HB3603 97TH GENERAL ASSEMBLY

LRB097 06449 AJO 46531 b

97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB3603

Introduced 2/24/2011, by Rep. Michelle Mussman - Emily McAsey

SYNOPSIS AS INTRODUCED:

New Act

Creates the Family Trust Act. Makes findings and defines terms. Creates the Illinois Family Trust Board of Trustees to provide services or support to persons with disabilities who are residents of Illinois or one of the 8 states adjacent to Illinois. Provides for payments for a beneficiary that supplement, but do not replace, services and support provided by State and federal government programs and which do not cause any reduction, impairment, or diminishment of government benefits. Provides for trust accounts, individual first party trust accounts, individual third party trust accounts, stand-by trusts, charitable trust accounts, separate trusts, and distributions. Provides for distributions upon the death of a beneficiary, administration of the Illinois Family Trust, and related matters.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning family trusts.

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

Section 1. Short title. This Act may be cited as the Family Trust Act.

Section 5. Findings. The General Assembly hereby finds and declares the following:

(1) It is an essential function of State government to provide basic support and services for certain persons with disabilities.

(2) Many persons with disabilities lack financial resources and must rely upon the government to provide services and support.

(3) It is in the best interest of the State and is necessary and desirable for the public health, safety, and welfare to encourage, enhance, and foster the ability of individuals with disabilities who reside in Illinois or who reside in one of the 8 states adjacent to Illinois, and in the best interests of their families and friends to supplement, but not replace, the services and support provided by State government and other governmental programs.

Section 10. Maximum benefit. In light of the findings and declarations described in Section 5, the General Assembly hereby declares that contributions to a trust account administered as part of the Illinois Family Trust by the Illinois Family Trust Board of Trustees as authorized in this Act, shall in no way reduce, impair, or diminish the benefits to which the beneficiary of the trust account is otherwise entitled by law, nor shall the administration of the Illinois Family Trust or any trust account therein be taken into consideration in determining appropriations for programs or services for persons with disabilities, and unless otherwise prohibited by federal statutes or regulations, all State agencies shall disregard the trust account as a resource when determining the eligibility of a resident for assistance.

Section 15. Definitions. As used in this Act:

"Beneficiary", also referred to as "life beneficiary", means a person who:

(a) has been determined to have a disability or to be a disabled person;

(b) is a resident of Illinois or one of the 8 states adjacent to Illinois; and

(c) is the person designated as the sole, primary beneficiary of a trust account administrated as part of the Illinois Family Trust by the Board of Trustees.

"Board of Trustees", "Board", or "Illinois Family Trust Board of Trustees" means the body corporate and instrumentality of the State, established as the Illinois Family Trust Board of Trustees pursuant to Section 20.

"Charitable trust account" means an account established and administered as part of the Illinois Family Trust for the benefit of disabled individuals, as provided in Section 50.

"Co-trustee" means a person designated by the settlor to act together with the trustee as co-trustee of a trust account.

"Department" means the Department of Public Health.

"Disability" means:

(a) a mental or physical impairment that substantially limits one or more major life activities, whether the impairment is congenital or acquired by accident, injury, or disease, and where the impairment is verified by medical findings; or

(b) as is defined in Section 1614(a)(3) of the Social Security Act, 42 U.S.C. 1382c(a)(3).

"Life beneficiary" or "beneficiary" means a designated beneficiary of the Illinois Family Trust.

"Illinois Family Trust" or "Trust" means the trust established and administered by the Board of Trustees, as trustee, pursuant to this Act.

"Net income" means the earnings received on investments less administrative expenses and fees.

"Principal balance" means the fair market value of all contributions made to a particular account, less distributions, determined as of the end of the calendar month immediately preceding the occurrence giving rise to any determination of principal balance.

"Remainder beneficiary" means the person designated to receive the applicable portion of the principal balance of a trust account remaining after the death of the beneficiary.

"Restricted account" means an account established and administered as part of the Trust for the benefit of a person with a disability.

"Standby trust" means the trust established upon distribution of a trust account by the Board of Trustees pursuant to a notice of withdrawal or termination.

"Trust account" means an account established and administered as part of the Illinois Family Trust for the benefit of a beneficiary.

"Trustee" means the Board of Trustees acting in its capacity as trustee of a trust account, the charitable trust account, or a restricted account.

Section 20. Illinois Family Trust.

