
5        (2) payment of reasonable compensation to the trustee;
6        (3) a transaction between a trust and another trust,
7    decedent's estate, or guardianship of which the trustee is
8    a fiduciary or in which a beneficiary has an interest;
9        (4) the entry of an agreement for a bank or other
10    deposit account, safe deposit box, custodian, agency, or
11    depository arrangement for all or any part of the trust
12    property, including an agreement for services provided by a
13    bank operated by or affiliated with the trustee, and the
14    payment of reasonable compensation for those services,
15    including compensation to the bank operated by or
16    affiliated with the trustee, except that nothing in this
17    paragraph shall be construed as removing any depository
18    arrangements from the requirements of the prudent investor
19    rule; or
20        (5) an advance by the trustee of money for the
21    protection of the trust.
22    (h) The court may appoint a special fiduciary to make a
23decision with respect to any proposed transaction that might
24violate this Section if entered into by the trustee.
 
25    Section 803. Impartiality. If a trust has 2 or more

 

 

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1beneficiaries, the trustee shall act impartially in investing,
2managing, and distributing the trust property giving due regard
3to the beneficiaries respective interests. The trustee must
4treat the beneficiaries equitably in light of the purposes and
5terms of the trust, including any manifestation of an intention
6to favor one or more beneficiaries.
 
7    Section 804. Prudent administration. A trustee shall
8administer the trust as a prudent person would, by considering
9the purposes, terms, distribution requirements, and other
10circumstances of the trust. In satisfying this standard, the
11trustee shall exercise reasonable care, skill, and caution.
 
12    Section 805. Costs of administration. In administering a
13trust, the trustee may incur only costs that are reasonable in
14relation to the trust property and the purposes of the trust.
 
15    Section 806. (Reserved).
 
16    Section 807. Delegation by trustee.
17    (a) Except as provided in subsection (b), the trustee has a
18duty not to delegate to others the performance of any acts
19involving the exercise of judgment and discretion.
20    (b) A trustee may delegate duties and powers that a prudent
21trustee of comparable skills could properly delegate under the
22circumstances. The trustee shall exercise reasonable care,

 

 

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1skill, and caution in:
2        (1) selecting an agent;
3        (2) establishing the scope and terms of the delegation,
4    consistent with the purposes of the trust and the trust
5    instrument; and
6        (3) periodically reviewing the agent's actions in
7    order to monitor the agent's performance and compliance
8    with the terms of the delegation.
9    (c) In performing a delegated function, an agent owes a
10duty to the trust to exercise reasonable care to comply with
11the terms of the delegation.
12    (d) A trustee who complies with subsection (b) is not
13liable to the beneficiaries or to the trust for an action of
14the agent to whom the function was delegated.
15    (e) By accepting a delegation of powers or duties from the
16trustee of a trust that is subject to the law of this State, an
17agent submits to the jurisdiction of the courts of this State.
 
18    Section 808. Directed trusts.
19    (a) In this Section:
20        (1) "Distribution trust advisor" means any one or more
21    persons given authority by the trust instrument to direct,
22    consent to, veto, or otherwise exercise all or any portion
23    of the distribution powers and discretions of the trust,
24    including, but not limited to, authority to make
25    discretionary distribution of income or principal.

 

 

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1        (2) "Excluded fiduciary" means any fiduciary that by
2    the trust instrument is directed to act in accordance with
3    the exercise of specified powers by a directing party, in
4    which case the specified powers are deemed granted not to
5    the fiduciary but to the directing party and the fiduciary
6    is deemed excluded from exercising the specified powers. If
7    a trust instrument provides that a fiduciary as to one or
8    more specified matters is to act, omit action, or make
9    decisions only with the consent of a directing party, then
10    the fiduciary is an excluded fiduciary with respect to the
11    matters. Notwithstanding any provision of this Section, a
12    person does not fail to qualify as an excluded fiduciary
13    solely by reason of having effectuated, participated in, or
14    consented to a transaction, including, but not limited to,
15    any transaction described in Section 111 or 411 or Article
16    12 invoking this Section with respect to any new or
17    existing trust.
18        (3) "Fiduciary" means any person expressly given one or
19    more fiduciary duties by the trust instrument, including,
20    but not limited to, a trustee.
21        (4) "Investment trust advisor" means any one or more
22    persons given authority by the trust instrument to direct,
23    consent to, veto, or otherwise exercise all or any portion
24    of the investment powers of the trust.
25        (5) "Power" means authority to take or withhold an
26    action or decision, including, but not limited to, an

 

 

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1    expressly specified power, the implied power necessary to
2    exercise a specified power, and authority inherent in a
3    general grant of discretion.
4        (6) "Trust protector" means any one or more persons
5    given any one or more of the powers specified in subsection
6    (d), regardless of whether the power is designated with the
7    title of trust protector by the trust instrument.
8    (b) An investment trust advisor may be designated in the
9trust instrument of a trust. The powers of an investment trust
10advisor may be exercised or not exercised in the sole and
11absolute discretion of the investment trust advisor, and are
12binding on all other persons, including, but not limited to,
13each beneficiary, fiduciary, excluded fiduciary, and any other
14party having an interest in the trust. The trust instrument may
15use the title "investment trust advisor" or any similar name or
16description demonstrating the intent to provide for the office
17and function of an investment trust advisor. Unless the terms
18of the trust provide otherwise, the investment trust advisor
19has the authority to:
20        (1) direct the trustee with respect to the retention,
21    purchase, transfer, assignment, sale, or encumbrance of
22    trust property and the investment and reinvestment of
23    principal and income of the trust;
24        (2) direct the trustee with respect to all management,
25    control, and voting powers related directly or indirectly
26    to trust assets, including, but not limited to, voting

 

 

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1    proxies for securities held in trust;
2        (3) select and determine reasonable compensation of
3    one or more advisors, managers, consultants, or
4    counselors, including the trustee, and to delegate to them
5    any of the powers of the investment trust advisor in
6    accordance with Section 807; and
7        (4) determine the frequency and methodology for
8    valuing any asset for which there is no readily available
9    market value.
10    (c) A distribution trust advisor may be designated in the
11trust instrument of a trust. The powers of a distribution trust
12advisor may be exercised or not exercised in the sole and
13absolute discretion of the distribution trust advisor, and are
14binding on all other persons, including, but not limited to,
15each beneficiary, fiduciary, excluded fiduciary, and any other
16party having an interest in the trust. The trust instrument may
17use the title "distribution trust advisor" or any similar name
18or description demonstrating the intent to provide for the
19office and function of a distribution trust advisor. Unless the
20terms of the trust provide otherwise, the distribution trust
21advisor has authority to direct the trustee with regard to all
22decisions relating directly or indirectly to discretionary
23distributions to or for one or more beneficiaries.
24    (d) A trust protector may be designated in the trust
25instrument of a trust. The powers of a trust protector may be
26exercised or not exercised in the sole and absolute discretion

 

 

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1of the trust protector, and are binding on all other persons,
2including, but not limited to, each beneficiary, investment
3trust advisor, distribution trust advisor, fiduciary, excluded
4fiduciary, and any other party having an interest in the trust.
5The trust instrument may use the title "trust protector" or any
6similar name or description demonstrating the intent to provide
7for the office and function of a trust protector. The powers
8granted to a trust protector by the trust instrument may
9include but are not limited to authority to do any one or more
10of the following:
11        (1) modify or amend the trust instrument to achieve
12    favorable tax status or respond to changes in the Internal
13    Revenue Code, federal laws, state law, or the rulings and
14    regulations under such laws;
15        (2) increase, decrease, or modify the interests of any
16    beneficiary or beneficiaries of the trust;
17        (3) modify the terms of any power of appointment
18    granted by the trust; however, such modification or
19    amendment may not grant a beneficial interest to any
20    individual, class of individuals, or other parties not
21    specifically provided for under the trust instrument;
22        (4) remove, appoint, or remove and appoint, a trustee,
23    investment trust advisor, distribution trust advisor,
24    another directing party, investment committee member, or
25    distribution committee member, including designation of a
26    plan of succession for future holders of any such office;

 

 

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1        (5) terminate the trust, including determination of
2    how the trustee shall distribute the trust property to be
3    consistent with the purposes of the trust;
4        (6) change the situs of the trust, the governing law of
5    the trust, or both;
6        (7) appoint one or more successor trust protectors,
7    including designation of a plan of succession for future
8    trust protectors;
9        (8) interpret terms of the trust at the request of the
10    trustee;
11        (9) advise the trustee on matters concerning a
12    beneficiary; or
13        (10) amend or modify the trust instrument to take
14    advantage of laws governing restraints on alienation,
15    distribution of trust property, or to improve the
16    administration of the trust.
17If a trust contains a charitable interest, a trust protector
18must give notice to the Attorney General's Charitable Trust
19Bureau at least 60 days before taking any of the actions
20authorized under paragraph (2), (3), (4), (5), or (6) of this
21subsection. The Attorney General may waive this notice
22requirement.
23    (e) A directing party is a fiduciary of the trust subject
24to the same duties and standards applicable to a trustee of a
25trust as provided by applicable law unless the trust instrument
26provides otherwise, but the trust instrument may not, however,

 

 

HB1471 Enrolled- 83 -LRB101 06784 LNS 51811 b

1relieve or exonerate a directing party from the duty to act or
2withhold acting as the directing party in good faith reasonably
3believes is in the best interests of the trust.
4    (f) The excluded fiduciary shall act in accordance with the
5trust instrument and comply with the directing party's exercise
6of the powers granted to the directing party by the trust
7instrument. Unless otherwise provided in the trust instrument,
8an excluded fiduciary has no duty to monitor, review, inquire,
9investigate, recommend, evaluate, or warn with respect to a
10directing party's exercise or failure to exercise any power
11granted to the directing party by the trust instrument,
12including, but not limited to, any power related to the
13acquisition, disposition, retention, management, or valuation
14of any asset or investment. Except as otherwise provided in
15this Section or the trust instrument, an excluded fiduciary is
16not liable, either individually or as a fiduciary, for any
17action, inaction, consent, or failure to consent by a directing
18party, including, but not limited to, any of the following:
19        (1) if a trust instrument provides that an excluded
20    fiduciary is to follow the direction of a directing party,
21    and such excluded fiduciary acts in accordance with such a
22    direction, then except in cases of willful misconduct on
23    the part of the excluded fiduciary in complying with the
24    direction of the directing party, the excluded fiduciary is
25    not liable for any loss resulting directly or indirectly
26    from following any such direction, including but not

 

 

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1    limited to compliance regarding the valuation of assets for
2    which there is no readily available market value;
3        (2) if a trust instrument provides that an excluded
4    fiduciary is to act or omit to act only with the consent of
5    a directing party, then except in cases of willful
6    misconduct on the part of the excluded fiduciary, the
7    excluded fiduciary is not liable for any loss resulting
8    directly or indirectly from any act taken or omitted as a
9    result of such directing party's failure to provide such
10    consent after having been asked to do so by the excluded
11    fiduciary; or
12        (3) if a trust instrument provides that, or for any
13    other reason, an excluded fiduciary is required to assume
14    the role or responsibilities of a directing party, or if
15    the excluded fiduciary appoints a directing party or
16    successor to a directing party other than in a nonjudicial
17    settlement agreement under Section 111 or in a second trust
18    under Article 12, then the excluded fiduciary shall also
19    assume the same fiduciary and other duties and standards
20    that applied to such directing party.
21    (g) By accepting an appointment to serve as a directing
22party of a trust that is subject to the laws of this State, the
23directing party submits to the jurisdiction of the courts of
24this State even if investment advisory agreements or other
25related agreements provide otherwise, and the directing party
26may be made a party to any action or proceeding if issues

 

 

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1relate to a decision or action of the directing party.
2    (h) Each directing party shall keep the excluded fiduciary
3and any other directing party reasonably informed regarding the
4administration of the trust with respect to any specific duty
5or function being performed by the directing party to the
6extent that the duty or function would normally be performed by
7the excluded fiduciary or to the extent that providing such
8information to the excluded fiduciary or other directing party
9is reasonably necessary for the excluded fiduciary or other
10directing party to perform its duties, and the directing party
11shall provide such information as reasonably requested by the
12excluded fiduciary or other directing party. Neither the
13performance nor the failure to perform of a directing party's
14duty to inform as provided in this subsection affects
15whatsoever the limitation on the liability of the excluded
16fiduciary as provided in this Section.
17    (i) Other required notices.
18        (1) A directing party shall:
19            (A) within 90 days after becoming a directing
20        party, notify each qualified beneficiary of the
21        acceptance and of the directing party's name, address,
22        and telephone number, except that the notice
23        requirement of this subdivision (A) does not apply with
24        respect to a succession of a business entity by merger
25        or consolidation with another business entity or by
26        transfer between holding company affiliates if there

 

 

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1        is no change in the contact information for the
2        directing party, in which case the successor entity has
3        discretion to determine what timing and manner of
4        notice is appropriate;
5            (B) notify each qualified beneficiary in advance
6        of any change in the rate of or the method of
7        determining the directing party's compensation; and
8            (C) notify each qualified beneficiary of the
9        directing party's resignation.
10        (2) In the event of the incapacity, death,
11    disqualification, or removal of any directing party, a
12    directing party who continues acting as directing party
13    following such an event shall notify each qualified
14    beneficiary of the incapacity, death, disqualification, or
15    removal of any other directing party within 90 days after
16    the event.
17    (j) An excluded fiduciary may, but is not required to,
18obtain and rely upon an opinion of counsel on any matter
19relevant to this Section.
20    (k) On and after January 1, 2013, this Section applies to:
21        (1) all existing and future trusts that appoint or
22    provide for a directing party, including, but not limited
23    to, a party granted power or authority effectively
24    comparable in substance to that of a directing party as
25    provided in this Section; or
26        (2) any existing or future trust that:

 

 

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1            (A) is modified in accordance with applicable law
2        or the terms of the trust to appoint or provide for a
3        directing party; or
4            (B) is modified to appoint or provide for a
5        directing party, including, but not limited to, a party
6        granted power or authority effectively comparable in
7        substance to that of a directing party, in accordance
8        with: (i) a court order; (ii) a nonjudicial settlement
9        agreement made in accordance with Section 111; or (iii)
10        an exercise of decanting power under Article 12,
11        regardless of whether the order, agreement, or
12        second-trust instrument specifies that this Section
13        governs the responsibilities, actions, and liabilities
14        of a person designated as a directing party or excluded
15        fiduciary.
 
16    Section 809. Control and protection of trust property. A
17trustee shall take reasonable steps to take control of and
18protect the trust property. If a corporation is acting as
19co-trustee with one or more individuals, the corporate trustee
20shall have custody of the trust estate unless all the trustees
21otherwise agree.
 
22    Section 810. Recordkeeping and identification of trust
23property.
24    (a) A trustee shall keep adequate records of the

 

 

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1administration of the trust.
2    (b) A trustee shall keep trust property separate from the
3trustee's own property.
4    (c) Except as otherwise provided in subsection (d), a
5trustee not subject to federal or state banking regulation
6shall cause the trust property to be designated so that the
7interest of the trust, to the extent feasible, appears in
8records maintained by a party other than a trustee or
9beneficiary to whom the trustee has delivered the property.
10    (d) If the trustee maintains records clearly indicating the
11respective interests, a trustee may invest as a whole the
12property of 2 or more separate trusts.
 
13    Section 811. Enforcement and defense of claims. A trustee
14shall take reasonable steps to enforce claims of the trust and
15to defend claims against the trust. It may be reasonable for a
16trustee not to enforce a claim, not to defend an action, to
17settle an action, or to suffer a default, depending upon the
18likelihood of recovery and the cost of suit and enforcement.
 
19    Section 812. Powers and duties of successor; liability for
20acts of predecessor; approval of accounts.
21    (a) A successor trustee shall have all the rights, powers,
22and duties that are granted to or imposed on the predecessor
23trustee.
24    (b) A successor trustee is under no duty to inquire into

 

 

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1the acts or doings of a predecessor trustee, and is not liable
2for any act or failure to act of a predecessor trustee.
3    (c) With the approval of a majority in interest of the
4beneficiaries then entitled to receive or eligible to have the
5benefit of the income from the trust, a successor trustee may
6accept the account rendered by, and the property received from,
7the predecessor trustee as a full and complete discharge of the
8predecessor trustee without incurring any liability.
 
9    Section 813.1. Duty to inform and account; trusts
10irrevocable and trustees accepting appointment after effective
11date of Code.
12    (a) This Section is prospective only and does not apply to
13any trust that was irrevocable before the effective date of
14this Code, or to a trustee who accepts a trusteeship before the
15effective date of this Code. Subject to Section 105, this
16Section supplants any common law duty of a trustee to inform
17and account to trust beneficiaries. This Section does not apply
18to trusts that became irrevocable before the effective date of
19this Code.
20    (b) General principles.
21        (1) The trustee shall notify each qualified
22    beneficiary:
23            (A) of the trust's existence;
24            (B) of the beneficiary's right to request a
25        complete copy of the trust instrument; and

 

 

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1            (C) whether the beneficiary has a right to receive
2        or request trust accountings.
3        The notice required by this paragraph (1) must be
4    given: (i) within 90 days of the trust becoming irrevocable
5    or if no trustee is then acting within 90 days of the
6    trustee's acceptance of the trusteeship; (ii) within 90
7    days of the trustee acquiring knowledge that a qualified
8    beneficiary has a representative under Article 3 who did
9    not previously receive notice; (iii) within 90 days of the
10    trustee acquiring knowledge that a qualified beneficiary
11    who previously had a representative under Article 3 no
12    longer has a representative under Article 3; and (iv)
13    within 90 days of the trustee acquiring knowledge that
14    there is a new qualified beneficiary.
15        (2) A trustee shall send at least annually a trust
16    accounting to all current beneficiaries.
17        (3) A trustee shall send at least annually a trust
18    accounting to all presumptive remainder beneficiaries.
19        (4) Upon termination of a trust, a trustee shall send a
20    trust accounting to all beneficiaries entitled to receive a
21    distribution of the residue of the trust.
22        (5) Notwithstanding any other provision, a trustee in
23    its discretion may provide notice, information, trust
24    accountings, or reports to any beneficiary of the trust
25    regardless of whether the communication is otherwise
26    required to be provided.

 

 

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1        (6) Upon the reasonable request of a qualified
2    beneficiary, the trustee shall promptly furnish to the
3    qualified beneficiary a complete copy of the trust
4    instrument.
5        (7) Notwithstanding any other provision, a trustee is
6    deemed to have fully and completely discharged the
7    trustee's duties under this Section to inform and account
8    to all beneficiaries, at common law or otherwise, if the
9    trustee provides the notice required under paragraph (1) to
10    each qualified beneficiary and if the trustee provides at
11    least annually and on termination of the trust a trust
12    accounting required by paragraph (2), (3), or (4) to each
13    beneficiary entitled to a trust accounting.
14        (8) For each asset or class of assets described in a
15    trust accounting for which there is no readily available
16    market value, the trustee, in the trustee's discretion, may
17    determine whether to estimate the value or use a nominal
18    carrying value for such an asset, how to estimate the value
19    of such an asset, and whether and how often to engage a
20    professional appraiser to value such an asset.
21    (c) Upon a vacancy in a trusteeship, unless a co-trustee
22remains in office, the trust accounting required by subsection
23(b) must be sent to the beneficiaries entitled to the
24accounting by the former trustee. A personal representative,
25guardian of the estate, or guardian of the person may send the
26trust accounting to the beneficiaries entitled to the

 

 

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1accounting on behalf of a deceased or incapacitated trustee.
2    (d) Other required notices.
3        (1) A trustee shall:
4            (A) within 90 days after accepting a trusteeship,
5        notify each qualified beneficiary of the acceptance
6        and of the trustee's name, address, and telephone
7        number, except that the notice requirement of this
8        subdivision (A) does not apply with respect to a
9        succession of a corporate trustee by merger or
10        consolidation with another corporate fiduciary or by
11        transfer between holding company affiliates if there
12        is no change in the contact information for the
13        trustee, in which case the successor trustee has
14        discretion to determine what timing and manner of
15        notice is appropriate;
16            (B) notify each qualified beneficiary in advance
17        of any change in the rate of or the method of
18        determining the trustee's compensation; and
19            (C) notify each qualified beneficiary of the
20        trustee's resignation.
21        (2) In the event of the incapacity, death,
22    disqualification, or removal of any trustee, a trustee who
23    continues acting as trustee following such an event shall
24    notify each qualified beneficiary of the incapacity,
25    death, disqualification, or removal of any other trustee
26    within 90 days after the event.

