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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 | | Article 1. General Provisions and Definitions. |
5 | | Section 101. Short title. This Act may be cited as the |
6 | | Illinois Trust Code. |
7 | | Section 102. Scope. Except as otherwise provided, this Code |
8 | | applies to express trusts, charitable or noncharitable, and |
9 | | trusts created pursuant to a statute, judgment, or decree that |
10 | | requires the trust to be administered in the manner of an |
11 | | express trust. This Code does not apply to any:
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12 | | (1) land trust;
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13 | | (2) voting trust;
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14 | | (3) security instrument such as a trust deed or |
15 | | mortgage;
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16 | | (4) liquidation trust;
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17 | | (5) escrow;
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18 | | (6) instrument under which a nominee, custodian for |
19 | | property, or paying or receiving agent is appointed;
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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
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2 | | (8) Grain Indemnity Trust Account or any other trust |
3 | | created under the
Grain Code.
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4 | | Section 103. Definitions. In this Code: |
5 | | (1) "Action", with respect to an act of a trustee, includes |
6 | | a failure to act.
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7 | | (2) "Ascertainable standard" means a standard relating to |
8 | | an individual's health, education, support, or maintenance |
9 | | within the meaning of Section 2041(b)(1)(A) or 2514(c)(1) of |
10 | | the Internal Revenue Code and any applicable regulations.
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11 | | (3) "Beneficiary" means a person that:
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12 | | (A) has a present or future beneficial interest in a |
13 | | trust, vested or contingent, assuming nonexercise of |
14 | | powers of appointment;
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15 | | (B) in a capacity other than that of trustee, holds a |
16 | | power of appointment over trust property; or
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17 | | (C) is an identified charitable organization that will |
18 | | or may receive distributions under the terms of the trust.
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19 | | (4) "Charitable interest" means an interest in a trust |
20 | | that:
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21 | | (A) is held by an identified charitable organization |
22 | | and makes the organization a qualified beneficiary;
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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
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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:
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7 | | (A) a person, other than an individual, organized and |
8 | | operated exclusively for charitable purposes; or
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9 | | (B) a government or governmental subdivision, agency, |
10 | | or instrumentality, to the extent it holds funds |
11 | | exclusively for a charitable purpose.
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12 | | (6) "Charitable purpose" means the relief of poverty, the |
13 | | advancement of education or religion, the promotion of health, |
14 | | municipal or other governmental purpose, or another purpose the |
15 | | achievement of which is beneficial to the community.
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16 | | (7) "Charitable trust" means a trust, or portion of a |
17 | | trust, created for a charitable purpose.
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18 | | (8) "Community property" means all personal property, |
19 | | wherever situated, that was acquired as or became, and |
20 | | remained, community property under the laws of another |
21 | | jurisdiction, and all real property situated in another |
22 | | jurisdiction that is community property under the laws of that |
23 | | jurisdiction.
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24 | | (9) "Current beneficiary" means a beneficiary that on the |
25 | | date the beneficiary's qualification is determined is a |
26 | | distributee or permissible distributee of trust income or |
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1 | | principal. The term "current beneficiary" includes the holder |
2 | | of a presently exercisable general power of appointment but |
3 | | does not include a person who is a beneficiary only because the |
4 | | person holds any other power of appointment.
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5 | | (10) "Directing party" means any investment trust advisor, |
6 | | distribution trust advisor, or trust protector.
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7 | | (11) "Donor", with reference to a power of appointment, |
8 | | means a person that creates a power of appointment.
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9 | | (12) "Environmental law" means a federal, state, or local |
10 | | law, rule, regulation, or ordinance relating to protection of |
11 | | the environment.
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12 | | (13) "General power of appointment" means a power of |
13 | | appointment exercisable in favor of a powerholder, the |
14 | | powerholder's estate, a creditor of the powerholder, or a |
15 | | creditor of the powerholder's estate.
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16 | | (14) "Guardian of the estate" means a person appointed by a |
17 | | court to administer the estate of a minor or adult individual.
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18 | | (15) "Guardian of the person" means a person appointed by a |
19 | | court to make decisions regarding the support, care, education, |
20 | | health, and welfare of a minor or adult individual.
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21 | | (16) "Incapacitated" or "incapacity" means the inability |
22 | | of an individual to manage property or business affairs because |
23 | | the individual is a minor, adjudicated incompetent, has an |
24 | | impairment in the ability to receive and evaluate information |
25 | | or make or communicate decisions even with the use of |
26 | | technological assistance; or
is at a location that is unknown |
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1 | | and not reasonably ascertainable. Without limiting the ways in |
2 | | which incapacity may be established, an individual is |
3 | | incapacitated if:
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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;
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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 |
21 | | Code of 1986 as amended from time to time and includes |
22 | | corresponding provisions of any subsequent federal tax law.
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23 | | (18) "Interested persons" means: (A) the trustee; and (B) |
24 | | all beneficiaries, or their respective representatives |
25 | | determined after giving effect to the provisions of Article 3, |
26 | | whose consent or joinder would be required in order to achieve |
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1 | | a binding settlement were the settlement to be approved by the |
2 | | court. "Interested persons" includes a trust advisor, |
3 | | investment advisor, distribution advisor, trust protector, or |
4 | | other holder, or committee of holders, of fiduciary or |
5 | | nonfiduciary powers, if the person then holds powers material |
6 | | to a particular question or dispute to be resolved or affected |
7 | | by a nonjudicial settlement in accordance with Section 111 or |
8 | | by a judicial proceeding.
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9 | | (19) "Interests of the beneficiaries" means the beneficial |
10 | | interests provided in the trust instrument.
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11 | | (20) "Jurisdiction", with respect to a geographic area, |
12 | | includes a State or country.
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13 | | (21) "Legal capacity" means that the person is not |
14 | | incapacitated.
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15 | | (22) "Nongeneral power of appointment" means a power of |
16 | | appointment that is not a general power of appointment.
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17 | | (23) "Person" means an individual, estate, business or |
18 | | nonprofit entity, public corporation, government or |
19 | | governmental subdivision, agency, or instrumentality, or other |
20 | | legal entity.
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21 | | (24) "Power of appointment" means a power that enables a |
22 | | powerholder acting in a nonfiduciary capacity to designate a |
23 | | recipient of an ownership interest in or another power of |
24 | | appointment over the appointive property. The term "power of |
25 | | appointment" does not include a power of attorney.
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26 | | (25) "Power of withdrawal" means a presently exercisable |
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1 | | general 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.
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6 | | (26) "Powerholder" means a person in which a donor creates |
7 | | a power of appointment.
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8 | | (27) "Presently exercisable power of appointment" means a |
9 | | power of appointment exercisable by the powerholder at the |
10 | | relevant time. The term "presently exercisable power of |
11 | | appointment": |
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:
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16 | | (i) the occurrence of the specified event;
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17 | | (ii) the satisfaction of the ascertainable |
18 | | standard; or
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19 | | (iii) the passage of the specified time; and
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20 | | (B) does not include a power exercisable only at the |
21 | | powerholder's death. |
22 | | (28) "Presumptive remainder beneficiary" means a |
23 | | beneficiary of a trust, as of the date of determination and |
24 | | assuming nonexercise of all powers of appointment, who either: |
25 | | (A) would be eligible to receive a distribution of income or |
26 | | principal if the trust terminated on that date; or (B) would be |
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1 | | eligible to receive a distribution of income or principal if |
2 | | the interests of all beneficiaries currently eligible to |
3 | | receive income or principal from the trust ended on that date |
4 | | without causing the trust to terminate.
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5 | | (29) "Property" means anything that may be the subject of |
6 | | ownership, whether real or personal, legal or equitable, or any |
7 | | interest therein.
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8 | | (30) "Qualified beneficiary" means a beneficiary who, on |
9 | | the date the beneficiary's qualification is determined and |
10 | | assuming nonexercise of powers of appointment:
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11 | | (A) is a distributee or permissible distributee of |
12 | | trust income or principal;
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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
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17 | | (C) would be a distributee or permissible distributee |
18 | | of trust income or principal if the trust terminated on |
19 | | that date.
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20 | | (31) "Revocable", as applied to a trust, means revocable by |
21 | | the settlor without the consent of the trustee or a person |
22 | | holding an adverse interest. A revocable trust is deemed |
23 | | revocable during the settlor's lifetime.
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24 | | (32) "Settlor", except as otherwise provided in Sections |
25 | | 113 and 1225, means a person, including a testator, who |
26 | | creates, or contributes property to, a trust. If more than one |
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1 | | person creates or contributes property to a trust, each person |
2 | | is a settlor of the portion of the trust property attributable |
3 | | to that person's contribution except to the extent another |
4 | | person has the power to revoke or withdraw that portion.
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5 | | (33) "Sign" means, with present intent to authenticate or |
6 | | adopt a record: |
7 | | (A) to execute or adopt a tangible symbol; or
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8 | | (B) to attach to or logically associate with the record |
9 | | an electronic symbol, sound, or process.
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10 | | (34) "Spendthrift provision" means a term of a trust that |
11 | | restrains both voluntary and involuntary transfer of a |
12 | | beneficiary's interest. |
13 | | (35) "State" means a State of the United States, the |
14 | | District of Columbia, Puerto Rico, the United States Virgin |
15 | | Islands, or any territory or insular possession subject to the |
16 | | jurisdiction of the United States. The term "state" includes an |
17 | | Indian tribe or band recognized by federal law or formally |
18 | | acknowledged by a state.
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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, |
8 | | agreement, declaration, or other written instrument.
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9 | | (38) "Trust accounting" means one or more written |
10 | | communications from the trustee with respect to the accounting |
11 | | year that describe: (A) the trust property, liabilities, |
12 | | receipts, and disbursements, including the amount of the |
13 | | trustee's compensation; (B) the value of the trust assets on |
14 | | hand at the close of the accounting period, to the extent |
15 | | feasible; and (C) all other material facts related to the |
16 | | trustee's administration of the trust. |
17 | | (39) "Trust instrument" means the written instrument |
18 | | stating the terms of a trust, including any amendment, any |
19 | | court order or nonjudicial settlement agreement establishing, |
20 | | construing, or modifying the terms of the trust in accordance |
21 | | with Section 111, Sections 410 through 416, or other applicable |
22 | | law, and any additional trust instrument under Article 12.
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23 | | (40) "Trustee" includes an original, additional, and |
24 | | successor trustee, and a co-trustee.
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25 | | (41) "Unascertainable beneficiary" means a beneficiary |
26 | | whose 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 |
3 | | knowledge of a fact if the person:
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4 | | (1) has actual knowledge of it;
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5 | | (2) has received a notice or notification of it; or
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6 | | (3) from all the facts and circumstances known to the |
7 | | person at the time in question, has reason to know it.
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8 | | (b) An organization that conducts activities through |
9 | | employees has notice or knowledge of a fact involving a trust |
10 | | only from the time the information was received by an employee |
11 | | having responsibility to act for the trust, or would have been |
12 | | brought to the employee's attention if the organization had |
13 | | exercised reasonable diligence. An organization exercises |
14 | | reasonable diligence if it maintains reasonable routines for |
15 | | communicating significant information to the employee having |
16 | | responsibility to act for the trust and there is reasonable |
17 | | compliance with the routines. Reasonable diligence does not |
18 | | require an employee of the organization to communicate |
19 | | information unless the communication is part of the |
20 | | individual's regular duties or the individual knows a matter |
21 | | involving the trust would be materially affected by the |
22 | | information.
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23 | | Section 105. Default and mandatory rules. |
24 | | (a) The trust instrument may specify the rights, powers, |
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1 | | duties, limitations, and immunities applicable to the trustee, |
2 | | beneficiary, and others and those terms, if not otherwise |
3 | | contrary to law, shall control, except to the extent |
4 | | specifically provided otherwise in this Section. The |
5 | | provisions of this Code apply to the trust to the extent that |
6 | | they are not inconsistent with specific terms of the trust.
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7 | | (b) Specific terms of the trust prevail over any provision |
8 | | of this Code except:
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9 | | (1) the requirements for creating a trust;
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10 | | (2) the duty of a trustee to act in good faith;
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11 | | (3) the requirement that a trust have a purpose that is |
12 | | lawful and not contrary to public policy;
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13 | | (4) the rules governing designated representatives as |
14 | | provided in Section 307;
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15 | | (5) the 21-year limitation contained in subsection (a) |
16 | | of Section 409;
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17 | | (6) the power of the court to modify or terminate a |
18 | | trust under Sections 411 through 417;
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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;
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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;
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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;
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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;
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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;
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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;
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16 | | (13) the effect of an exculpatory term under Section |
17 | | 1008;
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18 | | (14) the rights under Sections 1010 through 1013 of a |
19 | | person other than a trustee or beneficiary; and
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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.
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23 | | Section 106. Common law of trusts; principles of equity. |
24 | | The common law of trusts and principles of equity supplement |
25 | | this Code, except to the extent modified by this Code or |
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1 | | another statute of this State. |
2 | | Section 107. Governing law. |
3 | | (a) The meaning and effect of a trust instrument are |
4 | | determined by:
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5 | | (1) the law of the jurisdiction designated in the trust |
6 | | instrument; or
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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.
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10 | | (b) Except as otherwise expressly provided by the trust |
11 | | instrument or by court order, the laws of this State govern the |
12 | | administration of a trust while the trust is administered in |
13 | | this State.
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14 | | Section 108. Principal place of administration. |
15 | | (a) Without precluding other means for establishing a |
16 | | sufficient connection with the designated jurisdiction, the |
17 | | terms of a trust designating the principal place of |
18 | | administration are valid and controlling if:
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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
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22 | | (2) all or part of the administration occurs in the |
23 | | designated jurisdiction.
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24 | | (b) A trustee is under a continuing duty to administer the |
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1 | | trust at a place appropriate to its purposes, its |
2 | | administration, and the interests of the beneficiaries. |
3 | | (c) Without precluding the right of the court to order, |
4 | | approve, or disapprove a transfer, the trustee, in furtherance |
5 | | of the duty prescribed by subsection (b), may transfer the |
6 | | trust's principal place of administration to another State or |
7 | | to a jurisdiction outside of the United States. |
8 | | (d) The trustee shall notify the qualified beneficiaries of |
9 | | a proposed transfer of a trust's principal place of |
10 | | administration not less than 60 days before initiating the |
11 | | transfer. 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 |
24 | | transfer a trust's principal place of administration |
25 | | terminates if a qualified beneficiary notifies the trustee of |
26 | | an objection to the proposed transfer on or before the date |
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1 | | specified in the notice. |
2 | | (f) Notwithstanding any other provision of this Code, the |
3 | | trustee has no duty to inform the beneficiaries, or any other |
4 | | interested party, about the availability of this Section and |
5 | | further has no duty to review the trust instrument to determine |
6 | | whether any action should be taken under this Section unless |
7 | | requested to do so by a qualified beneficiary. |
8 | | (g) In connection with a transfer of the trust's principal |
9 | | place of administration, the trustee may transfer some or all |
10 | | of the trust property to a successor trustee designated in the |
11 | | terms of the trust or appointed pursuant to Section 704.
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12 | | Section 109. Methods and waiver of notice. |
13 | | (a) Notice to a person under this Code or the sending of a |
14 | | document to a person under this Code must be accomplished in a |
15 | | manner reasonably suitable under the circumstances and likely |
16 | | to result in receipt of the notice or document. Permissible |
17 | | methods of notice or for sending a document include first-class |
18 | | mail, personal delivery, delivery to the person's last known |
19 | | place of residence or place of business, or a properly directed |
20 | | electronic message. |
21 | | (b) Notice otherwise required under this Code or a document |
22 | | otherwise required to be sent under this Code need not be |
23 | | provided to a person whose identity or location is unknown to |
24 | | and not reasonably ascertainable by the trustee.
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25 | | (c) Notice under this Code or the sending of a document |
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1 | | under this Code may be waived by the person to be notified or |
2 | | sent the document.
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3 | | (d) Notice of a judicial proceeding must be given as |
4 | | provided in the applicable rules of civil procedure.
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5 | | (e) Subject to subsection (d), receipt by a beneficiary or |
6 | | other person of a trustee's notice, account, or other report is |
7 | | presumed if the trustee has reasonable procedures in place |
8 | | requiring the mailing or delivery of the notice, account, or |
9 | | report to the beneficiary or other person. This presumption |
10 | | applies to the mailing or delivery of a notice, account, or |
11 | | other report, including any communication required in writing, |
12 | | by electronic means or the provision of access to the |
13 | | information by electronic means so long as the beneficiary or |
14 | | other person has agreed to receive the information by |
15 | | electronic delivery or access.
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16 | | Section 110. Others treated as qualified beneficiaries. |
17 | | (a) A person appointed to enforce a trust created for the |
18 | | care of an animal or another noncharitable purpose as provided |
19 | | in Section 408 or 409 has the rights of a qualified beneficiary |
20 | | under this Code.
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21 | | (b) The Attorney General has the rights of a qualified |
22 | | beneficiary with respect to a charitable trust having its |
23 | | principal place of administration in this State.
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24 | | Section 111. Nonjudicial settlement agreements. |
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1 | | (a) Interested persons, or their respective |
2 | | representatives determined after giving effect to Article 3, |
3 | | may enter into a binding nonjudicial settlement agreement with |
4 | | respect to any matter involving a trust as provided in this |
5 | | Section.
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6 | | (b) The following matters may be resolved by a nonjudicial |
7 | | settlement agreement:
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8 | | (1) Validity, interpretation, or construction of the |
9 | | terms of the trust.
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10 | | (2) Approval of a trustee's report or accounting.
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11 | | (3) Exercise or nonexercise of any power by a trustee.
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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.
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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.
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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.
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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.
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4 | | (9) Liability or indemnification of a trustee for an |
5 | | action relating to the trust.
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6 | | (10) Resolution of bona fide disputes related to trust |
7 | | administration, investment, distribution, or other |
8 | | matters.
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9 | | (11) Modification of the terms of the trust pertaining |
10 | | to the administration of the trust.
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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.
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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.
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4 | | (c) If a trust contains a charitable interest, the parties |
5 | | to any proposed nonjudicial settlement agreement affecting the |
6 | | trust shall deliver to the Attorney General written notice of |
7 | | the proposed agreement at least 60 days before its effective |
8 | | date. The Bureau is not required to take action, but if it |
9 | | objects in a writing delivered to one or more of the parties |
10 | | before the proposed effective date, the agreement shall not |
11 | | take effect unless the parties obtain court approval.
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12 | | (d) Any beneficiary or other interested person may request |
13 | | the court to approve any part or all of a nonjudicial |
14 | | settlement agreement, including, without limitation, whether |
15 | | any representation is adequate and without material conflict of |
16 | | interest, if the petition for approval is filed within 60 days |
17 | | after the effective date of the agreement.
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18 | | (e) An agreement entered into in accordance with this |
19 | | Section, or a judicial proceeding pursued in accordance with |
20 | | this Section, is final and binding on the trustee, on all |
21 | | beneficiaries of the trust, both current and future, and on all |
22 | | other interested persons as if ordered by a court with |
23 | | competent jurisdiction over the trust, the trust property, and |
24 | | all parties in interest.
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25 | | (f) In the trustee's sole discretion, the trustee may, but |
26 | | is not required to, obtain and rely upon an opinion of counsel |
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1 | | on any matter relevant to this Section, including, without |
2 | | limitation:
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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;
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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;
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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
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12 | | (4) that the representative and the person represented |
13 | | have substantially similar interests with respect to the |
14 | | particular question or dispute.
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15 | | (g) This Section shall be construed as pertaining to the |
16 | | administration of a trust and shall be available to any trust |
17 | | that is administered in this State or that is governed by |
18 | | Illinois law with respect to the meaning and effect of its |
19 | | terms, except to the extent the trust instrument expressly |
20 | | prohibits the use of this Section by specific reference to this |
21 | | Section or a prior corresponding law. A provision in the trust |
22 | | instrument in the form: "Neither the provisions of Section 111 |
23 | | of the Illinois Trust Code nor any corresponding provision of |
24 | | future law may be used in the administration of this trust", or |
25 | | a similar provision demonstrating that intent, is sufficient to |
26 | | preclude the use of this Section.
