|
| | 98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014 HB0199 Introduced 1/25/2013, by Rep. Emily McAsey SYNOPSIS AS INTRODUCED: |
| 760 ILCS 5/5.3 | | 760 ILCS 5/16.1 | |
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Amends the Trusts and Trustees Act. Defines terms. Provides that an unascertainable beneficiary may be represented by and bound by another beneficiary having a substantially similar (instead of a substantially identical) interest on a particular question or dispute. Provides that if a trust beneficiary is an unrepresented minor, disabled, or unborn person, a parent of the beneficiary may represent and bind the beneficiary, provided that there is no conflict of interest between the minor or disabled person and either of that person's parents on that particular question or dispute. Further provides that this representative may on a particular question or dispute represent and bind an unborn beneficiary or an unascertainable beneficiary who has an interest that is substantially similar to the interest of the minor or disabled person, but only if there is no conflict of interest between the minor or the disabled person and the unborn or the unascertainable person. Makes other corresponding changes. Provides that conversion of a trust to a total return trust may be made with a trustee and all primary beneficiaries (instead of with a trustee and all beneficiaries and presumptive remaindermen beneficiaries) in accordance with other provisions of the Act. Provides that changes made apply to all trusts in existence on the effective date and to all trusts created after that date.
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| | A BILL FOR |
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1 | | AN ACT concerning civil law.
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2 | | Be it enacted by the People of the State of Illinois,
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3 | | represented in the General Assembly:
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4 | | Section 5. The Trusts and Trustees Act is amended by |
5 | | changing Sections 5.3 and 16.1 as follows:
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6 | | (760 ILCS 5/5.3)
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7 | | Sec. 5.3. Total return trusts.
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8 | | (a) Conversion by trustee. A trustee may convert a trust to |
9 | | a
total return trust as described in this Section if all of the
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10 | | following apply:
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11 | | (1) The trust describes the amount that may or must
be |
12 | | distributed to a beneficiary by referring to the
trust's |
13 | | income, and the trustee determines that
conversion to a |
14 | | total return trust will enable the
trustee to better carry |
15 | | out the purposes of the trust and the conversion is in
the |
16 | | best interests of the beneficiaries;
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17 | | (2) conversion to a total return trust means the |
18 | | trustee will invest and
manage trust assets seeking a total |
19 | | return without regard to whether that
return is from income |
20 | | or appreciation of principal, and will make distributions
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21 | | in accordance with this Section (such a trust is called a |
22 | | "total return trust"
in this Section);
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23 | | (3) 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 Section, to the following
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4 | | beneficiaries, determined as of the date the notice is sent |
5 | | and assuming
nonexercise of all powers of appointment:
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6 | | (A) all of the legally competent beneficiaries who |
7 | | are currently
receiving or eligible to receive income |
8 | | from the trust; and
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9 | | (B) all of the legally competent beneficiaries who |
10 | | would receive or be
eligible to receive a distribution |
11 | | of principal or income if the current
interests of |
12 | | beneficiaries currently receiving or eligible to |
13 | | receive income
ended;
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14 | | (4) there are one or more legally competent income |
15 | | beneficiaries
under subdivision (3)(A) of this subsection |
16 | | (a) and one or more legally
competent remainder |
17 | | beneficiaries under subdivision (3)(B) of this subsection
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18 | | (a), determined as of the date of sending the notice;
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19 | | (5) no beneficiary objects to the conversion to a total |
20 | | return trust in a
writing delivered to the trustee within |
21 | | 60 days after the notice is sent; and
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22 | | (6) the trustee has signed acknowledgments of receipt |
23 | | confirming that
notice was received by each beneficiary |
24 | | required to be sent notice under
subdivision (3) of this |
25 | | subsection (a).
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26 | | (b) Conversion by agreement. Conversion to a total return |
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1 | | trust may be made
by agreement between a trustee and (i) all |
2 | | primary beneficiaries, acting either individually or by their |
3 | | respective representatives in accordance with Section |
4 | | subsection 16.1 (a)(2) of this Act , or (ii) all beneficiaries |
5 | | currently eligible to receive income or principal from the |
6 | | trust and all beneficiaries who are presumptive remaindermen, |
7 | | either individually or by their respective representatives in |
8 | | accordance with subsection 16.1(a)(3) of this Act . The |
9 | | agreement may include any actions a court
could properly order |
10 | | under subsection (g) of this Section; however, any
distribution |
11 | | percentage determined by the agreement may not be less than 3%
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12 | | nor greater than 5%.
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13 | | (c) Conversion or reconversion by court.
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14 | | (1) The trustee may for any reason elect to petition |
15 | | the court to order
conversion to a total return trust, |
16 | | including without limitation the reason
that conversion |
17 | | under subsection (a) is unavailable because:
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18 | | (A) a beneficiary timely objects to the conversion |
19 | | to a total return
trust;
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20 | | (B) there are no legally competent beneficiaries |
21 | | described in
subdivision (3)(A) of subsection (a); or
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22 | | (C) there are no legally competent beneficiaries |
23 | | described in
subdivision (3)(B) of subsection (a).
