SB0365 95TH GENERAL ASSEMBLY

LRB095 04733 AJO 24792 b

95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
SB0365

Introduced 2/7/2007, by Sen. Randall "Randy" M. Hultgren

SYNOPSIS AS INTRODUCED:

760 ILCS 15/14

from Ch. 30, par. 514

Amends the Principal and Income Act. Provides that if, in the judgment of the trustee, the charging of the required part of the compensation due to the trustee, attorney, investment counsel, custodian, or accountant is (i) impractical because of the lack of sufficient income cash or principal cash and readily marketable intangible property or (ii) inadvisable because of the nature of the asset, then the trustee may pay the compensation out of the principal or income as the trustee sees fit. Provides that the decision to pay compensation out of the income or principal is conclusive and neither the income nor the principal is entitled to reimbursement. Makes other changes.

A BILL FOR

AN ACT concerning civil law.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Principal and Income Act is amended by changing Section 14 as follows:

(760 ILCS 15/14) (from Ch. 30, par. 514)

Sec. 14. Charges against income and principal.

(a) The following charges shall be made against income:

(1) ordinary expenses, other than compensation as provided in paragraph (6) of this subsection (a), incurred by the trustee in connection with the administration or protection of the trust property, including regularly recurring taxes assessed against any portion of the principal, water rates, premiums on insurance taken upon the interests of the income beneficiary, remainderman, or trustee, interest paid by the trustee (except interest on taxes as provided in paragraphs (7) and (8) of this subsection and paragraphs (5), (6), and (7) of subsection (c)), ordinary repairs and maintenance;

(2) (blank);

(3) one-half of court costs, attorney's fees and other expenses and fees on any judicial accounting, unless the court directs otherwise;

(4) court costs, attorney's fees and other expenses and fees on other judicial proceedings if the matter primarily concerns the income interest, unless the court directs otherwise;

(5) special compensation and expenses of or incurred by the trustee in connection with income;

(6) one-half of the regular compensation of the trustee, attorney, investment counsel, custodian or accountant, subject to paragraph (1) of subsection (d) (c);

(7) any tax, including interest and penalties thereon, levied upon receipts defined as income under this Act or the trust instrument and payable by the trustee;

(8) one-half of the interest on all estate, inheritance, and generation-skipping transfer taxes apportioned to the trust and one-half of the interest on any penalties on those taxes.

(a-5) A reasonable allowance for depreciation on property that is subject to depreciation under generally accepted accounting principles may be charged by the trustee, but no allowance shall be made for depreciation of that portion of any real property used by a beneficiary as a residence. Such an allowance shall be charged only against the income from the property subject to depreciation and shall not accrue from year to year.

(b) If charges against income are of an unusual amount, the trustee may by means of reserves or other reasonable means charge them over a reasonable period of time and withhold from distribution sufficient sums to regularize distributions.

(c) The following charges shall be made against principal:

(1) one-half of the regular compensation of the trustee, attorney, investment counsel, custodian or accountant, subject to subsection (d) shall be paid out of principal, provided that, if in the judgment of the trustee, the charging of a part or all of that portion of such compensation to principal is impracticable because of the lack of sufficient principal cash and readily marketable intangible personal property, or inadvisable because of the nature of the assets, that part or all of such compensation shall be paid out of income. The decision of the trustee to pay a larger portion or all of such compensation out of income shall be conclusive, and the income of the trust shall not be entitled to reimbursement from principal at any subsequent time or times;

(2) special compensation and expenses of or incurred by the trustee in connection with principal, trustee's compensation computed on principal as an acceptance, distribution or termination fee, and, unless the court directs otherwise, court costs, attorney's fees and other expenses and fees in judicial proceedings primarily concerning matters of principal or in any action to construe the trust or protect it or the property or assure the title to any trust property;

(3) charges not provided for in subsection (a), including the cost of investing and reinvesting principal, the payments on principal of an indebtedness (including a mortgage amortized by periodic payments of principal), and expenses for preparation of property for rental or sale;

(4) extraordinary repairs or expenses incurred in making a capital improvement to principal, including special assessments;

(4.5) costs and disbursements related to environmental matters, including reclamation, assessing environmental conditions, remedying and removing environmental contamination, monitoring remedial activities and the release of substances, preventing future releases of substances, collecting amounts from persons liable or potentially liable for the costs of those activities, penalties imposed under environmental laws or regulations and other payments made to comply with those laws or regulations, statutory or common law claims by third parties, and defending claims based on environmental matters;

(5) any tax, including interest and penalties thereon, levied upon profit, gain, or other receipts allocated to principal notwithstanding denomination of the tax as an income tax by the taxing authority;

(6) any tax, including interest and penalties thereon, levied upon amounts not actually received by the trustee before the date the tax is payable, including extensions, notwithstanding the denomination of the tax as an income tax by the taxing authority, except that if, in the judgment of the trustee, the charging against principal of part or all of the tax is impracticable because of a lack of sufficient principal cash and readily marketable intangible personal property or inadvisable because of the nature of the assets that part or all of the tax shall be charged against income. The decision of the trustee to charge part or all of the tax against income shall be conclusive, and the income of the trust shall not be entitled to reimbursement from principal at any subsequent time or times. If any part or all of the amount on which tax was previously paid and charged against principal is later received by the trustee and if the receipt is otherwise credited to income, then when the amount is received the portion of the tax previously paid and charged against principal attributable to the amount so received shall be deducted from the amount and credited to principal;

(7) all estate, inheritance, and generation-skipping transfer taxes and any penalties on the taxes apportioned to the trust and one-half of the interest on those taxes and penalties;

(8) a net loss in any fiscal or calendar year from the operation of a business or an agricultural or farming operation, to be repaid from income as available in the succeeding year or years;

(9) monies paid for the purchase of options.

(d) If, in the judgment of the trustee, the charging of all or part of the compensation provided for in item (6) of subsection (a) is impractical because of the lack of sufficient income cash or in item (1) of subsection (c) is impractical because of the lack of sufficient principal cash and readily marketable intangible personal property, or inadvisable because of the nature of the assets, such part or all of such compensation shall be paid out of income or principal as the trustee determines. The decision of the trustee to pay a larger portion or all of such compensation out of income or principal shall be conclusive, and neither the income nor principal of the trust shall be entitled to reimbursement at any subsequent time or times. The provisions of this subsection (d) shall not apply to the extent that they would cause a trust otherwise qualifying for a federal or State tax benefit or other benefit not to so qualify for that benefit. This subsection (d) is available to trusts in existence on the effective date of this amendatory Act of the 95th General Assembly or created after that date.

(Source: P.A. 91-923, eff. 7-7-00.)