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1 | | Section 112. Rules of construction. The rules of |
2 | | construction that apply in this State to the interpretation of |
3 | | wills and the disposition of property by will also apply as |
4 | | appropriate to the interpretation of the trust instrument and |
5 | | the disposition of the trust property. This Code shall be |
6 | | liberally construed and the rule that statutes in derogation of |
7 | | the 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 |
10 | | life of an individual insured under a life insurance policy |
11 | | that is owned by the trustee of the trust acting in a fiduciary |
12 | | capacity or that designates the trust itself as the owner if, |
13 | | on the date the policy is issued:
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14 | | (1) the insured is:
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15 | | (A) a settlor or beneficiary of the trust; or
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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
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19 | | (2) the trustee determines the life insurance |
20 | | proceeds:
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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
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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 |
2 | | interest in the life of an individual insured as described in |
3 | | this Section, then the insurable interest includes the joint |
4 | | lives of such an individual and his or her spouse.
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5 | | (c) Nothing in this Section limits or affects any provision |
6 | | of the Viatical Settlements Act of 2009.
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7 | | Section 114. Gift to a deceased beneficiary under an inter |
8 | | vivos trust. |
9 | | (a) If a gift of a present or future interest is to a |
10 | | descendant of the settlor who dies before or after the settlor, |
11 | | the descendants of the deceased beneficiary living when the |
12 | | gift is to take effect in possession or enjoyment take per |
13 | | stirpes the gift so bequeathed.
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14 | | (b) If a gift of a present or future interest is to a class |
15 | | and any member of the class dies before or after the settlor, |
16 | | the members of the class living when the gift is to take effect |
17 | | in possession or enjoyment take the share or shares that the |
18 | | deceased member would have taken if he or she were then living, |
19 | | except that, if the deceased member of the class is a |
20 | | descendant of the settlor, the descendants of the deceased |
21 | | member then living shall take per stirpes the share or shares |
22 | | that the deceased member would have taken if he or she were |
23 | | then living.
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24 | | (c) Except as provided in subsections (a) and (b), if the |
25 | | gift is not to a descendant of the settlor or is not to a class |
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1 | | as provided in subsections (a) and (b) and if the beneficiary |
2 | | dies either before or after the settlor and before the gift is |
3 | | to take effect in possession or enjoyment, then the gift shall |
4 | | lapse. If the gift lapses by reason of the death of the |
5 | | beneficiary before the gift is to take effect in possession or |
6 | | enjoyment, then the gift so given shall be included in and pass |
7 | | as part of the residue of the trust under the trust. If the |
8 | | gift is or becomes part of the residue, the gift so bequeathed |
9 | | shall pass to and be taken by the beneficiaries remaining, if |
10 | | any, of the residue in proportions and upon trusts |
11 | | corresponding to their respective interests in the residue of |
12 | | the trust. Subsections (a) and (b) do not apply to a future |
13 | | interest that is or becomes indefeasibly vested at the |
14 | | settlor's death or at any time thereafter before it takes |
15 | | effect in possession or enjoyment. This Section applies on and |
16 | | after January 1, 2005 for any gifts to a deceased beneficiary |
17 | | under an inter vivos trust if the deceased beneficiary dies |
18 | | after January 1, 2005 and before the gift is to take effect in |
19 | | possession or enjoyment.
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20 | | Section 115. Transfer of real property to trust. The |
21 | | transfer of real property to a trust requires a transfer of |
22 | | legal title to the trustee evidenced by a written instrument of |
23 | | conveyance. |
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 |
3 | | administration of a trust to the extent its jurisdiction is |
4 | | invoked by an interested person or as provided by law.
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5 | | (b) A trust is not subject to continuing judicial |
6 | | supervision unless ordered by the court.
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7 | | (c) A judicial proceeding involving a trust may relate to |
8 | | any matter involving the trust's administration, including a |
9 | | request for instructions.
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10 | | Section 202. Jurisdiction over trustee and beneficiary. |
11 | | (a) By accepting the trusteeship of a trust having its |
12 | | principal place of administration in this State or by moving |
13 | | the principal place of administration to this State, the |
14 | | trustee is subject to the jurisdiction of the courts of this |
15 | | State regarding any matter involving the trust.
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16 | | (b) With respect to their interests in the trust, the |
17 | | beneficiaries of a trust having its principal place of |
18 | | administration in this State are subject to the jurisdiction of |
19 | | the courts of this State regarding any matter involving the |
20 | | trust. By accepting a distribution from such a trust, the |
21 | | recipient personally submits to the jurisdiction of the courts |
22 | | of this State regarding any matter involving the trust.
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23 | | (c) Service of process upon any person who is subject to |
24 | | the jurisdiction of the courts of this State, as provided in |
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1 | | this Section, may be made by personally serving the summons |
2 | | upon the defendant outside this State, as provided in the Code |
3 | | of Civil Procedure, with the same force and effect as though |
4 | | summons had been personally served within this State.
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5 | | (d) This Section does not preclude other methods of |
6 | | obtaining jurisdiction over a trustee, beneficiary, or other |
7 | | person receiving property from the trust.
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8 | | Section 203. (Reserved). |
9 | | Section 204. Venue. |
10 | | (a) Except as otherwise provided in subsection (b), venue |
11 | | for a judicial proceeding involving a trust is in the county of |
12 | | this State in which the trust's principal place of |
13 | | administration is or will be located and, if the trust is |
14 | | created by will and the estate is not yet closed, in the county |
15 | | in which the decedent's estate is being administered.
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16 | | (b) If a trust has no trustee, venue for a judicial |
17 | | proceeding for the appointment of a trustee is proper in a |
18 | | county of this State in which a beneficiary resides, in a |
19 | | county in which any real or tangible trust property is located, |
20 | | and if the trust is created by will, in the county in which the |
21 | | decedent's estate was or is being administered. |
22 | | (c) At the election of the Attorney General, venue for a |
23 | | judicial proceeding involving a trust with a charitable |
24 | | interest is also proper in any county where the Attorney |
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1 | | General accepts and maintains the list of registrations under |
2 | | the Charitable Trust Act. |
3 | | Article 3. Representation. |
4 | | Section 301. Representation: basic effect. |
5 | | (a) Except as provided in Section 602 and subsection (c):
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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.
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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.
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15 | | (b) Except as otherwise provided in Section 602, a person |
16 | | under this Article who represents a settlor who is |
17 | | incapacitated may, on the settlor's behalf: (i) receive notice, |
18 | | information, accountings, or reports; (ii) give a binding |
19 | | consent; or (iii) enter a binding agreement.
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20 | | (c) A settlor may not represent and bind a beneficiary |
21 | | under this Article with respect to a nonjudicial settlement |
22 | | agreement under Section 111, the termination or modification of |
23 | | a trust under subsection (a) of Section 411, or an exercise of |
24 | | the decanting power under Article 12.
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1 | | (d) If pursuant to this Article a person may be represented |
2 | | by 2 or more representatives, then the representative who has |
3 | | legal capacity, in the following order of priority, shall |
4 | | represent and bind the person:
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5 | | (1) a representative or guardian ad litem appointed by |
6 | | a court under Section 305;
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7 | | (2) the holder of a power of appointment under Section |
8 | | 302;
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9 | | (3) a designated representative under Section 307;
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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;
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13 | | (5) an agent under a power of attorney for property |
14 | | under subsection (c) of Section 303;
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15 | | (6) a parent of a person under subsection (d) of |
16 | | Section 303;
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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
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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.
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23 | | (e) A trustee is not liable for giving notice, information, |
24 | | accountings, or reports to a person who is represented by |
25 | | another person under this Article, and nothing in this Article |
26 | | prohibits the trustee from giving notice, information, |
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1 | | accountings, or reports to the person represented.
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2 | | Section 302. Representation by holders of certain powers. |
3 | | (a) The holder of a testamentary or a presently exercisable |
4 | | power of appointment that is: (1) a general power of |
5 | | appointment; or (2) exercisable in favor of all persons other |
6 | | than the powerholder, the powerholder's estate, a creditor of |
7 | | the powerholder, or a creditor of the powerholder's estate, may |
8 | | represent and bind all persons, including permissible |
9 | | appointees and takers in default, whose interests may be |
10 | | eliminated by the exercise or nonexercise of the power.
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11 | | (b) To the extent there is no conflict of interest between |
12 | | a holder and the persons represented with respect to the |
13 | | particular question or dispute, the holder of a testamentary or |
14 | | presently exercisable power of appointment, other than a power |
15 | | described in subsection (a), may represent and bind all |
16 | | persons, including permissible appointees and takers in |
17 | | default, whose interests may be eliminated by the exercise or |
18 | | nonexercise of the power.
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19 | | Section 303. Representation by others. |
20 | | (a) If all qualified beneficiaries of a trust either have |
21 | | legal capacity or have representatives under this Article who |
22 | | have legal capacity, an action taken by all qualified |
23 | | beneficiaries, in each case either by the beneficiary or by the |
24 | | beneficiary's representative, shall represent and bind all |
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1 | | other beneficiaries who have a successor, contingent, future, |
2 | | or other interest in the trust.
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3 | | (b) If a person is represented by a court-appointed |
4 | | guardian of the estate or, if none, guardian of the person, |
5 | | then the guardian may represent and bind the person.
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6 | | (c) If an individual is incapacitated, an agent under a |
7 | | power of attorney for property who has authority to act with |
8 | | respect to the particular question or dispute and who does not |
9 | | have a material conflict of interest with respect to the |
10 | | particular question or dispute may represent and bind the |
11 | | principal. An agent is deemed to have authority under this |
12 | | subsection if the power of attorney grants the agent the power |
13 | | to settle claims and to exercise powers with respect to trusts |
14 | | and estates, even if the powers do not include powers to make a |
15 | | will, to revoke or amend a trust, or to require the trustee to |
16 | | pay income or principal.
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17 | | (d) If a person is incapacitated, a parent of the person |
18 | | may represent and bind the person if there is no material |
19 | | conflict of interest between the represented person and either |
20 | | of the person's parents with respect to the particular question |
21 | | or dispute. If a disagreement arises between parents who |
22 | | otherwise qualify to represent a child in accordance with this |
23 | | subsection and who are seeking to represent the same child, the |
24 | | parent who is a lineal descendant of the settlor of the trust |
25 | | that is the subject of the representation is entitled to |
26 | | represent the child; or if none, the parent who is a |
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1 | | beneficiary of the trust is entitled to represent the child.
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2 | | Section 304. Representation by person having substantially |
3 | | identical interest. |
4 | | (a) To the extent there is no material conflict of interest |
5 | | between the representative and the represented beneficiary |
6 | | with respect to the particular question or dispute, a |
7 | | beneficiary who is incapacitated, unborn, or unascertainable |
8 | | may, for all purposes, be represented by and bound by another |
9 | | beneficiary having a substantially similar interest with |
10 | | respect to the particular question or dispute.
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11 | | (b) A guardian, agent, or parent who is the representative |
12 | | for a beneficiary under subsection (b), (c), or (d) of Section |
13 | | 303 may, for all purposes, represent and bind any other |
14 | | beneficiary who is incapacitated, unborn, or unascertainable |
15 | | and who has an interest, with respect to the particular |
16 | | question or dispute, that is substantially similar to the |
17 | | interest of the beneficiary represented by the representative, |
18 | | but only to the extent that there is no material conflict of |
19 | | interest between the beneficiary represented by the |
20 | | representative and the other beneficiary with respect to the |
21 | | particular question or dispute.
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22 | | Section 305. Appointment of representative. |
23 | | (a) If the court determines that representation of an |
24 | | incapacitated, unborn, or unascertainable beneficiary might |
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1 | | otherwise be inadequate, the court may appoint a representative |
2 | | for any nonjudicial matter to receive any notice, information, |
3 | | accounting, or report on behalf of the beneficiary and to |
4 | | represent and bind the beneficiary, or may appoint a guardian |
5 | | ad litem in any judicial proceeding to represent the interests |
6 | | of, bind, and approve any order or agreement on behalf of the |
7 | | beneficiary.
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8 | | (b) A representative may act on behalf of the individual |
9 | | represented with respect to any matter arising under this Code, |
10 | | regardless of whether a judicial proceeding concerning the |
11 | | trust or estate is pending.
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12 | | (c) If not precluded by a conflict of interest with respect |
13 | | to the particular question or dispute, a representative or |
14 | | guardian ad litem may be appointed to represent several persons |
15 | | or interests.
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16 | | (d) In giving any consent or agreement, a representative or |
17 | | guardian ad litem may consider general family benefit accruing |
18 | | to the living members of the family of the person represented.
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19 | | Section 306. Representation of charity. If a trust contains |
20 | | a charitable interest, the Attorney General may, in accordance |
21 | | with this Section, represent, bind, and act on behalf of the |
22 | | charitable interest with respect to any particular question or |
23 | | dispute, including without limitation representing the |
24 | | charitable interest in a nonjudicial settlement agreement |
25 | | under Section 111, in an agreement to convert a trust to a |
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1 | | total return trust under Article 11, or in a distribution in |
2 | | further trust under Article 12. A charitable organization that |
3 | | is specifically named as beneficiary of a trust or otherwise |
4 | | has a beneficial interest in a trust may act for itself. |
5 | | Notwithstanding any other provision, nothing in this Section |
6 | | shall be construed to limit or affect the Attorney General's |
7 | | authority to file an action or take other steps as he or she |
8 | | deems advisable at any time to enforce or protect the general |
9 | | public interest as to a trust that provides a beneficial |
10 | | interest or expectancy for one or more charitable organizations |
11 | | or charitable purposes whether or not a specific charitable |
12 | | organization is named in the trust. This Section shall be |
13 | | construed as declarative of existing law and not as a new |
14 | | enactment. |
15 | | Section 307. Designated representative. |
16 | | (a) If specifically nominated in the trust instrument, one |
17 | | or more individuals with legal capacity may be designated to |
18 | | represent and bind an individual who is a qualified |
19 | | beneficiary. The trust instrument may also authorize any person |
20 | | or persons, other than a trustee of the trust, to designate one |
21 | | or more individuals with legal capacity to represent and bind |
22 | | an individual who is a qualified beneficiary. Any person so |
23 | | nominated or designated is referred to in this Section as a |
24 | | "designated representative".
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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.
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4 | | (2) A designated representative may not represent and |
5 | | bind a qualified beneficiary while the designated |
6 | | representative is serving as a trustee.
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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.
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18 | | (c) Each designated representative is a fiduciary of the |
19 | | trust subject to the standards applicable to a trustee of a |
20 | | trust under applicable law.
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21 | | (d) In no event may a designated representative be relieved |
22 | | or exonerated from the duty to act, or withhold from acting, in |
23 | | good faith and as the designated representative reasonably |
24 | | believes is in the best interest of the represented qualified |
25 | | beneficiary.
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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 |
4 | | created 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
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10 | | (3) exercise of a power of appointment in favor of a |
11 | | trustee.
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12 | | Section 402. Requirements for creation. |
13 | | (a) A trust is created only if:
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14 | | (1) the settlor has capacity to create a trust;
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15 | | (2) the settlor indicates an intention to create the |
16 | | trust;
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17 | | (3) the trust has a definite beneficiary or is:
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18 | | (A) a charitable trust;
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19 | | (B) a trust for the care of an animal, as provided |
20 | | in Section 408; or
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21 | | (C) a trust for a noncharitable purpose, as |
22 | | provided in Section 409;
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23 | | (4) the trustee has duties to perform; and
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24 | | (5) the same person is not the sole trustee and sole |
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1 | | beneficiary.
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2 | | (b) A beneficiary is definite if the beneficiary can be |
3 | | ascertained now or in the future, subject to any applicable |
4 | | rule against perpetuities.
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5 | | (c) A power in a trustee to select a beneficiary from an |
6 | | indefinite class is valid. If the power is not exercised within |
7 | | a reasonable time, the power fails and the property subject to |
8 | | the power passes to the persons who would have taken the |
9 | | property had the power not been conferred.
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10 | | Section 403. Trusts created in other jurisdictions. A trust |
11 | | not created by will is validly created if its creation complies |
12 | | with the law of the jurisdiction in which the trust instrument |
13 | | was executed, or the law of the jurisdiction in which, at the |
14 | | time of creation:
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15 | | (1) the settlor was domiciled, had a place of abode, or |
16 | | was a national;
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17 | | (2) a trustee was domiciled or had a place of business; |
18 | | or
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19 | | (3) any trust property was located.
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20 | | Section 404. Trust purposes. A trust may be created only to |
21 | | the extent its purposes are lawful and not contrary to public |
22 | | policy. |
23 | | Section 405. Charitable purposes; enforcement. |
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1 | | (a) A charitable trust may be created for any charitable |
2 | | purpose.
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3 | | (b) If the terms of a charitable trust do not indicate a |
4 | | particular charitable purpose or beneficiary and do not |
5 | | delegate to the trustee or others willing to exercise the |
6 | | authority to select one or more charitable purposes or |
7 | | beneficiaries, then the court may select one or more charitable |
8 | | purposes or beneficiaries. The selection must be consistent |
9 | | with the settlor's intention to the extent it can be |
10 | | ascertained.
|
11 | | (c) The settlor of a charitable trust, among others, may |
12 | | maintain a proceeding to enforce the trust.
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13 | | Section 406. Creation of trust induced by fraud, duress, or |
14 | | undue influence. If the creation, amendment, or restatement of |
15 | | a trust is procured by fraud, duress, mistake, or undue |
16 | | influence, the trust or any part so procured is void. The |
17 | | remainder of the trust not procured by such means is valid if |
18 | | the remainder is not invalid for other reasons. If the |
19 | | revocation of a trust, or any part of the trust, is procured by |
20 | | fraud, duress, mistake, or undue influence, the revocation is |
21 | | void. |
22 | | Section 407. Evidence of oral trust. Except as required by |
23 | | a statute other than this Code, a trust need not be evidenced |
24 | | by a trust instrument, but the creation of an oral trust and |
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1 | | its terms may be established only by clear and convincing |
2 | | evidence. |
3 | | Section 408. Trusts for domestic or pet animals. |
4 | | (a) A trust for the care of one or more designated domestic |
5 | | or pet animals is valid. The trust terminates when no living |
6 | | animal is covered by the trust. A trust instrument shall be |
7 | | liberally construed to bring the transfer within this Section, |
8 | | to presume against a merely precatory or honorary nature of its |
9 | | disposition, and to carry out the general intent of the |
10 | | transferor. Extrinsic evidence is admissible in determining |
11 | | the transferor's intent. |
12 | | (b) A trust for the care of one or more designated domestic |
13 | | or 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;
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22 | | (B) to the settlor, if then living;
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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;
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2 | | (D) to the transferor's heirs under Section 2-1 of |
3 | | the Probate Act of 1975.
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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.
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3 | | (7) The trust is exempt from the operation of the |
4 | | common law rule against perpetuities.
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5 | | Section 409. Noncharitable trust without ascertainable |
6 | | beneficiary.
|
7 | | (a) Except as otherwise provided in Section 408 or by |
8 | | another statute, a trust may be created for a noncharitable |
9 | | purpose without a definite or definitely ascertainable |
10 | | beneficiary or for a noncharitable but otherwise valid purpose |
11 | | to be selected by the trustee.
|
12 | | (b) The trust may not be enforced for more than 21 years. |
13 | | If the trust is still in existence after 21 years, the trust |
14 | | shall terminate. The unexpended trust property shall be |
15 | | distributed in the following order:
|
16 | | (1) as directed in the trust instrument;
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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 |
24 | | person appointed in the trust instrument or, if no person is so |
25 | | appointed, by a person appointed by the court.
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1 | | (d) Property of a trust authorized by this Section may be |
2 | | applied only to its intended use, except to the extent the |
3 | | court determines that the value of the trust property exceeds |
4 | | the amount required for the intended use. Property not required |
5 | | for the intended use must be distributed as provided in |
6 | | subsection (b).
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7 | | Section 410. Modification or termination of trust; |
8 | | proceedings for approval or disapproval. |
9 | | (a) In addition to the methods of termination prescribed by |
10 | | Sections 411 through 414, a trust terminates to the extent the |
11 | | trust is revoked or expires pursuant to the trust instrument, |
12 | | no purpose of the trust remains to be achieved, or the purposes |
13 | | of the trust have become unlawful, contrary to public policy, |
14 | | or impossible to achieve.
|
15 | | (b) A proceeding to approve or disapprove a proposed |
16 | | modification or termination under Sections 411 through 416, or |
17 | | trust combination or division under Section 417, may be |
18 | | commenced by a trustee or beneficiary or by the Attorney |
19 | | General for a trust with a charitable interest. The settlor of |
20 | | a charitable trust may maintain a proceeding to modify the |
21 | | trust under Section 413. |
22 | | Section 411. Modification or termination of noncharitable |
23 | | irrevocable trust by consent. |
24 | | (a) A noncharitable irrevocable trust may be terminated |
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1 | | upon consent of all of the beneficiaries if the court concludes |
2 | | that continuance of the trust is not necessary to achieve any |
3 | | material purpose of the trust.