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24 | | (2) A beneficiary may request the trustee to convert to |
25 | | a total return
trust or adjust the distribution percentage. |
26 | | If the trustee declines or fails
to act within 6 months |
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1 | | after receiving
a written request to do so, the beneficiary |
2 | | may petition the court to order the
conversion or |
3 | | adjustment.
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4 | | (3) The trustee may petition the court prospectively to |
5 | | reconvert from a
total return trust or adjust the |
6 | | distribution percentage if the trustee
determines that the |
7 | | reconversion or adjustment will enable
the trustee to |
8 | | better carry out the purposes of the trust. A beneficiary |
9 | | may
request the trustee to petition the court prospectively |
10 | | to reconvert from a
total return trust or adjust the |
11 | | distribution percentage. If the trustee
declines or fails |
12 | | to act within 6 months
after receiving a written request to |
13 | | do so, the beneficiary may petition the
court to order the |
14 | | reconversion or adjustment.
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15 | | (4) In a judicial proceeding under this subsection (c), |
16 | | the trustee may,
but need not, present the trustee's |
17 | | opinions and reasons (A) for supporting or
opposing |
18 | | conversion to (or reconversion from or adjustment of the |
19 | | distribution
percentage of) a total return trust, |
20 | | including
whether the trustee believes conversion (or |
21 | | reconversion
or adjustment of the distribution
percentage)
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22 | | would enable the
trustee to better carry out the purposes |
23 | | of the trust, and (B) about any other
matters relevant to |
24 | | the proposed conversion (or reconversion
or adjustment of |
25 | | the distribution
percentage).
A trustee's
actions in |
26 | | accordance with this subsection (c) shall not be deemed |
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1 | | improper or
inconsistent with the trustee's duty of |
2 | | impartiality unless the court finds
from all the evidence |
3 | | that the trustee acted in bad faith.
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4 | | (5) The court shall order conversion to (or |
5 | | reconversion prospectively
from
or adjustment of the |
6 | | distribution percentage
of)
a total return trust if the |
7 | | court determines that the conversion (or
reconversion or |
8 | | adjustment of the distribution percentage) will enable the
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9 | | trustee to better carry out the purposes of the
trust and |
10 | | the conversion
(or reconversion or adjustment of the
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11 | | distribution percentage)
is in the best interests of the |
12 | | beneficiaries.
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13 | | (6) Notwithstanding any other provision of this |
14 | | Section, a trustee has no
duty to inform beneficiaries |
15 | | about the availability of this Section and has no
duty to |
16 | | review the trust to determine whether any action should be |
17 | | taken under
this Section unless requested to do so in |
18 | | writing by a beneficiary described in
subdivision (3) of |
19 | | subsection (a).
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20 | | (d) Post conversion. While a trust is a total return trust, |
21 | | all
of the following shall apply to the trust:
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22 | | (1) the trustee shall make income distributions in |
23 | | accordance with the
governing instrument subject to the |
24 | | provisions of this Section;
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25 | | (2) the term "income" in the governing instrument means |
26 | | an annual amount
(the "distribution amount") equal to a |
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1 | | percentage (the "distribution
percentage") of the net fair |
2 | | market value of the trust's assets, whether the
assets are |
3 | | considered income or principal under the Principal and |
4 | | Income Act,
averaged over the lesser of:
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5 | | (i) the 3 preceding years; or
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6 | | (ii) the period during which the trust has been in |
7 | | existence;
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8 | | (3) the distribution percentage for any trust |
9 | | converted to a total return
trust by a trustee in |
10 | | accordance with subsection (a) shall be 4%;
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11 | | (4) the trustee shall pay to a beneficiary (in the case |
12 | | of an
underpayment) and shall recover from a beneficiary |
13 | | (in the case of an
overpayment) an amount equal to the |
14 | | difference between the amount properly
payable and the |
15 | | amount actually paid, plus interest compounded annually at |
16 | | a
rate per annum equal to the distribution percentage in |
17 | | the year or years while
the underpayment or overpayment |
18 | | exists; and
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19 | | (5) a change in the method of determining a reasonable |
20 | | current return by converting to a total return trust in |
21 | | accordance with this Section and substituting the |
22 | | distribution amount for net trust accounting income is a |
23 | | proper change in the definition of trust income |
24 | | notwithstanding any contrary provision of the Principal |
25 | | and Income Act, and the distribution amount shall be deemed |
26 | | a reasonable current return that fairly apportions the |
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1 | | total return of a total return trust.