 

 

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1        (3) A trustee shall notify each qualified beneficiary
2    of any change in the address, telephone number, or other
3    contact information for the trustee no later than 90 days
4    after the change goes into effect.
5    (e) Each request for information under this Section must be
6with respect to a single trust that is sufficiently identified
7to enable the trustee to locate the trust's records. A trustee
8may charge a reasonable fee for providing information under
9this Section to:
10        (1) a beneficiary who is not a qualified beneficiary;
11        (2) a qualified beneficiary for providing information
12    that was previously provided to the qualified beneficiary
13    or a representative under Article 3 for the qualified
14    beneficiary; or
15        (3) a representative under Article 3 for a qualified
16    beneficiary for information that was previously provided
17    to the qualified beneficiary or a representative under
18    Article 3 for the qualified beneficiary.
19    (f) If a trustee is bound by any confidentiality
20restrictions regarding a trust asset, then, before receiving
21the information, a beneficiary eligible under this Section to
22receive any information about that asset must agree to be bound
23by the same confidentiality restrictions. The trustee has no
24duty or obligation to disclose to any beneficiary any
25information that is otherwise prohibited to be disclosed by
26applicable law.

 

 

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1    (g) A qualified beneficiary may waive the right to receive
2information otherwise required to be furnished under this
3Section, such as a trust accounting, by an instrument in
4writing delivered to the trustee. A qualified beneficiary may
5at any time, by an instrument in writing delivered to the
6trustee, withdraw a waiver previously given with respect to
7future trust accountings.
8    (h) Receipt of information, notices, or a trust accounting
9by a beneficiary is presumed if the trustee has procedures in
10place requiring the mailing or delivery of information,
11notices, or trust accountings to the beneficiary. This
12presumption applies to the mailing or delivery of information,
13notices, or trust accountings by electronic means or the
14provision of access to an account by electronic means for so
15long as the beneficiary has agreed to receive electronic
16delivery or access.
17    (i) A trustee may request approval of the trustee's current
18or final trust accounting in a judicial proceeding at the
19trustee's election, with all reasonable and necessary costs of
20the proceeding payable by the trust and allocated between
21income and principal in accordance with the Principal and
22Income Act.
23    (j) Notwithstanding any other provision, this Section is
24not intended to and does not impose on any trustee a duty to
25inform any beneficiary in advance of transactions relating to
26the trust property.
 

 

 

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1    Section 813.2. Duty to inform and account; trusts
2irrevocable and trustees accepting appointment before the
3effective date of Code.
4    (a) This Section applies to all trusts that were
5irrevocable before the effective date of this Code and to a
6trustee who accepts a trusteeship before the effective date of
7this Code.
8    (b) Every trustee at least annually shall furnish to the
9beneficiaries then entitled to receive or receiving the income
10from the trust estate, or, if none, then to those beneficiaries
11eligible to have the benefit of the income from the trust
12estate, a current account showing the receipts, disbursements,
13and inventory of the trust estate.
14    (c) Every trustee shall on termination of the trust furnish
15to the beneficiaries then entitled to distribution of the trust
16estate a final account for the period from the date of the last
17current account to the date of distribution showing the
18inventory of the trust estate, the receipts, disbursements, and
19distributions and shall make available to the beneficiaries
20copies of prior accounts not previously furnished.
21    (d) If a beneficiary is incapacitated, the account shall be
22provided to the representative of the estate of the
23beneficiary. If no representative for the estate of a
24beneficiary under legal disability has been appointed, the
25account shall be provided to a spouse, parent, adult child, or

 

 

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1guardian of the person of the beneficiary.
2    (e) For each asset or class of assets described in the
3account for which there is no readily available market value,
4the trustee, in the trustee's discretion, may determine whether
5to estimate the value or use a nominal carrying value for such
6an asset, how to estimate the value of such an asset, and
7whether and how often to engage a professional appraiser to
8value such an asset.
 
9    Section 814. Discretionary powers; tax savings.
10    (a) Notwithstanding the breadth of discretion granted to a
11trustee or other fiduciary in the trust instrument, including
12the use of such terms as "absolute", "sole", or "uncontrolled",
13such fiduciary shall exercise a discretionary power in good
14faith and in accordance with the terms and purposes of the
15trust instrument.
16    (b) Subject to subsection (e), and unless the trust
17instrument expressly indicates that a rule in this subsection
18does not apply:
19        (1) a person other than a settlor who is a beneficiary
20    and a trustee or other fiduciary of a trust that confers on
21    that fiduciary a power to make discretionary distributions
22    to or for that fiduciary's personal benefit may exercise
23    the power only in accordance with an ascertainable
24    standard; and
25        (2) a trustee or other fiduciary may not exercise a

 

 

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1    power to make discretionary distributions to satisfy a
2    legal obligation of support that such fiduciary personally
3    owes another person.
4    (c) Subject to subsections (d) and (e), if a beneficiary of
5a trust, in an individual, trustee, or other capacity, removes
6a fiduciary and appoints a successor fiduciary who would be
7related or subordinate to that beneficiary within the meaning
8of Section 672(c) of the Internal Revenue Code if the
9beneficiary were the grantor, that successor fiduciary's
10discretionary powers are limited as follows:
11        (1) the fiduciary's discretionary power to make
12    distributions to or for the benefit of that beneficiary is
13    limited to an ascertainable standard;
14        (2) the fiduciary's discretionary power may not be
15    exercised to satisfy any of that beneficiary's legal
16    obligations for support or other purposes; and
17        (3) the fiduciary's discretionary power may not be
18    exercised to grant to that beneficiary a general power of
19    appointment.
20    (d) Subsection (c) does not apply if:
21        (1) the appointment of the trustee or other fiduciary
22    by the beneficiary may be made only in conjunction with
23    another person having a substantial interest in the
24    property of the trust subject to the power that is adverse
25    to the interest of the beneficiary within the meaning of
26    Section 2041(b)(1)(C)(ii) of the Internal Revenue Code; or

 

 

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1        (2) the appointment is in conformity with a procedure
2    governing appointments approved by the court before the
3    effective date of this Code.
4    (e) Subsections (b) and (c) do not apply to:
5        (1) a person other than a settlor who is a beneficiary
6    and trustee or other fiduciary of a trust that confers on
7    such fiduciary a power exercisable only in conjunction with
8    another person having a substantial interest in the
9    property subject to the power that is adverse to the
10    interest of that fiduciary within the meaning of Section
11    2041(b)(1)(C)(ii) of the Internal Revenue Code;
12        (2) a power held by the settlor's spouse who is the
13    trustee or other fiduciary of a trust for which a marital
14    deduction, as defined in Section 2056(b)(5) or 2523(e) of
15    the Internal Revenue Code, was previously allowed;
16        (3) any trust during any period that the trust may be
17    revoked or amended by its settlor;
18        (4) a trust if contributions to the trust qualify for
19    the annual exclusion under Section 2503(c) of the Internal
20    Revenue Code; or
21        (5) any portion of a trust over which the trustee or
22    other fiduciary is expressly granted in the trust
23    instrument a presently exercisable or testamentary general
24    power of appointment.
25    (f) A power whose exercise is limited or prohibited by
26subsections (b) and (c) may be exercised by a majority of the

 

 

HB1471 Enrolled- 99 -LRB101 06784 LNS 51811 b

1remaining trustees or other fiduciaries whose exercise of the
2power is not so limited or prohibited. If the power of all
3trustees or other fiduciaries is so limited or prohibited, the
4court may appoint a special fiduciary with authority to
5exercise the power.
 
6    Section 815. General powers of trustee.
7    (a) A trustee, without authorization by the court, may
8exercise:
9        (1) powers conferred by the trust instrument; or
10        (2) except as limited by the trust instrument:
11            (A) all powers over the trust property that an
12        unmarried owner with legal capacity has over
13        individually owned property;
14            (B) any other powers appropriate to achieve the
15        proper investment, management, and distribution of the
16        trust property; and
17            (C) any other powers conferred by this Code.
18    (b) The exercise of a power is subject to the fiduciary
19duties prescribed by this Code.
 
20    Section 816. Specific powers of trustee. Without limiting
21the authority conferred by Section 815, a trustee may:
22        (1) collect trust property and accept or reject
23    additions to the trust property from a settlor or any other
24    person;

 

 

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1        (2) acquire or sell property, for cash or on credit, at
2    public or private sale;
3        (3) exchange, partition, or otherwise change the
4    character of trust property;
5        (4) deposit trust money in an account in a regulated
6    financial-service institution;
7        (5) borrow money, with or without security, and
8    mortgage or pledge or otherwise encumber trust property for
9    a period within or extending beyond the duration of the
10    trust;
11        (6) with respect to an interest in a proprietorship,
12    partnership, limited liability company, business trust,
13    corporation, or other form of business or enterprise,
14    continue the business or other enterprise and take any
15    action that may be taken by shareholders, members, or
16    property owners, including merging, dissolving, pledging
17    other trust assets or guaranteeing a debt obligation of the
18    business or enterprise, or otherwise changing the form of
19    business organization or contributing additional capital;
20        (7) with respect to stocks or other securities,
21    exercise the rights of an absolute owner, including the
22    right to:
23            (A) vote, or give proxies to vote, with or without
24        power of substitution, or enter into or continue a
25        voting trust agreement;
26            (B) hold a security in the name of a nominee or in

 

 

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1        other form without disclosure of the trust so that
2        title may pass by delivery;
3            (C) pay calls, assessments, and other sums
4        chargeable or accruing against the securities, and
5        sell or exercise stock subscription or conversion
6        rights;
7            (D) deposit the securities with a depository or
8        other regulated financial-service institution; and
9            (E) participate in mergers, consolidations,
10        foreclosures, reorganizations, and liquidations;
11        (8) with respect to an interest in real property,
12    construct, or make ordinary or extraordinary repairs to,
13    alterations to, or improvements in, buildings or other
14    structures, demolish improvements, raze existing or erect
15    new party walls or buildings, subdivide or develop land,
16    dedicate any interest in real estate, dedicate land to
17    public use or grant public or private easements, enter into
18    contracts relating to real estate, and make or vacate plats
19    and adjust boundaries;
20        (9) enter into a lease for any purpose as lessor or
21    lessee, including a lease or other arrangement for
22    exploration and removal of natural resources, with or
23    without the option to purchase or renew, for a period
24    within or extending beyond the duration of the trust;
25        (10) grant an option involving a sale, lease, or other
26    disposition of trust property or acquire an option for the

 

 

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1    acquisition of property, including an option exercisable
2    beyond the duration of the trust, and exercise an option so
3    acquired;
4        (11) insure the property of the trust against damage or
5    loss and insure the trustee, the trustee's agents, and
6    beneficiaries against liability arising from the
7    administration of the trust;
8        (12) abandon or decline to administer property of no
9    value or of insufficient value to justify its collection or
10    continued administration;
11        (13) with respect to possible liability for violation
12    of environmental law:
13            (A) inspect or investigate property the trustee
14        holds or has been asked to hold, or property owned or
15        operated by an organization in which the trustee holds
16        or has been asked to hold an interest, for the purpose
17        of determining the application of environmental law
18        with respect to the property;
19            (B) take action to prevent, abate, or otherwise
20        remedy any actual or potential violation of any
21        environmental law affecting property held directly or
22        indirectly by the trustee, whether taken before or
23        after the assertion of a claim or the initiation of
24        governmental enforcement;
25            (C) decline to accept property into trust or
26        disclaim any power with respect to property that is or

 

 

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1        may be burdened with liability for violation of
2        environmental law;
3            (D) compromise claims against the trust that may be
4        asserted for an alleged violation of environmental
5        law; and
6            (E) pay the expense of any inspection, review,
7        abatement, or remedial action to comply with
8        environmental law;
9        (14) pay, contest, prosecute, or abandon any claim,
10    settle a claim or charges in favor of or against the trust,
11    and release, in whole or in part, a claim belonging to the
12    trust;
13        (15) pay taxes, assessments, compensation of the
14    trustee and of employees and agents of the trust, and other
15    expenses incurred in the administration of the trust;
16        (16) exercise elections with respect to federal,
17    state, and local taxes;
18        (17) select a mode of payment under any employee
19    benefit or retirement plan, annuity, or life insurance
20    payable to the trustee, exercise rights related to the
21    employee benefit or retirement plan, annuity, or life
22    insurance payable to the trustee, including exercise the
23    right to indemnification for expenses and against
24    liabilities, and take appropriate action to collect the
25    proceeds;
26        (18) make loans out of trust property, including loans

 

 

HB1471 Enrolled- 104 -LRB101 06784 LNS 51811 b

1    to a beneficiary on terms and conditions the trustee
2    considers to be fair and reasonable under the
3    circumstances, and the trustee has a lien on future
4    distributions for repayment of those loans;
5        (19) pledge trust property to guarantee loans made by
6    others to the beneficiary;
7        (20) appoint a trustee to act in another jurisdiction
8    to act as sole or co-trustee with respect to any part or
9    all of trust property located in the other jurisdiction,
10    confer upon the appointed trustee any or all of the rights,
11    powers, and duties of the appointing trustee, require that
12    the appointed trustee furnish security, and remove any
13    trustee so appointed;
14        (21) distribute income and principal in one or more of
15    the following ways, without being required to see to the
16    application of any distribution, as the trustee believes to
17    be for the best interests of any beneficiary who at the
18    time of distribution is incapacitated or in the opinion of
19    the trustee is unable to manage property or business
20    affairs because of incapacity:
21            (A) directly to the beneficiary;
22            (B) to the guardian of the estate, or if none, the
23        guardian of the person of the beneficiary;
24            (C) to a custodian for the beneficiary under any
25        state's Uniform Transfers to Minors Act, Uniform Gifts
26        to Minors Act or Uniform Custodial Trust Act, and, for

 

 

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1        that purpose, to create a custodianship or custodial
2        trust;
3            (D) to an adult relative of the beneficiary to be
4        expended on the beneficiary's behalf;
5            (E) by expending the money or using the property
6        directly for the benefit of the beneficiary;
7            (F) to a trust, created before the distribution
8        becomes payable, for the sole benefit of the
9        beneficiary and those dependent upon the beneficiary
10        during his or her lifetime, to be administered as a
11        part of the trust, except that any amount distributed
12        to the trust under this subparagraph (F) shall be
13        separately accounted for by the trustee of the trust
14        and shall be indefeasibly vested in the beneficiary so
15        that if the beneficiary dies before complete
16        distribution of the amounts, the amounts and the
17        accretions, earnings, and income, if any, shall be paid
18        to the beneficiary's estate, except that this
19        subparagraph (F) does not apply to the extent that it
20        would cause a trust otherwise qualifying for the
21        federal estate tax marital deduction not to qualify;
22        and
23            (G) by managing it as a separate fund on the
24        beneficiary's behalf, subject to the beneficiary's
25        continuing right to withdraw the distribution;
26        (22) on distribution of trust property or the division

 

 

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1    or termination of a trust, make distributions in divided or
2    undivided interests, allocate particular assets in
3    proportionate or disproportionate shares, value the trust
4    property for those purposes, and adjust for resulting
5    differences in valuation;
6        (23) resolve a dispute concerning the interpretation
7    of the trust or its administration by judicial proceeding,
8    nonjudicial settlement agreement under Section 111,
9    mediation, arbitration, or other procedure for alternative
10    dispute resolution;
11        (24) prosecute or defend an action, claim, or judicial
12    proceeding in any jurisdiction to protect trust property
13    and the trustee in the performance of the trustee's duties;
14        (25) execute contracts, notes, conveyances, and other
15    instruments that are useful to achieve or facilitate the
16    exercise of the trustee's powers, regardless of whether the
17    instruments contain covenants and warranties binding upon
18    and creating a charge against the trust estate or excluding
19    personal liability;
20        (26) on termination of the trust, exercise the powers
21    appropriate to wind up the administration of the trust and
22    distribute the trust property to the persons entitled to
23    it;
24        (27) enter into agreements for bank or other deposit
25    accounts, safe deposit boxes, or custodian, agency, or
26    depository arrangements for all or any part of the trust

 

 

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1    estate, including, to the extent fair to the beneficiaries,
2    agreements for services provided by a bank operated by or
3    affiliated with the trustee, and to pay reasonable
4    compensation for those services, including, to the extent
5    fair to the beneficiaries, compensation to the bank
6    operated by or affiliated with the trustee, except that
7    nothing in this Section shall be construed as removing any
8    depository arrangements from the requirements of the
9    prudent investor rule;
10        (28) engage attorneys, auditors, financial advisors,
11    and other agents and pay reasonable compensation to such
12    persons;
13        (29) invest in or hold undivided interests in property;
14        (30) if fair to the beneficiaries, deal with the
15    executor, trustee, or other representative of any other
16    trust or estate in which a beneficiary of the trust has an
17    interest, even if the trustee is an executor, trustee, or
18    other representative of the other trust or estate;
19        (31) make equitable division or distribution in cash or
20    in kind, or both, and for that purpose may value any
21    property divided or distributed in kind;
22        (32) rely upon an affidavit, certificate, letter, or
23    other evidence reasonably believed to be genuine and on the
24    basis of any such evidence to make any payment or
25    distribution in good faith without liability;
26        (33) except as otherwise directed by the court, have

 

 

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1    all of the rights, powers, and duties given to or imposed
2    upon the trustee by law and the terms of the trust during
3    the period between the termination of the trust and the
4    distribution of the trust assets and during any period in
5    which any litigation is pending that may void or invalidate
6    the trust in whole or in part or affect the rights, powers,
7    duties, or discretions of the trustee;
8        (34) plant and harvest crops; breed, raise, purchase,
9    and sell livestock; lease land, equipment, or livestock for
10    cash or on shares, purchase and sell, exchange or otherwise
11    acquire or dispose of farm equipment and farm produce of
12    all kinds; make improvements, construct, repair, or
13    demolish and remove any buildings, structures, or fences,
14    engage agents, managers, and employees and delegate powers
15    to them; engage in drainage and conservation programs;
16    terrace, clear, ditch, and drain lands and install
17    irrigation systems; replace improvements and equipment;
18    fertilize and improve the soil; engage in the growing,
19    improvement, and sale of trees and other forest crops;
20    participate or decline to participate in governmental
21    agricultural or land programs; and perform such acts as the
22    trustee deems appropriate using such methods as are
23    commonly employed by other farm owners in the community in
24    which the farm property is located;
25        (35) drill, mine, and otherwise operate for the
26    development of oil, gas, and other minerals; enter into

 

 

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1    contracts relating to the installation and operation of
2    absorption and repressuring plants; enter into unitization
3    or pooling agreements for any purpose including primary,
4    secondary, or tertiary recovery; place and maintain pipe
5    lines; execute oil, gas, and mineral leases, division and
6    transfer orders, grants, deeds, releases and assignments,
7    and other instruments; participate in a cooperative coal
8    marketing association or similar entity; and perform such
9    other acts as the trustee deems appropriate using such
10    methods as are commonly employed by owners of similar
11    interests in the community in which the interests are
12    located;
13        (36) continue an unincorporated business and
14    participate in its management by having the trustee or one
15    or more agents of the trustee act as a manager with
16    appropriate compensation from the business and incorporate
17    the business;
18        (37) continue a business in the partnership form and
19    participate in its management by having the trustee or one
20    or more agents of the trustee act as a partner, limited
21    partner, or employee with appropriate compensation from
22    the business; enter into new partnership agreements and
23    incorporate the business; and, with respect to activities
24    under this paragraph (37), the trustee or the agent or
25    agents of the trustee shall not be personally liable to
26    third persons with respect to actions not sounding in tort

 

 

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1    unless the trustee or agent fails to identify the trust
2    estate and disclose that the trustee or agent is acting in
3    a representative capacity, except that nothing in this
4    paragraph impairs in any way the liability of the trust
5    estate with respect to activities under this paragraph (37)
6    to the extent of the assets of the trust estate.
7        (38) Release, by means of any written renunciation,
8    relinquishment, surrender, refusal to accept,
9    extinguishment, and any other form of release, any power
10    granted to the trustee by applicable law or the terms of a
11    trust and held by such trustee in its fiduciary capacity,
12    including any power to invade property, any power to alter,
13    amend, or revoke any instrument, whether or not such
14    release causes a termination of any right or interest
15    thereunder, and any power remaining where one or more
16    partial releases have heretofore or hereafter been made
17    with respect to such power, whether heretofore or hereafter
18    created or reserved as to: (i) any property that is subject
19    thereto; (ii) any one or more of the objects thereof; or
20    (iii) limit in any other respect the extent to which it may
21    be exercised. The release may be permanent or applicable
22    only for a specific time and may apply only to the trustee
23    executing the release or the trustee and all future
24    trustees, successor trustees, and co-trustees of the trust
25    acting at any time or from time to time.
 