(a) There is hereby created the Illinois Family Trust, which shall be a body corporate and an instrumentality of the State, and which shall be incorporated as a not-for-profit corporation pursuant to the General Not For Profit Corporation Act of 1986. The Illinois Family Trust is authorized to apply for and qualify for recognition as an exempt organization pursuant to Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended.

(b) The Board of Trustees of the Illinois Family Trust shall consist of 9 members who are natural persons appointed by the Governor with the advice and consent of the Senate. The members' terms of office shall be 3 years and until their successors are appointed and qualified. The Board shall be composed of the following:

(1) Three members of the immediate family of persons who have a disability of mental illness. The Department's State Advisory Council for Comprehensive Psychiatric Services shall submit a panel of 9 proposed members of the Board to the Governor, from which the Governor shall appoint 3. One shall be appointed for a term of one year, one for 2 years, and one for 3 years. Thereafter, as the term of a member of the Board appointed under this Section expires each year, the State Advisory Council for Comprehensive Psychiatric Services shall submit to the Governor a panel of not less than 3 nor more than 5 proposed members of the Board of Trustees, and the Governor shall appoint one member from such panel for a term of 3 years;

(2) Three members of the immediate family of persons who have a developmental disability. The Department's Illinois Planning Council for Developmental Disabilities shall submit a panel of 9 proposed members of the Board to the Governor, from which the Governor shall appoint 3. One shall be appointed for a term of one year, one for 2 years, and one for 3 years. Thereafter, as the term of a member of the Board appointed under this Section expires each year, the Illinois Planning Council for Developmental Disabilities shall submit to the Governor a panel of not less than 3 nor more than 5 proposed members of the Board of Trustees, and the Governor shall appoint one member from such panel for a term of 3 years; and

(3) Three persons recognized for their expertise in general business matters and procedures. Of the 3 business persons to be appointed by the Governor, one shall be appointed for one year, one for 2 years, and one for 3 years. Thereafter, as the term of a member of the Board of Trustees appointed under this subdivision expires each year, the Governor shall appoint one business person as member for a term of 3 years.

(c) As used in paragraphs (1) and (2) of subsection (b) of this Section, "immediate family" includes spouse, parents, parents of spouse, children, spouses of children, and siblings.

(d) No member of the Board of Trustees shall receive compensation for services as a member of the Board. The Board shall reimburse the members of the Board for necessary expenses actually incurred in the performance of their duties.

(e) The Board of Trustees shall be subject to the provisions of this Act and is considered a public governmental body.

(f) The Board of Trustees shall annually prepare or cause to be prepared an accounting of funds administered by the Board and shall transmit a copy of the accounting to the Governor, the President of the Senate, and the Speaker of the House of Representatives.

(g) The Board of Trustees shall establish policies, procedures, and other rules and regulations necessary to implement the provisions of this Act.

(h) The Board of Trustees is authorized to advise, consult with, coordinate and render services to those departments, agencies, political subdivisions, and governmental instrumentalities of Illinois and of the states adjacent to Illinois, and those nonprofit organizations that qualify as organizations pursuant to Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended, that provide services or support to persons with disabilities who are residents of Illinois or one of the states adjacent to Illinois.

(i) The assets of the Board of Trustees shall not be considered State money, assets of the State, or revenue for any purposes of the State Constitution or statutes. The property of the Board of Trustees and its income and operations shall be exempt from all taxation by the State or any of its political subdivisions.

(j) No trustee, co-trustee, or successor co-trustee serving pursuant to the provisions of this Act shall at any time be held liable for any mistake of law or fact, or of both law and fact, or errors of judgment, nor for any loss sustained as a result thereof.

Section 25. Trust accounts.

(a) Trust accounts, restricted trust accounts, and the charitable trust account shall be held and administered in trust as the Illinois Family Trust. The charitable trust account, the restricted accounts, and the trust accounts shall each be maintained in trust as separate accounts, but may be pooled for purposes of investment and management.

(b) The Board of Trustees shall act as the trustee of the Illinois Family Trust. The Board of Trustees, as trustee, shall administer the Illinois Family Trust pursuant to the provisions of this Act and pursuant to the policies, procedures, rules, and regulations of the Board of Trustees.

(c) In addition to the powers and duties granted to the Board pursuant to this Act in its capacity as trustee of the Trust, the Board shall have all powers granted to trustees acting under the Trusts and Trustees Act; provided, that provisions of that Act regarding the duty to inform and report to the beneficiaries shall not apply to the Trust, except as specifically mandated in this Act.