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2 | | (e) Administration. The trustee, in the trustee's |
3 | | discretion, may determine
any of the following matters in |
4 | | administering a total return trust as the
trustee from time to |
5 | | time determines necessary or helpful for the
proper functioning |
6 | | of the trust:
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7 | | (1) the effective date of a conversion to a total |
8 | | return trust;
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9 | | (2) the manner of prorating the distribution amount for |
10 | | a short year in
which a beneficiary's interest commences or |
11 | | ceases;
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12 | | (3) whether distributions are made in cash or in kind;
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13 | | (4) the manner of adjusting valuations and |
14 | | calculations of the
distribution amount to account for |
15 | | other payments from or contributions to the
trust;
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16 | | (5) whether to value the trust's assets annually or |
17 | | more frequently;
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18 | | (6) what valuation dates and how many valuation dates |
19 | | to use;
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20 | | (7) valuation decisions about any asset for which there |
21 | | is no
readily available market value, including:
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22 | | (A) how frequently to value such an asset;
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23 | | (B) whether and how often to engage a professional |
24 | | appraiser
to value such an asset; and
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25 | | (C) whether to exclude the value of such an asset |
26 | | from the net
fair market value of the trust's assets |
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1 | | under subdivision (d)(2) for
purposes of determining |
2 | | the distribution amount. Any such asset so
excluded is |
3 | | referred to as an "excluded asset" in this subsection
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4 | | (e), and the trustee shall distribute any net income |
5 | | received from
the excluded asset as provided for in the |
6 | | governing instrument,
subject to the following |
7 | | principles:
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8 | | (i) unless the trustee determines there are |
9 | | compelling reasons to the
contrary considering all |
10 | | relevant factors including the best interests of |
11 | | the
beneficiaries, the trustee shall treat each |
12 | | asset for which there is no readily
available |
13 | | market value as an excluded asset;
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14 | | (ii) if tangible personal property or real |
15 | | property is possessed or
occupied by a |
16 | | beneficiary, the trustee shall not limit or |
17 | | restrict any right of
the beneficiary to use the |
18 | | property in accordance with the governing |
19 | | instrument
whether or not the trustee treats the |
20 | | property as an excluded asset;
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21 | | (iii) examples of assets for which there is a |
22 | | readily available market
value include: cash and |
23 | | cash equivalents; stocks, bonds, and other |
24 | | securities
and instruments for which there is an |
25 | | established market on a stock exchange,
in an |
26 | | over-the-counter market, or otherwise; and any |
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1 | | other property that can
reasonably be expected to |
2 | | be sold within one week of the decision to sell
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3 | | without extraordinary efforts by the seller;
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4 | | (iv) examples of assets for which there is no |
5 | | readily available market
value include: stocks, |
6 | | bonds, and other securities and instruments for |
7 | | which
there is no established market on a stock |
8 | | exchange, in an over-the-counter
market, or |
9 | | otherwise; real property; tangible personal |
10 | | property; and artwork
and other collectibles; and
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11 | | (8) any other administrative matters as the trustee |
12 | | determines necessary
or helpful for the proper functioning |
13 | | of the total return trust.
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14 | | (f) Allocations.
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15 | | (1) Expenses, taxes, and other charges that would be |
16 | | deducted from income
if the trust were not a total return |
17 | | trust shall not be deducted from the
distribution amount.
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18 | | (2) Unless otherwise provided by the governing |
19 | | instrument, the trustee
shall fund the distribution amount |
20 | | each year from the following sources for
that year in the |
21 | | order listed: first from net income (as the term would be
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22 | | determined if the trust were not a total return trust), |
23 | | then from other
ordinary income as determined for federal |
24 | | income tax purposes, then from net
realized short-term |
25 | | capital gains as determined for federal income tax
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26 | | purposes, then from net realized long-term capital gains as |
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1 | | determined for
federal income tax purposes, then from trust |
2 | | principal comprised of assets for
which there is a readily |
3 | | available market value, and then from other trust
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4 | | principal.
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5 | | (g) Court orders. The court may order any of the following |
6 | | actions in a
proceeding brought by a trustee or a beneficiary |
7 | | in accordance with subdivision
(c)(1), (c)(2),
or (c)(3):
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8 | | (1) select a distribution percentage other than 4%;
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9 | | (2) average the valuation of the trust's net assets |
10 | | over a period other
than 3 years;
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11 | | (3) reconvert prospectively from
or adjust the |
12 | | distribution percentage
of
a total return trust;
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13 | | (4) direct the distribution of net income (determined |
14 | | as if the trust were
not a total return trust) in excess of |
15 | | the distribution amount as to any or all
trust assets if |
16 | | the distribution is necessary to preserve a tax benefit; or
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17 | | (5) change or direct any administrative procedure as |
18 | | the court determines
necessary or helpful for the proper |
19 | | functioning of the total return trust.
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20 | | Nothing in this subsection (g) limits the equitable powers |
21 | | of the court to
grant
other
relief.