 

 

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1    Section 817. Distribution upon termination. Upon the
2occurrence of an event terminating a trust in whole or in part,
3or upon the exercise by a beneficiary of a right to withdraw
4trust principal, the trustee shall proceed expeditiously to
5make the distribution to the beneficiary. The trustee has the
6right to require from the beneficiary a written approval of the
7trustee's accountings provided to the beneficiary and, at the
8trustee's election, a refunding agreement from the beneficiary
9for liabilities that would otherwise be payable from trust
10property to the extent of the beneficiary's share of the
11distribution. An accounting approved under this Section is
12binding on the beneficiary providing the approval and on the
13beneficiary's successors, heirs, representatives, and assigns.
14A trustee may elect to withhold a reasonable amount of a
15distribution or require a reasonable reserve for the payment of
16debts, expenses, and taxes payable from the trust pending the
17receipt of a written approval of the trustee's accountings
18provided to the beneficiary and refunding agreement from a
19beneficiary or a judicial settlement of accounts.
 
20    Section 818. (Reserved).
 
21    Section 819. Nominee registration. The trustee may cause
22stocks, bonds, and other real or personal property belonging to
23the trust to be registered and held in the name of a nominee
24without mention of the trust in any instrument or record

 

 

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1constituting or evidencing title thereto. The trustee is liable
2for the acts of the nominee with respect to any investment so
3registered. The records of the trustee shall show at all times
4the ownership of the investment by the trustee, and the stocks,
5bonds, and other similar investments shall be in the possession
6and control of the trustee and be kept separate and apart from
7assets that are the individual property of the trustee.
 
8    Section 820. Proceeds of eminent domain or partition. If a
9trustee is appointed by a court of this State to receive money
10under eminent domain or partition proceedings and to invest it
11for the benefit of the person who would be entitled to the real
12estate or its income if it had not been taken or sold, on
13petition of any interested person describing the real estate to
14be purchased, the price to be paid, the probable income to be
15derived and the state of the title, the court may authorize the
16trustee to invest all or any part of the money in other real
17estate in this State. Title to the real estate so purchased
18shall be taken in the name of the trustee. If the interest of
19the beneficiary in the real estate taken or sold was a legal
20interest, the court shall direct the trustee to convey to the
21beneficiary a legal estate upon the same conditions and
22limitations of title, but the conveyance by the trustee shall
23preserve any right of entry for condition broken, possibility
24of reverter created by the instrument of title or any reversion
25or other vested interest that arose by operation of law at the

 

 

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1time the instrument took effect. The court shall not direct the
2conveyance by the trustee unless there is a person or class of
3persons in being who would have a vested interest in the real
4estate taken or sold under the instrument of title to the real
5estate and who would be entitled to possession of the real
6estate if it had not been taken or sold.
 
7    Section 821. Lands or estates subject to future interest or
8power of appointment; waste; appointment of trustee. If lands
9or any estate therein are subject to any legal or equitable
10future interest of any kind or to any power of appointment,
11whether a trust is involved or not, and it is made to appear
12that such lands or estate are liable to waste or depreciation
13in value, or that the sale thereof and the safe and proper
14investment of the proceeds will inure to the benefit and
15advantage of the persons entitled thereto, or that it is
16otherwise necessary for the conservation, preservation, or
17protection of the property or estate or of any present or
18future interest therein that such lands or estate be sold,
19mortgaged, leased, converted, exchanged, improved, managed or
20otherwise dealt with, the court may, pending the happening of
21the contingency, if any, and the vesting in possession of such
22future interest, declare a trust, and appoint a trustee or
23trustees for such lands or estate and vest in a trustee or
24trustees title to the property, and authorize and direct the
25sale of such property, either at a public sale or at private

 

 

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1sale, and upon such terms and conditions as the court may
2direct, and in such case may authorize the trustee or trustees
3to make such sale and to receive, hold and invest the proceeds
4thereof under the direction of the court for the benefit of the
5persons entitled or who may become entitled thereto according
6to their respective rights and interests, authorize and direct
7that all or any portion of the property, or the proceeds
8thereof, so subject to such future interests or powers of
9appointment, be leased, mortgaged, converted, exchanged,
10improved, managed, invested, reinvested, or otherwise dealt
11with, as the rights and interests of the parties and the
12equities of the case may require, and to that end may confer
13all necessary powers on the trustee or trustees. All orders of
14every court entered pursuant to this Section after June 30,
151982 and before September 16, 1985 vesting title to property in
16a trustee are hereby validated and such title is vested in such
17trustee effective the day the court entered such order.
 
18
Article 9. Illinois Prudent Investor Law; Life Insurance;
19
Affiliated Investments.

 
20    Section 900. Article title. This Article may be referred to
21as the Illinois Prudent Investor Law.
 
22    Section 901. Prudent investor rule.
23    (a) Except as otherwise provided in subsection (b), a

 

 

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1trustee administering a trust has a duty to invest and manage
2the trust assets to comply with the prudent investor rule set
3forth in this Article.
4    (b) The prudent investor rule, a default rule, may be
5expanded, restricted, eliminated, or otherwise altered by
6express terms of the trust. A trustee is not liable to a
7beneficiary for the trustee's reasonable and good faith
8reliance on those express provisions.
 
9    Section 902. Standard of care; portfolio strategy; risk and
10return objectives.
11    (a) A trustee has a duty to invest and manage trust assets
12as a prudent investor would, considering the purposes, terms,
13distribution requirements, and other circumstances of the
14trust. This standard requires the exercise of reasonable care,
15skill, and caution and applies not in isolation, but in the
16context of the trust portfolio as a whole and as a part of an
17overall investment strategy that incorporates risk and return
18objectives reasonably suitable to the trust.
19    (b) A trustee has a duty to pursue an investment strategy
20that considers both the reasonable production of income and
21safety of capital, consistent with the trustee's duty of
22impartiality and the purposes of the trust. Whether investments
23are underproductive or overproductive of income shall be judged
24by the portfolio as a whole and not as to any particular asset.
25    (c) The circumstances that a trustee may consider in making

 

 

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1investment decisions include, without limitation:
2        (1) the general economic conditions;
3        (2) the possible effect of inflation or deflation;
4        (3) the expected tax consequences of investment
5    decisions or strategies;
6        (4) the role each investment or course of action plays
7    within the overall portfolio;
8        (5) the expected total return including both income
9    yield and appreciation of capital;
10        (6) the duty to incur only reasonable and appropriate
11    costs;
12        (7) environmental and social considerations;
13        (8) governance policies of the entities in which the
14    trustee may invest;
15        (9) needs for liquidity, regularity of income, and
16    preservation or appreciation of capital; and
17        (10) an asset's special relationship or value, if any,
18    to the purpose of the trust or to one or more of the
19    beneficiaries.
20    (d) In addition to the circumstances listed in subsection
21(c), a trustee may, but need not, consider related trusts and
22the assets of beneficiaries known to the trustee when making
23investment decisions.
 
24    Section 903. Diversification. A trustee has a duty to
25diversify the investments of the trust unless, under the

 

 

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1circumstances, the trustee reasonably believes it is in the
2interests of the beneficiaries and furthers the purposes of the
3trust not to diversify.
 
4    Section 904. Duties at inception of trusteeship. A trustee
5has a duty, within a reasonable time after the acceptance of a
6trusteeship, to review trust assets and to make and implement
7decisions concerning the retention and disposition of original
8preexisting investments, in order to conform to this Article. A
9trustee's decision to retain or dispose of an asset may
10properly be influenced by the asset's special relationship or
11value to the purposes of the trust or to some or all of the
12beneficiaries, consistent with the trustee's duty of
13impartiality.
 
14    Section 905. Court action. Nothing in this Article
15abrogates or restricts the power of an appropriate court in
16proper cases to: (i) direct or permit the trustee to deviate
17from the terms of the trust; or (ii) to direct or permit the
18trustee to take, or to restrain the trustee from taking, any
19action regarding the making or retention of investments.
 
20    Section 906. (Reserved).
 
21    Section 907. (Reserved).
 

 

 

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1    Section 908. Reviewing compliance. No specific investment
2course of action is, taken alone, prudent or imprudent. The
3trustee may invest in every kind of property and type of
4investment, subject to this Article. A trustee's investment
5decisions and actions are to be judged in terms of the
6trustee's reasonable business judgment regarding the
7anticipated effect on the trust portfolio as a whole under the
8facts and circumstances prevailing at the time of the decision
9or action. This Article is a test of conduct and not of
10resulting performance.
 
11    Section 909. Delegation of investment and management
12functions. Notwithstanding any other provision of this Code,
13before delegating any investment functions to an agent in
14accordance with subsection (b) of Section 807, a trustee shall
15conduct an inquiry into the experience, performance history,
16professional licensing or registration, if any, and financial
17stability of the investment agent.
 
18    Section 910. Language invoking standard of Article. The
19following terms or comparable language in the investment powers
20and related provisions of a trust instrument, unless otherwise
21limited or modified by that instrument, shall be construed as
22authorizing any investment or strategy permitted under this
23Article: "investments permissible by law for investment of
24trust funds", "legal investments", "authorized investments",

 

 

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1"using the judgment and care under the circumstances then
2prevailing that persons of prudence, discretion, and
3intelligence exercise in the management of their own affairs,
4not in regard to speculation but in regard to the permanent
5disposition of their funds, considering the probable income as
6well as the probable safety of their capital", "prudent man
7rule", "prudent trustee rule", "prudent person rule", and
8"prudent investor rule".
 
9    Section 911. (See Section 900 for short title.)
 
10    Section 912. Application to existing trusts. The Sections
11of this Article that precede this Section apply to all existing
12and future trusts, but only as to actions or inactions
13occurring on or after January 1, 1992.
 
14    Section 913. Life insurance.
15    (a) Notwithstanding any other provision, the duties of a
16trustee with respect to acquiring or retaining as a trust asset
17a contract of insurance upon the life of the settlor, upon the
18lives of the settlor and the settlor's spouse, or upon the life
19of any person for which the trustee has an insurable interest
20in accordance with Section 113, do not include any of the
21following duties:
22        (1) to determine whether any contract of life insurance
23    in the trust, or to be acquired by the trust, is or remains

 

 

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1    a proper investment, including, without limitation, with
2    respect to:
3            (A) the type of insurance contract;
4            (B) the quality of the insurance contract;
5            (C) the quality of the insurance company; or
6            (D) the investments held within the insurance
7        contract.
8        (2) to diversify the investment among different
9    policies or insurers, among available asset classes, or
10    within an insurance contract;
11        (3) to inquire about or investigate into the health or
12    financial condition of an insured;
13        (4) to prevent the lapse of a life insurance contract
14    if the trust does not receive contributions or hold other
15    readily marketable assets to pay the life insurance
16    contract premiums; or
17        (5) to exercise any policy options, rights, or
18    privileges available under any contract of life insurance
19    in the trust, including any right to borrow the cash value
20    or reserve of the policy, acquire a paid-up policy, or
21    convert to a different policy.
22    (b) The trustee is not liable to the beneficiaries of the
23trust, the beneficiaries of the contract of insurance, or to
24any other party for loss arising from the absence of these
25duties regarding insurance contracts under this Section.
26    (c) This Section applies to an irrevocable trust created

 

 

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1after the effective date of this Code or to a revocable trust
2that becomes irrevocable after the effective date of this Code.
3The trustee of a trust described under this Section established
4before the effective date of this Code shall notify the settlor
5in writing that, unless the settlor provides written notice to
6the contrary to the trustee within 90 days of the trustee's
7notice, this Section applies to the trust. This Section does
8not apply if, within 90 days of the trustee's notice, the
9settlor notifies the trustee in writing that this Section does
10not apply. If the settlor is deceased, then the trustee shall
11give notice to all of the legally competent current
12beneficiaries, and this Section applies to the trust unless the
13majority of the beneficiaries notify the trustee to the
14contrary in writing within 90 days of the trustee's notice.
 
15    Section 914. Investments in affiliated investments;
16transactions with affiliates.
17    (a) As used in this Section:
18        (1) "Affiliate" means any corporation or other entity
19    that directly or indirectly is controlled by a financial
20    institution acting in a fiduciary capacity, or is related
21    to the financial institution by shareholding or other means
22    of common ownership and control.
23        (2) "Affiliated investment" means an investment for
24    which the fiduciary or an affiliate of the fiduciary acts
25    as advisor, administrator, distributor, placement agent,

 

 

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1    underwriter, broker, or in any other capacity for which the
2    fiduciary or an affiliate of the fiduciary receives or has
3    received compensation from the investment.
4        (3) "Fiduciary capacity" includes an agent with
5    investment discretion to determine what securities or
6    other assets to purchase or sell on behalf of a fiduciary
7    account.
8    (b) A financial institution acting in any fiduciary
9capacity may purchase any affiliated investment, including,
10but not limited to, insurance, equity derivatives, or
11securities underwritten or otherwise distributed by the
12financial institution or by an affiliate, through or directly
13from the financial institution or an affiliate or from a
14syndicate or selling group that includes the financial
15institution or an affiliate, if the purchase is otherwise
16prudent under the applicable fiduciary investment standard.
17    (c) The compensation paid to a financial institution acting
18in any fiduciary capacity or an affiliate of the financial
19institution for any affiliated investment under this Section
20must be reasonable and may not be prohibited by the instrument
21governing the fiduciary relationship. The compensation for the
22affiliated investment may be in addition to the compensation
23that the financial institution is otherwise entitled to receive
24from the fiduciary account.
25    (d) A financial institution shall disclose, at least
26annually:

 

 

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1        (1) any purchase of an affiliated investment
2    authorized by this Section, including all compensation
3    paid or to be paid by the fiduciary account or to be
4    received by an affiliate arising from the affiliated
5    investment;
6        (2) the capacities in which the financial institution
7    or an affiliate acts for the issuer of the securities or
8    the provider of the products or services; and
9        (3) that the financial institution or an affiliate may
10    have an interest in the affiliated investment.
11    (e) The disclosure shall be given, in writing or
12electronically by any document prepared for an affiliated
13investment under federal or state securities laws or in a
14written summary that includes all compensation received or to
15be received by the financial institution or any affiliate and
16an explanation of the manner in which the compensation is
17calculated (either as a percentage of the assets invested or by
18some other formula or method), to each principal in an agency
19relationship and to all persons entitled to receive account
20statements of any other fiduciary account.
21    (f) This Section applies to the purchase of securities made
22at the time of the initial offering of the securities or at any
23time thereafter.
24    (g) A financial institution that has complied with the
25terms of this Section has full authority to administer an
26affiliated investment, including the authority to vote proxies

 

 

HB1471 Enrolled- 124 -LRB101 06784 LNS 51811 b

1on the affiliated investment.
 
2
Article 10. Liability of Trustees and Rights of Persons Dealing
3
with Trustee.

 
4    Section 1001. Remedies for breach of trust.
5    (a) A violation by a trustee of a duty the trustee owes to
6a beneficiary is a breach of trust.
7    (b) To remedy a breach of trust that has occurred or may
8occur, the court may:
9        (1) compel the trustee to perform the trustee's duties;
10        (2) enjoin the trustee from committing a breach of
11    trust;
12        (3) compel the trustee to redress a breach of trust by
13    paying money, restoring property, or other means;
14        (4) order a trustee to account;
15        (5) appoint a special fiduciary to take possession of
16    the trust property and administer the trust;
17        (6) suspend the trustee;
18        (7) remove the trustee as provided in Section 706;
19        (8) reduce or deny compensation to the trustee; or
20        (9) subject to Section 1012, void an act of the
21    trustee, impose a lien or a constructive trust on trust
22    property, or trace trust property wrongfully disposed of
23    and recover the property or its proceeds.
24    (c) Nothing in this Section limits the equitable powers of

 

 

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1the court to order other appropriate relief.
 
2    Section 1002. Damages for breach of trust.
3    (a) A trustee who commits a breach of trust is liable to
4the beneficiaries affected for the greater of:
5        (1) the amount required to restore the value of the
6    trust property and trust distributions to what they would
7    have been had the breach not occurred; or
8        (2) the value of any benefit received by the trustee by
9    reason of the breach.
10    (b) Except as otherwise provided in this subsection, if
11more than one trustee is liable to the beneficiaries for a
12breach of trust, a trustee is entitled to contribution from the
13other trustee or trustees liable for the breach. A trustee is
14not entitled to contribution if the trustee was substantially
15more at fault than another trustee or if the trustee committed
16the breach of trust in bad faith or with reckless indifference
17to the purposes of the trust or the interests of the
18beneficiaries. A trustee who received a benefit from the breach
19of trust is not entitled to contribution from another trustee
20to the extent of the benefit received.
 
21    Section 1003. No damages in absence of breach. Except as
22provided in Section 802, absent a breach of trust, a trustee is
23not liable to a beneficiary for a loss or depreciation in the
24value of trust property or for any benefit received by the

 

 

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1trustee by reason of the administration of the trust.
 
2    Section 1004. Attorney's fees and costs. In a judicial
3proceeding involving the administration of a trust, the court,
4as equity may require, may award costs and expenses, including
5reasonable attorney's fees, to any party, to be paid by another
6party or from the trust that is the subject of the controversy.
 
7    Section 1005. Limitation on action against trustee.
8    (a) A beneficiary may not commence a proceeding against a
9trustee for breach of trust for any matter disclosed in writing
10by a trust accounting, or otherwise as provided in Sections
11813.1, 813.2, and Section 1102, after the date on which the
12disclosure becomes binding upon the beneficiary as provided
13below:
14        (1) With respect to a trust that becomes irrevocable
15    after the effective date of this Code and to trustees
16    accepting appointment after the effective date of this
17    Code, a matter disclosed in writing by a trust accounting
18    or otherwise pursuant to Section 813.1 and Section 1102 is
19    binding on each person who receives the information and
20    each person represented as provided in Article 3 by a
21    person who receives the information, and all of the
22    person's respective successors, representatives, heirs,
23    and assigns, unless an action against the trustee is
24    instituted within 2 years after the date the information is

 

 

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1    furnished. A trust accounting or other communication
2    adequately discloses the existence of a potential claim for
3    breach of trust if it provides sufficient information so
4    that the person entitled to receive the information knows
5    of the potential claim or should have inquired into its
6    existence.
7        (2) With respect to a trust that became irrevocable
8    before the effective date of this Code or a trustee that
9    accepted appointment before the effective date of this
10    Code, a current account is binding on each beneficiary
11    receiving the account and on the beneficiary's heirs and
12    assigns unless an action against the trustee is instituted
13    by the beneficiary or the beneficiary's heirs and assigns
14    within 3 years after the date the current account is
15    furnished, and a final accounting is binding on each
16    beneficiary receiving the final accounting and all persons
17    claiming by or through the beneficiary, unless an action
18    against the trustee is instituted by the beneficiary or
19    person claiming by or through him or her within 3 years
20    after the date the final account is furnished. If the
21    account is provided to the representative of the estate of
22    the beneficiary or to a spouse, parent, adult child, or
23    guardian of the person of the beneficiary, the account is
24    binding on the beneficiary unless an action is instituted
25    against the trustee by the representative of the estate of
26    the beneficiary or by the spouse, parent, adult child, or

 

 

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1    guardian of the person to whom the account is furnished
2    within 3 years after the date it is furnished.
3        (3) Notwithstanding paragraphs (1) and (2), with
4    respect to trust estates that terminated and were
5    distributed 10 years or less before January 1, 1988, the
6    final account furnished to the beneficiaries entitled to
7    distribution of the trust estate is binding on the
8    beneficiaries receiving the final account, and all persons
9    claiming by or through them, unless an action against the
10    trustee is instituted by the beneficiary or person claiming
11    by or through him or her within 5 years after January 1,
12    1988 or within 10 years after the date the final account
13    was furnished, whichever is longer.
14        (4) Notwithstanding paragraphs (1), (2) and (3), with
15    respect to trust estates that terminated and were
16    distributed more than 10 years before January 1, 1988, the
17    final account furnished to the beneficiaries entitled to
18    distribution of the trust estate is binding on the
19    beneficiaries receiving the final account, and all persons
20    claiming by or through them, unless an action against the
21    trustee is instituted by the beneficiary or person claiming
22    by or through him or her within 2 years after January 1,
23    1988.
24    (b) Unless barred earlier under subsection (a), a judicial
25proceeding by a beneficiary against a trustee for breach of
26trust must be commenced within 5 years after the first to occur

 

 

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1of:
2        (1) the removal, resignation, or death of the trustee;
3        (2) the termination of the beneficiary's interest in
4    the trust; or
5        (3) the termination of the trust.
6    (c) Notwithstanding any other provision of this Section, a
7beneficiary may bring any action against the trustee for
8fraudulent concealment within the time limit set forth in
9Section 13-215 of the Code of Civil Procedure.
 