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4 | | (b) A noncharitable irrevocable trust may be modified upon |
5 | | consent of all of the beneficiaries if the court concludes that |
6 | | modification is not inconsistent with any material purpose of |
7 | | the trust.
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8 | | (c) The court shall consider spendthrift provisions as a |
9 | | factor in making a decision under this Section, but the court |
10 | | is not precluded from modifying or terminating a trust because |
11 | | the trust contains spendthrift provisions.
|
12 | | (d) Upon termination of a trust under subsection (a), the |
13 | | trustee shall distribute the trust property as agreed by the |
14 | | beneficiaries.
|
15 | | (e) If not all of the beneficiaries consent to a proposed |
16 | | modification or termination of the trust under subsection (a) |
17 | | or (b), the modification or termination may be approved by the |
18 | | court 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.
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24 | | Section 412. Modification or termination because of |
25 | | unanticipated circumstances or inability to administer trust |
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1 | | effectively. |
2 | | (a) The court may modify the administrative or dispositive |
3 | | terms of a trust or terminate the trust if, because of |
4 | | circumstances not anticipated by the settlor, modification or |
5 | | termination will further the purposes of the trust. To the |
6 | | extent practicable, the modification must be made in accordance |
7 | | with the settlor's probable intention.
|
8 | | (b) The court may modify the administrative terms of a |
9 | | trust if continuation of the trust on its existing terms would |
10 | | be impracticable or wasteful or impair the trust's |
11 | | administration.
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12 | | (c) Upon termination of a trust under this Section, the |
13 | | court shall order the distribution of the trust property as |
14 | | agreed by the beneficiaries, or if the beneficiaries cannot |
15 | | agree, then as the court determines is equitable and consistent |
16 | | with the purposes of the trust. |
17 | | (d) Notwithstanding any other provision in this Section, if |
18 | | the trust contains a charitable interest, the modification |
19 | | cannot diminish the charitable interest or alter the charitable |
20 | | purpose, except as would be permitted under Section 413, and |
21 | | upon termination of a trust under this Section, any charitable |
22 | | distribution shall be made in a manner consistent with the |
23 | | settlor'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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1 | | particular charitable purpose becomes unlawful, impracticable, |
2 | | impossible to achieve, or wasteful:
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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 |
11 | | would result in distribution of the trust property to a |
12 | | noncharitable beneficiary prevails over the power of the court |
13 | | under subsection (a) to apply cy pres to modify or terminate |
14 | | the 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 |
20 | | trust. |
21 | | (a) After notice to the qualified beneficiaries, the |
22 | | trustee of a trust consisting of trust property having a total |
23 | | value less than $100,000 may terminate the trust if the trustee |
24 | | concludes that the costs of continuing the trust will |
25 | | substantially impair accomplishment of the purpose of the |
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1 | | trust.
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2 | | (b) The court may modify or terminate a trust or remove the |
3 | | trustee and appoint a different trustee if it determines that |
4 | | the value of the trust property is insufficient to justify the |
5 | | cost of administration.
|
6 | | (c) Upon termination of a trust under this Section, the |
7 | | trustee shall distribute the trust property to the current |
8 | | beneficiaries in the proportions to which they are entitled to |
9 | | mandatory current distributions, or if their interests are |
10 | | indefinite, to the current beneficiaries per stirpes if they |
11 | | have a common ancestor, or if not, then in equal shares. The |
12 | | trustee shall give notice to the current beneficiaries at least |
13 | | 30 days before the effective date of the termination.
|
14 | | (d) This Section does not apply to an easement for |
15 | | conservation or preservation.
|
16 | | (e) If a particular trustee is a current beneficiary of the |
17 | | trust or is legally obligated to a current beneficiary, then |
18 | | that particular trustee may not participate as a trustee in the |
19 | | exercise of this termination power; however, if the trust has |
20 | | one or more co-trustees who are not so disqualified from |
21 | | participating, the co-trustee or co-trustees may exercise this |
22 | | power.
|
23 | | (f) This Section does not apply to the extent that it would |
24 | | cause a trust otherwise qualifying for a federal or state tax |
25 | | benefit or other benefit not to qualify, nor does it apply to |
26 | | trusts for domestic or pet animals.
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1 | | Section 415. Reformation to correct mistakes. The court may |
2 | | reform the terms of a trust, even if unambiguous, to conform |
3 | | the terms to the settlor's intention if it is proved by clear |
4 | | and convincing evidence what the settlor's intention was and |
5 | | that the terms of the trust were affected by a mistake of fact |
6 | | or law, whether in expression or inducement. |
7 | | Section 416. Modification to achieve settlor's tax |
8 | | objectives. To achieve the settlor's tax objectives, the court |
9 | | may modify the terms of a trust in a manner that is not |
10 | | contrary to the settlor's probable intention. The court may |
11 | | provide 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 |
14 | | to 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 |
22 | | if the result impairs the rights of any beneficiary or |
23 | | adversely affects achievement of the material purposes of the |
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1 | | subject trust or trusts.
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2 | | (c) A severance or consolidation may be made for any reason |
3 | | including to reflect a partial disclaimer, to reflect |
4 | | differences in perpetuities periods, to reflect or result in |
5 | | differences in federal or state tax attributes, to satisfy any |
6 | | federal tax requirement or election, or to reduce potential |
7 | | generation-skipping transfer tax liability, and shall be made |
8 | | in a manner consistent with the rules governing disclaimers, |
9 | | federal tax attributes, requirements or elections, or any |
10 | | applicable federal or state tax rules or regulations.
|
11 | | (d) A separate account or trust created by severance or |
12 | | segregation:
|
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 |
2 | | property after severance or segregation occurs shall pass to |
3 | | the designated taker of the amount or property.
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4 | | (f) In managing, investing, administering, and |
5 | | distributing the trust property of any separate account or |
6 | | trust and in making applicable federal or state tax elections, |
7 | | the trustee may consider the differences in federal or state |
8 | | tax attributes and all other factors the trustee believes |
9 | | pertinent and may make disproportionate distributions from the |
10 | | separate accounts or trusts.
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11 | | Article 5. Creditor's Claims; Spendthrift and Discretionary |
12 | | Trusts. |
13 | | Section 501. Rights of beneficiary's creditor or assignee. |
14 | | Except as provided in Section 504, to the extent a |
15 | | beneficiary's interest is not subject to a spendthrift |
16 | | provision, the court may authorize a creditor or assignee of |
17 | | the beneficiary to reach the beneficiary's interest by |
18 | | attachment of present or future distributions to or for the |
19 | | benefit of the beneficiary or other means. The court may limit |
20 | | the award to such relief as is appropriate under the |
21 | | circumstances. |
22 | | Section 502. Spendthrift provision. |
23 | | (a) A spendthrift provision is valid only if it prohibits |
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1 | | both voluntary and involuntary transfer of a beneficiary's |
2 | | interest.
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3 | | (b) A term of a trust providing that the interest of a |
4 | | beneficiary is held subject to a "spendthrift trust", or words |
5 | | of similar import, is sufficient to restrain both voluntary and |
6 | | involuntary transfer of the beneficiary's interest.
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7 | | (c) A beneficiary may not transfer an interest in a trust |
8 | | in violation of a valid spendthrift provision and, except as |
9 | | otherwise provided in this Article, a creditor or assignee of |
10 | | the beneficiary may not reach the interest or a distribution by |
11 | | the trustee before its receipt by the beneficiary.
|
12 | | (d) A valid spendthrift provision does not prevent the |
13 | | appointment of interests through the exercise of a power of |
14 | | appointment.
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15 | | Section 503. Exceptions to spendthrift provision. |
16 | | (a) In this Section, "child" includes any person for whom |
17 | | an order or judgment for child support has been entered in this |
18 | | or another state.
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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;
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3 | | (2) a judgment creditor who has provided services for |
4 | | the protection of a beneficiary's interest in the trust; |
5 | | and
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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.
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8 | | (c) Except as otherwise provided in this subsection and in |
9 | | Section 504, a claimant against which a spendthrift provision |
10 | | cannot be enforced may obtain from a court an order attaching |
11 | | present or future distributions to or for the benefit of the |
12 | | beneficiary. The court may limit the award to such relief as is |
13 | | appropriate under the circumstances. Notwithstanding this |
14 | | subsection, the remedies provided in this subsection apply to a |
15 | | claim for unpaid child support obligations by a beneficiary's |
16 | | child, spouse, former spouse, judgment creditor, or claim |
17 | | described in subsection (b) only as a last resort upon an |
18 | | initial showing that traditional methods of enforcing the claim |
19 | | are insufficient.
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20 | | Section 504. Discretionary distributions; effect of |
21 | | standard. |
22 | | (a) As used in this Section, "discretionary distribution" |
23 | | means a distribution that is subject to the trustee's |
24 | | discretion regardless of whether the discretion is expressed in |
25 | | the form of a standard of distribution and regardless of |
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1 | | whether the trustee has abused the discretion. |
2 | | (b) Regardless of whether a trust contains a spendthrift |
3 | | provision, and regardless of whether the beneficiary is acting |
4 | | as trustee, if a trustee may make discretionary distributions |
5 | | to or for the benefit of a beneficiary, a creditor of the |
6 | | beneficiary, including a creditor described in subsection (b) |
7 | | of 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.
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14 | | (c) If the trustee's discretion to make distributions for |
15 | | the trustee's own benefit is limited by an ascertainable |
16 | | standard, a creditor may not reach or compel distribution of |
17 | | the beneficial interest except to the extent the interest would |
18 | | be subject to the creditor's claim were the beneficiary not |
19 | | acting as trustee.
|
20 | | (d) This Section does not limit the right of a beneficiary |
21 | | to maintain a judicial proceeding against a trustee for an |
22 | | abuse of discretion or failure to comply with a standard for |
23 | | distribution.
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24 | | Section 505. Creditor's claim against settlor. |
25 | | (a) Whether or not the terms of a trust contain a |
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1 | | spendthrift 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.
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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.
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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.
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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.
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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:
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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;
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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
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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
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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.
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25 | | (b) For purposes of this Section:
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26 | | (1) during the period the power may be exercised, the |
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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
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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.
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10 | | Section 506. Overdue distribution. |
11 | | (a) In this Section, "mandatory distribution" means a |
12 | | distribution of income or principal that the trustee is |
13 | | required to make to a beneficiary under the trust instrument, |
14 | | including a distribution upon termination of the trust. The |
15 | | term does not include a distribution subject to the exercise of |
16 | | the trustee's discretion even if (1) the discretion is |
17 | | expressed in the form of a standard of distribution, or (2) the |
18 | | terms of the trust authorizing a distribution couple language |
19 | | of discretion with language of direction.
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20 | | (b) Whether or not a trust contains a spendthrift |
21 | | provision, a creditor or assignee of a beneficiary may reach a |
22 | | mandatory distribution of income or principal, including a |
23 | | distribution upon termination of the trust, if the trustee has |
24 | | not made the distribution to the beneficiary within a |
25 | | reasonable time after the designated distribution date.
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1 | | Section 507. Personal obligations of trustee. Trust |
2 | | property is not subject to personal obligations of the trustee, |
3 | | even if the trustee becomes insolvent or bankrupt. |
4 | | Section 508. Lapse of power to withdraw. A beneficiary of a |
5 | | trust may not be considered to be a settlor or to have made a |
6 | | transfer to the trust merely because of a lapse, release, or |
7 | | waiver of his or her power of withdrawal to the extent that the |
8 | | value of the affected property does not exceed the greatest of |
9 | | the amounts specified in Sections 2041(b)(2), 2514(e), and |
10 | | 2503(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 |
21 | | who has a disability that substantially impairs the |
22 | | individual's ability to provide for his or her own care or |
23 | | custody and constitutes a substantial disability, is not liable |
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1 | | to pay or reimburse this State or any public agency for |
2 | | financial aid or services to the individual except to the |
3 | | extent the trust was created by the individual or trust |
4 | | property has been distributed directly to or is otherwise under |
5 | | the control of the individual, except that this exception does |
6 | | not apply to a trust created with the property of the |
7 | | individual with a disability or property within his or her |
8 | | control if the trust complies with Medicaid reimbursement |
9 | | requirements of federal law. Notwithstanding any other |
10 | | provisions to the contrary, a trust created with the property |
11 | | of the individual with a disability or property within his or |
12 | | her control is liable, after the reimbursement of Medicaid |
13 | | expenditures, to this State for reimbursement of any other |
14 | | service charges outstanding at the death of the individual with |
15 | | a disability. Property, goods, and services purchased or owned |
16 | | by a trust for and used or consumed by a beneficiary with a |
17 | | disability shall not be considered trust property distributed |
18 | | to or under the control of the beneficiary. |
19 | | (c) Except as otherwise prohibited by law, the court or a |
20 | | person with a disability may irrevocably assign resources of |
21 | | that person to either or both of: (i) an ABLE account, as |
22 | | defined under Section 16.6 of the State Treasurer Act; or (ii) |
23 | | a discretionary trust that complies with the Medicaid |
24 | | reimbursement requirements of federal law. A court may reserve |
25 | | the right to determine the amount, duration, or enforcement of |
26 | | the irrevocable assignment. |
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1 | | Article 6. Revocable Trusts. |
2 | | Section 601. Capacity of settlor of revocable trust. The |
3 | | capacity required of the settlor to create, amend, revoke in |
4 | | whole or in part, or add property to a revocable trust is the |
5 | | same 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 |
8 | | instrument expressly provides that the trust is revocable or |
9 | | that the settlor has an unrestricted power of amendment. The |
10 | | settlor may amend a trust only if the trust expressly provides |
11 | | that the trust is revocable or amendable by the settlor.
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12 | | (b) If a revocable trust has more than one settlor:
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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;
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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
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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. |
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1 | | (c) The settlor may revoke or amend a revocable trust |
2 | | instrument:
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3 | | (1) by substantially complying with a method provided |
4 | | in the trust instrument; or
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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.
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10 | | (d) Upon revocation of a revocable trust, the trustee shall |
11 | | deliver the trust property to the settlor or as the settlor |
12 | | directs.
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13 | | (e) A settlor's powers with respect to revocation, |
14 | | amendment, or distribution of trust property may not be |
15 | | exercised by an agent under a power of attorney unless |
16 | | expressly authorized by the power and not prohibited by the |
17 | | trust instrument.
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18 | | (f) A guardian of the estate of the settlor, if any, or a |
19 | | guardian of the person of the settlor may not exercise a |
20 | | settlor's powers with respect to revocation, amendment, or |
21 | | distribution of trust property unless ordered by the court |
22 | | supervising the guardianship.
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23 | | (g) A trustee who does not know that a trust has been |
24 | | revoked or amended is not liable for distributions made and |
25 | | other actions taken or not taken on the assumption that the |
26 | | trust had not been amended or revoked.
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1 | | Section 603. Settlor's powers; powers of withdrawal. |
2 | | (a) To the extent a trust is revocable by a settlor, and |
3 | | the settlor personally has capacity to revoke the trust, a |
4 | | trustee may follow a direction of the settlor that is contrary |
5 | | to the terms of the trust. To the extent a trust is revocable |
6 | | by a settlor in conjunction with a person other than a trustee |
7 | | or person holding an adverse interest, and the settlor and such |
8 | | other person personally have the capacity to revoke the trust, |
9 | | the trustee may follow a direction from the settlor and the |
10 | | other person holding the power to revoke even if the direction |
11 | | is contrary to the terms of the trust. |
12 | | (b) To the extent a trust is revocable by a settlor, and |
13 | | the settlor personally has capacity to revoke the trust, rights |
14 | | of the beneficiaries are subject to the control of, and the |
15 | | duties of the trustee are owed exclusively to, the settlor. |
16 | | (c) While a trust is revocable by a settlor but the settlor |
17 | | does not personally have the capacity to revoke the trust, the |
18 | | duties of the trustee are owed only to the settlor and current |
19 | | beneficiaries. If the settlor is a beneficiary, the settlor's |
20 | | interests as a beneficiary take priority over the interests of |
21 | | all other beneficiaries.
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22 | | (d) Except as provided in subsection (e), only the settlor, |
23 | | a representative of the settlor under Article 3 during the |
24 | | settlor's lifetime if the settlor is incapacitated, and the |
25 | | representative of the settlor's estate after the settlor's |
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1 | | death have standing to contest, challenge, or bring any |
2 | | proceeding in any court regarding any action of the trustee of |
3 | | a revocable trust taken or not taken while the trust is |
4 | | revocable.
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5 | | (e) An individual who is or was a current beneficiary |
6 | | during the settlor's lifetime, a representative of such an |
7 | | individual under Article 3 or the representative of such |
8 | | individual's estate after the individual's death, has standing |
9 | | to contest, challenge, or bring any proceeding in any court |
10 | | regarding any action of the trustee of a revocable trust while |
11 | | the trust is revocable but the settlor does not personally have |
12 | | capacity to revoke the trust, but only to the extent the action |
13 | | of the trustee affects the interest of the individual as a |
14 | | current beneficiary of the trust during the lifetime of the |
15 | | settlor while the settlor does not personally have the capacity |
16 | | to revoke the trust.
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17 | | (f) The holder of a non-lapsing power of withdrawal, during |
18 | | the period the power may be exercised, has the rights of a |
19 | | settlor of a revocable trust to the extent of the property |
20 | | subject to the power.
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21 | | Section 604. Limitation on action contesting validity of |
22 | | revocable trust; distribution of trust property. |
23 | | (a) A person may commence a judicial proceeding to contest |
24 | | the validity of a trust that was revocable at the settlor's |
25 | | death only within the earlier of:
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1 | | (1) 2 years after the settlor's death; or
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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
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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.
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12 | | (b) Nine months after the death of the settlor of a trust |
13 | | that was revocable at the settlor's death, the trustee may |
14 | | proceed to distribute the trust property in accordance with the |
15 | | trust instrument. The trustee is not subject to liability for |
16 | | doing so unless:
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17 | | (1) the trustee knows of a pending judicial proceeding |
18 | | contesting the validity of the trust; or
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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.
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23 | | (c) A beneficiary of a trust that was revocable at the |
24 | | settlor's death that is determined to have been invalid is |
25 | | liable to return any distribution received and all income and |
26 | | appreciation associated with the distribution from the date of |
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1 | | receipt until the date of return of the distribution.
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2 | | Section 605. Revocation of provisions in revocable trust by |
3 | | divorce or annulment |
4 | | (a) As used in this Section:
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5 | | (1) "Judicial termination of marriage" includes, but |
6 | | is not limited to, divorce, dissolution, annulment or |
7 | | declaration of invalidity of marriage.
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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.
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13 | | (3) "Trust" means a trust created by a nontestamentary |
14 | | instrument executed after January 1, 1982.
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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.
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21 | | (b) Unless the trust instrument or the judgment of judicial |
22 | | termination of marriage expressly provides otherwise, judicial |
23 | | termination of marriage of the settlor of a trust revokes every |
24 | | provision that is revocable by the settlor pertaining to the |
25 | | settlor's former spouse in a trust instrument or amendment |
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1 | | executed by the settlor before the entry of the judgment of |
2 | | judicial termination of marriage of the settlor and any such |
3 | | trust shall be administered and construed as if the settlor's |
4 | | former spouse had died upon entry of the judgment of judicial |
5 | | termination of marriage.
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6 | | (c) A trustee who has no actual knowledge of a judgment of |
7 | | judicial termination of marriage of the settlor is not liable |
8 | | for any action taken or omitted in good faith on the assumption |
9 | | that the settlor is married. The preceding sentence is intended |
10 | | to affect only the liability of the trustee and shall not |
11 | | affect the disposition of beneficial interests in any trust. |
12 | | (d) Notwithstanding Section 102, this Section may be made |
13 | | applicable by specific reference in the trust instrument to |
14 | | this Section in any (1) land trust; (2) voting trust; (3) |
15 | | security instrument such as a trust deed or mortgage; (4) |
16 | | liquidation trust; (5) escrow; (6) instrument under which a |
17 | | nominee, custodian for property or paying or receiving agent is |
18 | | appointed; or (7) trust created by a deposit arrangement in a |
19 | | bank or savings institution, commonly known as "Totten Trust".