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22 | | (h) Restrictions. Conversion to a total return trust does
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23 | | not affect any provision in the governing instrument:
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24 | | (1) directing or authorizing the trustee to distribute |
25 | | principal;
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26 | | (2) directing or authorizing the trustee to distribute |
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1 | | a fixed annuity or
a fixed fraction of the value of trust |
2 | | assets;
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3 | | (3) authorizing a beneficiary to withdraw a portion or |
4 | | all of the
principal; or
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5 | | (4) in any manner that would diminish an amount |
6 | | permanently set aside for
charitable purposes under the |
7 | | governing instrument unless both income and
principal are |
8 | | so set aside.
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9 | | (i) Tax limitations. If a particular trustee is a |
10 | | beneficiary of the trust
and conversion or failure to convert |
11 | | would enhance or diminish the beneficial
interest of the |
12 | | trustee, or if possession or exercise of the conversion power
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13 | | by a particular trustee would alone cause any individual to be |
14 | | treated as owner
of a part of the trust for income tax purposes |
15 | | or cause a part of the trust to
be included in the gross estate |
16 | | of any individual for estate tax purposes, then
that particular |
17 | | trustee may not participate as a trustee in the exercise of the
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18 | | conversion power; however:
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19 | | (1) the trustee may petition the court under |
20 | | subdivision (c)(1) to order
conversion in accordance with |
21 | | this Section; and
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22 | | (2) if the trustee has one or more co-trustees to whom |
23 | | this subsection (i)
does not apply, the co-trustee or |
24 | | co-trustees may convert the trust to a total
return trust |
25 | | in accordance with this Section.
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26 | | (j) Releases. A trustee may irrevocably release the power |
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1 | | granted by this
Section if the trustee reasonably believes the |
2 | | release is in the best interests
of the trust and its |
3 | | beneficiaries. The release may be personal to the
releasing |
4 | | trustee or may apply generally to some or all subsequent |
5 | | trustees,
and the release may be for any specified period, |
6 | | including a period measured by
the life of an individual.
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7 | | (k) Remedies. A trustee who reasonably and in good faith |
8 | | takes or omits to
take any action under this Section is not |
9 | | liable to any person interested in
the trust.
If a trustee |
10 | | reasonably and
in good faith takes or omits to take any action |
11 | | under this Section and a person
interested in the trust opposes |
12 | | the act or omission, the person's exclusive
remedy is to obtain |
13 | | an order of the court directing the trustee to convert the
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14 | | trust to a total return trust, to reconvert from a total return |
15 | | trust, to
change the distribution percentage, or to order any |
16 | | administrative procedures
the court determines necessary or |
17 | | helpful for the proper functioning of the
trust. An act or |
18 | | omission by a trustee under this Section is presumed taken or
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19 | | omitted reasonably and in good faith unless it is
determined by |
20 | | the court to have been an abuse of discretion. Any claim by any
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21 | | person interested in the trust that an act or omission by a |
22 | | trustee under this
Section was an abuse of discretion is barred |
23 | | if not asserted in a proceeding
commenced by or on behalf of |
24 | | the person within 2 years after the trustee has
sent to the |
25 | | person or the person's personal representative a notice or
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26 | | report in writing sufficiently disclosing facts fundamental to |
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1 | | the claim such
that the person knew or reasonably should have |
2 | | known of the claim.
The preceding sentence shall not apply to a |
3 | | person who was under a legal
disability at the time the notice |
4 | | or report was sent and who then had no
personal representative. |
5 | | For purposes of this subsection (k), a personal
representative |
6 | | refers to a court appointed guardian or conservator of the
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7 | | estate of a person.
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8 | | (l) Application. This Section is available to trusts in |
9 | | existence on the
effective date of this amendatory Act of the |
10 | | 92nd General Assembly or created
after that date. This Section |
11 | | shall be construed as pertaining to the
administration of a |
12 | | trust and shall be available to any trust that
is administered |
13 | | in Illinois under Illinois law or that
is governed by Illinois |
14 | | law with respect to the meaning and effect of
its terms unless:
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15 | | (1) the trust is a trust described in Internal
Revenue |
16 | | Code Section 642(c)(5), 664(d),
2702(a)(3), or 2702(b); or
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17 | | (2) the governing instrument expressly prohibits use |
18 | | of this Section by
specific reference to this Section. A |
19 | | provision in the governing instrument in
the form: "Neither |
20 | | the provisions of Section 5.3 of the Trusts and Trustees |
21 | | Act
nor any corresponding provision of future law may be |
22 | | used in the administration
of this trust" or a similar |
23 | | provision demonstrating that intent is sufficient
to |
24 | | preclude the use of this Section.
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25 | | (m) Application to express trusts.
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26 | | (1) This subsection (m) does not apply to a charitable |
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1 | | remainder unitrust as defined by Section 664(d), Internal |
2 | | Revenue Code of 1986 (26 U.S.C. Section 664), as amended.