10    Section 1006. Reliance on trust instrument. A trustee who
11acts in reasonable reliance on the express language of the
12trust instrument is not liable to a beneficiary for a breach of
13trust to the extent the breach resulted from the reliance.
 
14    Section 1007. Event affecting administration or
15distribution. If the happening of an event, including, but not
16limited to, marriage, divorce, performance of educational
17requirements, or death, affects the administration or
18distribution of a trust, a trustee who has exercised reasonable
19care to ascertain the happening of the event is not liable for
20a loss resulting from the trustee's lack of knowledge.
 
21    Section 1008. Exculpation of trustee.
22    (a) A term of a trust relieving a trustee of liability for
23breach of trust is unenforceable to the extent that it:

 

 

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1        (1) relieves the trustee of liability for breach of
2    trust committed in bad faith or with reckless indifference
3    to the purposes of the trust or the interests of the
4    beneficiaries; or
5        (2) was inserted as the result of an abuse by the
6    trustee of a fiduciary or confidential relationship to the
7    settlor.
8    (b) An exculpatory term drafted or caused to be drafted by
9the trustee is invalid as an abuse of a fiduciary or
10confidential relationship unless the trustee proves that the
11exculpatory term is fair under the circumstances and that its
12existence and contents were adequately communicated to the
13settlor. These conditions are satisfied if the settlor was
14represented by independent counsel.
 
15    Section 1009. Beneficiary's consent, release, or
16ratification.
17    (a) A trustee is not liable to a beneficiary, or to anyone
18claiming by or through the beneficiary, for breach of trust if
19the beneficiary consented to the conduct constituting the
20breach, released the trustee from liability for the breach, or
21ratified the transaction constituting the breach, unless:
22        (1) the consent, release, or ratification of the
23    beneficiary was induced by improper conduct of the trustee;
24    or
25        (2) at the time of the consent, release, or

 

 

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1    ratification, the beneficiary did not know of the
2    beneficiary's rights or of the material facts relating to
3    the breach.
4    (b) If the beneficiary's consent, release, or ratification
5involves a self-dealing transaction, the consent, release, or
6ratification is binding only if the transaction was fair and
7reasonable. The condition that a self-dealing transaction must
8be fair and reasonable is satisfied if the beneficiary was
9represented by independent counsel. No consideration is
10required for the consent, release, or ratification to be valid.
 
11    Section 1010. Limitation on personal liability of trustee.
12    (a) Except as otherwise provided in the contract, a trustee
13is not personally liable on a contract properly entered into in
14the trustee's fiduciary capacity in the course of administering
15the trust if the trustee in the contract disclosed the
16fiduciary capacity.
17    (b) A trustee is personally liable for torts committed in
18the course of administering a trust, or for obligations arising
19from ownership or control of trust property, including
20liability for violation of environmental law, only if the
21trustee is personally at fault.
22    (c) A claim based on a contract entered into by a trustee
23in the trustee's fiduciary capacity, on an obligation arising
24from ownership or control of trust property, or on a tort
25committed in the course of administering a trust, may be

 

 

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1asserted in a judicial proceeding against the trustee in the
2trustee's fiduciary capacity, whether or not the trustee is
3personally liable for the claim.
 
4    Section 1011. Interest as general partner.
5    (a) Except as otherwise provided in subsection (c) or
6unless personal liability is imposed in the contract, a trustee
7who holds an interest as a general partner in a general or
8limited partnership is not personally liable on a contract
9entered into by the partnership after the trust's acquisition
10of the interest if the fiduciary capacity was disclosed in the
11contract or in a statement previously filed pursuant to the
12Uniform Partnership Act (1997) or Uniform Limited Partnership
13Act (2001) or any other similar state law.
14    (b) Except as otherwise provided in subsection (c), a
15trustee who holds an interest as a general partner is not
16personally liable for torts committed by the partnership or for
17obligations arising from ownership or control of the interest
18unless the trustee is personally at fault.
19    (c) The immunity provided by this Section does not apply if
20an interest in the partnership is held by the trustee in a
21capacity other than that of trustee or is held by the trustee's
22spouse or one or more of the trustee's descendants, siblings,
23or parents, or the spouse of any of them.
24    (d) If the trustee of a revocable trust holds an interest
25as a general partner, the settlor is personally liable for

 

 

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1contracts and other obligations of the partnership as if the
2settlor were a general partner.
 
3    Section 1012. Protection of person dealing with trustee.
4    (a) A person other than a beneficiary or a beneficiary's
5representative under Article 3 acting in a representative
6capacity who in good faith assists a trustee, or who in good
7faith and for value deals with a trustee, without knowledge
8that the trustee is exceeding or improperly exercising the
9trustee's powers is protected from liability as if the trustee
10properly exercised the power.
11    (b) A person other than a beneficiary or a beneficiary's
12representative under Article 3 acting in a representative
13capacity who in good faith deals with a trustee is not required
14to inquire into the extent of the trustee's powers or the
15propriety of their exercise.
16    (c) A person, including a beneficiary, who in good faith
17delivers assets to a trustee need not ensure their proper
18application.
19    (d) A person other than a beneficiary who in good faith
20assists a former trustee, or who in good faith and for value
21deals with a former trustee, without knowledge that the
22trusteeship has terminated is protected from liability as if
23the former trustee were still a trustee.
24    (e) Comparable protective provisions of other laws
25relating to commercial transactions or transfer of securities

 

 

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1by fiduciaries prevail over the protection provided by this
2Section.
 
3    Section 1013. Certification of trust.
4    (a) Instead of furnishing a copy of the trust instrument to
5a person other than a beneficiary, the trustee may furnish to
6the person a certification of trust containing the following
7information:
8        (1) a statement that the trust exists and the date the
9    trust instrument was executed;
10        (2) the identity of the settlor;
11        (3) the identity and address of the currently acting
12    trustee;
13        (4) the powers of the trustee;
14        (5) the revocability or irrevocability of the trust,
15    whether the trust is amendable or unamendable, and the
16    identity of any person holding a power to revoke the trust;
17        (6) the authority of co-trustees to sign or otherwise
18    authenticate and whether all or less than all are required
19    in order to exercise powers of the trustee;
20        (7) the trust's taxpayer identification number; and
21        (8) the manner of taking title to trust property.
22    (b) A certification of trust must be signed or otherwise
23authenticated by one or more of the trustees. A third party may
24require that the certification of trust be acknowledged.
25    (c) A certification of trust must state that the trust has

 

 

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1not been revoked, modified, or amended in any manner that would
2cause the representations contained in the certification of
3trust to be incorrect.
4    (d) A certification of trust need not contain the
5dispositive terms of a trust.
6    (e) A recipient of a certification of trust may require the
7trustee to furnish copies of those excerpts from the original
8trust instrument and later amendments that designate the
9trustee and confer upon the trustee the power to act in the
10pending transaction.
11    (f) A person who acts in reliance upon a certification of
12trust without actual knowledge that the representations
13contained therein are incorrect is not liable to any person for
14so acting and may assume without inquiry the existence of the
15facts contained in the certification. Knowledge of the trust
16instrument may not be inferred solely from the fact that a copy
17of all or part of the trust instrument is held by the person
18relying upon the certification.
19    (g) A person who in good faith enters into a transaction in
20reliance upon a certification of trust may enforce the
21transaction against the trust property as if the
22representations contained in the certification were correct.
23    (h) A person making a demand for the trust instrument in
24addition to a certification of trust or excerpts is liable for
25damages if the court determines that the person did not act in
26good faith in demanding the trust instrument. A person required

 

 

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1to examine a complete copy of the trust instrument for purposes
2of complying with applicable federal, state, or local law, a
3person acting in a fiduciary capacity with respect to a trust,
4and the Attorney General's Charitable Trust Bureau are deemed
5to be acting in good faith when demanding a copy of the trust
6instrument. This Section does not modify or limit any
7obligation a trustee may have to furnish a copy of a trust
8instrument to the Attorney General under the Charitable Trust
9Act or the Solicitation for Charity Act.
10    (i) This Section does not limit the right of a person to
11obtain a copy of the trust instrument in a judicial proceeding
12concerning the trust.
13    (j) A certification of trust may be substantially as
14follows, but nothing in this subsection invalidates or bars the
15use of a certification of trust in any other or different form:
16
CERTIFICATION OF TRUST
17Name of trust:...............................................
18Date trust instrument was executed:..........................
19Tax Identification Number of trust (SSN or EIN):.............
20Name(s) of settlor(s) of trust:..............................
21Name(s) of currently acting trustee(s):......................
22Address(es) of currently acting trustee(s):..................
23.... This trust states that .... of .... co-trustee(s) are
24required to exercise the powers of the trustee.
25.... The co-trustees authorized to sign or otherwise
26authenticate on behalf of the trust are:.....................

 

 

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1.... There are no co-trustees authorized to sign or otherwise
2authenticate on behalf of the trust.
3Name(s) of successor trustee(s):.............................
4The trustee(s) has (have) the power to (state, synopsize, or
5describe relevant powers):.
6Title to the trust property shall be taken as follows (for
7example, "John Doe and Jane Doe, co-trustees of the Doe Family
8Living Trust, dated January 4, 1999"):.......................
9.... This is an irrevocable trust.
10.... This is a revocable trust. Name(s) of person(s) holding
11power to revoke the trust:...................................
12.... This is an unamendable trust.
13.... This trust is amendable. Name(s) of person(s) holding
14power to amend the trust:....................................
 
15I (we) certify that the above-named trust is in full force and
16has not been revoked, modified, or amended in any manner that
17would cause the representations in this Certification of Trust
18to be incorrect.
 
19IN WITNESS THEREOF, each of the undersigned, being a trustee of
20the above-named trust with the authority to execute this
21Certification of Trust, does hereby execute it this ..... day
22of .........., .......
 
23Trustee Signature: .............

 

 

HB1471 Enrolled- 138 -LRB101 06784 LNS 51811 b

1Printed Name: ..................
 
2Trustee Signature: .............
3Printed Name: ..................
 
4[OPTIONAL:
5State of .................)
6County of ................)
 
7This instrument was signed and acknowledged before me on
8.........., ...... (date) by (name/s of person/s):.........
 
9(Signature of Notary Public):
10............................
11(SEAL)]
 
12    Section 1014. Reliance on Secretary of Financial and
13Professional Regulation. No trustee or other person is liable
14under this Code for any act done or omitted in good faith in
15conformity with any rule, interpretation, or opinion issued by
16the Secretary of Financial and Professional Regulation,
17notwithstanding that after the act or omission has occurred,
18the rule, opinion, or interpretation upon which reliance is
19placed is amended, rescinded, or determined by judicial or
20other authority to be invalid for any reason.
 

 

 

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1
Article 11. Total Return Trusts.

 
2    Section 1101. Total return trust defined; trustee duty to
3inform.
4    (a) In this Article, "total return trust" means a trust
5converted in accordance with this Article that the trustee
6shall manage and invest seeking a total return without regard
7to whether the return is from income or appreciation of
8principal.
9    (b) Notwithstanding any other provision of this Article, a
10trustee has no duty to inform beneficiaries about the
11availability of this Article and has no duty to review the
12trust to determine whether any action should be taken under
13this Article unless requested to do so in writing by a
14qualified beneficiary.
 
15    Section 1102. Conversion by trustee. A trustee may convert
16a trust to a total return trust as described in this Article if
17all of the following apply:
18        (1) The trust describes the amount that may or must be
19    distributed to a beneficiary by referring to the trust's
20    income, and the trustee determines that conversion to a
21    total return trust will enable the trustee to better carry
22    out the purposes of the trust and the conversion is in the
23    best interests of the beneficiaries;
24        (2) the trustee sends a written notice of the trustee's

 

 

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1    decision to convert the trust to a total return trust,
2    specifying a prospective effective date for the conversion
3    and including a copy of this Article, to all of the
4    qualified beneficiaries; and
5        (3) no qualified beneficiary objects to the conversion
6    to a total return trust in a writing delivered to the
7    trustee within 60 days after the notice is sent.
 
8    Section 1103. Conversion by agreement. Conversion to a
9total return trust may be made by agreement between a trustee
10and all qualified beneficiaries. The agreement may include any
11actions a court could properly order under Section 1108;
12however, any distribution percentage determined by the
13agreement may not be less than 3% nor greater than 5%.
 
14    Section 1104. Conversion or reconversion by court.
15    (a) The trustee may for any reason elect to petition the
16court to order conversion to a total return trust, including
17without limitation the reason that conversion under Section
181102 is unavailable because a beneficiary timely objects to the
19conversion to a total return trust.
20    (b) A beneficiary may request the trustee to convert to a
21total return trust or adjust the distribution percentage. If
22the trustee declines or fails to act within 6 months after
23receiving a written request to do so, the beneficiary may
24petition the court to order the conversion or adjustment.

 

 

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1    (c) The trustee may petition the court prospectively to
2reconvert from a total return trust or adjust the distribution
3percentage if the trustee determines that the reconversion or
4adjustment will enable the trustee to better carry out the
5purposes of the trust. A beneficiary may request the trustee to
6petition the court prospectively to reconvert from a total
7return trust or adjust the distribution percentage. If the
8trustee declines or fails to act within 6 months after
9receiving a written request to do so, the beneficiary may
10petition the court to order the reconversion or adjustment.
11    (d) In a judicial proceeding under this Section, the
12trustee may, but need not, present the trustee's opinions and
13reasons (1) for supporting or opposing conversion to (or
14reconversion from or adjustment of the distribution percentage
15of) a total return trust, including whether the trustee
16believes conversion (or reconversion or adjustment of the
17distribution percentage) would enable the trustee to better
18carry out the purposes of the trust, and (2) about any other
19matters relevant to the proposed conversion (or reconversion or
20adjustment of the distribution percentage). A trustee's
21actions in accordance with this Section shall not be deemed
22improper or inconsistent with the trustee's duty of
23impartiality unless the court finds from all the evidence that
24the trustee acted in bad faith.
25    (e) The court shall order conversion to (or reconversion
26prospectively from or adjustment of the distribution

 

 

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1percentage of) a total return trust if the court determines
2that the conversion (or reconversion or adjustment of the
3distribution percentage) will enable the trustee to better
4carry out the purposes of the trust and the conversion (or
5reconversion or adjustment of the distribution percentage) is
6in the best interests of the beneficiaries.
7    (f) The court may order any of the following actions in a
8proceeding brought by a trustee or a beneficiary under this
9Section:
10        (1) select a distribution percentage other than 4%;
11        (2) average the valuation of the trust's net assets
12    over a period other than 3 years;
13        (3) reconvert prospectively from or adjust the
14    distribution percentage of a total return trust;
15        (4) direct the distribution of net income (determined
16    as if the trust were not a total return trust) in excess of
17    the distribution amount as to any or all trust assets if
18    the distribution is necessary to preserve a tax benefit; or
19        (5) change or direct any administrative procedure as
20    the court determines necessary or helpful for the proper
21    functioning of the total return trust.
22    (g) Nothing in this Section limits the equitable powers of
23the court to grant other relief.
 
24    Section 1105. Post conversion. While a trust is a total
25return trust, all of the following apply to the trust:

 

 

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1        (1) the trustee shall make income distributions in
2    accordance with the trust instrument subject to this
3    Article;
4        (2) the term "income" in the trust instrument means an
5    annual amount (the "distribution amount") equal to a
6    percentage (the "distribution percentage") of the net fair
7    market value of the trust's assets, whether the assets are
8    considered income or principal under the Principal and
9    Income Act, averaged over the lesser of:
10            (A) the 3 preceding years; or
11            (B) the period during which the trust has been in
12        existence;
13        (3) the distribution percentage for any trust
14    converted to a total return trust by a trustee in
15    accordance with Section 1102 shall be 4%;
16        (4) the trustee shall pay to a beneficiary (in the case
17    of an underpayment) and shall recover from a beneficiary
18    (in the case of an overpayment) an amount equal to the
19    difference between the amount properly payable and the
20    amount actually paid, plus interest compounded annually at
21    a rate per annum equal to the distribution percentage in
22    the year or years while the underpayment or overpayment
23    exists; and
24        (5) a change in the method of determining a reasonable
25    current return by converting to a total return trust in
26    accordance with this Article and substituting the

 

 

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1    distribution amount for net trust accounting income is a
2    proper change in the definition of trust income
3    notwithstanding any contrary provision of the Principal
4    and Income Act, and the distribution amount shall be deemed
5    a reasonable current return that fairly apportions the
6    total return of a total return trust.
 
7    Section 1106. Administration.
8    (a) As used in this Section, "excluded asset" means an
9asset for which there is no readily available market value and
10that the trustee determines in accordance with subsection (d)
11shall be excluded from the net fair market value of the trust's
12assets for purposes of determining the distribution amount
13under paragraph (2) of Section 1105.
14    (b) The trustee, in the trustee's discretion, may determine
15any of the following matters in administering a total return
16trust as the trustee from time to time determines necessary or
17helpful for the proper functioning of the trust:
18        (1) the effective date of a conversion to a total
19    return trust;
20        (2) the manner of prorating the distribution amount for
21    a short year in which a beneficiary's interest commences or
22    ceases;
23        (3) whether distributions are made in cash or in kind;
24        (4) the manner of adjusting valuations and
25    calculations of the distribution amount to account for

 

 

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1    other payments from or contributions to the trust;
2        (5) whether to value the trust's assets annually or
3    more frequently;
4        (6) what valuation dates and how many valuation dates
5    to use;
6        (7) valuation decisions about any asset for which there
7    is no readily available market value, including:
8            (A) how frequently to value such an asset; and
9            (B) whether and how often to engage a professional
10        appraiser to value such an asset;
11        (8) which trust assets are excluded assets; and
12        (9) any other administrative matters as the trustee
13    determines necessary or helpful for the proper functioning
14    of the total return trust.
15    (c) The trustee shall distribute any net income received
16from excluded assets as provided in the trust instrument.
17    (d) Unless the trustee determines there are compelling
18reasons to the contrary considering all relevant factors
19including the best interests of the beneficiaries, the trustee
20shall treat each asset for which there is no readily available
21market value as an excluded asset. Examples of assets for which
22there is a readily available market value include: cash and
23cash equivalents; stocks, bonds, and other securities and
24instruments for which there is an established market on a stock
25exchange, in an over-the-counter market, or otherwise; and any
26other property that can reasonably be expected to be sold

 

 

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1within one week of the decision to sell without extraordinary
2efforts by the seller. Examples of assets for which there is no
3readily available market value include: stocks, bonds, and
4other securities and instruments for which there is no
5established market on a stock exchange, in an over-the-counter
6market, or otherwise; real property; tangible personal
7property; and artwork and other collectibles.
8    (e) If tangible personal property or real property is
9possessed or occupied by a beneficiary, the trustee shall not
10limit or restrict any right of the beneficiary to use the
11property in accordance with the trust instrument regardless of
12whether the trustee treats the property as an excluded asset.
 