Section 30. First party trust account.

(a) A beneficiary who is a person with disabilities as defined in Section 1614(a)(3) of the Social Security Act 42 U.S.C. 1382c(a)(3), or the parent, grandparent, or legal guardian of a beneficiary, or a court, as settlor, may contribute assets of the beneficiary in trust to the Board as Trustee, for the benefit of the beneficiary as part of a pooled trust described by 42 U.S.C. Section 1396p(d)(4)(C). Upon such contribution, the settlor's completion and execution of trust documents provided by the trustee, and the trustee's review, approval and execution of the trust documents, a trust account for the beneficiary shall thereby be created. A trust account to which the assets of a beneficiary are contributed shall be referred to as a "first party trust account" and shall be held and administered in trust for the benefit of the beneficiary.

(b) The settlor may designate a co-trustee, and a successor or successors to the co-trustee, to act together with the trustee as trustees of the first-party trust account; provided that the beneficiary may not act as a co-trustee or successor co-trustee; and provided further that court approval of the beneficiary, co-trustee, or successor trustee shall be required in connection with any first party trust account created pursuant to this Section.

(c) If the Board determines, in its good faith judgment, that a co-trustee has breached his or her fiduciary duties, either as a result of an act of commission or omission, then the Board may, by written notice to such co-trustee, remove such co-trustee and may appoint a successor co-trustee or serve as sole trustee.

(d) At the death of the beneficiary, the Board of Trustees shall provide notice that the trust account has terminated to each state of which the Board of Trustees has knowledge that such state has provided medical assistance on behalf of the beneficiary under a state plan for medical assistance under Title 42 of the United States Code. After distribution of 25% of the principal balance of the trust account to the charitable trust account, the Board of Trustees shall pay over and distribute to such states all amounts remaining in the trust account up to an amount equal to the total medical assistance paid by such states on behalf of the beneficiary under the state plan for medical assistance under Title 42 of the United States Code. In the event that the beneficiary has received medical assistance from more than one state with claims on the proceeds for reimbursement of medical assistance payments under Title 42 of the United States Code and there are insufficient assets to pay the entire balance due to each state then the proceeds shall be distributed to each state on a pro rata basis based upon each state's proportionate share of the total medical assistance paid by all states.

(e) To the extent any amounts remain in the trust account after distribution to the charitable trust account and the State or states for state reimbursement claims, the remainder shall be distributed to such person, entities, or organizations designated as remainder beneficiaries by the settlor in the trust documents. If any individual remainder beneficiary named by the settlor is not then living, then in the absence of contrary instruction in the trust documents completed by the settlor, such remainder beneficiary's distribution shall be made to such remainder beneficiary's heirs-at-law, as determined by the laws of the state of the beneficiary's residence at the time of the beneficiary's death.

Section 35. Third party trust account.

(a) Any person, as settlor, except a beneficiary or a beneficiary's spouse, may contribute assets not including assets of the beneficiary or the beneficiary's spouse in trust to the Board of Trustees as trustee, for the benefit of the beneficiary. Upon such contribution, the settlor's completion and execution of trust documents provided by the trustee, and the trustee's review, approval and execution of the trust documents, a trust account for the beneficiary shall thereby be created. A trust account to which assets that do not include assets of a beneficiary or of a beneficiary's spouse are contributed shall be referred to as a "third party trust account", and shall be held and administered in trust for the benefit of the beneficiary as provided in this Section.

(b) The settlor may designate a co-trustee, and a successor or successors to the co-trustee, to act together with the Board of Trustees as trustee of the third party trust account; provided that the beneficiary or the beneficiary's spouse may not act as co-trustee, or successor co-trustee; and provided further that court approval of the beneficiary, co-trustee, or successor trustee shall be required in connection with any third party trust account created pursuant to this Section.

(c) If the Board determines, in its good faith judgment, that a co-trustee has breached his or her fiduciary duties, either as a result of an act of commission or omission, then the Board may, by written notice to such co-trustee, remove such co-trustee, appoint a successor co-trustee, or serve as sole trustee.