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3 | | (2) In this subsection (m):
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4 | | (A) "Unitrust" means a trust the terms of which |
5 | | require distribution of a unitrust amount, without |
6 | | regard to whether the trust has been converted to a |
7 | | total return trust in accordance with this Section or |
8 | | whether the trust is established by express terms of |
9 | | the governing instrument.
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10 | | (B) "Unitrust amount" means an amount equal to a |
11 | | percentage of a trust's assets that may or must be |
12 | | distributed to one or more beneficiaries annually in |
13 | | accordance with the terms of the trust. The unitrust |
14 | | amount may be determined by reference to the net fair |
15 | | market value of the trust's assets as of a particular |
16 | | date or as an average determined on a multiple year |
17 | | basis.
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18 | | (3) A unitrust changes the definition of income by |
19 | | substituting the unitrust amount for net trust accounting |
20 | | income as the method of determining current return and |
21 | | shall be given effect notwithstanding any contrary |
22 | | provision of the Principal and Income Act. By way of |
23 | | example and not limitation, a unitrust amount determined by |
24 | | a percentage of not less than 3% nor greater than 5% is |
25 | | conclusively presumed a reasonable current return that |
26 | | fairly apportions the total return of a unitrust.
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1 | | (4) The allocations provision of subdivision (2) of |
2 | | subsection (f) of Section 5.3 applies to a unitrust except |
3 | | to the extent its governing instrument expressly provides |
4 | | otherwise.
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5 | | (Source: P.A. 96-479, eff. 1-1-10.)
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6 | | (760 ILCS 5/16.1)
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7 | | Sec. 16.1. Virtual representation.
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8 | | (a) Representation by a beneficiary with a person having |
9 | | substantially similar identical interest , by the primary |
10 | | beneficiaries and by others ; contingent remainder |
11 | | beneficiaries . |
12 | | (1) To the extent there is no conflict of interest |
13 | | between the representative and the person represented |
14 | | beneficiary with respect to the particular question or |
15 | | dispute , a beneficiary who is a minor , or a disabled , or |
16 | | unborn beneficiary person , or a beneficiary person whose |
17 | | identity or location is unknown and not reasonably |
18 | | ascertainable (hereinafter referred to as an |
19 | | "unascertainable beneficiary") , may for all purposes be |
20 | | represented by and bound by another beneficiary individual |
21 | | having a substantially similar identical interest with |
22 | | respect to the particular question or dispute; provided, |
23 | | however, that the represented beneficiary such person is |
24 | | not otherwise represented by a court appointed guardian or |
25 | | agent in accordance with subdivision (a)(4) or by a parent |
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1 | | in accordance with subdivision (a)(5) as provided in the |
2 | | next sentence . If a person is represented by a court |
3 | | appointed guardian of the estate or, if none, by a court |
4 | | appointed guardian of the person, the actions of such |
5 | | guardian shall represent and bind that person for purposes |
6 | | of this subsection (a)(1). |
7 | | (2) If all primary beneficiaries of a trust either have |
8 | | legal capacity are adults and not disabled, or have |
9 | | representatives in accordance with this subsection (a) (1) |
10 | | who have legal capacity are adults and not disabled , the |
11 | | actions of such primary beneficiaries, in each case either |
12 | | by the beneficiary or by the beneficiary's representative |
13 | | or their respective representatives , shall represent and |
14 | | bind all other beneficiaries persons who have a successor, |
15 | | contingent, future, or other interest in the trust and who |
16 | | would become primary beneficiaries only by reason of |
17 | | surviving a primary beneficiary . |
18 | | For purposes of this Section, "primary beneficiary" |
19 | | means a beneficiary who is either: (i) currently eligible |
20 | | to receive income or principal from the trust or (ii) |
21 | | assuming nonexercise of all powers of appointment, will be |
22 | | eligible to receive a distribution of principal from the |
23 | | trust if the beneficiary survives to the final date of |
24 | | distribution with respect to the beneficiary's share. |
25 | | (3) For purposes of this Act: |
26 | | (A) "Primary beneficiary" means a beneficiary of a |
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1 | | trust who as of the date of determination is either: |
2 | | (i) currently eligible to receive income or principal |
3 | | from the trust, or (ii) a presumptive remainder |
4 | | beneficiary. If all presumptive remainder |
5 | | beneficiaries either are adults and not disabled, or |
6 | | have representatives in accordance with subsection |
7 | | (a)(1) who are adults and not disabled, the actions of |
8 | | such presumptive remainder beneficiaries, or their |
9 | | respective representatives, shall represent and bind |
10 | | all other beneficiaries who have a successor, |
11 | | contingent, or other future interest in the trust. For |
12 | | purposes of this Section, "presumptive remainder |
13 | | beneficiaries" means, |