13    Section 1107. Allocations.
14    (a) Expenses, taxes, and other charges that would be
15deducted from income if the trust were not a total return trust
16shall not be deducted from the distribution amount.
17    (b) Unless otherwise provided by the trust instrument, the
18trustee shall fund the distribution amount each year from the
19following sources for that year in the order listed:
20        (1) first from net income (as the term would be
21    determined if the trust were not a total return trust);
22        (2) then from other ordinary income as determined for
23    federal income tax purposes;
24        (3) then from net realized short-term capital gains as
25    determined for federal income tax purposes;

 

 

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1        (4) then from net realized long-term capital gains as
2    determined for federal income tax purposes;
3        (5) then from trust principal comprised of assets for
4    which there is a readily available market value; and
5        (6) then from other trust principal.
 
6    Section 1108. Restrictions. Conversion to a total return
7trust does not affect any provision in the trust instrument:
8        (1) directing or authorizing the trustee to distribute
9    principal;
10        (2) directing or authorizing the trustee to distribute
11    a fixed annuity or a fixed fraction of the value of trust
12    assets;
13        (3) authorizing a beneficiary to withdraw a portion or
14    all of the principal; or
15        (4) in any manner that would diminish an amount
16    permanently set aside for charitable purposes under the
17    trust instrument unless both income and principal are so
18    set aside.
 
19    Section 1109. Tax limitations.
20    (a) If a particular trustee is a beneficiary of the trust
21and conversion or failure to convert would enhance or diminish
22the beneficial interest of the trustee, or if possession or
23exercise of the conversion power by a particular trustee would
24alone cause any individual to be treated as owner of a part of

 

 

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1the trust for income tax purposes or cause a part of the trust
2to be included in the gross estate of any individual for estate
3tax purposes, then the particular trustee may not participate
4as a trustee in the exercise of the conversion power except
5that the particular trustee may petition the court under
6subsection (a) of Section 1104 to order conversion in
7accordance with this Article.
8    (b) If the particular trustee has one or more co-trustees
9to whom subsection (a) does not apply, the co-trustee or
10co-trustees may convert the trust to a total return trust in
11accordance with this Article.
 
12    Section 1110. Releases. A trustee may irrevocably release
13the power granted by this Article if the trustee reasonably
14believes the release is in the best interests of the trust and
15its beneficiaries. The release may be personal to the releasing
16trustee or may apply generally to some or all subsequent
17trustees, and the release may be for any specified period,
18including a period measured by the life of an individual.
 
19    Section 1111. Remedies. A trustee who reasonably and in
20good faith takes any action under this Article is not liable to
21any interested person. If a trustee reasonably and in good
22faith takes any action under this Article and an interested
23person opposes the action, the person's exclusive remedy is to
24obtain an order of the court directing the trustee to convert

 

 

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1the trust to a total return trust, to reconvert from a total
2return trust, to change the distribution percentage, or to
3order any administrative procedures the court determines
4necessary or helpful for the proper functioning of the trust.
5An action by a trustee under this Article is presumed taken or
6omitted reasonably and in good faith unless it is determined by
7the court to have been an abuse of discretion.
 
8    Section 1112. Application. This Article is available to
9trusts in existence on or after August 22, 2002. This Article
10shall be construed as pertaining to the administration of a
11trust and shall be available to any trust that is administered
12in Illinois or that is governed by Illinois law with respect to
13the meaning and effect of its terms unless one of the following
14apply:
15        (1) The trust is a trust described in Section
16    642(c)(5), 664(d), 2702(a)(3), or 2702(b) of the Internal
17    Revenue Code.
18        (2) The trust instrument expressly prohibits use of
19    this Article by specific reference to this Article or a
20    prior corresponding law. A provision in the trust
21    instrument in the form: "Neither the provisions of Article
22    11 of the Illinois Trust Code nor any corresponding
23    provision of future law may be used in the administration
24    of this trust" or a similar provision demonstrating that
25    intent is sufficient to preclude the use of this Article.
 

 

 

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1    Section 1113. Application to express trusts.
2    (a) In this Section:
3        (1) "Unitrust" means a trust the terms of which require
4    distribution of a unitrust amount, without regard to
5    whether the trust has been converted to a total return
6    trust in accordance with this Article or whether the trust
7    is established by express terms of the trust.
8        (2) "Unitrust amount" means an amount equal to a
9    percentage of a trust's assets that may or must be
10    distributed to one or more beneficiaries annually in
11    accordance with the terms of the trust. The unitrust amount
12    may be determined by reference to the net fair market value
13    of the trust's assets as of a particular date or as an
14    average determined on a multiple-year basis.
15    (b) A unitrust changes the definition of income by
16substituting the unitrust amount for net trust accounting
17income as the method of determining current return and shall be
18given effect notwithstanding any contrary provision of the
19Principal and Income Act. By way of example and not limitation,
20a unitrust amount determined by a percentage of not less than
213% nor greater than 5% is conclusively presumed a reasonable
22current return that fairly apportions the total return of a
23unitrust.
24    (c) Subsection (b) of Section 1107 applies to a unitrust
25except to the extent its trust instrument expressly provides

 

 

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1otherwise.
2    (d) This Section does not apply to a charitable remainder
3unitrust as defined by Section 664(d) of the Internal Revenue
4Code.
 
5
Article 12. Trust Decanting.

 
6    Section 1201. Article title. This Article may be referred
7to as the Trust Decanting Law.
 
8    Section 1202. Definitions. In this Article:
9    (1) "Appointive property" means the property or property
10interest subject to a power of appointment.
11    (2) "Authorized fiduciary" means:
12        (A) a trustee or other fiduciary, other than a settlor,
13    that has discretion to distribute or direct a trustee to
14    distribute part or all of the principal of the first trust
15    to one or more current beneficiaries;
16        (B) a special fiduciary appointed under Section 1209;
17    or
18        (C) a special-needs fiduciary under Section 1213.
19    (3) "Court" means the court in this State having
20jurisdiction in matters relating to trusts.
21    (4) "Decanting power" or "the decanting power" means the
22power of an authorized fiduciary under this Article to
23distribute property of a first trust to one or more second

 

 

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1trusts or to modify the terms of the first trust.
2    (5) "Expanded distributive discretion" means a
3discretionary power of distribution that is not limited to an
4ascertainable standard or a reasonably definite standard.
5    (6) "First trust" means a trust over which an authorized
6fiduciary may exercise the decanting power.
7    (7) "First-trust instrument" means the trust instrument
8for a first trust.
9    (8) "Reasonably definite standard" means a clearly
10measurable standard under which a holder of a power of
11distribution is legally accountable within the meaning of
12Section 674(b)(5)(A) of the Internal Revenue Code, as amended,
13and any applicable regulations.
14    (9) "Record" means information that is inscribed on a
15tangible medium or that is stored in an electronic or other
16medium and is retrievable in perceivable form.
17    (10) "Second trust" means:
18        (A) a first trust after modification under this
19    Article; or
20        (B) a trust to which a distribution of property from a
21    first trust is or may be made under this Article.
22    (11) "Second-trust instrument" means the trust instrument
23for a second trust.
 
24    Section 1203. Scope.
25    (a) Except as otherwise provided in subsections (b) and

 

 

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1(c), this Article applies to an express trust that is
2irrevocable or revocable by the settlor only with the consent
3of the trustee or a person holding an adverse interest.
4    (b) This Article does not apply to a trust held solely for
5charitable purposes.
6    (c) Subject to Section 1215, a trust instrument may
7restrict or prohibit exercise of the decanting power.
8    (d) This Article does not limit the power of a trustee,
9powerholder, or other person to distribute or appoint property
10in further trust or to modify a trust under the trust
11instrument, law of this State other than this Article, common
12law, a court order, or a nonjudicial settlement agreement.
13    (e) This Article does not affect the ability of a settlor
14to provide in a trust instrument for the distribution or
15appointment in further trust of the trust property or for
16modification of the trust instrument.
 
17    Section 1204. Fiduciary duty.
18    (a) In exercising the decanting power, an authorized
19fiduciary shall act in accordance with its fiduciary duties,
20including the duty to act in accordance with the purposes of
21the first trust.
22    (b) This Article does not create or imply a duty to
23exercise the decanting power or to inform beneficiaries about
24the applicability of this Article.
25    (c) Except as otherwise provided in a first-trust

 

 

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1instrument, for purposes of this Article and Section 801, the
2terms of the first trust are deemed to include the decanting
3power.
 
4    Section 1205. Application; governing law. This Article
5applies to a trust created before, on, or after the effective
6date of this Code that:
7        (1) has its principal place of administration in this
8    State, including a trust whose principal place of
9    administration has been changed to this State; or
10        (2) provides by its trust instrument that it is
11    governed by the law of this State or is governed by the law
12    of this State for the purpose of:
13            (A) administration, including administration of a
14        trust whose governing law for purposes of
15        administration has been changed to the law of this
16        State;
17            (B) construction of terms of the trust; or
18            (C) determining the meaning or effect of terms of
19        the trust.
 
20    Section 1206. Reasonable reliance. A trustee or other
21person that reasonably relies on the validity of a distribution
22of part or all of the property of a trust to another trust, or a
23modification of a trust, under this Article, law of this State
24other than this Article or the law of another jurisdiction is

 

 

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1not liable to any person for any action or failure to act as a
2result of the reliance.
 
3    Section 1207. Notice.
4    (a) In this Section, a notice period begins on the day
5notice is given under subsection (c) and ends 59 days after the
6day notice is given.
7    (b) Except as otherwise provided in this Article, an
8authorized fiduciary may exercise the decanting power without
9the consent of any person and without court approval.
10    (c) Except as otherwise provided in subsection (f), an
11authorized fiduciary shall give notice in a record of the
12intended exercise of the decanting power not later than 60 days
13before the exercise to:
14        (1) each settlor of the first trust, if living or then
15    in existence;
16        (2) each qualified beneficiary of the first trust;
17        (3) each holder of a presently exercisable power of
18    appointment over any part or all of the first trust;
19        (4) each person that currently has the right to remove
20    or replace the authorized fiduciary;
21        (5) each other fiduciary of the first trust;
22        (6) each fiduciary of the second trust; and
23        (7) the Attorney General's Charitable Trust Bureau, if
24    the first trust contains a charitable interest.
25    (d) An authorized fiduciary is not required to give notice

 

 

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1under subsection (c) to a qualified beneficiary who is a minor
2and has no representative. The authorized fiduciary is not
3required to give notice under subsection (c) to a person that
4is not known to the fiduciary or is known to the fiduciary but
5cannot be located by the fiduciary after reasonable diligence.
6    (e) A notice under subsection (c) must:
7        (1) specify the manner in which the authorized
8    fiduciary intends to exercise the decanting power;
9        (2) specify the proposed effective date for exercise of
10    the power;
11        (3) include a copy of the first-trust instrument; and
12        (4) include a copy of all second-trust instruments.
13    (f) The decanting power may be exercised before expiration
14of the notice period under subsection (a) if all persons
15entitled to receive notice waive the period in a signed record.
16    (g) The receipt of notice, waiver of the notice period, or
17expiration of the notice period does not affect the right of a
18person to file an application under Section 1209 with the court
19asserting that:
20        (1) an attempted exercise of the decanting power is
21    ineffective because it did not comply with this Article or
22    was an abuse of discretion or breach of fiduciary duty; or
23        (2) Section 1222 applies to the exercise of the
24    decanting power.
25    (h) An exercise of the decanting power is not ineffective
26because of the failure to give notice to one or more persons

 

 

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1under subsection (c) if the authorized fiduciary acted with
2reasonable care to comply with subsection (c).
3    (i) If the first trust contains a charitable interest and
4the Attorney General objects to the proposed exercise of the
5decanting power in writing delivered to the authorized
6fiduciary before the end of the notice period, the authorized
7fiduciary may proceed with the proposed exercise of the
8decanting power only with either court approval or the later
9written consent of the Attorney General.
 
10    Section 1208. (Reserved).
 
11    Section 1209. Court involvement.
12    (a) On application of an authorized fiduciary, a person
13entitled to notice under Section 1207(c), a beneficiary, or,
14with respect to a charitable interest, the Attorney General or
15any other person that has standing to enforce the charitable
16interest, the court may:
17        (1) provide instructions to the authorized fiduciary
18    regarding whether a proposed exercise of the decanting
19    power is permitted under this Article and consistent with
20    the fiduciary duties of the authorized fiduciary;
21        (2) appoint a special fiduciary and authorize the
22    special fiduciary to determine whether the decanting power
23    should be exercised under this Article and to exercise the
24    decanting power;

 

 

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1        (3) approve an exercise of the decanting power;
2        (4) determine that a proposed or attempted exercise of
3    the decanting power is ineffective because:
4            (A) after applying Section 1222, the proposed or
5        attempted exercise does not or did not comply with this
6        Article; or
7            (B) the proposed or attempted exercise would be or
8        was an abuse of the fiduciary's discretion or a breach
9        of fiduciary duty;
10        (5) determine the extent to which Section 1222 applies
11    to a prior exercise of the decanting power;
12        (6) provide instructions to the trustee regarding the
13    application of Section 1222 to a prior exercise of the
14    decanting power; or
15        (7) order other appropriate relief to carry out the
16    purposes of this Article.
17    (b) On application of an authorized fiduciary, the court
18may approve:
19        (1) an increase in the fiduciary's compensation under
20    Section 1216; or
21        (2) a modification under Section 1218 of a provision
22    granting a person the right to remove or replace the
23    fiduciary.
 
24    Section 1210. Formalities. An exercise of the decanting
25power must be made in a record signed by an authorized

 

 

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1fiduciary. The signed record must, directly or by reference to
2the notice required by Section 1207, identify the first trust
3and the second trust or trusts and state the property of the
4first trust being distributed to each second trust and the
5property, if any, that remains in the first trust.
 
6    Section 1211. Decanting power under expanded distributive
7discretion.
8    (a) In this Section:
9        (1) "Noncontingent" right means a right that is not
10    subject to the exercise of discretion or the occurrence of
11    a specified event that is not certain to occur. The term
12    does not include a right held by a beneficiary if any
13    person has discretion to distribute property subject to the
14    right of any person other than the beneficiary or the
15    beneficiary's estate.
16        (2) "Successor beneficiary" means a beneficiary that
17    on the date the beneficiary's qualification is determined
18    is not a qualified beneficiary. The term does not include a
19    person that is a beneficiary only because the person holds
20    a nongeneral power of appointment.
21        (3) "Vested interest" means:
22            (A) a right to a mandatory distribution that is a
23        noncontingent right as of the date of the exercise of
24        the decanting power;
25            (B) a current and noncontingent right, annually or

 

 

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1        more frequently, to a mandatory distribution of
2        income, a specified dollar amount, or a percentage of
3        value of some or all of the trust property;
4            (C) a current and noncontingent right, annually or
5        more frequently, to withdraw income, a specified
6        dollar amount, or a percentage of value of some or all
7        of the trust property;
8            (D) a presently exercisable general power of
9        appointment; or
10            (E) a right to receive an ascertainable part of the
11        trust property on the trust's termination that is not
12        subject to the exercise of discretion or to the
13        occurrence of a specified event that is not certain to
14        occur.
15    (b) Subject to subsection (c) and Section 1214, an
16authorized fiduciary that has expanded distributive discretion
17to distribute the principal of a first trust to one or more
18current beneficiaries may exercise the decanting power over the
19principal of the first trust.
20    (c) Subject to Section 1213, in an exercise of the
21decanting power under this Section, a second trust may not:
22        (1) include as a current beneficiary a person that is
23    not a current beneficiary of the first trust, except as
24    otherwise provided in subsection (d);
25        (2) include as a presumptive remainder beneficiary or
26    successor beneficiary a person that is not a current

 

 

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1    beneficiary, presumptive remainder beneficiary, or
2    successor beneficiary of the first trust, except as
3    otherwise provided in subsection (d); or
4        (3) reduce or eliminate a vested interest.
5    (d) Subject to subsection (c)(3) and Section 1214, in an
6exercise of the decanting power under this Section, a second
7trust may be a trust created or administered under the law of
8any jurisdiction and may:
9        (1) retain a power of appointment granted in the first
10    trust;
11        (2) omit a power of appointment granted in the first
12    trust, other than a presently exercisable general power of
13    appointment;
14        (3) create or modify a power of appointment if the
15    powerholder is a current beneficiary of the first trust and
16    the authorized fiduciary has expanded distributive
17    discretion to distribute principal to the beneficiary; and
18        (4) create or modify a power of appointment if the
19    powerholder is a presumptive remainder beneficiary or
20    successor beneficiary of the first trust, but the exercise
21    of the power may take effect only after the powerholder
22    becomes, or would have become if then living, a current
23    beneficiary.
24    (e) A power of appointment described in subsection (d)(1)
25through (4) of subsection (d) may be general or nongeneral. The
26class of permissible appointees in favor of which the power may

 

 

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1be exercised may be broader than or different from the
2beneficiaries of the first trust.
3    (f) If an authorized fiduciary has expanded distributive
4discretion to distribute part but not all of the principal of a
5first trust, the fiduciary may exercise the decanting power
6under this Section over that part of the principal over which
7the authorized fiduciary has expanded distributive discretion.
 
8    Section 1212. Decanting power under limited distributive
9discretion.
10    (a) In this Section, "limited distributive discretion"
11means a discretionary power of distribution that is limited to
12an ascertainable standard or a reasonably definite standard.
13    (b) An authorized fiduciary that has limited distributive
14discretion over the principal of the first trust for the
15benefit of one or more current beneficiaries may exercise the
16decanting power over the principal of the first trust.
17    (c) Under this Section and subject to Section 1214, a
18second trust may be created or administered under the law of
19any jurisdiction. Under this Section, the second trusts, in the
20aggregate, must grant each beneficiary of the first trust
21beneficial interests that are substantially similar to the
22beneficial interests of the beneficiary in the first trust.
23    (d) A power to make a distribution under a second trust for
24the benefit of a beneficiary who is an individual is
25substantially similar to a power under the first trust to make

 

 

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1a distribution directly to the beneficiary. A distribution is
2for the benefit of a beneficiary if:
3        (1) the distribution is applied for the benefit of the
4    beneficiary;
5        (2) the beneficiary is incapacitated or in the opinion
6    of the trustee is unable to manage property or business
7    affairs, and the distribution is made as permitted under
8    this Code; or
9        (3) the distribution is made as permitted under the
10    terms of the first-trust instrument and the second-trust
11    instrument for the benefit of the beneficiary.
12    (e) If an authorized fiduciary has limited distributive
13discretion over part but not all of the principal of a first
14trust, the fiduciary may exercise the decanting power under
15this Section over that part of the principal over which the
16authorized fiduciary has limited distributive discretion.
 