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20 | | (e) If provisions of a trust are revoked solely by this |
21 | | Section, they are revived by the settlor's remarriage to the |
22 | | former spouse.
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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 |
2 | | person designated as trustee accepts the trusteeship:
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3 | | (1) by substantially complying with a method of |
4 | | acceptance provided in the trust instrument; or
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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.
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11 | | (b) A person designated as trustee who has not yet accepted |
12 | | the trusteeship may decline the trusteeship. A designated |
13 | | trustee who does not accept the trusteeship within 120 days |
14 | | after receiving notice of the designation is deemed to have |
15 | | declined the trusteeship.
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16 | | (c) A person designated as trustee, without accepting the |
17 | | trusteeship, may, but need not:
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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
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23 | | (2) inspect or investigate trust property to determine |
24 | | potential liability under environmental or other law or for |
25 | | any other purpose.
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26 | | (d) A person acting under subsection (c) is not liable for |
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1 | | actions taken in good faith.
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2 | | Section 702. Trustee's bond. |
3 | | (a) A trustee shall give bond to secure performance of the |
4 | | trustee's duties only if the court finds that a bond is needed |
5 | | to protect the interests of the beneficiaries or is required by |
6 | | the terms of the trust and the court has not dispensed with the |
7 | | requirement. |
8 | | (b) The court may specify the amount of a bond, its |
9 | | liabilities, and whether sureties are necessary. The court may |
10 | | modify or terminate a bond at any time. |
11 | | (c) A corporate fiduciary, as defined in Section 1-5.505 of |
12 | | the Corporate Fiduciary Act, qualified to do trust business in |
13 | | this State need not give bond, even if required by the terms of |
14 | | the trust. |
15 | | Section 703. Co-trustees. |
16 | | (a) Co-trustees who are unable to reach a unanimous |
17 | | decision may act by majority decision after prior written |
18 | | notice to, or written waiver of notice by, each other |
19 | | co-trustee.
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20 | | (b) If a vacancy occurs in a co-trusteeship, subsection (b) |
21 | | of Section 704 applies.
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22 | | (c) A co-trustee must participate in the performance of a |
23 | | trustee's function unless the co-trustee is unavailable to |
24 | | perform the function because of absence, illness, |
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1 | | disqualification under other law, or other temporary |
2 | | incapacity or the co-trustee has properly delegated the |
3 | | performance of the function to another trustee.
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4 | | (d) If a co-trustee is unavailable to perform duties |
5 | | because of absence, illness, disqualification under other law, |
6 | | or other temporary incapacity, and prompt action is necessary |
7 | | to achieve the purposes of the trust or to avoid injury to the |
8 | | trust property, the remaining co-trustee or a majority of the |
9 | | remaining co-trustees may act for the trust.
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10 | | (e) A trustee may delegate to a co-trustee for any period |
11 | | of time any or all of the trustee's rights, powers, and duties. |
12 | | Unless a delegation was irrevocable, a trustee may revoke a |
13 | | delegation previously made.
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14 | | (f) Except as otherwise provided in subsection (g), a |
15 | | trustee who is not qualified to participate in an action or who |
16 | | does not join in an action of another trustee is not liable for |
17 | | the action.
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18 | | (g) Each trustee who is not an excluded fiduciary under |
19 | | Section 808 shall exercise reasonable care to:
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20 | | (1) prevent a co-trustee from committing a serious |
21 | | breach of trust; and
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22 | | (2) compel a co-trustee to redress a serious breach of |
23 | | trust.
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24 | | (h) A dissenting trustee who joins in an action at the |
25 | | direction of the majority of the trustees and who notified any |
26 | | co-trustee of the dissent at or before the time of the action |
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1 | | is not liable for the action unless the action is a serious |
2 | | breach of trust. |
3 | | Section 704. Vacancy in trusteeship; appointment of |
4 | | successor. |
5 | | (a) A vacancy in a trusteeship occurs if:
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6 | | (1) a person designated as trustee declines the |
7 | | trusteeship;
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8 | | (2) a person designated as trustee cannot be identified |
9 | | or does not exist;
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10 | | (3) a trustee resigns;
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11 | | (4) a trustee is disqualified or removed;
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12 | | (5) a trustee dies;
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13 | | (6) a guardian is appointed for an individual serving |
14 | | as trustee; or
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15 | | (7) an individual serving as trustee becomes |
16 | | incapacitated.
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17 | | (b) If one or more co-trustees remain in office, a vacancy |
18 | | in a trusteeship need not be filled and the remaining |
19 | | co-trustees or trustee may act for the trust. A vacancy in a |
20 | | trusteeship must be filled if the trust has no remaining |
21 | | trustee, or if the existing vacancy impairs the administration |
22 | | of the trust as determined by the remaining trustees.
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23 | | (c) A vacancy in a trusteeship of a trust that is required |
24 | | to be filled must be filled in the following order of priority:
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25 | | (1) by a person designated in accordance with the trust |
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1 | | instrument to act as successor trustee;
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2 | | (2) by a person appointed by a majority of the |
3 | | beneficiaries who are distributees or permissible |
4 | | distributees of trust income; or
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5 | | (3) by a person appointed by the court.
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6 | | (d) If a trust contains a charitable interest, then the |
7 | | appointment of a successor trustee provided under paragraph (2) |
8 | | of subsection (c) shall not take effect until 30 days after |
9 | | written notice is delivered to the Attorney General's |
10 | | Charitable Trust Bureau. The Attorney General may waive this |
11 | | notice requirement.
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12 | | Section 705. Resignation of trustee. |
13 | | (a) A trustee may resign:
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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
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17 | | (2) with the approval of the court.
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18 | | (b) In approving a resignation, the court may issue orders |
19 | | and impose conditions reasonably necessary for the protection |
20 | | of the trust property.
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21 | | (c) Any liability of a resigning trustee or of any sureties |
22 | | on the trustee's bond for acts or omissions of the trustee is |
23 | | not discharged or affected by the trustee's resignation.
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24 | | Section 706. Removal of trustee. |
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1 | | (a) A settlor, a co-trustee, or a qualified beneficiary may |
2 | | request the court to remove a trustee, or a trustee may be |
3 | | removed by the court on its own initiative.
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4 | | (b) The court may remove a trustee if:
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5 | | (1) the trustee has committed a serious breach of |
6 | | trust;
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7 | | (2) lack of cooperation among co-trustees |
8 | | substantially impairs the administration of the trust;
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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
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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.
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21 | | (c) Pending a final decision on a request to remove a |
22 | | trustee, or in lieu of or in addition to removing a trustee, |
23 | | the court may order such appropriate relief under subsection |
24 | | (b) of Section 1001 as may be necessary to protect the trust |
25 | | property or the interests of the beneficiaries. |
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1 | | Section 707. Delivery of property by former trustee. |
2 | | (a) Unless a co-trustee remains in office or the court |
3 | | otherwise orders, and until the trust property is delivered to |
4 | | a successor trustee or other person entitled to it, a trustee |
5 | | who has resigned or been removed has the duties of a trustee |
6 | | and the powers necessary to protect the trust property.
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7 | | (b) A trustee who has resigned or been removed shall |
8 | | proceed expeditiously to deliver the trust property within the |
9 | | trustee's possession to the co-trustee, successor trustee, or |
10 | | other person entitled to it.
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11 | | Section 708. Compensation of trustee. |
12 | | (a) If the trust instrument does not specify the trustee's |
13 | | compensation, a trustee is entitled to compensation that is |
14 | | reasonable under the circumstances.
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15 | | (b) If the trust instrument specifies the trustee's |
16 | | compensation, the trustee is entitled to be compensated as |
17 | | specified, but the court may allow more or less compensation |
18 | | if:
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19 | | (1) the duties of the trustee are substantially |
20 | | different from those contemplated when the trust was |
21 | | created; or
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22 | | (2) the compensation specified by the trust instrument |
23 | | would be unreasonably low or high.
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24 | | Section 709. Reimbursement of expenses. |
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1 | | (a) A trustee is entitled to be reimbursed out of the trust |
2 | | property, with interest as appropriate, for:
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3 | | (1) expenses that were properly incurred in the |
4 | | administration and protection of the trust; and
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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.
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8 | | (b) An advance by the trustee of money for the protection |
9 | | of the trust gives rise to a right to reimbursement with |
10 | | reasonable interest.
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11 | | Article 8. Duties and Powers of Trustee. |
12 | | Section 801. Duty to administer trust. Upon acceptance of a |
13 | | trusteeship, the trustee shall administer the trust in good |
14 | | faith, in accordance with its purposes and the terms of the |
15 | | trust, and in accordance with this Code. |
16 | | Section 802. Duty of loyalty. |
17 | | (a) Subject to the rights of persons dealing with or |
18 | | assisting the trustee as provided in Section 1012, a sale, |
19 | | encumbrance, or other transaction involving the investment or |
20 | | management of trust property entered into by the trustee for |
21 | | the trustee's own personal account or that is otherwise |
22 | | affected by a conflict between the trustee's fiduciary and |
23 | | personal interests is voidable by a beneficiary affected by the |
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1 | | transaction and a trustee must disgorge to the trust any profit |
2 | | from 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 |
17 | | investment or management of trust property is presumed to be |
18 | | affected by a conflict between personal and fiduciary interests |
19 | | if 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 |
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1 | | authorized by law.
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2 | | (c) A transaction between a trustee and a beneficiary that |
3 | | does not concern trust property, that occurs during the |
4 | | existence of the trust and from which the trustee obtains an |
5 | | advantage, is voidable by the beneficiary unless the trustee |
6 | | establishes that the transaction was fair to the beneficiary.
|
7 | | (d) A transaction not concerning trust property in which |
8 | | the trustee engages in the trustee's individual capacity |
9 | | involves a conflict between personal and fiduciary interests if |
10 | | the transaction concerns an opportunity properly belonging to |
11 | | the trust.
|
12 | | (e) An investment by a trustee in securities of an |
13 | | investment company or investment trust to which the trustee, or |
14 | | its affiliate, provides services in a capacity other than as |
15 | | trustee is not presumed to be affected by a conflict between |
16 | | personal and fiduciary interests if the investment otherwise |
17 | | complies with the prudent investor rule. In addition to its |
18 | | compensation for acting as trustee, the trustee may be |
19 | | compensated by the investment company or investment trust for |
20 | | providing those services out of fees charged to the trust so |
21 | | long as the total compensation paid by the trust as trustee's |
22 | | fees and mutual fund or other investment fees is reasonable.
|
23 | | (f) In voting shares of stock or in exercising powers of |
24 | | control over similar interests in other forms of enterprise, |
25 | | the trustee shall act in the best interests of the |
26 | | beneficiaries.
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1 | | (g) This Section does not preclude the following |
2 | | transactions, if fair to the beneficiaries:
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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 |
23 | | decision with respect to any proposed transaction that might |
24 | | violate this Section if entered into by the trustee.
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25 | | Section 803. Impartiality. If a trust has 2 or more |
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1 | | beneficiaries, the trustee shall act impartially in investing, |
2 | | managing, and distributing the trust property giving due regard |
3 | | to the beneficiaries respective interests. The trustee must |
4 | | treat the beneficiaries equitably in light of the purposes and |
5 | | terms of the trust, including any manifestation of an intention |
6 | | to favor one or more beneficiaries. |
7 | | Section 804. Prudent administration. A trustee shall |
8 | | administer the trust as a prudent person would, by considering |
9 | | the purposes, terms, distribution requirements, and other |
10 | | circumstances of the trust. In satisfying this standard, the |
11 | | trustee shall exercise reasonable care, skill, and caution. |
12 | | Section 805. Costs of administration. In administering a |
13 | | trust, the trustee may incur only costs that are reasonable in |
14 | | relation 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 |
18 | | duty not to delegate to others the performance of any acts |
19 | | involving the exercise of judgment and discretion.
|
20 | | (b) A trustee may delegate duties and powers that a prudent |
21 | | trustee of comparable skills could properly delegate under the |
22 | | circumstances. The trustee shall exercise reasonable care, |
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1 | | skill, and caution in:
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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 |
10 | | duty to the trust to exercise reasonable care to comply with |
11 | | the terms of the delegation.
|
12 | | (d) A trustee who complies with subsection (b) is not |
13 | | liable to the beneficiaries or to the trust for an action of |
14 | | the agent to whom the function was delegated.
|
15 | | (e) By accepting a delegation of powers or duties from the |
16 | | trustee of a trust that is subject to the law of this State, an |
17 | | agent 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.
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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 |
9 | | trust instrument of a trust. The powers of an investment trust |
10 | | advisor may be exercised or not exercised in the sole and |
11 | | absolute discretion of the investment trust advisor, and are |
12 | | binding on all other persons, including, but not limited to, |
13 | | each beneficiary, fiduciary, excluded fiduciary, and any other |
14 | | party having an interest in the trust. The trust instrument may |
15 | | use the title "investment trust advisor" or any similar name or |
16 | | description demonstrating the intent to provide for the office |
17 | | and function of an investment trust advisor. Unless the terms |
18 | | of the trust provide otherwise, the investment trust advisor |
19 | | has 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;
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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 |
11 | | trust instrument of a trust. The powers of a distribution trust |
12 | | advisor may be exercised or not exercised in the sole and |
13 | | absolute discretion of the distribution trust advisor, and are |
14 | | binding on all other persons, including, but not limited to, |
15 | | each beneficiary, fiduciary, excluded fiduciary, and any other |
16 | | party having an interest in the trust. The trust instrument may |
17 | | use the title "distribution trust advisor" or any similar name |
18 | | or description demonstrating the intent to provide for the |
19 | | office and function of a distribution trust advisor. Unless the |
20 | | terms of the trust provide otherwise, the distribution trust |
21 | | advisor has authority to direct the trustee with regard to all |
22 | | decisions relating directly or indirectly to discretionary |
23 | | distributions to or for one or more beneficiaries.
|
24 | | (d) A trust protector may be designated in the trust |
25 | | instrument of a trust. The powers of a trust protector may be |
26 | | exercised or not exercised in the sole and absolute discretion |
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1 | | of the trust protector, and are binding on all other persons, |
2 | | including, but not limited to, each beneficiary, investment |
3 | | trust advisor, distribution trust advisor, fiduciary, excluded |
4 | | fiduciary, and any other party having an interest in the trust. |
5 | | The trust instrument may use the title "trust protector" or any |
6 | | similar name or description demonstrating the intent to provide |
7 | | for the office and function of a trust protector. The powers |
8 | | granted to a trust protector by the trust instrument may |
9 | | include but are not limited to authority to do any one or more |
10 | | of 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;
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4 | | (6) change the situs of the trust, the governing law of |
5 | | the trust, or both;
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6 | | (7) appoint one or more successor trust protectors, |
7 | | including designation of a plan of succession for future |
8 | | trust protectors;
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9 | | (8) interpret terms of the trust at the request of the |
10 | | trustee;
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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.
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17 | | If a trust contains a charitable interest, a trust protector |
18 | | must give notice to the Attorney General's Charitable Trust |
19 | | Bureau at least 60 days before taking any of the actions |
20 | | authorized under paragraph (2), (3), (4), (5), or (6) of this |
21 | | subsection. The Attorney General may waive this notice |
22 | | requirement.
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23 | | (e) A directing party is a fiduciary of the trust subject |
24 | | to the same duties and standards applicable to a trustee of a |
25 | | trust as provided by applicable law unless the trust instrument |
26 | | provides otherwise, but the trust instrument may not, however, |
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1 | | relieve or exonerate a directing party from the duty to act or |
2 | | withhold acting as the directing party in good faith reasonably |
3 | | believes is in the best interests of the trust.
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4 | | (f) The excluded fiduciary shall act in accordance with the |
5 | | trust instrument and comply with the directing party's exercise |
6 | | of the powers granted to the directing party by the trust |
7 | | instrument. Unless otherwise provided in the trust instrument, |
8 | | an excluded fiduciary has no duty to monitor, review, inquire, |
9 | | investigate, recommend, evaluate, or warn with respect to a |
10 | | directing party's exercise or failure to exercise any power |
11 | | granted to the directing party by the trust instrument, |
12 | | including, but not limited to, any power related to the |
13 | | acquisition, disposition, retention, management, or valuation |
14 | | of any asset or investment. Except as otherwise provided in |
15 | | this Section or the trust instrument, an excluded fiduciary is |
16 | | not liable, either individually or as a fiduciary, for any |
17 | | action, inaction, consent, or failure to consent by a directing |
18 | | party, 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;
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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
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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 |
22 | | party of a trust that is subject to the laws of this State, the |
23 | | directing party submits to the jurisdiction of the courts of |
24 | | this State even if investment advisory agreements or other |
25 | | related agreements provide otherwise, and the directing party |
26 | | may be made a party to any action or proceeding if issues |
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1 | | relate to a decision or action of the directing party.
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2 | | (h) Each directing party shall keep the excluded fiduciary |
3 | | and any other directing party reasonably informed regarding the |
4 | | administration of the trust with respect to any specific duty |
5 | | or function being performed by the directing party to the |
6 | | extent that the duty or function would normally be performed by |
7 | | the excluded fiduciary or to the extent that providing such |
8 | | information to the excluded fiduciary or other directing party |
9 | | is reasonably necessary for the excluded fiduciary or other |
10 | | directing party to perform its duties, and the directing party |
11 | | shall provide such information as reasonably requested by the |
12 | | excluded fiduciary or other directing party. Neither the |
13 | | performance nor the failure to perform of a directing party's |
14 | | duty to inform as provided in this subsection affects |
15 | | whatsoever the limitation on the liability of the excluded |
16 | | fiduciary as provided in this Section.
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17 | | (i) Other required notices.
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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
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8 | | (C) notify each qualified beneficiary of the |
9 | | directing party's resignation.
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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.
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17 | | (j) An excluded fiduciary may, but is not required to, |
18 | | obtain and rely upon an opinion of counsel on any matter |
19 | | relevant to this Section.
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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
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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 |
17 | | trustee shall take reasonable steps to take control of and |
18 | | protect the trust property. If a corporation is acting as |
19 | | co-trustee with one or more individuals, the corporate trustee |
20 | | shall have custody of the trust estate unless all the trustees |
21 | | otherwise agree. |
22 | | Section 810. Recordkeeping and identification of trust |
23 | | property. |
24 | | (a) A trustee shall keep adequate records of the |
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1 | | administration of the trust.
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2 | | (b) A trustee shall keep trust property separate from the |
3 | | trustee's own property.
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4 | | (c) Except as otherwise provided in subsection (d), a |
5 | | trustee not subject to federal or state banking regulation |
6 | | shall cause the trust property to be designated so that the |
7 | | interest of the trust, to the extent feasible, appears in |
8 | | records maintained by a party other than a trustee or |
9 | | beneficiary to whom the trustee has delivered the property.
|
10 | | (d) If the trustee maintains records clearly indicating the |
11 | | respective interests, a trustee may invest as a whole the |
12 | | property of 2 or more separate trusts.
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13 | | Section 811. Enforcement and defense of claims. A trustee |
14 | | shall take reasonable steps to enforce claims of the trust and |
15 | | to defend claims against the trust. It may be reasonable for a |
16 | | trustee not to enforce a claim, not to defend an action, to |
17 | | settle an action, or to suffer a default, depending upon the |
18 | | likelihood of recovery and the cost of suit and enforcement. |
19 | | Section 812. Powers and duties of successor; liability for |
20 | | acts of predecessor; approval of accounts. |
21 | | (a) A successor trustee shall have all the rights, powers, |
22 | | and duties that are granted to or imposed on the predecessor |
23 | | trustee.
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24 | | (b) A successor trustee is under no duty to inquire into |
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1 | | the acts or doings of a predecessor trustee, and is not liable |
2 | | for any act or failure to act of a predecessor trustee.
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3 | | (c) With the approval of a majority in interest of the |
4 | | beneficiaries then entitled to receive or eligible to have the |
5 | | benefit of the income from the trust, a successor trustee may |
6 | | accept the account rendered by, and the property received from, |
7 | | the predecessor trustee as a full and complete discharge of the |
8 | | predecessor trustee without incurring any liability. |
9 | | Section 813.1. Duty to inform and account; trusts |
10 | | irrevocable and trustees accepting appointment after effective |
11 | | date of Code. |
12 | | (a) This Section is prospective only and does not apply to |
13 | | any trust that was irrevocable before the effective date of |
14 | | this Code, or to a trustee who accepts a trusteeship before the |
15 | | effective date of this Code. Subject to Section 105, this |
16 | | Section supplants any common law duty of a trustee to inform |
17 | | and account to trust beneficiaries. This Section does not apply |
18 | | to trusts that became irrevocable before the effective date of |
19 | | this Code.
|
20 | | (b) General principles.