14 | | (B) "Presumptive remainder beneficiary" means a |
15 | | beneficiary of a trust, as of the date of determination |
16 | | and assuming nonexercise of all powers of appointment, |
17 | | all beneficiaries who either : (i) (A) would be eligible |
18 | | to receive a distribution of income or principal if the |
19 | | trust terminated on that date, or (ii) (B) would be |
20 | | eligible to receive a distribution of income or |
21 | | principal if the interests of all beneficiaries |
22 | | currently eligible to receive income or principal from |
23 | | the trust ended on that date without causing the trust |
24 | | to terminate. |
25 | | (C) "Disabled person" as of any date means either a |
26 | | disabled person within the meaning of Section 11a-2 of |
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1 | | the Probate Act of 1975 or a person who, within the 365 |
2 | | days immediately preceding that date, was examined by a |
3 | | licensed physician who determined that the person |
4 | | lacked the capacity to make prudent financial |
5 | | decisions, and the physician made a written record of |
6 | | the physician's determination and signed the written |
7 | | record within 90 days after the examination. |
8 | | (D) A person has legal capacity unless the person |
9 | | is a minor or a disabled person. |
10 | | (4) If a trust beneficiary is represented by a court |
11 | | appointed guardian of the estate or, if none, guardian of |
12 | | the person, the guardian shall represent and bind the |
13 | | beneficiary. If a trust beneficiary is a disabled person, |
14 | | an agent under a power of attorney for property who has |
15 | | authority to act with respect to the particular question or |
16 | | dispute and who does not have a conflict of interest with |
17 | | respect to the particular question or dispute may represent |
18 | | and bind the principal. An agent is deemed to have such |
19 | | authority if the power of attorney grants the agent the |
20 | | power to settle claims and to exercise powers with respect |
21 | | to trusts and estates, even if the powers do not include |
22 | | powers to make a will, to revoke or amend a trust, or to |
23 | | require the trustee to pay income or principal. Absent a |
24 | | court order pursuant to the Illinois Power of Attorney Act |
25 | | directing a guardian to exercise powers of the principal |
26 | | under an agency that survives disability, an agent under a |
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1 | | power of attorney for property who in accordance with this |
2 | | subdivision has authority to represent and bind a disabled |
3 | | principal takes precedence over a court appointed guardian |
4 | | unless the court specifies otherwise. This subdivision |
5 | | applies to all agencies, whenever and wherever executed. |
6 | | The consent of a person who may represent and bind another |
7 | | person in accordance with this Section is binding on the |
8 | | person represented, and notice to a person who may |
9 | | represent and bind another person in accordance with this |
10 | | Section has the same effect as if notice were given |
11 | | directly to the other person. |
12 | | (5) If a trust beneficiary is a minor or a disabled or |
13 | | unborn person and is not represented by a guardian or agent |
14 | | in accordance with subdivision (a)(4), then a parent of the |
15 | | beneficiary may represent and bind the beneficiary, |
16 | | provided that there is no conflict of interest between the |
17 | | represented person and either of the person's parents with |
18 | | respect to the particular question or dispute. If a |
19 | | disagreement arises between parents who otherwise qualify |
20 | | to represent a child in accordance with this subsection (a) |
21 | | and who are seeking to represent the same child, the parent |
22 | | who is a lineal descendant of the settlor of the trust that |
23 | | is the subject of the representation is entitled to |
24 | | represent the child; or if none, the parent who is a |
25 | | beneficiary of the trust is entitled to represent the |
26 | | child. |
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1 | | (6) A guardian, agent or parent who is the |
2 | | representative for a beneficiary under subdivision (a)(4) |
3 | | or (a)(5) may, for all purposes, represent and bind any |
4 | | other beneficiary who is a minor or a disabled, unborn, or |
5 | | unascertainable beneficiary who has an interest, with |
6 | | respect to the particular question or dispute, that is |
7 | | substantially similar to the interest of the beneficiary |
8 | | represented by the representative, but only to the extent |
9 | | that there is no conflict of interest between the |
10 | | beneficiary represented by the representative and the |
11 | | other beneficiary with respect to the particular question |
12 | | or dispute; provided, however, that the other beneficiary |
13 | | is not otherwise represented by a guardian or agent in |
14 | | accordance with subdivision (a)(4) or by a parent in |
15 | | accordance with subdivision (a)(5). |
16 | | (7) The action or consent of a representative who may |
17 | | represent and bind a beneficiary in accordance with this |
18 | | Section is binding on the beneficiary represented, and |
19 | | notice or service of process to the representative has the |
20 | | same effect as if the notice or service of process were |
21 | | given directly to the beneficiary represented. |
22 | | (8) Nothing in this Section limits the discretionary |
23 | | power of a court in a judicial proceeding to appoint a |
24 | | guardian ad litem for any minor, disabled, unborn, or |
25 | | unascertainable beneficiary with respect to a particular |
26 | | question or dispute, but appointment of a guardian ad litem |