17    Section 1213. Trust for beneficiary with disability.
18    (a) In this Section:
19        (1) "Beneficiary with a disability" means a
20    beneficiary of the first trust who the special-needs
21    fiduciary believes may qualify for governmental benefits
22    based on disability, whether or not the beneficiary
23    currently receives those benefits or is an individual who
24    has been adjudicated incompetent.
25        (2) "Best interests" of a beneficiary with a disability

 

 

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1    include, without limitation, consideration of the
2    financial impact to the family of the beneficiary who has a
3    disability.
4        (3) "Governmental benefits" means financial aid or
5    services from a state, federal, or other public agency.
6        (4) "Special-needs fiduciary" means, with respect to a
7    trust that has a beneficiary with a disability:
8            (A) a trustee or other fiduciary, other than a
9        settlor, that has discretion to distribute part or all
10        of the principal of a first trust to one or more
11        current beneficiaries;
12            (B) if no trustee or fiduciary has discretion under
13        subparagraph (A), a trustee or other fiduciary, other
14        than a settlor, that has discretion to distribute part
15        or all of the income of the first trust to one or more
16        current beneficiaries; or
17            (C) if no trustee or fiduciary has discretion under
18        subparagraphs (A) and (B), a trustee or other
19        fiduciary, other than a settlor, that is required to
20        distribute part or all of the income or principal of
21        the first trust to one or more current beneficiaries.
22        (5) "Special-needs trust" means a trust the trustee
23    believes would not be considered a resource for purposes of
24    determining whether the beneficiary with a disability is
25    eligible for governmental benefits.
26    (b) A special-needs fiduciary may exercise the decanting

 

 

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1power under Section 1211 over the principal of a first trust as
2if the fiduciary had authority to distribute principal to a
3beneficiary with a disability subject to expanded distributive
4discretion if:
5        (1) a second trust is a special-needs trust that
6    benefits the beneficiary with a disability; and
7        (2) the special-needs fiduciary determines that
8    exercise of the decanting power will further the purposes
9    of the first trust or the best interests of the beneficiary
10    with a disability.
11    (c) In an exercise of the decanting power under this
12Section, the following rules apply:
13        (1) If the first trust was created by the beneficiary
14    with a disability, or to the extent the first trust was
15    funded by the beneficiary with a disability, then
16    notwithstanding paragraph (2) of subsection (c) of Section
17    1211, the interest in the second trust of a beneficiary
18    with a disability may:
19            (A) be a pooled trust as defined by Medicaid law
20        for the benefit of the beneficiary with a disability
21        under 42 U.S.C. 1396p(d)(4)(C), as amended; or
22            (B) contain payback provisions complying with
23        reimbursement requirements of Medicaid law under 42
24        U.S.C. 1396p(d)(4)(A), as amended.
25        (2) Paragraph (3) of subsection (c) of Section 1211
26    does not apply to the interests of the beneficiary with a

 

 

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1    disability.
2        (3) Except as affected by any change to the interests
3    of the beneficiary with a disability, the second trusts, in
4    the aggregate, must grant each other beneficiary of the
5    first trust beneficial interests in the second trusts that
6    are substantially similar to the beneficiary's beneficial
7    interests in the first trust.
 
8    Section 1214. Protection of charitable interests.
9    (a) In this Section:
10        (1) "Determinable charitable interest" means a
11    charitable interest that is a right to a mandatory
12    distribution currently, periodically, on the occurrence of
13    a specified event, or after the passage of a specified time
14    and that is unconditional or that will in all events be
15    held for charitable purposes.
16        (2) "Unconditional" means not subject to the
17    occurrence of a specified event that is not certain to
18    occur, other than a requirement in a trust instrument that
19    a charitable organization be in existence or qualify under
20    a particular provision of the Internal Revenue Code on the
21    date of the distribution if the charitable organization
22    meets the requirement on the date of determination.
23    (b) If a first trust contains a determinable charitable
24interest, the Attorney General has the rights of a qualified
25beneficiary and may represent and bind the charitable interest.

 

 

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1    (c) If a first trust contains a charitable interest, the
2second trusts in the aggregate may not:
3        (1) diminish the charitable interest;
4        (2) diminish the interest of an identified charitable
5    organization that holds the charitable interest;
6        (3) alter any charitable purpose stated in the
7    first-trust instrument; or
8        (4) alter any condition or restriction related to the
9    charitable interest.
10    (d) If there are 2 or more second trusts, the second trusts
11shall be treated as one trust for purposes of determining
12whether the exercise of the decanting power diminishes the
13charitable interest or diminishes the interest of an identified
14charitable organization for purposes of subsection (c).
15    (e) If a first trust contains a determinable charitable
16interest, the second trusts that include charitable interests
17pursuant to subsection (c) must be administered under the law
18of this State unless:
19        (1) the Attorney General, after receiving notice under
20    Section 1207, fails to object in a signed record delivered
21    to the authorized fiduciary within the notice period;
22        (2) the Attorney General consents in a signed record to
23    the second trusts being administered under the law of
24    another jurisdiction; or
25        (3) the court approves the exercise of the decanting
26    power.

 

 

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1    (f) This Article does not limit the powers and duties of
2the Attorney General under Illinois law.
 
3    Section 1215. Trust limitation on decanting.
4    (a) An authorized fiduciary may not exercise the decanting
5power to the extent the first-trust instrument expressly
6prohibits exercise of:
7        (1) the decanting power; or
8        (2) a power granted by state law to the fiduciary to
9    distribute part or all of the principal of the trust to
10    another trust or to modify the trust.
11    (b) Exercise of the decanting power is subject to any
12restriction in the first-trust instrument that expressly
13applies to exercise of:
14        (1) the decanting power; or
15        (2) a power granted by state law to a fiduciary to
16    distribute part or all of the principal of the trust to
17    another trust or to modify the trust.
18    (c) A general prohibition of the amendment or revocation of
19a first trust, a spendthrift clause, or a clause restraining
20the voluntary or involuntary transfer of a beneficiary's
21interest does not preclude exercise of the decanting power.
22    (d) Subject to subsections (a) and (b), an authorized
23fiduciary may exercise the decanting power under this Article
24even if the first-trust instrument permits the authorized
25fiduciary or another person to modify the first-trust

 

 

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1instrument or to distribute part or all of the principal of the
2first trust to another trust.
3    (e) If a first-trust instrument contains an express
4prohibition described in subsection (a) or an express
5restriction described in subsection (b), that provision must be
6included in the second-trust instrument.
 
7    Section 1216. Change in compensation.
8    (a) If a first-trust instrument specifies an authorized
9fiduciary's compensation, the fiduciary may not exercise the
10decanting power to increase the fiduciary's compensation
11beyond the specified compensation unless:
12        (1) all qualified beneficiaries of the second trust
13    consent to the increase in a signed record; or
14        (2) the increase is approved by the court.
15    (b) If a first-trust instrument does not specify an
16authorized fiduciary's compensation, the fiduciary may not
17exercise the decanting power to increase the fiduciary's
18compensation above the compensation permitted by Section 708
19unless:
20        (1) all qualified beneficiaries of the second trust
21    consent to the increase in a signed record; or
22        (2) the increase is approved by the court.
23    (c) A change in an authorized fiduciary's compensation that
24is incidental to other changes made by the exercise of the
25decanting power is not an increase in the fiduciary's

 

 

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1compensation for purposes of subsections (a) and (b).
 
2    Section 1217. Relief from liability and indemnification.
3    (a) Except as otherwise provided in this Section, a
4second-trust instrument may not relieve an authorized
5fiduciary from liability for breach of trust to a greater
6extent than the first-trust instrument.
7    (b) A second-trust instrument may provide for
8indemnification of an authorized fiduciary of the first trust
9or another person acting in a fiduciary capacity under the
10first trust for any liability or claim that would have been
11payable from the first trust if the decanting power had not
12been exercised.
13    (c) A second-trust instrument may not reduce fiduciary
14liability in the aggregate.
15    (d) Subject to subsection (c), a second-trust instrument
16may divide and reallocate fiduciary powers among fiduciaries,
17including one or more trustees, distribution advisors,
18investment advisors, trust protectors, or other persons, and
19relieve a fiduciary from liability for an act or failure to act
20of another fiduciary as permitted by law of this State other
21than this Article.
 
22    Section 1218. Removal or replacement of authorized
23fiduciary. An authorized fiduciary may not exercise the
24decanting power to modify a provision in the first-trust

 

 

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1instrument granting another person power to remove or replace
2the fiduciary unless:
3        (1) the person holding the power consents to the
4    modification in a signed record and the modification
5    applies only to the person;
6        (2) the person holding the power and the qualified
7    beneficiaries of the second trust consent to the
8    modification in a signed record and the modification grants
9    a substantially similar power to another person; or
10        (3) the court approves the modification and the
11    modification grants a substantially similar power to
12    another person.
 
13    Section 1219. Tax-related limitations.
14    (a) In this Section:
15        (1) "Grantor trust" means a trust as to which a settlor
16    of a first trust is considered the owner under Sections 671
17    through 677 of the Internal Revenue Code or Section 679 of
18    the Internal Revenue Code.
19        (2) "Nongrantor trust" means a trust that is not a
20    grantor trust.
21        (3) "Qualified benefits property" means property
22    subject to the minimum distribution requirements of
23    Section 401(a)(9) of the Internal Revenue Code, and any
24    applicable regulations, or to any similar requirements
25    that refer to Section 401(a)(9) of the Internal Revenue

 

 

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1    Code or the regulations.
2    (b) An exercise of the decanting power is subject to the
3following limitations:
4        (1) If a first trust contains property that qualified,
5    or would have qualified but for provisions of this Article
6    other than this Section, for a marital deduction for
7    purposes of the gift or estate tax under the Internal
8    Revenue Code or a state gift, estate, or inheritance tax,
9    the second-trust instrument must not include or omit any
10    term that, if included in or omitted from the trust
11    instrument for the trust to which the property was
12    transferred, would have prevented the transfer from
13    qualifying for the deduction, or would have reduced the
14    amount of the deduction, under the same provisions of the
15    Internal Revenue Code or state law under which the transfer
16    qualified.
17        (2) If the first trust contains property that
18    qualified, or would have qualified but for provisions of
19    this Article other than this Section, for a charitable
20    deduction for purposes of the income, gift, or estate tax
21    under the Internal Revenue Code or a state income, gift,
22    estate, or inheritance tax, the second-trust instrument
23    must not include or omit any term that, if included in or
24    omitted from the trust instrument for the trust to which
25    the property was transferred, would have prevented the
26    transfer from qualifying for the deduction, or would have

 

 

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1    reduced the amount of the deduction, under the same
2    provisions of the Internal Revenue Code or state law under
3    which the transfer qualified.
4        (3) If the first trust contains property that
5    qualified, or would have qualified but for provisions of
6    this Article other than this Section, for the exclusion
7    from the gift tax described in Section 2503(b) of the
8    Internal Revenue Code, the second-trust instrument must
9    not include or omit a term that, if included in or omitted
10    from the trust instrument for the trust to which the
11    property was transferred, would have prevented the
12    transfer from qualifying under the same provision of
13    Section 2503 of the Internal Revenue Code. If the first
14    trust contains property that qualified, or would have
15    qualified but for provisions of this Article other than
16    this Section, for the exclusion from the gift tax described
17    in Section 2503(b) of the Internal Revenue Code, by
18    application of Section 2503(c) of the Internal Revenue
19    Code, the second-trust instrument must not include or omit
20    a term that, if included or omitted from the trust
21    instrument for the trust to which the property was
22    transferred, would have prevented the transfer from
23    qualifying under Section 2503(c) of the Internal Revenue
24    Code.
25        (4) If the property of the first trust includes shares
26    of stock in an S corporation, as defined in Section 1361 of

 

 

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1    the Internal Revenue Code and the first trust is, or but
2    for provisions of this Article other than this Section
3    would be, a permitted shareholder under any provision of
4    Section 1361 of the Internal Revenue Code, an authorized
5    fiduciary may exercise the power with respect to part or
6    all of the S-corporation stock only if any second trust
7    receiving the stock is a permitted shareholder under
8    Section 1361(c)(2) of the Internal Revenue Code. If the
9    property of the first trust includes shares of stock in an
10    S corporation and the first trust is, or but for provisions
11    of this Article other than this Section, would be, a
12    qualified subchapter-S trust within the meaning of Section
13    1361(d) of the Internal Revenue Code, the second-trust
14    instrument must not include or omit a term that prevents
15    the second trust from qualifying as a qualified
16    subchapter-S trust.
17        (5) If the first trust contains property that
18    qualified, or would have qualified but for provisions of
19    this Article other than this Section, for a zero inclusion
20    ratio for purposes of the generation-skipping transfer tax
21    under Section 2642(c) of the Internal Revenue Code the
22    second-trust instrument must not include or omit a term
23    that, if included in or omitted from the first-trust
24    instrument, would have prevented the transfer to the first
25    trust from qualifying for a zero inclusion ratio under
26    Section 2642(a) of the Internal Revenue Code.

 

 

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1        (6) If the first trust is directly or indirectly the
2    beneficiary of qualified benefits property, the
3    second-trust instrument may not include or omit any term
4    that, if included in or omitted from the first-trust
5    instrument, would have increased the minimum distributions
6    required with respect to the qualified benefits property
7    under Section 401(a)(9) of the Internal Revenue Code and
8    any applicable regulations, or any similar requirements
9    that refer to Section 401(a)(9) of the Internal Revenue
10    Code or the regulations. If an attempted exercise of the
11    decanting power violates the preceding sentence, the
12    trustee is deemed to have held the qualified benefits
13    property and any reinvested distributions of the property
14    as a separate share from the date of the exercise of the
15    power and Section 1222 applies to the separate share.
16        (7) If the first trust qualifies as a grantor trust
17    because of the application of Section 672(f)(2)(A) of the
18    Internal Revenue Code the second trust may not include or
19    omit a term that, if included in or omitted from the
20    first-trust instrument, would have prevented the first
21    trust from qualifying under Section 672(f)(2)(A) of the
22    Internal Revenue Code.
23        (8) In this paragraph (8), "tax benefit" means a
24    federal or state tax deduction, exemption, exclusion, or
25    other benefit not otherwise listed in this Section, except
26    for a benefit arising from being a grantor trust. Subject

 

 

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1    to paragraph (9) of this subsection (b), a second-trust
2    instrument may not include or omit a term that, if included
3    in or omitted from the first-trust instrument, would have
4    prevented qualification for a tax benefit if:
5            (A) the first-trust instrument expressly indicates
6        an intent to qualify for the benefit or the first-trust
7        instrument clearly is designed to enable the first
8        trust to qualify for the benefit; and
9            (B) the transfer of property held by the first
10        trust or the first trust qualified, or but for
11        provisions of this Article other than this Section,
12        would have qualified for the tax benefit.
13        (9) Subject to paragraph (4) of this subsection (b):
14            (A) except as otherwise provided in paragraph (7)
15        of this subsection (b), the second trust may be a
16        nongrantor trust, even if the first trust is a grantor
17        trust; and
18            (B) except as otherwise provided in paragraph (10)
19        of this subsection (b), the second trust may be a
20        grantor trust, even if the first trust is a nongrantor
21        trust.
22        (10) An authorized fiduciary may not exercise the
23    decanting power if a settlor objects in a signed record
24    delivered to the fiduciary within the notice period and:
25            (A) the first trust and second trusts are both
26        grantor trusts, in whole or in part, the first trust

 

 

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1        grants the settlor or another person the power to cause
2        the second trust to cease to be a grantor trust, and
3        the second trust does not grant an equivalent power to
4        the settlor or other person; or
5            (B) the first trust is a nongrantor trust and the
6        second trust is a grantor trust, in whole or in part,
7        with respect to the settlor, unless:
8                (i) the settlor has the power at all times to
9            cause the second trust to cease to be a grantor
10            trust; or
11                (ii) the first-trust instrument contains a
12            provision granting the settlor or another person a
13            power that would cause the first trust to cease to
14            be a grantor trust and the second-trust instrument
15            contains the same provision.
 
16    Section 1220. Duration of second trust.
17    (a) Subject to subsection (b), a second trust may have a
18duration that is the same as or different from the duration of
19the first trust.
20    (b) To the extent that property of a second trust is
21attributable to property of the first trust, the second trust
22is subject to any rules governing maximum perpetuity,
23accumulation, or suspension of the power of alienation
24applicable to property of the first trust.
 

 

 

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1    Section 1221. Need to distribute not required. An
2authorized fiduciary may exercise the decanting power whether
3or not under the first trust's discretionary distribution
4standard the fiduciary would have made or could have been
5compelled to make a discretionary distribution of principal at
6the time of the exercise.
 
7    Section 1222. Savings provision.
8    (a) If exercise of the decanting power would be effective
9under this Article except that the second-trust instrument in
10part does not comply with this Article, the exercise of the
11power is effective and the following rules apply to the
12principal of the first trust subject to the exercise of the
13power:
14        (1) A provision in the second-trust instrument that is
15    not permitted under this Article is void to the extent
16    necessary to comply with this Article.
17        (2) A provision required by this Article to be in the
18    second-trust instrument that is not contained in the
19    instrument is deemed to be included in the instrument to
20    the extent necessary to comply with this Article.
21    (b) If a trustee or other fiduciary of a second trust
22discovers that subsection (a) applies to a prior exercise of
23the decanting power, the fiduciary shall take such appropriate
24corrective action as is consistent with the fiduciary's duties.
 

 

 

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1    Section 1223. Trust for care of animal.
2    (a) In this Section:
3        (1) "Animal trust" means a trust or an interest in a
4    trust created to provide for the care of one or more
5    designated domestic or pet animals.
6        (2) "Protector" means a person described in paragraph
7    (3) of subsection (b) of Section 408.
8    (b) The decanting power may be exercised over an animal
9trust that has a protector to the extent the trust could be
10decanted under this Article as if each animal that benefits
11from the trust were an individual, if the protector consents in
12a signed record to the exercise of the decanting power.
13    (c) A protector for an animal has the rights under this
14Article of a qualified beneficiary.
15    (d) Notwithstanding any other provision of this Article, if
16a first trust is an animal trust, in an exercise of the
17decanting power, the second trust must provide that trust
18property may be applied only to its intended purpose for the
19period the first trust benefited the animal.
 
20    Section 1224. (Reserved).
 
21    Section 1225. Settlor.
22    (a) For purposes of the laws of this State other than this
23Article and subject to subsection (b), a settlor of a first
24trust is deemed to be the settlor of the second trust with

 

 

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1respect to the portion of the principal of the first trust
2subject to the exercise of the decanting power.
3    (b) In determining settlor intent with respect to a second
4trust, the intent of a settlor of the first trust, the intent
5of a settlor of the second trust, and the intent of the
6authorized fiduciary may be considered.
 
7    Section 1226. Later-discovered property.
8    (a) Except as otherwise provided in subsection (c), if
9exercise of the decanting power was intended to distribute all
10the principal of the first trust to one or more second trusts,
11later-discovered property otherwise belonging to the first
12trust and property paid to or acquired by the first trust after
13the exercise of the power is part of the trust estate of the
14second trust.
15    (b) Except as otherwise provided in subsection (c), if
16exercise of the decanting power was intended to distribute less
17than all the principal of the first trust to one or more second
18trusts, later-discovered property belonging to the first trust
19or property paid to or acquired by the first trust after
20exercise of the decanting power remains part of the trust
21estate of the first trust.
22    (c) An authorized fiduciary may provide in an exercise of
23the decanting power or by the terms of a second trust for
24disposition of later-discovered property belonging to the
25first trust or property paid to or acquired by the first trust

 

 

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1after exercise of the decanting power.
 
2    Section 1227. Obligations. A debt, liability, or other
3obligation enforceable against property of a first trust is
4enforceable to the same extent against that property when held
5by the second trust after exercise of the decanting power.
 
6
Article 13. Uniform Powers of Appointment Law.

 
7    Section 1301. Article title. This Article may be referred
8to as the Uniform Powers of Appointment Law.
 
9    Section 1302. Definitions. In this Article:
10    (1) "Appointee" means a person to which a powerholder makes
11an appointment of appointive property.
12    (2) "Appointive property" means the property or property
13interest subject to a power of appointment.
14    (3) "Blanket-exercise clause" means a clause in an
15instrument that exercises a power of appointment and is not a
16specific-exercise clause. The term includes a clause that:
17        (A) expressly uses the words "any power" in exercising
18    any power of appointment the powerholder has;
19        (B) expressly uses the words "any property" in
20    appointing any property over which the powerholder has a
21    power of appointment; or
22        (C) disposes of all property subject to disposition by

 

 

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1    the powerholder.
2    (4) "Exclusionary power of appointment" means a power of
3appointment exercisable in favor of any one or more of the
4permissible appointees to the exclusion of the other
5permissible appointees.
6    (5) "Gift-in-default clause" means a clause identifying a
7taker in default of appointment.
8    (6) "Impermissible appointee" means a person that is not a
9permissible appointee.
10    (7) "Instrument" means a writing.
11    (8) "Permissible appointee" means a person in whose favor a
12powerholder may exercise a power of appointment.
13    (9) "Record" means information that is inscribed on a
14tangible medium or that is stored in an electronic or other
15medium and is retrievable in perceivable form.
16    (10) "Specific-exercise clause" means a clause in an
17instrument that specifically refers to and exercises a
18particular power of appointment.
19    (11) "Taker in default of appointment" means a person that
20takes part or all of the appointive property to the extent the
21powerholder does not effectively exercise the power of
22appointment.
23    (12) "Terms of the instrument" means the manifestation of
24the intent of the maker of the instrument regarding the
25instrument's provisions as expressed in the instrument or as
26may be established by other evidence that would be admissible

 

 

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1in a legal proceeding.
 