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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.
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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.
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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.
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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 |
22 | | remains in office, the trust accounting required by subsection |
23 | | (b) must be sent to the beneficiaries entitled to the |
24 | | accounting by the former trustee. A personal representative, |
25 | | guardian of the estate, or guardian of the person may send the |
26 | | trust accounting to the beneficiaries entitled to the |
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1 | | accounting on behalf of a deceased or incapacitated trustee.
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2 | | (d) Other required notices.
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3 | | (1) A trustee shall:
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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;
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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
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19 | | (C) notify each qualified beneficiary of the |
20 | | trustee's resignation.
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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 |
6 | | with respect to a single trust that is sufficiently identified |
7 | | to enable the trustee to locate the trust's records. A trustee |
8 | | may charge a reasonable fee for providing information under |
9 | | this 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 |
20 | | restrictions regarding a trust asset, then, before receiving |
21 | | the information, a beneficiary eligible under this Section to |
22 | | receive any information about that asset must agree to be bound |
23 | | by the same confidentiality restrictions. The trustee has no |
24 | | duty or obligation to disclose to any beneficiary any |
25 | | information that is otherwise prohibited to be disclosed by |
26 | | applicable law. |
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1 | | (g) A qualified beneficiary may waive the right to receive |
2 | | information otherwise required to be furnished under this |
3 | | Section, such as a trust accounting, by an instrument in |
4 | | writing delivered to the trustee. A qualified beneficiary may |
5 | | at any time, by an instrument in writing delivered to the |
6 | | trustee, withdraw a waiver previously given with respect to |
7 | | future trust accountings. |
8 | | (h) Receipt of information, notices, or a trust accounting |
9 | | by a beneficiary is presumed if the trustee has procedures in |
10 | | place requiring the mailing or delivery of information, |
11 | | notices, or trust accountings to the beneficiary. This |
12 | | presumption applies to the mailing or delivery of information, |
13 | | notices, or trust accountings by electronic means or the |
14 | | provision of access to an account by electronic means for so |
15 | | long as the beneficiary has agreed to receive electronic |
16 | | delivery or access. |
17 | | (i) A trustee may request approval of the trustee's current |
18 | | or final trust accounting in a judicial proceeding at the |
19 | | trustee's election, with all reasonable and necessary costs of |
20 | | the proceeding payable by the trust and allocated between |
21 | | income and principal in accordance with the Principal and |
22 | | Income Act. |
23 | | (j) Notwithstanding any other provision, this Section is |
24 | | not intended to and does not impose on any trustee a duty to |
25 | | inform any beneficiary in advance of transactions relating to |
26 | | the trust property. |
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1 | | Section 813.2. Duty to inform and account; trusts |
2 | | irrevocable and trustees accepting appointment before the |
3 | | effective date of Code. |
4 | | (a) This Section applies to all trusts that were |
5 | | irrevocable before the effective date of this Code and to a |
6 | | trustee who accepts a trusteeship before the effective date of |
7 | | this Code.
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8 | | (b) Every trustee at least annually shall furnish to the |
9 | | beneficiaries then entitled to receive or receiving the income |
10 | | from the trust estate, or, if none, then to those beneficiaries |
11 | | eligible to have the benefit of the income from the trust |
12 | | estate, a current account showing the receipts, disbursements, |
13 | | and inventory of the trust estate.
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14 | | (c) Every trustee shall on termination of the trust furnish |
15 | | to the beneficiaries then entitled to distribution of the trust |
16 | | estate a final account for the period from the date of the last |
17 | | current account to the date of distribution showing the |
18 | | inventory of the trust estate, the receipts, disbursements, and |
19 | | distributions and shall make available to the beneficiaries |
20 | | copies of prior accounts not previously furnished.
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21 | | (d) If a beneficiary is incapacitated, the account shall be |
22 | | provided to the representative of the estate of the |
23 | | beneficiary. If no representative for the estate of a |
24 | | beneficiary under legal disability has been appointed, the |
25 | | account shall be provided to a spouse, parent, adult child, or |
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1 | | guardian of the person of the beneficiary.
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2 | | (e) For each asset or class of assets described in the |
3 | | account
for which there is no readily available market value, |
4 | | the trustee, in the trustee's
discretion, may determine whether |
5 | | to estimate the value or use a nominal carrying
value for such |
6 | | an asset, how to estimate the value of such an asset, and |
7 | | whether and
how often to engage a professional appraiser to |
8 | | value such an asset. |
9 | | Section 814. Discretionary powers; tax savings. |
10 | | (a) Notwithstanding the breadth of discretion granted to a |
11 | | trustee or other fiduciary in the trust instrument, including |
12 | | the use of such terms as "absolute", "sole", or "uncontrolled", |
13 | | such fiduciary shall exercise a discretionary power in good |
14 | | faith and in accordance with the terms and purposes of the |
15 | | trust instrument.
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16 | | (b) Subject to subsection (e), and unless the trust |
17 | | instrument expressly indicates that a rule in this subsection |
18 | | does not apply:
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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
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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.
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4 | | (c) Subject to subsections (d) and (e), if a beneficiary of |
5 | | a trust, in an individual, trustee, or other capacity, removes |
6 | | a fiduciary and appoints a successor fiduciary who would be |
7 | | related or subordinate to that beneficiary within the meaning |
8 | | of Section 672(c) of the Internal Revenue Code if the |
9 | | beneficiary were the grantor, that successor fiduciary's |
10 | | discretionary powers are limited as follows:
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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;
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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
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17 | | (3) the fiduciary's discretionary power may not be |
18 | | exercised to grant to that beneficiary a general power of |
19 | | appointment.
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20 | | (d) Subsection (c) does not apply if:
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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.
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4 | | (e) Subsections (b) and (c) do not apply to:
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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;
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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;
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16 | | (3) any trust during any period that the trust may be |
17 | | revoked or amended by its settlor;
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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
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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.
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25 | | (f) A power whose exercise is limited or prohibited by |
26 | | subsections (b) and (c) may be exercised by a majority of the |
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1 | | remaining trustees or other fiduciaries whose exercise of the |
2 | | power is not so limited or prohibited. If the power of all |
3 | | trustees or other fiduciaries is so limited or prohibited, the |
4 | | court may appoint a special fiduciary with authority to |
5 | | exercise the power.
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6 | | Section 815. General powers of trustee. |
7 | | (a) A trustee, without authorization by the court, may |
8 | | exercise:
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9 | | (1) powers conferred by the trust instrument; or
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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;
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14 | | (B) any other powers appropriate to achieve the |
15 | | proper investment, management, and distribution of the |
16 | | trust property; and
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17 | | (C) any other powers conferred by this Code.
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18 | | (b) The exercise of a power is subject to the fiduciary |
19 | | duties prescribed by this Code.
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20 | | Section 816. Specific powers of trustee. Without limiting |
21 | | the authority conferred by Section 815, a trustee may:
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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;
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3 | | (3) exchange, partition, or otherwise change the |
4 | | character of trust property;
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5 | | (4) deposit trust money in an account in a regulated |
6 | | financial-service institution;
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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;
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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;
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20 | | (7) with respect to stocks or other securities, |
21 | | exercise the rights of an absolute owner, including the |
22 | | right to:
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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;
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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;
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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;
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7 | | (D) deposit the securities with a depository or |
8 | | other regulated financial-service institution; and
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9 | | (E) participate in mergers, consolidations, |
10 | | foreclosures, reorganizations, and liquidations;
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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;
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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;
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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;
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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;
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8 | | (12) abandon or decline to administer property of no |
9 | | value or of insufficient value to justify its collection or |
10 | | continued administration;
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11 | | (13) with respect to possible liability for violation |
12 | | of environmental law:
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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;
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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;
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3 | | (D) compromise claims against the trust that may be |
4 | | asserted for an alleged violation of environmental |
5 | | law; and
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6 | | (E) pay the expense of any inspection, review, |
7 | | abatement, or remedial action to comply with |
8 | | environmental law;
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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;
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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;
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16 | | (16) exercise elections with respect to federal, |
17 | | state, and local taxes;
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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;
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26 | | (18) make loans out of trust property, including loans |
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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;
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5 | | (19) pledge trust property to guarantee loans made by |
6 | | others to the beneficiary;
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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;
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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:
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21 | | (A) directly to the beneficiary;
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22 | | (B) to the guardian of the estate, or if none, the |
23 | | guardian of the person of the beneficiary;
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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;
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3 | | (D) to an adult relative of the beneficiary to be |
4 | | expended on the beneficiary's behalf;
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5 | | (E) by expending the money or using the property |
6 | | directly for the benefit of the beneficiary;
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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
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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;
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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;
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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;
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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;
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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;
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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;
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10 | | (28) engage attorneys, auditors, financial advisors, |
11 | | and other agents and pay reasonable compensation to such |
12 | | persons;
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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;
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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;
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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;
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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;
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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;
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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;
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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;
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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 |
2 | | occurrence of an event terminating a trust in whole or in part, |
3 | | or upon the exercise by a beneficiary of a right to withdraw |
4 | | trust principal, the trustee shall proceed expeditiously to |
5 | | make the distribution to the beneficiary. The trustee has the |
6 | | right to require from the beneficiary a written approval of the |
7 | | trustee's accountings provided to the beneficiary and, at the |
8 | | trustee's election, a refunding agreement from the beneficiary |
9 | | for liabilities that would otherwise be payable from trust |
10 | | property to the extent of the beneficiary's share of the |
11 | | distribution. An accounting approved under this Section is |
12 | | binding on the beneficiary providing the approval and on the |
13 | | beneficiary's successors, heirs, representatives, and assigns. |
14 | | A trustee may elect to withhold a reasonable amount of a |
15 | | distribution or require a reasonable reserve for the payment of |
16 | | debts, expenses, and taxes payable from the trust pending the |
17 | | receipt of a written approval of the trustee's accountings |
18 | | provided to the beneficiary and refunding agreement from a |
19 | | beneficiary or a judicial settlement of accounts. |
20 | | Section 818. (Reserved). |
21 | | Section 819. Nominee registration. The trustee may cause |
22 | | stocks, bonds, and other real or personal property belonging to |
23 | | the trust to be registered and held in the name of a nominee |
24 | | without mention of the trust in any instrument or record |
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1 | | constituting or evidencing title thereto. The trustee is liable |
2 | | for the acts of the nominee with respect to any investment so |
3 | | registered. The records of the trustee shall show at all times |
4 | | the ownership of the investment by the trustee, and the stocks, |
5 | | bonds, and other similar investments shall be in the possession |
6 | | and control of the trustee and be kept separate and apart from |
7 | | assets that are the individual property of the trustee. |
8 | | Section 820. Proceeds of eminent domain or partition. If a |
9 | | trustee is appointed by a court of this State to receive money |
10 | | under eminent domain or partition proceedings and to invest it |
11 | | for the benefit of the person who would be entitled to the real |
12 | | estate or its income if it had not been taken or sold, on |
13 | | petition of any interested person describing the real estate to |
14 | | be purchased, the price to be paid, the probable income to be |
15 | | derived and the state of the title, the court may authorize the |
16 | | trustee to invest all or any part of the money in other real |
17 | | estate in this State. Title to the real estate so purchased |
18 | | shall be taken in the name of the trustee. If the interest of |
19 | | the beneficiary in the real estate taken or sold was a legal |
20 | | interest, the court shall direct the trustee to convey to the |
21 | | beneficiary a legal estate upon the same conditions and |
22 | | limitations of title, but the conveyance by the trustee shall |
23 | | preserve any right of entry for condition broken, possibility |
24 | | of reverter created by the instrument of title or any reversion |
25 | | or other vested interest that arose by operation of law at the |
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1 | | time the instrument took effect. The court shall not direct the |
2 | | conveyance by the trustee unless there is a person or class of |
3 | | persons in being who would have a vested interest in the real |
4 | | estate taken or sold under the instrument of title to the real |
5 | | estate and who would be entitled to possession of the real |
6 | | estate if it had not been taken or sold. |
7 | | Section 821. Lands or estates subject to future interest or |
8 | | power of appointment; waste; appointment of trustee. If lands |
9 | | or any estate therein are subject to any legal or equitable |
10 | | future interest of any kind or to any power of appointment, |
11 | | whether a trust is involved or not, and it is made to appear |
12 | | that such lands or estate are liable to waste or depreciation |
13 | | in value, or that the sale thereof and the safe and proper |
14 | | investment of the proceeds will inure to the benefit and |
15 | | advantage of the persons entitled thereto, or that it is |
16 | | otherwise necessary for the conservation, preservation, or |
17 | | protection of the property or estate or of any present or |
18 | | future interest therein that such lands or estate be sold, |
19 | | mortgaged, leased, converted, exchanged, improved, managed or |
20 | | otherwise dealt with, the court may, pending the happening of |
21 | | the contingency, if any, and the vesting in possession of such |
22 | | future interest, declare a trust, and appoint a trustee or |
23 | | trustees for such lands or estate and vest in a trustee or |
24 | | trustees title to the property, and authorize and direct the |
25 | | sale of such property, either at a public sale or at private |
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1 | | sale, and upon such terms and conditions as the court may |
2 | | direct, and in such case may authorize the trustee or trustees |
3 | | to make such sale and to receive, hold and invest the proceeds |
4 | | thereof under the direction of the court for the benefit of the |
5 | | persons entitled or who may become entitled thereto according |
6 | | to their respective rights and interests, authorize and direct |
7 | | that all or any portion of the property, or the proceeds |
8 | | thereof, so subject to such future interests or powers of |
9 | | appointment, be leased, mortgaged, converted, exchanged, |
10 | | improved, managed, invested, reinvested, or otherwise dealt |
11 | | with, as the rights and interests of the parties and the |
12 | | equities of the case may require, and to that end may confer |
13 | | all necessary powers on the trustee or trustees. All orders of |
14 | | every court entered pursuant to this Section after June 30, |
15 | | 1982 and before September 16, 1985 vesting title to property in |
16 | | a trustee are hereby validated and such title is vested in such |
17 | | trustee 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 |
21 | | as 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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1 | | trustee administering a trust has a duty to invest and manage |
2 | | the trust assets to comply with the prudent investor rule set |
3 | | forth in this Article.
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4 | | (b) The prudent investor rule, a default rule, may be |
5 | | expanded, restricted, eliminated, or otherwise altered by |
6 | | express terms of the trust. A trustee is not liable to a |
7 | | beneficiary for the trustee's reasonable and good faith |
8 | | reliance on those express provisions.
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9 | | Section 902. Standard of care; portfolio strategy; risk and |
10 | | return objectives. |
11 | | (a) A trustee has a duty to invest and manage trust assets |
12 | | as a prudent investor would, considering the purposes, terms, |
13 | | distribution requirements, and other circumstances of the |
14 | | trust. This standard requires the exercise of reasonable care, |
15 | | skill, and caution and applies not in isolation, but in the |
16 | | context of the trust portfolio as a whole and as a part of an |
17 | | overall investment strategy that incorporates risk and return |
18 | | objectives reasonably suitable to the trust.
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19 | | (b) A trustee has a duty to pursue an investment strategy |
20 | | that considers both the reasonable production of income and |
21 | | safety of capital, consistent with the trustee's duty of |
22 | | impartiality and the purposes of the trust. Whether investments |
23 | | are underproductive or overproductive of income shall be judged |
24 | | by the portfolio as a whole and not as to any particular asset.
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25 | | (c) The circumstances that a trustee may consider in making |
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1 | | investment decisions include, without limitation:
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2 | | (1) the general economic conditions;
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3 | | (2) the possible effect of inflation or deflation;
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4 | | (3) the expected tax consequences of investment |
5 | | decisions or strategies;
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6 | | (4) the role each investment or course of action plays |
7 | | within the overall portfolio;
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8 | | (5) the expected total return including both income |
9 | | yield and appreciation of capital;
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10 | | (6) the duty to incur only reasonable and appropriate |
11 | | costs;
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12 | | (7) environmental and social considerations;
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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
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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.
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20 | | (d) In addition to the circumstances listed in subsection |
21 | | (c), a trustee may, but need not, consider related trusts and |
22 | | the assets of beneficiaries known to the trustee when making |
23 | | investment decisions.
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24 | | Section 903. Diversification. A trustee has a duty to |
25 | | diversify the investments of the trust unless, under the |
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1 | | circumstances, the trustee reasonably believes it is in the |
2 | | interests of the beneficiaries and furthers the purposes of the |
3 | | trust not to diversify. |
4 | | Section 904. Duties at inception of trusteeship. A trustee |
5 | | has a duty, within a reasonable time after the acceptance of a |
6 | | trusteeship, to review trust assets and to make and implement |
7 | | decisions concerning the retention and disposition of original |
8 | | preexisting investments, in order to conform to this Article. A |
9 | | trustee's decision to retain or dispose of an asset may |
10 | | properly be influenced by the asset's special relationship or |
11 | | value to the purposes of the trust or to some or all of the |
12 | | beneficiaries, consistent with the trustee's duty of |
13 | | impartiality. |
14 | | Section 905. Court action. Nothing in this Article |
15 | | abrogates or restricts the power of an appropriate court in |
16 | | proper cases to: (i) direct or permit the trustee to deviate |
17 | | from the terms of the trust; or (ii) to direct or permit the |
18 | | trustee to take, or to restrain the trustee from taking, any |
19 | | action 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 |
2 | | course of action is, taken alone, prudent or imprudent. The |
3 | | trustee may invest in every kind of property and type of |
4 | | investment, subject to this Article. A trustee's investment |
5 | | decisions and actions are to be judged in terms of the |
6 | | trustee's reasonable business judgment regarding the |
7 | | anticipated effect on the trust portfolio as a whole under the |
8 | | facts and circumstances prevailing at the time of the decision |
9 | | or action. This Article is a test of conduct and not of |
10 | | resulting performance. |
11 | | Section 909. Delegation of investment and management |
12 | | functions. Notwithstanding any other provision of this Code, |
13 | | before delegating any investment functions to an agent in |
14 | | accordance with subsection (b) of Section 807, a trustee shall |
15 | | conduct an inquiry into the experience, performance history, |
16 | | professional licensing or registration, if any, and financial |
17 | | stability of the investment agent. |
18 | | Section 910. Language invoking standard of Article. The |
19 | | following terms or comparable language in the investment powers |
20 | | and related provisions of a trust instrument, unless otherwise |
21 | | limited or modified by that instrument, shall be construed as |
22 | | authorizing any investment or strategy permitted under this |
23 | | Article: "investments permissible by law for investment of |
24 | | trust funds", "legal investments", "authorized investments", |
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1 | | "using the judgment and care under the circumstances then |
2 | | prevailing that persons of prudence, discretion, and |
3 | | intelligence exercise in the management of their own affairs, |
4 | | not in regard to speculation but in regard to the permanent |
5 | | disposition of their funds, considering the probable income as |
6 | | well as the probable safety of their capital", "prudent man |
7 | | rule", "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 |
11 | | of this Article that precede this Section apply to all existing |
12 | | and future trusts, but only as to actions or inactions |
13 | | occurring on or after January 1, 1992. |
14 | | Section 913. Life insurance. |
15 | | (a) Notwithstanding any other provision, the duties of a |
16 | | trustee with respect to acquiring or retaining as a trust asset |
17 | | a contract of insurance upon the life of the settlor, upon the |
18 | | lives of the settlor and the settlor's spouse, or upon the life |
19 | | of any person for which the trustee has an insurable interest |
20 | | in accordance with Section 113, do not include any of the |
21 | | following duties:
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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:
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3 | | (A) the type of insurance contract;
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4 | | (B) the quality of the insurance contract;
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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;
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11 | | (3) to inquire about or investigate into the health or |
12 | | financial condition of an insured;
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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
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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.
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22 | | (b) The trustee is not liable to the beneficiaries of the |
23 | | trust, the beneficiaries of the contract of insurance, or to |
24 | | any other party for loss arising from the absence of these |
25 | | duties regarding insurance contracts under this Section.