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1 | | need not be considered and is not necessary if such |
2 | | beneficiary is otherwise represented in accordance with |
3 | | this Section. |
4 | | (b) Total return trusts. This Section shall apply to enable |
5 | | conversion to a total return trust by agreement in accordance |
6 | | with subsection 5.3(b) of the total return trust provisions of |
7 | | Section 5.3 of this Act, by whether such agreement is made |
8 | | between the trustee and (A) all primary beneficiaries of the |
9 | | trust, in each case either by the beneficiary or by the |
10 | | beneficiary's representative in accordance with this Section , |
11 | | either individually or by their respective representatives in |
12 | | accordance with subsection (a)(1), or (B) all beneficiaries |
13 | | currently eligible to receive income or principal from the |
14 | | trust and all beneficiaries who are presumptive remaindermen of |
15 | | the trust, in each case either individually or by their |
16 | | respective representatives in accordance with subsection |
17 | | (a)(1) . |
18 | | (c) Representation of charity. A charity that is |
19 | | specifically named as beneficiary of a trust or that otherwise |
20 | | has an express beneficial interest in a trust shall act for |
21 | | itself. If a trust provides a beneficial interest or expectancy |
22 | | for one or more charities or charitable purposes that are not |
23 | | specifically named or otherwise represented (the "charitable |
24 | | interest"), the Illinois Attorney General may, in accordance |
25 | | with this Section, represent, bind, and act on behalf of the |
26 | | charitable interest with respect to any particular question or |
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1 | | dispute, including without limitation representing the |
2 | | charitable interest in a nonjudicial settlement agreement or in |
3 | | an agreement to convert a trust to a total return trust in |
4 | | accordance with subsection 5.3(b) of the total return trust |
5 | | provisions of Section 5.3 of this Act. This subsection (c) |
6 | | shall be construed as being declarative of existing law and not |
7 | | as a new enactment. Notwithstanding any other provision, |
8 | | nothing in this Section shall be construed to limit or affect |
9 | | the Illinois Attorney General's authority to file an action or |
10 | | take other steps as he or she deems advisable at any time to |
11 | | enforce or protect the general public interest as to a trust |
12 | | that provides a beneficial interest or expectancy for one or |
13 | | more charities or charitable purposes whether or not a specific |
14 | | charity is named in the trust. |
15 | | (d) Nonjudicial settlement agreements. |
16 | | (1) For purposes of this Section, "interested persons" |
17 | | means the trustee and all beneficiaries, or their |
18 | | respective representatives determined after giving effect |
19 | | to the preceding provisions of this Section, other persons |
20 | | and parties in interest whose consent or joinder would be |
21 | | required in order to achieve a binding settlement were the |
22 | | settlement to be approved by the court. "Interested |
23 | | persons" also includes a trust advisor, investment |
24 | | advisor, distribution advisor, trust protector or other |
25 | | holder, or committee of holders, of fiduciary or |
26 | | nonfiduciary powers, if the person then holds powers |
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1 | | material to a particular question or dispute to be resolved |
2 | | or affected by a nonjudicial settlement agreement in |
3 | | accordance with this Section or by the court. |
4 | | (2) Interested Except as otherwise provided in |
5 | | subsection (d)(3), interested persons, or their respective |
6 | | representatives determined after giving effect to the |
7 | | preceding provisions of this Section, may enter into a |
8 | | binding nonjudicial settlement agreement with respect to |
9 | | any matter involving a trust as provided in this Section . |
10 | | (3) (Blank). A nonjudicial settlement agreement is |
11 | | valid only to the extent its terms and conditions could be |
12 | | properly approved under applicable law by a court of |
13 | | competent jurisdiction. |
14 | | (4) The following matters Matters that may be resolved |
15 | | by a nonjudicial settlement agreement include but are not |
16 | | limited to : |
17 | | (A) Validity, interpretation , or construction of |
18 | | the terms of the trust . ; |
19 | | (B) Approval approval of a trustee's report or |
20 | | accounting . ; |
21 | | (C) Exercise exercise or nonexercise of any power |
22 | | by a trustee . ; |
23 | | (D) The the grant to a trustee of any necessary or |
24 | | desirable administrative power if the grant does not |
25 | | conflict with a clear material purpose of the trust. ; |
26 | | (E) Questions questions relating to property or an |
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1 | | interest in property held by the trust if the |
2 | | resolution does not conflict with a clear material |
3 | | purpose of the trust. ; |
4 | | (F) Removal, appointment, or removal and |
5 | | appointment of a trustee, trust advisor, investment |
6 | | advisor, distribution advisor, trust protector or |
7 | | other holder, or committee of holders, of fiduciary or |
8 | | nonfiduciary powers, including without limitation |
9 | | designation of a plan of succession or procedure to |
10 | | determine successors to any such office. resignation |
11 | | or appointment of a trustee; |
12 | | (G) Determination determination of a trustee's |
13 | | compensation . ; |
14 | | (H) Transfer transfer of a trust's principal place |