2    Section 1303. Governing law. Unless the terms of the
3instrument creating a power of appointment manifest a contrary
4intent:
5    (1) the creation, revocation, or amendment of the power is
6governed by the law of the donor's domicile at the relevant
7time; and
8    (2) the exercise, release, or disclaimer of the power, or
9the revocation or amendment of the exercise, release, or
10disclaimer of the power, is governed by the law of the
11powerholder's domicile at the relevant time.
 
12    Section 1304. Creation of power of appointment.
13    (a) A power of appointment is created only if:
14        (1) the instrument creating the power:
15            (A) is valid under applicable law; and
16            (B) except as otherwise provided in subsection
17        (b), transfers the appointive property; and
18        (2) the terms of the instrument creating the power
19    manifest the donor's intent to create, in a powerholder, a
20    power of appointment over the appointive property
21    exercisable in favor of a permissible appointee.
22    (b) Subdivision (a)(1)(B) does not apply to the creation of
23a power of appointment by the exercise of a power of
24appointment.

 

 

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1    (c) A power of appointment may not be created in a deceased
2individual.
3    (d) Subject to an applicable rule against perpetuities, a
4power of appointment may be created in an unborn or
5unascertained powerholder.
 
6    Section 1305. Nontransferability. A powerholder may not
7transfer a power of appointment. If the powerholder dies
8without exercising or releasing the power, the power lapses.
 
9    Section 1306. Presumption of unlimited authority. Subject
10to Section 1308, and unless the terms of the instrument
11creating a power of appointment manifest a contrary intent, the
12power is:
13        (1) presently exercisable;
14        (2) exclusionary; and
15        (3) except as otherwise provided in Section 1307,
16    general.
 
17    Section 1307. Exception to presumption of unlimited
18authority. Unless the terms of the instrument creating a power
19of appointment manifest a contrary intent, the power is
20nongeneral if:
21        (1) the power is exercisable only at the powerholder's
22    death; and
23        (2) the permissible appointees of the power are a

 

 

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1    defined and limited class that does not include the
2    powerholder's estate, the powerholder's creditors, or the
3    creditors of the powerholder's estate.
 
4    Section 1308. Rules of classification.
5    (a) In this Section, "adverse party" means a person with a
6substantial beneficial interest in property that would be
7affected adversely by a powerholder's exercise or nonexercise
8of a power of appointment in favor of the powerholder, the
9powerholder's estate, a creditor of the powerholder, or a
10creditor of the powerholder's estate.
11    (b) If a powerholder may exercise a power of appointment
12only with the consent or joinder of an adverse party, the power
13is nongeneral.
14    (c) If the permissible appointees of a power of appointment
15are not defined and limited, the power is exclusionary.
 
16    Section 1309. Power to revoke or amend. A donor may revoke
17or amend a power of appointment only to the extent that:
18        (1) the instrument creating the power is revocable by
19    the donor; or
20        (2) the donor reserves a power of revocation or
21    amendment in the instrument creating the power of
22    appointment.
 
23    Section 1310. Requisites for exercise of power of

 

 

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1appointment. A power of appointment is exercised only:
2        (1) if the instrument exercising the power is valid
3    under applicable law;
4        (2) if the terms of the instrument exercising the
5    power:
6            (A) manifest the powerholder's intent to exercise
7        the power; and
8            (B) subject to Section 1313, satisfy the
9        requirements of exercise, if any, imposed by the donor;
10        and
11        (3) to the extent the appointment is a permissible
12    exercise of the power.
 
13    Section 1311. Intent to exercise: determining intent from
14residuary clause.
15    (a) In this Section:
16        (1) "Residuary clause" does not include a residuary
17    clause containing a blanket-exercise clause or a
18    specific-exercise clause.
19        (2) "Will" includes a codicil and a testamentary
20    instrument that revises another will.
21    (b) A residuary clause in a powerholder's will, or a
22comparable clause in the powerholder's revocable trust,
23manifests the powerholder's intent to exercise a power of
24appointment only if:
25        (1) the terms of the instrument containing the

 

 

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1    residuary clause do not manifest a contrary intent;
2        (2) the power is a general power exercisable in favor
3    of the powerholder's estate;
4        (3) there is no gift-in-default clause or it is
5    ineffective; and
6        (4) the powerholder did not release the power.
 
7    Section 1312. Intent to exercise: after-acquired power.
8Unless the terms of the instrument exercising a power of
9appointment manifest a contrary intent:
10        (1) except as otherwise provided in paragraph (2), a
11    blanket-exercise clause extends to a power acquired by the
12    powerholder after executing the instrument containing the
13    clause; and
14        (2) if the powerholder is also the donor of the power,
15    the clause does not extend to the power unless there is no
16    gift-in-default clause or it is ineffective.
 
17    Section 1313. Substantial compliance with donor-imposed
18formal requirement. A powerholder's substantial compliance
19with a formal requirement of an appointment imposed by the
20donor, including a requirement that the instrument exercising
21the power of appointment make reference or specific reference
22to the power, is sufficient if:
23        (1) the powerholder knows of and intends to exercise
24    the power; and

 

 

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1        (2) the powerholder's manner of attempted exercise of
2    the power does not impair a material purpose of the donor
3    in imposing the requirement.
 
4    Section 1314. Permissible appointment.
5    (a) A powerholder of a general power of appointment that
6permits appointment to the powerholder or the powerholder's
7estate may make any appointment, including an appointment in
8trust or creating a new power of appointment, that the
9powerholder could make in disposing of the powerholder's own
10property.
11    (b) A powerholder of a general power of appointment that
12permits appointment only to the creditors of the powerholder or
13of the powerholder's estate is restricted to appointing to
14those creditors.
15    (c) Unless the terms of the instrument creating a power of
16appointment manifest a contrary intent, the powerholder of a
17nongeneral power may:
18        (1) make an appointment in any form, with any
19    conditions and limitations, including an appointment in
20    trust to any trustee, in favor of a permissible appointee;
21        (2) create a general or nongeneral power in a
22    permissible appointee that may be exercisable in favor of
23    persons other than permissible appointees of the original
24    nongeneral power; or
25        (3) create a nongeneral power in any person to appoint

 

 

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1    to one or more of the permissible appointees of the
2    original nongeneral power.
 
3    Section 1315. Appointment to deceased appointee. Subject
4to Section 4-11 of the Probate Act of 1975, an appointment to a
5deceased appointee is ineffective.
 
6    Section 1316. Impermissible appointment.
7    (a) Except as otherwise provided in Section 1315, an
8exercise of a power of appointment in favor of an impermissible
9appointee is ineffective.
10    (b) An exercise of a power of appointment in favor of a
11permissible appointee is ineffective to the extent the
12appointment is a fraud on the power.
 
13    Section 1317. Selective allocation doctrine. If a
14powerholder exercises a power of appointment in a disposition
15that also disposes of property the powerholder owns, the owned
16property and the appointive property must be allocated in the
17permissible manner that best carries out the powerholder's
18intent.
 
19    Section 1318. Capture doctrine: disposition of
20ineffectively appointed property under general power. To the
21extent a powerholder of a general power of appointment, other
22than a power to revoke, amend, or withdraw property from a

 

 

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1trust, makes an ineffective appointment:
2        (1) the gift-in-default clause controls the
3    disposition of the ineffectively appointed property; or
4        (2) if there is no gift-in-default clause or to the
5    extent the clause is ineffective, the ineffectively
6    appointed property:
7            (A) passes to:
8                (i) the powerholder if the powerholder is a
9            permissible appointee and living; or
10                (ii) if the powerholder is an impermissible
11            appointee or not living, the powerholder's estate
12            if the estate is a permissible appointee; or
13            (B) if there is no taker under subparagraph (A),
14        passes under a reversionary interest to the donor or
15        the donor's transferee or successor in interest.
 
16    Section 1319. Disposition of unappointed property under
17released or unexercised general power. To the extent a
18powerholder releases or fails to exercise a general power of
19appointment other than a power to revoke, amend, or withdraw
20property from a trust:
21        (1) the gift-in-default clause controls the
22    disposition of the unappointed property; or
23        (2) if there is no gift-in-default clause or to the
24    extent the clause is ineffective:
25            (A) except as otherwise provided in subparagraph

 

 

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1        (B), the unappointed property passes to:
2                (i) the powerholder if the powerholder is a
3            permissible appointee and living; or
4                (ii) if the powerholder is an impermissible
5            appointee or not living, the powerholder's estate
6            if the estate is a permissible appointee; or
7            (B) to the extent the powerholder released the
8        power, or if there is no taker under subparagraph (A),
9        the unappointed property passes under a reversionary
10        interest to the donor or the donor's transferee or
11        successor in interest.
 
12    Section 1320. Disposition of unappointed property under
13released or unexercised nongeneral power. To the extent a
14powerholder releases, ineffectively exercises, or fails to
15exercise a nongeneral power of appointment:
16    (1) the gift-in-default clause controls the disposition of
17the unappointed property; or
18    (2) if there is no gift-in-default clause or to the extent
19the clause is ineffective, the unappointed property:
20        (A) passes to the permissible appointees if:
21            (i) the permissible appointees are defined and
22        limited; and
23            (ii) the terms of the instrument creating the power
24        do not manifest a contrary intent; or
25        (B) if there is no taker under subparagraph (A), passes

 

 

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1    under a reversionary interest to the donor or the donor's
2    transferee or successor in interest.
 
3    Section 1321. Disposition of unappointed property if
4partial appointment to taker in default. Unless the terms of
5the instrument creating or exercising a power of appointment
6manifest a contrary intent, if the powerholder makes a valid
7partial appointment to a taker in default of appointment, the
8taker in default of appointment may share fully in unappointed
9property.
 
10    Section 1322. Appointment to taker in default. If a
11powerholder of a general power makes an appointment to a taker
12in default of appointment and the appointee would have taken
13the property under a gift-in-default clause had the property
14not been appointed, the power of appointment is deemed not to
15have been exercised, and the appointee takes under the
16gift-in-default clause.
 
17    Section 1323. Powerholder's authority to revoke or amend
18exercise. A powerholder may revoke or amend an exercise of a
19power of appointment only to the extent that:
20        (1) the powerholder reserves a power of revocation or
21    amendment in the instrument exercising the power of
22    appointment and, if the power is nongeneral, the terms of
23    the instrument creating the power of appointment do not

 

 

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1    prohibit the reservation; or
2        (2) the terms of the instrument creating the power of
3    appointment provide that the exercise is revocable or
4    amendable.
 
5    Section 1324. Disposition of trust property subject to
6power. In disposing of trust property subject to a power of
7appointment exercisable by an instrument other than a will, a
8trustee acting in good faith shall have no liability to any
9appointee or taker in default of appointment for relying upon
10an instrument believed to be genuine purporting to exercise a
11power of appointment or for assuming that there is no
12instrument exercising the power of appointment in the absence
13of actual knowledge thereof within 3 months of the last date on
14which the power of appointment may be exercised.
 
15    Section 1325. Disclaimer. As provided by Section 2-7 of the
16Probate Act of 1975:
17        (1) A powerholder may disclaim all or part of a power
18    of appointment.
19        (2) A permissible appointee, appointee, or taker in
20    default of appointment may disclaim all or part of an
21    interest in appointive property.
 
22    Section 1326. Authority to release. A powerholder may
23release a power of appointment, in whole or in part, except to

 

 

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1the extent the terms of the instrument creating the power
2prevent the release.
 
3    Section 1327. Method of release. A powerholder of a
4releasable power of appointment may release the power in whole
5or in part:
6        (1) by substantial compliance with a method provided in
7    the terms of the instrument creating the power; or
8        (2) if the terms of the instrument creating the power
9    do not provide a method or the method provided in the terms
10    of the instrument is not expressly made exclusive, by an
11    instrument manifesting the powerholder's intent by clear
12    and convincing evidence.
 
13    Section 1328. Revocation or amendment of release. A
14powerholder may revoke or amend a release of a power of
15appointment only to the extent that:
16        (1) the instrument of release is revocable by the
17    powerholder; or
18        (2) the powerholder reserves a power of revocation or
19    amendment in the instrument of release.
 
20    Section 1329. Power to contract: presently exercisable
21power of appointment. A powerholder of a presently exercisable
22power of appointment may contract:
23        (1) not to exercise the power; or

 

 

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1        (2) to exercise the power if the contract when made
2    does not confer a benefit on an impermissible appointee.
 
3    Section 1330. Power to contract: power of appointment not
4presently exercisable. A powerholder of a power of appointment
5that is not presently exercisable may contract to exercise or
6not to exercise the power only if the powerholder:
7        (1) is also the donor of the power; and
8        (2) has reserved the power in a revocable trust.
 
9    Section 1331. Remedy for breach of contract to appoint or
10not to appoint. The remedy for a powerholder's breach of a
11contract to appoint or not to appoint is limited to damages
12payable out of the appointive property or, if appropriate,
13specific performance of the contract.
 
14    Section 1332. Creditor claim: general power created by
15powerholder.
16    (a) In this Section, "power of appointment created by the
17powerholder" includes a power of appointment created in a
18transfer by another person to the extent the powerholder
19contributed value to the transfer.
20    (b) Appointive property subject to a general power of
21appointment created by the powerholder is subject to a claim of
22a creditor of the powerholder or of the powerholder's estate to
23the extent provided in the Uniform Fraudulent Transfer Act.

 

 

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1    (c) Subject to subsection (b), appointive property subject
2to a general power of appointment created by the powerholder is
3not subject to a claim of a creditor of the powerholder or the
4powerholder's estate to the extent the powerholder irrevocably
5appointed the property in favor of a person other than the
6powerholder or the powerholder's estate.
7    (d) Subject to subsections (b) and (c), and notwithstanding
8the presence of a spendthrift provision or whether the claim
9arose before or after the creation of the power of appointment,
10appointive property subject to a general power of appointment
11created by the powerholder is subject to a claim of a creditor
12of:
13        (1) the powerholder, to the same extent as if the
14    powerholder owned the appointive property, if the power is
15    presently exercisable; and
16        (2) the powerholder's estate, to the extent the estate
17    is insufficient to satisfy the claim and subject to the
18    right of a decedent to direct the source from which
19    liabilities are paid, if the power is exercisable at the
20    powerholder's death.
 
21    Section 1333. Creditor claim: general power not created by
22powerholder.
23    (a) Except as otherwise provided in subsection (b),
24appointive property subject to a general power of appointment
25created by a person other than the powerholder is subject to a

 

 

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1claim of a creditor of:
2        (1) the powerholder, to the extent the powerholder's
3    property is insufficient, if the power is presently
4    exercisable; and
5        (2) the powerholder's estate if the power is exercised
6    at the powerholder's death, to the extent the estate is
7    insufficient, subject to the right of the deceased
8    powerholder to direct the source from which liabilities are
9    paid.
10    (b) Subject to subsection (c) of Section 1335, a power of
11appointment created by a person other than the powerholder that
12is subject to an ascertainable standard relating to an
13individual's health, education, support, or maintenance within
14the meaning of Section 2041(b)(1)(A) of the Internal Revenue
15Code or Section 2514(c)(1) of the Internal Revenue Code, as
16amended, is treated for purposes of this Article as a
17nongeneral power.
 
18    Section 1334. Power to withdraw.
19    (a) For purposes of Sections 1333 through 1336, and except
20as otherwise provided in subsection (b), a power to withdraw
21property from a trust is treated, during the time the power may
22be exercised, as a presently exercisable general power of
23appointment to the extent of the property subject to the power
24to withdraw.
25    (b) A power to withdraw property from a trust ceases to be

 

 

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1treated as a presently exercisable general power of appointment
2upon its lapse, release, or waiver.
 
3    Section 1335. Creditor claim: nongeneral power.
4    (a) Except as otherwise provided in subsections (b) and
5(c), appointive property subject to a nongeneral power of
6appointment is exempt from a claim of a creditor of the
7powerholder or the powerholder's estate.
8    (b) Appointive property subject to a nongeneral power of
9appointment is subject to a claim of a creditor of the
10powerholder or the powerholder's estate to the extent that the
11powerholder owned the property and, reserving the nongeneral
12power, transferred the property in violation of the Uniform
13Fraudulent Transfer Act.
14    (c) If the initial gift in default of appointment is to the
15powerholder or the powerholder's estate, a nongeneral power of
16appointment is treated for purposes of this Section as a
17general power.
 
18    Section 1336. Application to existing relationships.
19    (a) Except as otherwise provided in this Article, on and
20after the effective date of this Code:
21        (1) this Article applies to a power of appointment
22    created before, on, or after its effective date;
23        (2) this Article applies to a judicial proceeding
24    concerning a power of appointment commenced on or after its

 

 

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1    effective date;
2        (3) this Article applies to a judicial proceeding
3    concerning a power of appointment commenced before its
4    effective date unless the court finds that application of a
5    particular provision of this Article would substantially
6    interfere with the effective conduct of the judicial
7    proceeding or prejudice a right of a party, in which case
8    the particular provision of this Article does not apply and
9    the superseded law applies;
10        (4) a rule of construction or presumption provided in
11    this Article applies to an instrument executed before the
12    effective date of the Article unless there is a clear
13    indication of a contrary intent in the terms of the
14    instrument; and
15        (5) an act done before the effective date of this Code
16    is not affected by this Article.
17    (b) If a right is acquired, extinguished, or barred on the
18expiration of a prescribed period that commenced under law of
19this State other than this Article before the effective date of
20this Code, the law continues to apply to the right.
21    (c) No trustee is liable to any person in whose favor a
22power of appointment may have been exercised for any
23distribution of property made to persons entitled to take in
24default of the effective exercise of the power of appointment
25to the extent that the distribution shall have been completed
26before the effective date of this Code.
 

 

 

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1
Article 14. Perpetuities.

 
2    Section 1401. Article title. Except for Section 1407, this
3Article may be referred to as the Law Concerning Perpetuities.
 
4    Section 1402. Purpose. This Article modifies the common law
5rule of property known as the rule against perpetuities, that,
6except as modified by statutes in force at the effective date
7of this Article and by this Article, shall remain in full force
8and effect.
 
9    Section 1403. Definitions and terms. As used in this
10Article unless the context otherwise requires:
11    (a) Any reference in this Article to income to be "paid" or
12to income "payments" or to "receiving" income includes income
13payable or distributable to or applicable for the benefit of a
14beneficiary.
15    (b) "Instrument" means any writing pursuant to which any
16legal or equitable interest in property or in the income
17therefrom is affected, disposed of, or created.
18    (c) "Qualified perpetual trust" means any trust created by
19any written instrument executed on or after January 1, 1998,
20including an amendment to an instrument in existence before
21that date and the exercise of a power of appointment granted by
22an instrument executed or amended on or after that date:

 

 

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1        (1) to which, by the specific terms governing the
2    trust, the rule against perpetuities does not apply; and
3        (2) the power of the trustee (or other person to whom
4    the power is properly granted or delegated) to sell
5    property of which is not limited by the trust instrument or
6    any provision of law for any period of time beyond the
7    period of the rule against perpetuities.
 