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26 | | (c) This Section applies to an irrevocable trust created |
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1 | | after the effective date of this Code or to a revocable trust |
2 | | that becomes irrevocable after the effective date of this Code. |
3 | | The trustee of a trust described under this Section established |
4 | | before the effective date of this Code shall notify the settlor |
5 | | in writing that, unless the settlor provides written notice to |
6 | | the contrary to the trustee within 90 days of the trustee's |
7 | | notice, this Section applies to the trust. This Section does |
8 | | not apply if, within 90 days of the trustee's notice, the |
9 | | settlor notifies the trustee in writing that this Section does |
10 | | not apply. If the settlor is deceased, then the trustee shall |
11 | | give notice to all of the legally competent current |
12 | | beneficiaries, and this Section applies to the trust unless the |
13 | | majority of the beneficiaries notify the trustee to the |
14 | | contrary in writing within 90 days of the trustee's notice.
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15 | | Section 914. Investments in affiliated investments; |
16 | | transactions with affiliates. |
17 | | (a) As used in this Section:
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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.
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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.
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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.
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8 | | (b) A financial institution acting in any fiduciary |
9 | | capacity may purchase any affiliated investment, including, |
10 | | but not limited to, insurance, equity derivatives, or |
11 | | securities underwritten or otherwise distributed by the |
12 | | financial institution or by an affiliate, through or directly |
13 | | from the financial institution or an affiliate or from a |
14 | | syndicate or selling group that includes the financial |
15 | | institution or an affiliate, if the purchase is otherwise |
16 | | prudent under the applicable fiduciary investment standard.
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17 | | (c) The compensation paid to a financial institution acting |
18 | | in any fiduciary capacity or an affiliate of the financial |
19 | | institution for any affiliated investment under this Section |
20 | | must be reasonable and may not be prohibited by the instrument |
21 | | governing the fiduciary relationship. The compensation for the |
22 | | affiliated investment may be in addition to the compensation |
23 | | that the financial institution is otherwise entitled to receive |
24 | | from the fiduciary account.
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25 | | (d) A financial institution shall disclose, at least |
26 | | annually:
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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;
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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
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9 | | (3) that the financial institution or an affiliate may |
10 | | have an interest in the affiliated investment.
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11 | | (e) The disclosure shall be given, in writing or |
12 | | electronically by any document prepared for an affiliated |
13 | | investment under federal or state securities laws or in a |
14 | | written summary that includes all compensation received or to |
15 | | be received by the financial institution or any affiliate and |
16 | | an explanation of the manner in which the compensation is |
17 | | calculated (either as a percentage of the assets invested or by |
18 | | some other formula or method), to each principal in an agency |
19 | | relationship and to all persons entitled to receive account |
20 | | statements of any other fiduciary account.
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21 | | (f) This Section applies to the purchase of securities made |
22 | | at the time of the initial offering of the securities or at any |
23 | | time thereafter.
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24 | | (g) A financial institution that has complied with the |
25 | | terms of this Section has full authority to administer an |
26 | | affiliated investment, including the authority to vote proxies |
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1 | | on the affiliated investment.
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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 |
6 | | a beneficiary is a breach of trust.
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7 | | (b) To remedy a breach of trust that has occurred or may |
8 | | occur, the court may:
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9 | | (1) compel the trustee to perform the trustee's duties;
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10 | | (2) enjoin the trustee from committing a breach of |
11 | | trust;
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12 | | (3) compel the trustee to redress a breach of trust by |
13 | | paying money, restoring property, or other means;
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14 | | (4) order a trustee to account;
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15 | | (5) appoint a special fiduciary to take possession of |
16 | | the trust property and administer the trust;
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17 | | (6) suspend the trustee;
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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.
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24 | | (c) Nothing in this Section limits the equitable powers of |
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1 | | the court to order other appropriate relief.
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2 | | Section 1002. Damages for breach of trust. |
3 | | (a) A trustee who commits a breach of trust is liable to |
4 | | the beneficiaries affected for the greater of:
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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
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8 | | (2) the value of any benefit received by the trustee by |
9 | | reason of the breach.
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10 | | (b) Except as otherwise provided in this subsection, if |
11 | | more than one trustee is liable to the beneficiaries for a |
12 | | breach of trust, a trustee is entitled to contribution from the |
13 | | other trustee or trustees liable for the breach. A trustee is |
14 | | not entitled to contribution if the trustee was substantially |
15 | | more at fault than another trustee or if the trustee committed |
16 | | the breach of trust in bad faith or with reckless indifference |
17 | | to the purposes of the trust or the interests of the |
18 | | beneficiaries. A trustee who received a benefit from the breach |
19 | | of trust is not entitled to contribution from another trustee |
20 | | to the extent of the benefit received.
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21 | | Section 1003. No damages in absence of breach. Except as |
22 | | provided in Section 802, absent a breach of trust, a trustee is |
23 | | not liable to a beneficiary for a loss or depreciation in the |
24 | | value of trust property or for any benefit received by the |
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1 | | trustee by reason of the administration of the trust. |
2 | | Section 1004. Attorney's fees and costs. In a judicial |
3 | | proceeding involving the administration of a trust, the court, |
4 | | as equity may require, may award costs and expenses, including |
5 | | reasonable attorney's fees, to any party, to be paid by another |
6 | | party 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 |
9 | | trustee for breach of trust for any matter disclosed in writing |
10 | | by a trust accounting, or otherwise as provided in Sections |
11 | | 813.1, 813.2, and Section 1102, after the date on which the |
12 | | disclosure becomes binding upon the beneficiary as provided |
13 | | below:
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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.
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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 |
25 | | proceeding by a beneficiary against a trustee for breach of |
26 | | trust must be commenced within 5 years after the first to occur |
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1 | | of:
|
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 |
7 | | beneficiary may bring any action against the trustee for |
8 | | fraudulent concealment within the time limit set forth in |
9 | | Section 13-215 of the Code of Civil Procedure.
|
10 | | Section 1006. Reliance on trust instrument. A trustee who |
11 | | acts in reasonable reliance on the express language of the |
12 | | trust instrument is not liable to a beneficiary for a breach of |
13 | | trust to the extent the breach resulted from the reliance. |
14 | | Section 1007. Event affecting administration or |
15 | | distribution. If the happening of an event, including, but not |
16 | | limited to, marriage, divorce, performance of educational |
17 | | requirements, or death, affects the administration or |
18 | | distribution of a trust, a trustee who has exercised reasonable |
19 | | care to ascertain the happening of the event is not liable for |
20 | | a 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 |
23 | | breach 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 |
9 | | the trustee is invalid as an abuse of a fiduciary or |
10 | | confidential relationship unless the trustee proves that the |
11 | | exculpatory term is fair under the circumstances and that its |
12 | | existence and contents were adequately communicated to the |
13 | | settlor. These conditions are satisfied if the settlor was |
14 | | represented by independent counsel.
|
15 | | Section 1009. Beneficiary's consent, release, or |
16 | | ratification. |
17 | | (a) A trustee is not liable to a beneficiary, or to anyone |
18 | | claiming by or through the beneficiary, for breach of trust if |
19 | | the beneficiary consented to the conduct constituting the |
20 | | breach, released the trustee from liability for the breach, or |
21 | | ratified 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 |
5 | | involves a self-dealing transaction, the consent, release, or |
6 | | ratification is binding only if the transaction was fair and |
7 | | reasonable. The condition that a self-dealing transaction must |
8 | | be fair and reasonable is satisfied if the beneficiary was |
9 | | represented by independent counsel. No consideration is |
10 | | required 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 |
13 | | is not personally liable on a contract properly entered into in |
14 | | the trustee's fiduciary capacity in the course of administering |
15 | | the trust if the trustee in the contract disclosed the |
16 | | fiduciary capacity.
|
17 | | (b) A trustee is personally liable for torts committed in |
18 | | the course of administering a trust, or for obligations arising |
19 | | from ownership or control of trust property, including |
20 | | liability for violation of environmental law, only if the |
21 | | trustee is personally at fault.
|
22 | | (c) A claim based on a contract entered into by a trustee |
23 | | in the trustee's fiduciary capacity, on an obligation arising |
24 | | from ownership or control of trust property, or on a tort |
25 | | committed in the course of administering a trust, may be |
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1 | | asserted in a judicial proceeding against the trustee in the |
2 | | trustee's fiduciary capacity, whether or not the trustee is |
3 | | personally liable for the claim.
|
4 | | Section 1011. Interest as general partner. |
5 | | (a) Except as otherwise provided in subsection (c) or |
6 | | unless personal liability is imposed in the contract, a trustee |
7 | | who holds an interest as a general partner in a general or |
8 | | limited partnership is not personally liable on a contract |
9 | | entered into by the partnership after the trust's acquisition |
10 | | of the interest if the fiduciary capacity was disclosed in the |
11 | | contract or in a statement previously filed pursuant to the |
12 | | Uniform Partnership Act (1997) or Uniform Limited Partnership |
13 | | Act (2001) or any other similar state law.
|
14 | | (b) Except as otherwise provided in subsection (c), a |
15 | | trustee who holds an interest as a general partner is not |
16 | | personally liable for torts committed by the partnership or for |
17 | | obligations arising from ownership or control of the interest |
18 | | unless the trustee is personally at fault.
|
19 | | (c) The immunity provided by this Section does not apply if |
20 | | an interest in the partnership is held by the trustee in a |
21 | | capacity other than that of trustee or is held by the trustee's |
22 | | spouse or one or more of the trustee's descendants, siblings, |
23 | | or parents, or the spouse of any of them.
|
24 | | (d) If the trustee of a revocable trust holds an interest |
25 | | as a general partner, the settlor is personally liable for |
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1 | | contracts and other obligations of the partnership as if the |
2 | | settlor were a general partner.
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3 | | Section 1012. Protection of person dealing with trustee. |
4 | | (a) A person other than a beneficiary or a beneficiary's |
5 | | representative under Article 3 acting in a representative |
6 | | capacity who in good faith assists a trustee, or who in good |
7 | | faith and for value deals with a trustee, without knowledge |
8 | | that the trustee is exceeding or improperly exercising the |
9 | | trustee's powers is protected from liability as if the trustee |
10 | | properly exercised the power.
|
11 | | (b) A person other than a beneficiary or a beneficiary's |
12 | | representative under Article 3 acting in a representative |
13 | | capacity who in good faith deals with a trustee is not required |
14 | | to inquire into the extent of the trustee's powers or the |
15 | | propriety of their exercise.
|
16 | | (c) A person, including a beneficiary, who in good faith |
17 | | delivers assets to a trustee need not ensure their proper |
18 | | application.
|
19 | | (d) A person other than a beneficiary who in good faith |
20 | | assists a former trustee, or who in good faith and for value |
21 | | deals with a former trustee, without knowledge that the |
22 | | trusteeship has terminated is protected from liability as if |
23 | | the former trustee were still a trustee.
|
24 | | (e) Comparable protective provisions of other laws |
25 | | relating to commercial transactions or transfer of securities |
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1 | | by fiduciaries prevail over the protection provided by this |
2 | | Section.
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3 | | Section 1013. Certification of trust. |
4 | | (a) Instead of furnishing a copy of the trust instrument to |
5 | | a person other than a beneficiary, the trustee may furnish to |
6 | | the person a certification of trust containing the following |
7 | | information:
|
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 |
23 | | authenticated by one or more of the trustees. A third party may |
24 | | require that the certification of trust be acknowledged.
|
25 | | (c) A certification of trust must state that the trust has |
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1 | | not been revoked, modified, or amended in any manner that would |
2 | | cause the representations contained in the certification of |
3 | | trust to be incorrect.
|
4 | | (d) A certification of trust need not contain the |
5 | | dispositive terms of a trust.
|
6 | | (e) A recipient of a certification of trust may require the |
7 | | trustee to furnish copies of those excerpts from the original |
8 | | trust instrument and later amendments that designate the |
9 | | trustee and confer upon the trustee the power to act in the |
10 | | pending transaction.
|
11 | | (f) A person who acts in reliance upon a certification of |
12 | | trust without actual knowledge that the representations |
13 | | contained therein are incorrect is not liable to any person for |
14 | | so acting and may assume without inquiry the existence of the |
15 | | facts contained in the certification. Knowledge of the trust |
16 | | instrument may not be inferred solely from the fact that a copy |
17 | | of all or part of the trust instrument is held by the person |
18 | | relying upon the certification.
|
19 | | (g) A person who in good faith enters into a transaction in |
20 | | reliance upon a certification of trust may enforce the |
21 | | transaction against the trust property as if the |
22 | | representations contained in the certification were correct.
|
23 | | (h) A person making a demand for the trust instrument in |
24 | | addition to a certification of trust or excerpts is liable for |
25 | | damages if the court determines that the person did not act in |
26 | | good faith in demanding the trust instrument. A person required |
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1 | | to examine a complete copy of the trust instrument for purposes |
2 | | of complying with applicable federal, state, or local law, a |
3 | | person acting in a fiduciary capacity with respect to a trust, |
4 | | and the Attorney General's Charitable Trust Bureau are deemed |
5 | | to be acting in good faith when demanding a copy of the trust |
6 | | instrument. This Section does not modify or limit any |
7 | | obligation a trustee may have to furnish a copy of a trust |
8 | | instrument to the Attorney General under the Charitable Trust |
9 | | Act or the Solicitation for Charity Act.
|
10 | | (i) This Section does not limit the right of a person to |
11 | | obtain a copy of the trust instrument in a judicial proceeding |
12 | | concerning the trust.
|
13 | | (j) A certification of trust may be substantially as |
14 | | follows, but nothing in this subsection invalidates or bars the |
15 | | use of a certification of trust in any other or different form:
|
16 | | CERTIFICATION OF TRUST |
17 | | Name of trust: ...............................................
|
18 | | Date trust instrument was executed: ..........................
|
19 | | Tax Identification Number of trust (SSN or EIN): .............
|
20 | | Name(s) of settlor(s) of trust: ..............................
|
21 | | Name(s) of currently acting trustee(s): ......................
|
22 | | Address(es) of currently acting trustee(s): ..................
|
23 | | .... This trust states that .... of .... co-trustee(s) are |
24 | | required to exercise the powers of the trustee.
|
25 | | .... The co-trustees authorized to sign or otherwise |
26 | | authenticate on behalf of the trust are: .....................
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1 | | .... There are no co-trustees authorized to sign or otherwise |
2 | | authenticate on behalf of the trust. |
3 | | Name(s) of successor trustee(s): .............................
|
4 | | The trustee(s) has (have) the power to (state, synopsize, or |
5 | | describe relevant powers): . |
6 | | Title to the trust property shall be taken as follows (for |
7 | | example, "John Doe and Jane Doe, co-trustees of the Doe Family |
8 | | Living Trust, dated January 4, 1999"): .......................
|
9 | | .... This is an irrevocable trust.
|
10 | | .... This is a revocable trust. Name(s) of person(s) holding |
11 | | power to revoke the trust: ...................................
|
12 | | .... This is an unamendable trust.
|
13 | | .... This trust is amendable. Name(s) of person(s) holding |
14 | | power to amend the trust: .................................... |
15 | | I (we) certify that the above-named trust is in full force and |
16 | | has not been revoked, modified, or amended in any manner that |
17 | | would cause the representations in this Certification of Trust |
18 | | to be incorrect. |
19 | | IN WITNESS THEREOF, each of the undersigned, being a trustee of |
20 | | the above-named trust with the authority to execute this |
21 | | Certification of Trust, does hereby execute it this ..... day |
22 | | of .........., ....... |
23 | | Trustee Signature: ............. |
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1 | | Printed Name: .................. |
2 | | Trustee Signature: .............
|
3 | | Printed Name: .................. |
4 | | [OPTIONAL: |
5 | | State of .................) |
6 | | County of ................) |
7 | | This 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 |
13 | | Professional Regulation. No trustee or other person is liable |
14 | | under this Code for any act done or omitted in good faith in |
15 | | conformity with any rule, interpretation, or opinion issued by |
16 | | the Secretary of Financial and Professional Regulation, |
17 | | notwithstanding that after the act or omission has occurred, |
18 | | the rule, opinion, or interpretation upon which reliance is |
19 | | placed is amended, rescinded, or determined by judicial or |
20 | | other 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 |
3 | | inform. |
4 | | (a) In this Article, "total return trust" means a trust |
5 | | converted in accordance with this Article that the trustee |
6 | | shall manage and invest seeking a total return without regard |
7 | | to whether the return is from income or appreciation of |
8 | | principal.
|
9 | | (b) Notwithstanding any other provision of this Article, a |
10 | | trustee has no duty to inform beneficiaries about the |
11 | | availability of this Article and has no duty to review the |
12 | | trust to determine whether any action should be taken under |
13 | | this Article unless requested to do so in writing by a |
14 | | qualified beneficiary.
|
15 | | Section 1102. Conversion by trustee. A trustee may convert |
16 | | a trust to a total return trust as described in this Article if |
17 | | all 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 |
9 | | total return trust may be made by agreement between a trustee |
10 | | and all qualified beneficiaries. The agreement may include any |
11 | | actions a court could properly order under Section 1108; |
12 | | however, any distribution percentage determined by the |
13 | | agreement 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 |
16 | | court to order conversion to a total return trust, including |
17 | | without limitation the reason that conversion under Section |
18 | | 1102 is unavailable because a beneficiary timely objects to the |
19 | | conversion to a total return trust.
|
20 | | (b) A beneficiary may request the trustee to convert to a |
21 | | total return trust or adjust the distribution percentage. If |
22 | | the trustee declines or fails to act within 6 months after |
23 | | receiving a written request to do so, the beneficiary may |
24 | | petition the court to order the conversion or adjustment.
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1 | | (c) The trustee may petition the court prospectively to |
2 | | reconvert from a total return trust or adjust the distribution |
3 | | percentage if the trustee determines that the reconversion or |
4 | | adjustment will enable the trustee to better carry out the |
5 | | purposes of the trust. A beneficiary may request the trustee to |
6 | | petition the court prospectively to reconvert from a total |
7 | | return trust or adjust the distribution percentage. If the |
8 | | trustee declines or fails to act within 6 months after |
9 | | receiving a written request to do so, the beneficiary may |
10 | | petition the court to order the reconversion or adjustment.
|
11 | | (d) In a judicial proceeding under this Section, the |
12 | | trustee may, but need not, present the trustee's opinions and |
13 | | reasons (1) for supporting or opposing conversion to (or |
14 | | reconversion from or adjustment of the distribution percentage |
15 | | of) a total return trust, including whether the trustee |
16 | | believes conversion (or reconversion or adjustment of the |
17 | | distribution percentage) would enable the trustee to better |
18 | | carry out the purposes of the trust, and (2) about any other |
19 | | matters relevant to the proposed conversion (or reconversion or |
20 | | adjustment of the distribution percentage). A trustee's |
21 | | actions in accordance with this Section shall not be deemed |
22 | | improper or inconsistent with the trustee's duty of |
23 | | impartiality unless the court finds from all the evidence that |
24 | | the trustee acted in bad faith.
|
25 | | (e) The court shall order conversion to (or reconversion |
26 | | prospectively from or adjustment of the distribution |
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1 | | percentage of) a total return trust if the court determines |
2 | | that the conversion (or reconversion or adjustment of the |
3 | | distribution percentage) will enable the trustee to better |
4 | | carry out the purposes of the trust and the conversion (or |
5 | | reconversion or adjustment of the distribution percentage) is |
6 | | in the best interests of the beneficiaries.
|
7 | | (f) The court may order any of the following actions in a |
8 | | proceeding brought by a trustee or a beneficiary under this |
9 | | Section:
|
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 |
23 | | the court to grant other relief.
|
24 | | Section 1105. Post conversion. While a trust is a total |
25 | | return 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 |
9 | | asset for which there is no readily available market value and |
10 | | that the trustee determines in accordance with subsection (d) |
11 | | shall be excluded from the net fair market value of the trust's |
12 | | assets for purposes of determining the distribution amount |
13 | | under paragraph (2) of Section 1105.
|
14 | | (b) The trustee, in the trustee's discretion, may determine |
15 | | any of the following matters in administering a total return |
16 | | trust as the trustee from time to time determines necessary or |
17 | | helpful 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 |
16 | | from excluded assets as provided in the trust instrument.
|
17 | | (d) Unless the trustee determines there are compelling |
18 | | reasons to the contrary considering all relevant factors |
19 | | including the best interests of the beneficiaries, the trustee |
20 | | shall treat each asset for which there is no readily available |
21 | | market value as an excluded asset. Examples of assets for which |
22 | | there is a readily available market value include: cash and |
23 | | cash equivalents; stocks, bonds, and other securities and |
24 | | instruments for which there is an established market on a stock |
25 | | exchange, in an over-the-counter market, or otherwise; and any |
26 | | other property that can reasonably be expected to be sold |
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1 | | within one week of the decision to sell without extraordinary |
2 | | efforts by the seller. Examples of assets for which there is no |
3 | | readily available market value include: stocks, bonds, and |
4 | | other securities and instruments for which there is no |
5 | | established market on a stock exchange, in an over-the-counter |
6 | | market, or otherwise; real property; tangible personal |
7 | | property; and artwork and other collectibles.