15 | | of administration , including without limitation to |
16 | | change the law governing administration of the trust. ; |
17 | | (I) Liability liability or indemnification of a |
18 | | trustee for an action relating to the trust . ; |
19 | | (J) Resolution of bona fide resolution of disputes |
20 | | or issues related to administration, investment, |
21 | | distribution or other matters . ; |
22 | | (K) Modification modification of terms of the |
23 | | trust pertaining to administration of the trust . ; and |
24 | | (L) Termination termination of the trust, provided |
25 | | that court approval of such termination must be |
26 | | obtained in accordance with subdivision subsection |
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1 | | (d)(5) of this Section , and the court must conclude |
2 | | continuance of the trust is not necessary to achieve |
3 | | any clear material purpose of the trust . ; upon The |
4 | | court may consider spendthrift provisions as a factor |
5 | | in making a decision under this subdivision, but a |
6 | | spendthrift provision is not necessarily a clear |
7 | | material purpose of a trust, and the court is not |
8 | | precluded from modifying or terminating a trust |
9 | | because the trust instrument contains a spendthrift |
10 | | provision. Upon such termination the court may order |
11 | | the trust property distributed as agreed by the parties |
12 | | to the agreement or otherwise as the court determines |
13 | | equitable consistent with the purposes of the trust. |
14 | | (M) Any other matter involving a trust to the |
15 | | extent the terms and conditions of the nonjudicial |
16 | | settlement agreement could be properly approved under |
17 | | applicable law by a court of competent jurisdiction. |
18 | | (5) Any beneficiary or other interested person may |
19 | | request the court to approve any part or all of a |
20 | | nonjudicial settlement agreement, including whether any |
21 | | representation is adequate and without conflict of |
22 | | interest, provided that the petition for such approval must |
23 | | be filed before or within 60 days after the effective date |
24 | | of the agreement. |
25 | | (6) An agreement entered into in accordance with this |
26 | | Section shall be final and binding on the trustee , on and |
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1 | | all beneficiaries of the trust, both current and future, |
2 | | and on all other interested persons as if ordered by a |
3 | | court with competent jurisdiction over the trust, the trust |
4 | | property, and all parties in interest. |
5 | | (7) In the trustee's sole discretion, the trustee may, |
6 | | but is not required to, obtain and rely upon an opinion of |
7 | | counsel on any matter relevant to this Section, including |
8 | | without limitation: (i) where required by this Section, |
9 | | that the any agreement proposed to be made in accordance |
10 | | with this Section does not conflict with a clear material |
11 | | purpose of the trust or could be properly approved by the |
12 | | court under applicable law ; (ii) in the case of a trust |
13 | | termination, that continuance of the trust is not necessary |
14 | | to achieve any clear material purpose of the trust; (iii) , |
15 | | or that there is no conflict of interest between a |
16 | | representative and the person represented with respect to |
17 | | the particular question or dispute; or (iv) that the |
18 | | representative and the person represented have |
19 | | substantially similar interests with respect to the or |
20 | | among those being represented with respect to a particular |
21 | | question or dispute. |
22 | | (e) Application. On and after its effective date, this |
23 | | Section applies to all existing and future trusts, judicial |
24 | | proceedings, or agreements entered into in accordance with this |
25 | | Section on or after the effective date.
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26 | | (f) This Section shall be construed as pertaining to the |
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1 | | administration of a trust and shall be available to any trust |
2 | | that is administered in this State or that is governed by |
3 | | Illinois law with respect to the meaning and effect of its |
4 | | terms, except to the extent the governing instrument expressly |
5 | | prohibits the use of this Section by specific reference to this |
6 | | Section. A provision in the governing instrument in the form: |
7 | | "Neither the provisions of Section 16.1 of the Illinois Trusts |
8 | | and Trustees Act nor any corresponding provision of future law |
9 | | may be used in the administration of this trust", or a similar |
10 | | provision demonstrating that intent, is sufficient to preclude |
11 | | the use of this Section. |
12 | | (g) The changes made by this amendatory Act of the 98th |
13 | | General Assembly apply to all trusts in existence on the |
14 | | effective date of this amendatory Act of the 98th General |
15 | | Assembly or created after that date, and are applicable to |
16 | | judicial proceedings and nonjudicial matters involving such |
17 | | trusts. For purposes of this Section: |
18 | | (i) judicial proceedings include any proceeding before |
19 | | a court or administrative tribunal of this State and any |
20 | | arbitration or mediation proceedings; and |
21 | | (ii) nonjudicial matters include, but are not limited |
22 | | to, nonjudicial settlement agreements entered into in |
23 | | accordance with this Section and the grant of any consent, |
24 | | release, ratification, or indemnification. |
25 | | (Source: P.A. 96-479, eff. 1-1-10.)
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