8    Section 1404. Application of rule against perpetuities.
9    (a) The rule against perpetuities does not apply:
10        (1) to any disposition of property or interest therein
11    that, at the effective date of this Code, does not violate,
12    or is exempted by statute from the operation of, the common
13    law rule against perpetuities;
14        (2) to powers of a trustee to sell, lease, or mortgage
15    property or to powers that relate to the administration or
16    management of trust assets, including, but not limited to,
17    discretionary powers of a trustee to determine what
18    receipts constitute principal and what receipts constitute
19    income and powers to appoint a successor trustee;
20        (3) to mandatory powers of a trustee to distribute
21    income, or to discretionary powers of a trustee to
22    distribute principal before termination of a trust, to a
23    beneficiary having an interest in the principal that is
24    irrevocably vested in quality and quantity;
25        (4) to discretionary powers of a trustee to allocate

 

 

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1    income and principal among beneficiaries, but no exercise
2    of any such power after the expiration of the period of the
3    rule against perpetuities is valid;
4        (5) to leases to commence in the future or upon the
5    happening of a future event, but no such lease is valid
6    unless the term of the lease actually commences in
7    possession within 40 years from the date of execution of
8    the lease;
9        (6) to commitments (A) by a lessor to enter into a
10    lease with a subtenant or with the holder of a leasehold
11    mortgage or (B) by a lessee or sublessee to enter into a
12    lease with the holder of a mortgage;
13        (7) to options in gross or to preemptive rights in the
14    nature of a right of first refusal, but no option in gross
15    shall be valid for more than 40 years from the date of its
16    creation; or
17        (8) to qualified perpetual trusts as defined in Section
18    1403.
19    (b) The period of the rule against perpetuities shall not
20commence to run in connection with any disposition of property
21or interest therein, and no instrument shall be regarded as
22becoming effective for purposes of the rule against
23perpetuities, and no interest or power shall be deemed to be
24created for purposes of the rule against perpetuities as long
25as, by the terms of the instrument, the maker of the instrument
26has the power to revoke the instrument or to transfer or direct

 

 

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1to be transferred to himself or herself the entire legal and
2equitable ownership of the property or interest therein.
3    (c) In determining whether an interest violates the rule
4against perpetuities:
5        (1) it is presumed:
6            (A) that the interest was intended to be valid;
7            (B) in the case of an interest conditioned upon the
8        probate of a will, the appointment of an executor,
9        administrator or trustee, the completion of the
10        administration of an estate, the payment of debts, the
11        sale or distribution of property, the determination of
12        federal or state tax liabilities or the happening of
13        any administrative contingency, that the contingency
14        must occur, if at all, within the period of the rule
15        against perpetuities; and
16            (C) if the instrument creates an interest in the
17        "widow", "widower", or "spouse" of another person,
18        that the maker of the instrument intended to refer to a
19        person who was living at the date that the period of
20        the rule against perpetuities commences to run;
21        (2) if any interest, but for this subsection, would be
22    invalid because it is made to depend upon any person
23    attaining or failing to attain an age in excess of 21
24    years, the age specified shall be reduced to 21 years as to
25    every person to whom the age contingency applies;
26        (3) notwithstanding paragraphs (1) and (2), if the

 

 

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1    validity of any interest depends upon the possibility of
2    the birth or adoption of a child, the following apply:
3            (A) no person shall be deemed capable of having a
4        child until he or she has attained the age of 13 years;
5            (B) any person who has attained the age of 65 years
6        shall be deemed incapable of having a child;
7            (C) evidence is admissible as to the incapacity of
8        having a child by a living person who has not attained
9        the age of 65 years; and
10            (D) the possibility of having a child or more
11        remote descendant by adoption shall be disregarded.
12    (d) Paragraphs (2), (3), and (6) of subsection (a) and
13subsection (b) are declaratory of existing law.
 
14    Section 1405. Trusts.
15    (a) Subject to subsections (e) and (f), a trust containing
16any limitation that, but for this subsection, would violate the
17rule against perpetuities as modified by Section 1404 shall
18terminate at the expiration of a period of:
19        (1) 21 years after the death of the last to die of all
20    of the beneficiaries of the instrument who were living at
21    the date when the period of the rule against perpetuities
22    commenced to run; or
23        (2) 21 years after that date if no beneficiary of the
24    instrument was then living, unless events occur that cause
25    an earlier termination in accordance with the terms of the

 

 

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1    instrument and then the principal shall be distributed as
2    provided by the instrument.
3    (b) Subject to subsections (c), (d) and (e), when a trust
4terminates because of the application of subsection (a), the
5trustee shall distribute the principal to those persons who
6would be the heirs at law of the maker of the instrument if he
7or she died at the expiration of the period specified in
8subsection (a) and in the proportions then specified by
9statute, unless the trust was created by the exercise of a
10power of appointment and then the principal shall be
11distributed to the person who would have received it if the
12power had not been exercised.
13    (c) Before any distribution of principal is made pursuant
14to subsection (b), the trustee shall distribute, out of
15principal, to each living beneficiary who, but for termination
16of the trust because of the application of subsection (a),
17would have been entitled to be paid income after the expiration
18of the period specified in subsection (a), an amount equal to
19the present value (determined as provided in subsection (d)) of
20the income that the beneficiary would have been entitled to be
21paid after the expiration of that period.
22    (d) In determining the present value of income for purposes
23of any distribution to a beneficiary pursuant to subsection
24(c):
25        (1) when income payments would have been subject in
26    whole or in part to any discretionary power, it shall be

 

 

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1    assumed:
2            (A) that the income that would have been paid to an
3        individual income beneficiary would have been the
4        maximum amount of income that could have been paid to
5        him or her in the exercise of the power;
6            (B) if the income would or might have been payable
7        to more than one beneficiary, that (except as
8        hereinafter provided) each beneficiary would have
9        received an equal share of the income, unless the
10        instrument specifies less than an equal share as the
11        maximum amount or proportion of income that would have
12        been paid to any beneficiary in the exercise of the
13        power, in which event the maximum specified shall
14        control; and
15            (C) if the income would or might have been payable
16        to the descendants of the maker of the instrument or of
17        another person, that, unless the instrument provides
18        otherwise, the descendants would have received the
19        income per stirpes;
20        (2)(A) present value shall be computed on an actuarial
21    basis and there shall be assumed a return of 5%, at simple
22    interest, on the value of the principal from which the
23    beneficiary would have been entitled to receive income; and
24        (B) if the interest in income was to be for the life of
25    the beneficiary or for the life of another, the computation
26    shall be made on the expectancy set forth in the most

 

 

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1    recently published American Experience Tables of Mortality
2    and no other evidence of duration or expectancy shall be
3    considered;
4        (3) if the trustee cannot determine the present value
5    of any income interest in accordance with the provisions of
6    the instrument and the foregoing rules concerning income
7    payments, the present value of the interest shall be deemed
8    to be zero.
9    (e) This Section applies only when a trust would violate
10the rule against perpetuities as modified by Section 1404 and
11does not apply to any trust that would have been valid apart
12from this Article.
13    (f) This Section does not apply when a trust violates the
14rule against perpetuities because the trust estate may not vest
15in the trustee within the period of the rule.
 
16    Section 1406. Applicability. Sections 1401 through 1405
17apply only to instruments, including instruments that exercise
18a power of appointment, that become effective after September
1922, 1969.
 
20    Section 1407. Vesting of any limitation of property.
21    (a) This Section may be referred to as the Perpetuities
22Vesting Law.
23    (b) The vesting of any limitation of property, whether
24created in the exercise of a power of appointment or in any

 

 

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1other manner, shall not be regarded as deferred for purposes of
2the rule against perpetuities merely because the limitation is
3made to the estate of a person or to a personal representative,
4or to a trustee under a will, or to take effect on the probate
5of a will.
6    (c) This Section applies only to limitations created after
7July 1, 1952.
 
8
Article 15. Miscellaneous Provisions.

 
9    Section 1501. Uniformity of application and construction.
10In applying and construing this Code, consideration must be
11given to the need to promote uniformity of the law with respect
12to its subject matter among states that enact comparable
13provisions of the Uniform Trust Code.
 
14    Section 1502. Severability. If any provision of this Code
15or its application to any person or circumstances is held
16invalid, the invalidity does not affect other provisions or
17applications of this Code which can be given effect without the
18invalid provision or application, and to this end the
19provisions of this Code are severable.
 
20    Section 1503. Rights retained by Attorney General. Nothing
21in this Code is intended to derogate any right the Attorney
22General has under the common law of this State to represent a

 

 

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1charitable interest in trust. Nothing in this Code relieves a
2trustee of duties to file documents under, and otherwise comply
3with, the Charitable Trust Act or the Solicitation for Charity
4Act.
 
5    Section 1504. (See Section 9999 for effective date.)
 
6    (760 ILCS 5/Act rep.)
7    Section 1505. The Trusts and Trustees Act is repealed.
 
8    (760 ILCS 35/Act rep.)
9    Section 1505.1. The Trusts and Dissolutions of Marriage Act
10is repealed.
 
11    (760 ILCS 105/Act rep.)
12    Section 1505.2. The Uniform Powers of Appointment Act is
13repealed.
 
14    (765 ILCS 305/Act rep.)
15    Section 1505.3. The Statute Concerning Perpetuities is
16repealed.
 
17    (765 ILCS 310/Act rep.)
18    Section 1505.4. The Perpetuities Vesting Act is repealed.
 
19    (765 ILCS 315/Act rep.)

 

 

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1    Section 1505.5. The Trust Accumulation Act is repealed.
 
2    Section 1506. Application to existing relationships.
3Except as otherwise provided in this Code, on the effective
4date of this Code:
5        (1) This Code applies to all trusts created before, on,
6    or after its effective date.
7        (2) This Code applies to all judicial proceedings
8    concerning trusts commenced on or after its effective date.
9    As used in this Section, "judicial proceedings" includes
10    any proceeding before a court or administrative tribunal of
11    this State and any arbitration or mediation proceedings.
12        (3) this Code applies to all nonjudicial matters
13    concerning trusts commenced before, on, or after its
14    effective date. As used in this Section, "nonjudicial
15    matters" includes, but is not limited to, nonjudicial
16    settlement agreements entered into under Section 111 and
17    the grant of any consent, release, ratification, or
18    indemnification.
19        (4) This Code applies to judicial proceedings
20    concerning trusts commenced before its effective date
21    unless the court finds that application of a particular
22    provision of this Code would substantially interfere with
23    the effective conduct of the judicial proceedings or
24    prejudice the rights of the parties, in which case the
25    particular provision of this Code does not apply and the

 

 

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1    superseded law applies.
2        (5) Any rule of construction or presumption provided in
3    this Code applies to trust instruments executed before the
4    effective date of this Code unless there is a clear
5    indication of a contrary intent in the trust instrument.
6        (6) An act done before the effective date of this Code
7    is not affected by this Code.
8        (7) If a right is acquired, extinguished, or barred
9    upon the expiration of a prescribed period that has
10    commenced to run under any other statute before the
11    effective date of this Code, that statute continues to
12    apply to the right even if it has been repealed or
13    superseded.
14        (8) This Code shall be construed as pertaining to
15    administration of a trust and applies to any trust that is
16    administered in Illinois under Illinois law or that is
17    governed by Illinois law with respect to the meaning and
18    effect of its terms, except to the extent the trust
19    instrument expressly prohibits use of this Code by specific
20    reference to this Code.
 
21
Article 16. Amendatory Provisions.

 
22    Section 1601. The Public Use Trust Act is amended by
23changing Section 2 as follows:
 

 

 

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1    (30 ILCS 160/2)  (from Ch. 127, par. 4002)
2    Sec. 2. (a) The Department of Agriculture and the
3Department of Natural Resources have the power to enter into a
4trust agreement with a person or group of persons under which
5the State agency may receive or collect money or other property
6from the person or group of persons and may expend such money
7or property solely for a public purpose within the powers and
8duties of that State agency and stated in the trust agreement.
9The State agency shall be the trustee under any such trust
10agreement.
11    (b) Money or property received under a trust agreement
12shall not be deposited in the State treasury and is not subject
13to appropriation by the General Assembly, but shall be held and
14invested by the trustee separate and apart from the State
15treasury. The trustee shall invest money or property received
16under a trust agreement as provided for trustees under the
17Illinois Trust Code Trusts and Trustees Act or as otherwise
18provided in the trust agreement.
19    (c) The trustee shall maintain detailed records of all
20receipts and disbursements in the same manner as required for
21trustees under the Illinois Trust Code Trusts and Trustees Act.
22The trustee shall provide an annual accounting of all receipts,
23disbursements, and inventory to all donors to the trust and the
24Auditor General. The annual accounting shall be made available
25to any member of the public upon request.
26(Source: P.A. 100-695, eff. 8-3-18.)
 

 

 

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1    Section 1602. The Township Code is amended by changing
2Section 135-20 as follows:
 
3    (60 ILCS 1/135-20)
4    Sec. 135-20. Powers of board of managers. The board of
5managers shall control and manage the cemeteries jointly
6acquired by the townships or road districts. The board of
7managers may receive in trust from the proprietors or owners of
8any lot in the cemeteries, or any person, corporation,
9association, or society interested in the maintenance of those
10cemeteries, any gift or legacy of money or real, personal, or
11mixed property that is donated or bequeathed to the board of
12managers for the use and maintenance of the lot or cemeteries.
13The board of managers may convert the property into money, may
14invest the money in securities in which trust funds may be
15invested under the Illinois Trust Code Trusts and Trustees Act,
16and may apply the income perpetually for the care of the lot or
17the care and maintenance of the cemeteries as specified in the
18gift or legacy or as provided by the board of managers if the
19gift or legacy does not specify the manner in which the income
20is to be expended.
21(Source: P.A. 83-1362; 88-62.)
 
22    Section 1603. The Corporate Fiduciary Act is amended by
23changing Sections 1-6, 6-10, and 9-5 as follows:
 

 

 

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1    (205 ILCS 620/1-6)  (from Ch. 17, par. 1551-6)
2    Sec. 1-6. General Corporate Powers. A corporate fiduciary
3shall have the powers:
4        (a) if it is a State bank, those powers granted under
5    Sections 3 and 5 of the Illinois Banking Act; and
6        (b) if it is a State savings and loan association,
7    those powers granted under Sections 1-6 through 1-8 of the
8    Illinois Savings and Loan Act of 1985; and
9        (c) if it is a State savings bank, those powers granted
10    under the Savings Bank Act; and
11        (d) if it is a corporation organized under the Business
12    Corporation Act of 1983, as now or hereafter amended, or a
13    limited liability company organized under the Limited
14    Liability Company Act, those powers granted in Article 8
15    Sections 4.01 through 4.24 of the Illinois Trust Code
16    Trusts and Trustees Act, as now or hereafter amended, to
17    the extent the exercise of such powers by the corporate
18    fiduciary are not contrary to the instrument containing the
19    appointment of the corporate fiduciary, the court order
20    appointing the corporate fiduciary or any other statute
21    specifically limiting the power of the corporate fiduciary
22    under the circumstances; and
23        (e) subject to Article XLIV of the Illinois Insurance
24    Code, to act as the agent for any fire, life, or other
25    insurance company authorized by the State of Illinois, by

 

 

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1    soliciting and selling insurance and collecting premiums
2    on policies issued by such company; and may receive for
3    services so rendered such fees or commissions as may be
4    agreed upon between the said corporate fiduciary and the
5    insurance company for which it may act as agent; provided,
6    however, that no such corporate fiduciary shall in any case
7    assume or guarantee the payment of any premium on insurance
8    policies issued through its agency by its principal; and
9    provided further, that the corporate fiduciary shall not
10    guarantee the truth of any statement made by an assured in
11    filing his application for insurance.
12    The Commissioner may specify powers of corporate
13fiduciaries generally or of a particular corporate fiduciary
14and by rule or order limit or restrict such powers of corporate
15fiduciaries or a particular corporate fiduciary if he finds the
16exercise of such power by corporate fiduciaries generally or of
17the corporate fiduciary in particular may tend to be an unsafe
18or unsound practice, or if such power is otherwise not in the
19interest of beneficiaries of any fiduciary appointment.
20(Source: P.A. 90-41, eff. 10-1-97; 90-424, eff. 1-1-98; 90-655,
21eff. 7-30-98; 91-97, eff. 7-9-99.)
 
22    (205 ILCS 620/6-10)  (from Ch. 17, par. 1556-10)
23    Sec. 6-10. The receiver for a corporate fiduciary, under
24the direction of the Commissioner, shall have the power and
25authority and is charged with the duties and responsibilities

 

 

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1as follows:
2        (1) To take possession of, and for the purpose of the
3    receivership, the title to the books, records and assets of
4    every description of the corporate fiduciary.
5        (2) To proceed to collect all debts, dues and claims
6    belonging to the corporate fiduciary.
7        (3) To file with the Commissioner a copy of each report
8    which he makes to the court, together with such other
9    reports and records as the Commissioner may require.
10        (4) The receiver shall have authority to sue and defend
11    in the receiver's own name and with respect to the affairs,
12    assets, claims, debts and choses chooses in action of the
13    corporate fiduciary.
14        (5) The receiver shall have authority, and it shall be
15    the receiver's duty, to surrender to the customers of such
16    corporate fiduciary, when requested in writing directed to
17    the receiver by such customers, the assets, private papers
18    and valuables left with the corporate fiduciary for
19    safekeeping, under a custodial or agency agreement, upon
20    satisfactory proof of ownership.
21        (6) As soon as can reasonably be done, the receiver
22    shall resign on behalf of the corporate fiduciary, all
23    trusteeships, guardianships, and all appointments as
24    executor and administrator, or as custodian under the
25    Illinois Uniform Transfers to Minors Act, as now or
26    hereafter amended, or as fiduciary under custodial or

 

 

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1    agency agreements or under the terms of any other written
2    agreement or court order whereunder the corporate
3    fiduciary is holding property in a fiduciary capacity for
4    the benefit of another person, making in each case, from
5    the records and documents available to the receiver, a
6    proper accounting, in the manner and scope as determined by
7    the Commissioner to be practical and advisable under the
8    circumstances, on behalf of the corporate fiduciary. The
9    receiver, prior to resigning, shall cause a successor
10    trustee or fiduciary to be appointed pursuant to the terms
11    set forth in the governing instrument or pursuant to the
12    provisions of the Illinois Trust Code Trusts and Trustees
13    Act, as now or hereafter amended, if applicable, then the
14    receiver shall make application to the court having
15    jurisdiction over the liquidation or winding up of the
16    corporate fiduciary, for the appointment of a successor.
17    The receiver, if a corporate fiduciary, shall not be
18    disqualified from acting as successor trustee or fiduciary
19    if appointed under the terms of the governing instrument,
20    by court order or by the customer of the corporate
21    fiduciary whose affairs are being liquidated or wound up
22    and, in such case, no guardian ad litem need be appointed
23    to review the accounting of the receiver unless the
24    beneficiaries or customers of the corporate fiduciary so
25    request in writing.
26        (7) The receiver shall have authority to redeem or take

 

 

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1    down collateral hypothecated by the corporate fiduciary to
2    secure its notes and other evidence of indebtedness
3    whenever the Commissioner deems it to be in the best
4    interest of the creditors of the corporate fiduciary and
5    directs the receiver so to do.
6        (8) Whenever the receiver shall find it necessary in
7    the receiver's opinion to use and employ money of the
8    corporate fiduciary, in order to protect fully and benefit
9    the corporate fiduciary, by the purchase or redemption of
10    any property, real or personal, in which the corporate
11    fiduciary may have any rights by reason of any bond,
12    mortgage, assignment, or other claim thereto, the receiver
13    may certify the facts together with the receiver's opinions
14    as to the value of the property involved, and the value of
15    the equity the corporate fiduciary may have in the property
16    to the Commissioner, together with a request for the right
17    and authority to use and employ so much of the money of the
18    corporate fiduciary as may be necessary to purchase the
19    property, or to redeem the same from a sale if there was a
20    sale, and if such request is granted, the receiver may use
21    so much of the money of the corporate fiduciary as the
22    Commissioner may have authorized to purchase said property
23    at such sale.
24        (9) The receiver shall deposit daily all monies
25    collected by the receiver in any State or national bank
26    selected by the Commissioner, who may require (and the bank

 

 

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1    so selected may furnish) of such depository satisfactory
2    securities or satisfactory surety bond for the safekeeping
3    and prompt payment of the money so deposited. The deposits
4    shall be made in the name of the Commissioner in trust for
5    the receiver and be subject to withdrawal upon the
6