|
8 | | (e) If tangible personal property or real property is |
9 | | possessed or occupied by a beneficiary, the trustee shall not |
10 | | limit or restrict any right of the beneficiary to use the |
11 | | property in accordance with the trust instrument regardless of |
12 | | whether the trustee treats the property as an excluded asset.
|
13 | | Section 1107. Allocations. |
14 | | (a) Expenses, taxes, and other charges that would be |
15 | | deducted from income if the trust were not a total return trust |
16 | | shall not be deducted from the distribution amount.
|
17 | | (b) Unless otherwise provided by the trust instrument, the |
18 | | trustee shall fund the distribution amount each year from the |
19 | | following 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 |
7 | | trust 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 |
21 | | and conversion or failure to convert would enhance or diminish |
22 | | the beneficial interest of the trustee, or if possession or |
23 | | exercise of the conversion power by a particular trustee would |
24 | | alone cause any individual to be treated as owner of a part of |
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1 | | the trust for income tax purposes or cause a part of the trust |
2 | | to be included in the gross estate of any individual for estate |
3 | | tax purposes, then the particular trustee may not participate |
4 | | as a trustee in the exercise of the conversion power except |
5 | | that the particular trustee may petition the court under |
6 | | subsection (a) of Section 1104 to order conversion in |
7 | | accordance with this Article.
|
8 | | (b) If the particular trustee has one or more co-trustees |
9 | | to whom subsection (a) does not apply, the co-trustee or |
10 | | co-trustees may convert the trust to a total return trust in |
11 | | accordance with this Article.
|
12 | | Section 1110. Releases. A trustee may irrevocably release |
13 | | the power granted by this Article if the trustee reasonably |
14 | | believes the release is in the best interests of the trust and |
15 | | its beneficiaries. The release may be personal to the releasing |
16 | | trustee or may apply generally to some or all subsequent |
17 | | trustees, and the release may be for any specified period, |
18 | | including a period measured by the life of an individual. |
19 | | Section 1111. Remedies. A trustee who reasonably and in |
20 | | good faith takes any action under this Article is not liable to |
21 | | any interested person. If a trustee reasonably and in good |
22 | | faith takes any action under this Article and an interested |
23 | | person opposes the action, the person's exclusive remedy is to |
24 | | obtain an order of the court directing the trustee to convert |
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1 | | the trust to a total return trust, to reconvert from a total |
2 | | return trust, to change the distribution percentage, or to |
3 | | order any administrative procedures the court determines |
4 | | necessary or helpful for the proper functioning of the trust. |
5 | | An action by a trustee under this Article is presumed taken or |
6 | | omitted reasonably and in good faith unless it is determined by |
7 | | the court to have been an abuse of discretion. |
8 | | Section 1112. Application. This Article is available to |
9 | | trusts in existence on or after August 22, 2002. This Article |
10 | | shall be construed as pertaining to the administration of a |
11 | | trust and shall be available to any trust that is administered |
12 | | in Illinois or that is governed by Illinois law with respect to |
13 | | the meaning and effect of its terms unless one of the following |
14 | | apply:
|
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 |
16 | | substituting the unitrust amount for net trust accounting |
17 | | income as the method of determining current return and shall be |
18 | | given effect notwithstanding any contrary provision of the |
19 | | Principal and Income Act. By way of example and not limitation, |
20 | | a unitrust amount determined by a percentage of not less than |
21 | | 3% nor greater than 5% is conclusively presumed a reasonable |
22 | | current return that fairly apportions the total return of a |
23 | | unitrust.
|
24 | | (c) Subsection (b) of Section 1107 applies to a unitrust |
25 | | except to the extent its trust instrument expressly provides |
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1 | | otherwise.
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2 | | (d) This Section does not apply to a charitable remainder |
3 | | unitrust as defined by Section 664(d) of the Internal Revenue |
4 | | Code.
|
5 | | Article 12.
Trust Decanting. |
6 | | Section 1201. Article title. This Article may be referred |
7 | | to as the Trust Decanting Law. |
8 | | Section 1202. Definitions. In this Article:
|
9 | | (1) "Appointive property" means the property or property |
10 | | interest 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 |
20 | | jurisdiction in matters relating to trusts.
|
21 | | (4) "Decanting power" or "the decanting power" means the |
22 | | power of an authorized fiduciary under this Article to |
23 | | distribute property of a first trust to one or more second |
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1 | | trusts or to modify the terms of the first trust.
|
2 | | (5) "Expanded distributive discretion" means a |
3 | | discretionary power of distribution that is not limited to an |
4 | | ascertainable standard or a reasonably definite standard.
|
5 | | (6) "First trust" means a trust over which an authorized |
6 | | fiduciary may exercise the decanting power.
|
7 | | (7) "First-trust instrument" means the trust instrument |
8 | | for a first trust.
|
9 | | (8) "Reasonably definite standard" means a clearly |
10 | | measurable standard under which a holder of a power of |
11 | | distribution is legally accountable within the meaning of |
12 | | Section 674(b)(5)(A) of the Internal Revenue Code, as amended, |
13 | | and any applicable regulations.
|
14 | | (9) "Record" means information that is inscribed on a |
15 | | tangible medium or that is stored in an electronic or other |
16 | | medium 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 |
23 | | for 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 |
2 | | irrevocable or revocable by the settlor only with the consent |
3 | | of the trustee or a person holding an adverse interest.
|
4 | | (b) This Article does not apply to a trust held solely for |
5 | | charitable purposes.
|
6 | | (c) Subject to Section 1215, a trust instrument may |
7 | | restrict or prohibit exercise of the decanting power.
|
8 | | (d) This Article does not limit the power of a trustee, |
9 | | powerholder, or other person to distribute or appoint property |
10 | | in further trust or to modify a trust under the trust |
11 | | instrument, law of this State other than this Article, common |
12 | | law, a court order, or a nonjudicial settlement agreement.
|
13 | | (e) This Article does not affect the ability of a settlor |
14 | | to provide in a trust instrument for the distribution or |
15 | | appointment in further trust of the trust property or for |
16 | | modification of the trust instrument.
|
17 | | Section 1204. Fiduciary duty. |
18 | | (a) In exercising the decanting power, an authorized |
19 | | fiduciary shall act in accordance with its fiduciary duties, |
20 | | including the duty to act in accordance with the purposes of |
21 | | the first trust.
|
22 | | (b) This Article does not create or imply a duty to |
23 | | exercise the decanting power or to inform beneficiaries about |
24 | | the applicability of this Article.
|
25 | | (c) Except as otherwise provided in a first-trust |
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1 | | instrument, for purposes of this Article and Section 801, the |
2 | | terms of the first trust are deemed to include the decanting |
3 | | power.
|
4 | | Section 1205. Application; governing law. This Article |
5 | | applies to a trust created before, on, or after the effective |
6 | | date 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 |
21 | | person that reasonably relies on the validity of a distribution |
22 | | of part or all of the property of a trust to another trust, or a |
23 | | modification of a trust, under this Article, law of this State |
24 | | other than this Article or the law of another jurisdiction is |
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1 | | not liable to any person for any action or failure to act as a |
2 | | result of the reliance. |
3 | | Section 1207. Notice. |
4 | | (a) In this Section, a notice period begins on the day |
5 | | notice is given under subsection (c) and ends 59 days after the |
6 | | day notice is given. |
7 | | (b) Except as otherwise provided in this Article, an |
8 | | authorized fiduciary may exercise the decanting power without |
9 | | the consent of any person and without court approval.
|
10 | | (c) Except as otherwise provided in subsection (f), an |
11 | | authorized fiduciary shall give notice in a record of the |
12 | | intended exercise of the decanting power not later than 60 days |
13 | | before 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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1 | | under subsection (c) to a qualified beneficiary who is a minor |
2 | | and has no representative. The authorized fiduciary is not |
3 | | required to give notice under subsection (c) to a person that |
4 | | is not known to the fiduciary or is known to the fiduciary but |
5 | | cannot 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 |
14 | | of the notice period under subsection (a) if all persons |
15 | | entitled to receive notice waive the period in a signed record.
|
16 | | (g) The receipt of notice, waiver of the notice period, or |
17 | | expiration of the notice period does not affect the right of a |
18 | | person to file an application under Section 1209 with the court |
19 | | asserting 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 |
26 | | because of the failure to give notice to one or more persons |
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1 | | under subsection (c) if the authorized fiduciary acted with |
2 | | reasonable care to comply with subsection (c). |
3 | | (i) If the first trust contains a charitable interest and |
4 | | the Attorney General objects to the proposed exercise of the |
5 | | decanting power in writing delivered to the authorized |
6 | | fiduciary before the end of the notice period, the authorized |
7 | | fiduciary may proceed with the proposed exercise of the |
8 | | decanting power only with either court approval or the later |
9 | | written consent of the Attorney General. |
10 | | Section 1208. (Reserved). |
11 | | Section 1209. Court involvement. |
12 | | (a) On application of an authorized fiduciary, a person |
13 | | entitled to notice under Section 1207(c), a beneficiary, or, |
14 | | with respect to a charitable interest, the Attorney General or |
15 | | any other person that has standing to enforce the charitable |
16 | | interest, 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 |
18 | | may 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 |
25 | | power must be made in a record signed by an authorized |
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1 | | fiduciary. The signed record must, directly or by reference to |
2 | | the notice required by Section 1207, identify the first trust |
3 | | and the second trust or trusts and state the property of the |
4 | | first trust being distributed to each second trust and the |
5 | | property, if any, that remains in the first trust. |
6 | | Section 1211. Decanting power under expanded distributive |
7 | | discretion. |
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 |
16 | | authorized fiduciary that has expanded distributive discretion |
17 | | to distribute the principal of a first trust to one or more |
18 | | current beneficiaries may exercise the decanting power over the |
19 | | principal of the first trust.
|
20 | | (c) Subject to Section 1213, in an exercise of the |
21 | | decanting 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 |
6 | | exercise of the decanting power under this Section, a second |
7 | | trust may be a trust created or administered under the law of |
8 | | any 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) |
25 | | through (4) of subsection (d) may be general or nongeneral. The |
26 | | class of permissible appointees in favor of which the power may |
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1 | | be exercised may be broader than or different from the |
2 | | beneficiaries of the first trust.
|
3 | | (f) If an authorized fiduciary has expanded distributive |
4 | | discretion to distribute part but not all of the principal of a |
5 | | first trust, the fiduciary may exercise the decanting power |
6 | | under this Section over that part of the principal over which |
7 | | the authorized fiduciary has expanded distributive discretion.
|
8 | | Section 1212. Decanting power under limited distributive |
9 | | discretion. |
10 | | (a) In this Section, "limited distributive discretion" |
11 | | means a discretionary power of distribution that is limited to |
12 | | an ascertainable standard or a reasonably definite standard.
|
13 | | (b) An authorized fiduciary that has limited distributive |
14 | | discretion over the principal of the first trust for the |
15 | | benefit of one or more current beneficiaries may exercise the |
16 | | decanting power over the principal of the first trust.
|
17 | | (c) Under this Section and subject to Section 1214, a |
18 | | second trust may be created or administered under the law of |
19 | | any jurisdiction. Under this Section, the second trusts, in the |
20 | | aggregate, must grant each beneficiary of the first trust |
21 | | beneficial interests that are substantially similar to the |
22 | | beneficial interests of the beneficiary in the first trust.
|
23 | | (d) A power to make a distribution under a second trust for |
24 | | the benefit of a beneficiary who is an individual is |
25 | | substantially similar to a power under the first trust to make |
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1 | | a distribution directly to the beneficiary. A distribution is |
2 | | for 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 |
13 | | discretion over part but not all of the principal of a first |
14 | | trust, the fiduciary may exercise the decanting power under |
15 | | this Section over that part of the principal over which the |
16 | | authorized 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.
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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.
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26 | | (b) A special-needs fiduciary may exercise the decanting |
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1 | | power under Section 1211 over the principal of a first trust as |
2 | | if the fiduciary had authority to distribute principal to a |
3 | | beneficiary with a disability subject to expanded distributive |
4 | | discretion 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 |
12 | | Section, 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.
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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 |
24 | | interest, the Attorney General has the rights of a qualified |
25 | | beneficiary and may represent and bind the charitable interest.
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1 | | (c) If a first trust contains a charitable interest, the |
2 | | second 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 |
11 | | shall be treated as one trust for purposes of determining |
12 | | whether the exercise of the decanting power diminishes the |
13 | | charitable interest or diminishes the interest of an identified |
14 | | charitable organization for purposes of subsection (c).
|
15 | | (e) If a first trust contains a determinable charitable |
16 | | interest, the second trusts that include charitable interests |
17 | | pursuant to subsection (c) must be administered under the law |
18 | | of 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 |
2 | | the Attorney General under Illinois law.
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3 | | Section 1215. Trust limitation on decanting. |
4 | | (a) An authorized fiduciary may not exercise the decanting |
5 | | power to the extent the first-trust instrument expressly |
6 | | prohibits 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 |
12 | | restriction in the first-trust instrument that expressly |
13 | | applies 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 |
19 | | a first trust, a spendthrift clause, or a clause restraining |
20 | | the voluntary or involuntary transfer of a beneficiary's |
21 | | interest does not preclude exercise of the decanting power.
|
22 | | (d) Subject to subsections (a) and (b), an authorized |
23 | | fiduciary may exercise the decanting power under this Article |
24 | | even if the first-trust instrument permits the authorized |
25 | | fiduciary or another person to modify the first-trust |
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1 | | instrument or to distribute part or all of the principal of the |
2 | | first trust to another trust.
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3 | | (e) If a first-trust instrument contains an express |
4 | | prohibition described in subsection (a) or an express |
5 | | restriction described in subsection (b), that provision must be |
6 | | included in the second-trust instrument.
|
7 | | Section 1216. Change in compensation. |
8 | | (a) If a first-trust instrument specifies an authorized |
9 | | fiduciary's compensation, the fiduciary may not exercise the |
10 | | decanting power to increase the fiduciary's compensation |
11 | | beyond 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 |
16 | | authorized fiduciary's compensation, the fiduciary may not |
17 | | exercise the decanting power to increase the fiduciary's |
18 | | compensation above the compensation permitted by Section 708 |
19 | | unless:
|
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 |
24 | | is incidental to other changes made by the exercise of the |
25 | | decanting power is not an increase in the fiduciary's |
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1 | | compensation for purposes of subsections (a) and (b).
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2 | | Section 1217. Relief from liability and indemnification. |
3 | | (a) Except as otherwise provided in this Section, a |
4 | | second-trust instrument may not relieve an authorized |
5 | | fiduciary from liability for breach of trust to a greater |
6 | | extent than the first-trust instrument.
|
7 | | (b) A second-trust instrument may provide for |
8 | | indemnification of an authorized fiduciary of the first trust |
9 | | or another person acting in a fiduciary capacity under the |
10 | | first trust for any liability or claim that would have been |
11 | | payable from the first trust if the decanting power had not |
12 | | been exercised.
|
13 | | (c) A second-trust instrument may not reduce fiduciary |
14 | | liability in the aggregate.
|
15 | | (d) Subject to subsection (c), a second-trust instrument |
16 | | may divide and reallocate fiduciary powers among fiduciaries, |
17 | | including one or more trustees, distribution advisors, |
18 | | investment advisors, trust protectors, or other persons, and |
19 | | relieve a fiduciary from liability for an act or failure to act |
20 | | of another fiduciary as permitted by law of this State other |
21 | | than this Article.
|
22 | | Section 1218. Removal or replacement of authorized |
23 | | fiduciary. An authorized fiduciary may not exercise the |
24 | | decanting power to modify a provision in the first-trust |
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1 | | instrument granting another person power to remove or replace |
2 | | the 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 |
3 | | following 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.
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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.
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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.
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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
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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 |
18 | | duration that is the same as or different from the duration of |
19 | | the first trust.
|
20 | | (b) To the extent that property of a second trust is |
21 | | attributable to property of the first trust, the second trust |
22 | | is subject to any rules governing maximum perpetuity, |
23 | | accumulation, or suspension of the power of alienation |
24 | | applicable to property of the first trust.
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1 | | Section 1221. Need to distribute not required. An |
2 | | authorized fiduciary may exercise the decanting power whether |
3 | | or not under the first trust's discretionary distribution |
4 | | standard the fiduciary would have made or could have been |
5 | | compelled to make a discretionary distribution of principal at |
6 | | the time of the exercise. |
7 | | Section 1222. Savings provision. |
8 | | (a) If exercise of the decanting power would be effective |
9 | | under this Article except that the second-trust instrument in |
10 | | part does not comply with this Article, the exercise of the |
11 | | power is effective and the following rules apply to the |
12 | | principal of the first trust subject to the exercise of the |
13 | | power:
|
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 |
22 | | discovers that subsection (a) applies to a prior exercise of |
23 | | the decanting power, the fiduciary shall take such appropriate |
24 | | corrective 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 |
9 | | trust that has a protector to the extent the trust could be |
10 | | decanted under this Article as if each animal that benefits |
11 | | from the trust were an individual, if the protector consents in |
12 | | a signed record to the exercise of the decanting power.
|
13 | | (c) A protector for an animal has the rights under this |
14 | | Article of a qualified beneficiary.
|
15 | | (d) Notwithstanding any other provision of this Article, if |
16 | | a first trust is an animal trust, in an exercise of the |
17 | | decanting power, the second trust must provide that trust |
18 | | property may be applied only to its intended purpose for the |
19 | | period 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 |
23 | | Article and subject to subsection (b), a settlor of a first |
24 | | trust is deemed to be the settlor of the second trust with |
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1 | | respect to the portion of the principal of the first trust |
2 | | subject to the exercise of the decanting power.
|
3 | | (b) In determining settlor intent with respect to a second |
4 | | trust, the intent of a settlor of the first trust, the intent |
5 | | of a settlor of the second trust, and the intent of the |
6 | | authorized fiduciary may be considered.
|
7 | | Section 1226. Later-discovered property. |
8 | | (a) Except as otherwise provided in subsection (c), if |
9 | | exercise of the decanting power was intended to distribute all |
10 | | the principal of the first trust to one or more second trusts, |
11 | | later-discovered property otherwise belonging to the first |
12 | | trust and property paid to or acquired by the first trust after |
13 | | the exercise of the power is part of the trust estate of the |
14 | | second trust.
|
15 | | (b) Except as otherwise provided in subsection (c), if |
16 | | exercise of the decanting power was intended to distribute less |
17 | | than all the principal of the first trust to one or more second |
18 | | trusts, later-discovered property belonging to the first trust |
19 | | or property paid to or acquired by the first trust after |
20 | | exercise of the decanting power remains part of the trust |
21 | | estate of the first trust.
|
22 | | (c) An authorized fiduciary may provide in an exercise of |
23 | | the decanting power or by the terms of a second trust for |
24 | | disposition of later-discovered property belonging to the |
25 | | first trust or property paid to or acquired by the first trust |
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1 | | after exercise of the decanting power.
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2 | | Section 1227. Obligations. A debt, liability, or other |
3 | | obligation enforceable against property of a first trust is |
4 | | enforceable to the same extent against that property when held |
5 | | by 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 |
8 | | to 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 |
11 | | an appointment of appointive property.
|
12 | | (2) "Appointive property" means the property or property |
13 | | interest subject to a power of appointment.
|
14 | | (3) "Blanket-exercise clause" means a clause in an |
15 | | instrument that exercises a power of appointment and is not a |
16 | | specific-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.
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2 | | (4) "Exclusionary power of appointment" means a power of |
3 | | appointment exercisable in favor of any one or more of the |
4 | | permissible appointees to the exclusion of the other |
5 | | permissible appointees.
|
6 | | (5) "Gift-in-default clause" means a clause identifying a |
7 | | taker in default of appointment.
|
8 | | (6) "Impermissible appointee" means a person that is not a |
9 | | permissible appointee.
|
10 | | (7) "Instrument" means a writing.
|
11 | | (8) "Permissible appointee" means a person in whose favor a |
12 | | powerholder may exercise a power of appointment.
|
13 | | (9) "Record" means information that is inscribed on a |
14 | | tangible medium or that is stored in an electronic or other |
15 | | medium and is retrievable in perceivable form. |
16 | | (10) "Specific-exercise clause" means a clause in an |
17 | | instrument that specifically refers to and exercises a |
18 | | particular power of appointment.
|
19 | | (11) "Taker in default of appointment" means a person that |
20 | | takes part or all of the appointive property to the extent the |
21 | | powerholder does not effectively exercise the power of |
22 | | appointment.
|
23 | | (12) "Terms of the instrument" means the manifestation of |
24 | | the intent of the maker of the instrument regarding the |
25 | | instrument's provisions as expressed in the instrument or as |
26 | | may be established by other evidence that would be admissible |
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1 | | in a legal proceeding. |
2 | | Section 1303. Governing law. Unless the terms of the |
3 | | instrument creating a power of appointment manifest a contrary |
4 | | intent: |
5 | | (1) the creation, revocation, or amendment of the power is |
6 | | governed by the law of the donor's domicile at the relevant |
7 | | time; and
|
8 | | (2) the exercise, release, or disclaimer of the power, or |
9 | | the revocation or amendment of the exercise, release, or |
10 | | disclaimer of the power, is governed by the law of the |
11 | | powerholder'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 |
23 | | a power of appointment by the exercise of a power of |
24 | | appointment.
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1 | | (c) A power of appointment may not be created in a deceased |
2 | | individual.
|
3 | | (d) Subject to an applicable rule against perpetuities, a |
4 | | power of appointment may be created in an unborn or |
5 | | unascertained powerholder. |
6 | | Section 1305. Nontransferability. A powerholder may not |
7 | | transfer a power of appointment. If the powerholder dies |
8 | | without exercising or releasing the power, the power lapses. |
9 | | Section 1306. Presumption of unlimited authority. Subject |
10 | | to Section 1308, and unless the terms of the instrument |
11 | | creating a power of appointment manifest a contrary intent, the |
12 | | power 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 |
18 | | authority. Unless the terms of the instrument creating a power |
19 | | of appointment manifest a contrary intent, the power is |
20 | | nongeneral 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 |
6 | | substantial beneficial interest in property that would be |
7 | | affected adversely by a powerholder's exercise or nonexercise |
8 | | of a power of appointment in favor of the powerholder, the |
9 | | powerholder's estate, a creditor of the powerholder, or a |
10 | | creditor of the powerholder's estate.
|
11 | | (b) If a powerholder may exercise a power of appointment |
12 | | only with the consent or joinder of an adverse party, the power |
13 | | is nongeneral.
|
14 | | (c) If the permissible appointees of a power of appointment |
15 | | are not defined and limited, the power is exclusionary.
|
16 | | Section 1309. Power to revoke or amend. A donor may revoke |
17 | | or 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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1 | | appointment.
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 |
14 | | residuary 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 |
22 | | comparable clause in the powerholder's revocable trust, |
23 | | manifests the powerholder's intent to exercise a power of |
24 | | appointment 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. |
8 | | Unless the terms of the instrument exercising a power of |
9 | | appointment 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 |
18 | | formal requirement. A powerholder's substantial compliance |
19 | | with a formal requirement of an appointment imposed by the |
20 | | donor, including a requirement that the instrument exercising |
21 | | the power of appointment make reference or specific reference |
22 | | to 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 |
6 | | permits appointment to the powerholder or the powerholder's |
7 | | estate may make any appointment, including an appointment in |
8 | | trust or creating a new power of appointment, that the |
9 | | powerholder could make in disposing of the powerholder's own |
10 | | property.
|
11 | | (b) A powerholder of a general power of appointment that |
12 | | permits appointment only to the creditors of the powerholder or |
13 | | of the powerholder's estate is restricted to appointing to |
14 | | those creditors.
|
15 | | (c) Unless the terms of the instrument creating a power of |
16 | | appointment manifest a contrary intent, the powerholder of a |
17 | | nongeneral 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 |
4 | | to Section 4-11 of the Probate Act of 1975, an appointment to a |
5 | | deceased appointee is ineffective. |
6 | | Section 1316. Impermissible appointment. |
7 | | (a) Except as otherwise provided in Section 1315, an |
8 | | exercise of a power of appointment in favor of an impermissible |
9 | | appointee is ineffective.
|
10 | | (b) An exercise of a power of appointment in favor of a |
11 | | permissible appointee is ineffective to the extent the |
12 | | appointment is a fraud on the power.
|
13 | | Section 1317. Selective allocation doctrine. If a |
14 | | powerholder exercises a power of appointment in a disposition |
15 | | that also disposes of property the powerholder owns, the owned |
16 | | property and the appointive property must be allocated in the |
17 | | permissible manner that best carries out the powerholder's |
18 | | intent. |
19 | | Section 1318. Capture doctrine: disposition of |
20 | | ineffectively appointed property under general power. To the |
21 | | extent a powerholder of a general power of appointment, other |
22 | | than a power to revoke, amend, or withdraw property from a |
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1 | | trust, 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 |
17 | | released or unexercised general power.
To the extent a |
18 | | powerholder releases or fails to exercise a general power of |
19 | | appointment other than a power to revoke, amend, or withdraw |
20 | | property 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 |
13 | | released or unexercised nongeneral power. To the extent a |
14 | | powerholder releases, ineffectively exercises, or fails to |
15 | | exercise a nongeneral power of appointment:
|
16 | | (1) the gift-in-default clause controls the disposition of |
17 | | the unappointed property; or
|
18 | | (2) if there is no gift-in-default clause or to the extent |
19 | | the 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 |
4 | | partial appointment to taker in default. Unless the terms of |
5 | | the instrument creating or exercising a power of appointment |
6 | | manifest a contrary intent, if the powerholder makes a valid |
7 | | partial appointment to a taker in default of appointment, the |
8 | | taker in default of appointment may share fully in unappointed |
9 | | property. |
10 | | Section 1322. Appointment to taker in default. If a |
11 | | powerholder of a general power makes an appointment to a taker |
12 | | in default of appointment and the appointee would have taken |
13 | | the property under a gift-in-default clause had the property |
14 | | not been appointed, the power of appointment is deemed not to |
15 | | have been exercised, and the appointee takes under the |
16 | | gift-in-default clause. |
17 | | Section 1323. Powerholder's authority to revoke or amend |
18 | | exercise. A powerholder may revoke or amend an exercise of a |
19 | | power 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 |
6 | | power. In disposing of trust property subject to a power of |
7 | | appointment exercisable by an instrument other than a will, a |
8 | | trustee acting in good faith shall have no liability to any |
9 | | appointee or taker in default of appointment for relying upon |
10 | | an instrument believed to be genuine purporting to exercise a |
11 | | power of appointment or for assuming that there is no |
12 | | instrument exercising the power of appointment in the absence |
13 | | of actual knowledge thereof within 3 months of the last date on |
14 | | which the power of appointment may be exercised. |
15 | | Section 1325. Disclaimer. As provided by Section 2-7 of the |
16 | | Probate 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 |
23 | | release a power of appointment, in whole or in part, except to |
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1 | | the extent the terms of the instrument creating the power |
2 | | prevent the release. |
3 | | Section 1327. Method of release. A powerholder of a |
4 | | releasable power of appointment may release the power in whole |
5 | | or 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 |
14 | | powerholder may revoke or amend a release of a power of |
15 | | appointment 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 |
21 | | power of appointment. A powerholder of a presently exercisable |
22 | | power 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 |
4 | | presently exercisable. A powerholder of a power of appointment |
5 | | that is not presently exercisable may contract to exercise or |
6 | | not 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 |
10 | | not to appoint. The remedy for a powerholder's breach of a |
11 | | contract to appoint or not to appoint is limited to damages |
12 | | payable out of the appointive property or, if appropriate, |
13 | | specific performance of the contract. |
14 | | Section 1332. Creditor claim: general power created by |
15 | | powerholder. |
16 | | (a) In this Section, "power of appointment created by the |
17 | | powerholder" includes a power of appointment created in a |
18 | | transfer by another person to the extent the powerholder |
19 | | contributed value to the transfer.
|
20 | | (b) Appointive property subject to a general power of |
21 | | appointment created by the powerholder is subject to a claim of |
22 | | a creditor of the powerholder or of the powerholder's estate to |
23 | | the extent provided in the Uniform Fraudulent Transfer Act.
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1 | | (c) Subject to subsection (b), appointive property subject |
2 | | to a general power of appointment created by the powerholder is |
3 | | not subject to a claim of a creditor of the powerholder or the |
4 | | powerholder's estate to the extent the powerholder irrevocably |
5 | | appointed the property in favor of a person other than the |
6 | | powerholder or the powerholder's estate.
|
7 | | (d) Subject to subsections (b) and (c), and notwithstanding |
8 | | the presence of a spendthrift provision or whether the claim |
9 | | arose before or after the creation of the power of appointment, |
10 | | appointive property subject to a general power of appointment |
11 | | created by the powerholder is subject to a claim of a creditor |
12 | | of:
|
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 |
22 | | powerholder. |
23 | | (a) Except as otherwise provided in subsection (b), |
24 | | appointive property subject to a general power of appointment |
25 | | created by a person other than the powerholder is subject to a |
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1 | | claim 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 |
11 | | appointment created by a person other than the powerholder that |
12 | | is subject to an ascertainable standard relating to an |
13 | | individual's health, education, support, or maintenance within |
14 | | the meaning of Section 2041(b)(1)(A) of the Internal Revenue |
15 | | Code or Section 2514(c)(1) of the Internal Revenue Code, as |
16 | | amended, is treated for purposes of this Article as a |
17 | | nongeneral power.
|
18 | | Section 1334. Power to withdraw. |
19 | | (a) For purposes of Sections 1333 through 1336, and except |
20 | | as otherwise provided in subsection (b), a power to withdraw |
21 | | property from a trust is treated, during the time the power may |
22 | | be exercised, as a presently exercisable general power of |
23 | | appointment to the extent of the property subject to the power |
24 | | to withdraw.
|
25 | | (b) A power to withdraw property from a trust ceases to be |
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1 | | treated as a presently exercisable general power of appointment |
2 | | upon 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 |
6 | | appointment is exempt from a claim of a creditor of the |
7 | | powerholder or the powerholder's estate.
|
8 | | (b) Appointive property subject to a nongeneral power of |
9 | | appointment is subject to a claim of a creditor of the |
10 | | powerholder or the powerholder's estate to the extent that the |
11 | | powerholder owned the property and, reserving the nongeneral |
12 | | power, transferred the property in violation of the Uniform |
13 | | Fraudulent Transfer Act.
|
14 | | (c) If the initial gift in default of appointment is to the |
15 | | powerholder or the powerholder's estate, a nongeneral power of |
16 | | appointment is treated for purposes of this Section as a |
17 | | general power.
|
18 | | Section 1336. Application to existing relationships. |
19 | | (a) Except as otherwise provided in this Article, on and |
20 | | after 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 |
18 | | expiration of a prescribed period that commenced under law of |
19 | | this State other than this Article before the effective date of |
20 | | this Code, the law continues to apply to the right.
|
21 | | (c) No trustee is liable to any person in whose favor a |
22 | | power of appointment may have been exercised for any |
23 | | distribution of property made to persons entitled to take in |
24 | | default of the effective exercise of the power of appointment |
25 | | to the extent that the distribution shall have been completed |
26 | | before the effective date of this Code.
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1 | | Article 14.
Perpetuities. |
2 | | Section 1401. Article title. Except for Section 1407, this |
3 | | Article may be referred to as the Law Concerning Perpetuities. |
4 | | Section 1402. Purpose. This Article modifies the common law |
5 | | rule of property known as the rule against perpetuities, that, |
6 | | except as modified by statutes in force at the effective date |
7 | | of this Article and by this Article, shall remain in full force |
8 | | and effect. |
9 | | Section 1403. Definitions and terms. As used in this |
10 | | Article unless the context otherwise requires:
|
11 | | (a) Any reference in this Article to income to be "paid" or |
12 | | to income "payments" or to "receiving" income includes income |
13 | | payable or distributable to or applicable for the benefit of a |
14 | | beneficiary.
|
15 | | (b) "Instrument" means any writing pursuant to which any |
16 | | legal or equitable interest in property or in the income |
17 | | therefrom is affected, disposed of, or created.
|
18 | | (c) "Qualified perpetual trust" means any trust created by |
19 | | any written instrument executed on or after January 1, 1998, |
20 | | including an amendment to an instrument in existence before |
21 | | that date and the exercise of a power of appointment granted by |
22 | | an 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 |
20 | | commence to run in connection with any disposition of property |
21 | | or interest therein, and no instrument shall be regarded as |
22 | | becoming effective for purposes of the rule against |
23 | | perpetuities, and no interest or power shall be deemed to be |
24 | | created for purposes of the rule against perpetuities as long |
25 | | as, by the terms of the instrument, the maker of the instrument |
26 | | has the power to revoke the instrument or to transfer or direct |
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1 | | to be transferred to himself or herself the entire legal and |
2 | | equitable ownership of the property or interest therein.
|
3 | | (c) In determining whether an interest violates the rule |
4 | | against 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 |
13 | | subsection (b) are declaratory of existing law.
|
14 | | Section 1405. Trusts. |
15 | | (a) Subject to subsections (e) and (f), a trust containing |
16 | | any limitation that, but for this subsection, would violate the |
17 | | rule against perpetuities as modified by Section 1404 shall |
18 | | terminate 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 |
4 | | terminates because of the application of subsection (a), the |
5 | | trustee shall distribute the principal to those persons who |
6 | | would be the heirs at law of the maker of the instrument if he |
7 | | or she died at the expiration of the period specified in |
8 | | subsection (a) and in the proportions then specified by |
9 | | statute, unless the trust was created by the exercise of a |
10 | | power of appointment and then the principal shall be |
11 | | distributed to the person who would have received it if the |
12 | | power had not been exercised.
|
13 | | (c) Before any distribution of principal is made pursuant |
14 | | to subsection (b), the trustee shall distribute, out of |
15 | | principal, to each living beneficiary who, but for termination |
16 | | of the trust because of the application of subsection (a), |
17 | | would have been entitled to be paid income after the expiration |
18 | | of the period specified in subsection (a), an amount equal to |
19 | | the present value (determined as provided in subsection (d)) of |
20 | | the income that the beneficiary would have been entitled to be |
21 | | paid after the expiration of that period.
|
22 | | (d) In determining the present value of income for purposes |
23 | | of 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 |
10 | | the rule against perpetuities as modified by Section 1404 and |
11 | | does not apply to any trust that would have been valid apart |
12 | | from this Article.
|
13 | | (f) This Section does not apply when a trust violates the |
14 | | rule against perpetuities because the trust estate may not vest |
15 | | in the trustee within the period of the rule.
|
16 | | Section 1406. Applicability. Sections 1401 through 1405 |
17 | | apply only to instruments, including instruments that exercise |
18 | | a power of appointment, that become effective after September |
19 | | 22, 1969. |
20 | | Section 1407. Vesting of any limitation of property. |
21 | | (a) This Section may be referred to as the Perpetuities |
22 | | Vesting Law. |
23 | | (b) The vesting of any limitation of property, whether |
24 | | created in the exercise of a power of appointment or in any |
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1 | | other manner, shall not be regarded as deferred for purposes of |
2 | | the rule against perpetuities merely because the limitation is |
3 | | made to the estate of a person or to a personal representative, |
4 | | or to a trustee under a will, or to take effect on the probate |
5 | | of a will. |
6 | | (c) This Section applies only to limitations created after |
7 | | July 1, 1952. |
8 | | Article 15.
Miscellaneous Provisions. |
9 | | Section 1501. Uniformity of application and construction. |
10 | | In applying and construing this Code, consideration must be |
11 | | given to the need to promote uniformity of the law with respect |
12 | | to its subject matter among states that enact comparable |
13 | | provisions of the Uniform Trust Code. |
14 | | Section 1502. Severability. If any provision of this Code |
15 | | or its application to any person or circumstances is held |
16 | | invalid, the invalidity does not affect other provisions or |
17 | | applications of this Code which can be given effect without the |
18 | | invalid provision or application, and to this end the |
19 | | provisions of this Code are severable. |
20 | | Section 1503. Rights retained by Attorney General. Nothing |
21 | | in this Code is intended to derogate any right the Attorney |
22 | | General has under the common law of this State to represent a |
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1 | | charitable interest in trust. Nothing in this Code relieves a |
2 | | trustee of duties to file documents under, and otherwise comply |
3 | | with, the Charitable Trust Act or the Solicitation for Charity |
4 | | Act. |
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 |
10 | | is repealed. |
11 | | (760 ILCS 105/Act rep.) |
12 | | Section 1505.2. The Uniform Powers of Appointment Act is |
13 | | repealed. |
14 | | (765 ILCS 305/Act rep.) |
15 | | Section 1505.3. The Statute Concerning Perpetuities is |
16 | | repealed. |
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. |
3 | | Except as otherwise provided in this Code, on the effective |
4 | | date 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 |
23 | | changing 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 |
3 | | Department of Natural
Resources have the
power to enter into a |
4 | | trust agreement with a person or group of persons under
which |
5 | | the State agency may receive or collect money or other property |
6 | | from the
person or group of persons and may expend such money |
7 | | or property solely for a
public purpose within the powers and |
8 | | duties of that State agency and stated in
the trust agreement. |
9 | | The State agency shall be the trustee under any such
trust |
10 | | agreement.
|
11 | | (b) Money or property received under a trust agreement |
12 | | shall not be
deposited in the State treasury and is not subject |
13 | | to appropriation by the
General Assembly, but shall be held and |
14 | | invested by the trustee separate
and apart from the State |
15 | | treasury. The trustee shall invest money or
property received |
16 | | under a trust agreement as provided for trustees under
the |
17 | | Illinois Trust Code Trusts and Trustees Act or as otherwise |
18 | | provided in the trust agreement.
|
19 | | (c) The trustee shall maintain detailed records of all |
20 | | receipts and
disbursements in the same manner as required for |
21 | | trustees under the Illinois Trust Code Trusts
and Trustees Act . |
22 | | The trustee shall provide an annual accounting of all
receipts, |
23 | | disbursements, and inventory to all donors to the trust and the
|
24 | | Auditor General. The annual accounting shall be made available |
25 | | to 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 |
2 | | Section 135-20 as follows:
|
3 | | (60 ILCS 1/135-20)
|
4 | | Sec. 135-20. Powers of board of managers. The board of |
5 | | managers shall
control and manage the cemeteries jointly |
6 | | acquired by the townships or road
districts. The board of |
7 | | managers may receive in trust from the proprietors or
owners of |
8 | | any lot in the cemeteries, or any person, corporation, |
9 | | association,
or society interested in the maintenance of those |
10 | | cemeteries, any gift or
legacy of money or real, personal, or |
11 | | mixed property that is donated or
bequeathed to the board of |
12 | | managers for the use and maintenance of the lot or
cemeteries. |
13 | | The board of managers may convert the property into money, may
|
14 | | invest the money in securities in which trust funds may be |
15 | | invested under the Illinois Trust Code
Trusts and Trustees Act , |
16 | | and may apply the income perpetually for the care of
the lot or |
17 | | the care and maintenance of the cemeteries as specified in the |
18 | | gift
or legacy or as provided by the board of managers if the |
19 | | gift or legacy does
not specify the manner in which the income |
20 | | is to be expended.
|
21 | | (Source: P.A. 83-1362; 88-62.)
|
22 | | Section 1603. The Corporate Fiduciary Act is amended by |
23 | | changing 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 |
3 | | shall 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 |
13 | | fiduciaries generally
or of a particular corporate fiduciary |
14 | | and
by rule or order limit or restrict such powers of corporate
|
15 | | fiduciaries or a particular corporate fiduciary if he finds the |
16 | | exercise of
such power by corporate fiduciaries generally or of |
17 | | the corporate
fiduciary in particular may tend to be an unsafe |
18 | | or unsound practice, or if
such power is otherwise not in the |
19 | | interest of beneficiaries of
any fiduciary appointment.
|
20 | | (Source: P.A. 90-41, eff. 10-1-97; 90-424, eff. 1-1-98; 90-655, |
21 | | eff.
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
|
24 | | the direction of the Commissioner, shall have the power and
|
25 | | authority and is charged with the duties and responsibilities |
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1 | | as
follows:
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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.
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6 | | (8) Whenever the receiver shall find it necessary in
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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
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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
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23 | | at such sale.
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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 |