(d) At the death of the beneficiary, the Board of Trustees shall promptly determine the principal balance of the trust account and, after payment of any expenses of the beneficiary as the Board may authorize and all fees and expenses of the Board, shall distribute to the persons, entities, or organizations designated by the settlor as remainder beneficiaries in the trust documents:

(1) an amount equal to 100% of the principal balance if the beneficiary shall not have received any benefits provided by use of trust account income or principal; or

(2) an amount equal to 75% of the principal balance if the beneficiary shall have received any benefits provided by use of trust account income or principal; and

(3) any principal not distributed pursuant to the provisions of subdivision (2) of subsection (d) of this Section, and any undistributed income shall be distributed to the charitable trust account established pursuant to the provisions of Section 45;

(4) if any individual remainder beneficiary named by the settlor is not then living, then in the absence of contrary instructions in the trust documents completed by the settlor, such remainder beneficiary's share shall be distributed to such remainder beneficiary's heirs-at-law, as determined by the laws of the state of the beneficiary's residence at the time of the beneficiary's death.

(e) Notwithstanding the provisions of subsection (d) of this Section to the contrary, the settlor may voluntarily agree that a smaller percentage of the principal balance in any trust account established by such settlor than is provided in subsection (d) of this Section be distributed to the remainder beneficiaries designated in the trust documents; and that a corresponding larger percentage of the principal balance in such trust account be distributed either to the charitable trust account or to a designated restricted account within the charitable trust account.

Section 40. Settlor.

(a) The settlor of a revocable third party trust account or the co-trustee of a revocable third party trust account if authorized by the settlor in the trust documents, upon written notice to the Board and with the Board's consent may, from time to time, withdraw such part of the trust account as the settlor or such authorized co-trustee may determine; provided, however, neither the settlor nor such authorized co-trustee may withdraw an amount that when aggregated with all withdrawals within the prior 12 months shall reduce the remaining principal balance of the trust account below the greater of the amount due the Board, if the trust account had terminated at the time of such withdrawal or the minimum amount required by the Board, from time to time, for an account.

(b) The settlor of a revocable third party trust account or the co-trustee of a revocable third party trust account if authorized by the settlor in the trust documents, upon written notice to the Board and with the Board's consent may revoke and terminate the trust account. Upon receipt of such notice, the Board shall promptly determine the principal balance of the trust account and after payment of all fees and expenses of the Board shall distribute:

(1) In the case of revocation and termination by the settlor:

(A) an amount equal to 100% of the principal balance to the settlor if the beneficiary shall not have received any benefits provided by use of trust account income or principal; or

(B) an amount equal to 75% of the principal balance to the settlor if the beneficiary shall have received any benefits provided by use of trust account income or principal; and

(C) any principal not distributed pursuant to the provisions of items (A) and (B) of this paragraph (1) of subsection (b) of this Section, and any undistributed income to the charitable trust account.

(2) In the case of revocation and termination by an authorized co-trustee:

(A) an amount equal to 100% of the principal balance shall be distributed to the trustees of the standby trust, if the beneficiary shall not have received any benefits provided by use of trust account income or principal, to be held, administered, and distributed in accordance with the provisions of subsection (h) of this Section; or

(B) an amount equal to 75% of the then principal balance shall be distributed to the trustees of the standby trust, if the beneficiary shall have received any benefits provided by use of trust account income or principal, to be held, administered, and distributed in accordance with the provisions of subsection (h) of this Section; and

(C) any principal not distributed pursuant to the provisions of paragraph (B) of this paragraph (2), and any undistributed income shall be distributed to the charitable trust account.

(c) The trustee or trustees of the standby trust shall hold, administer, and distribute the principal and income of the standby trust, in the discretion of such trustee, for the support, health, education, and general well-being of the beneficiary during the beneficiary's life, recognizing that it is the purpose of the standby trust to supplement, not replace, any government benefits for the beneficiary's basic support to which such beneficiary may be entitled and to increase the quality of such beneficiary's life by providing the beneficiary those amenities which cannot otherwise be provided by public assistance or entitlements or other available sources. Permissible expenditures include, but are not limited to, those described in subdivision (2) of Section 45.

Section 45. Administration. Each first party trust account and third party trust account shall be held and administered in trust as follows:

(1) The Board of Trustees shall hold, administer, and distribute the principal and income of the trust account, in the discretion of the trustee, in consultation with the co-trustee, for the health, education, and general well-being of the beneficiary, recognizing that the purpose of the trust account is to supplement, not replace, any government benefits for the beneficiary's basic support to which such beneficiary may be entitled.

(2) Expenditure of trust account funds shall be made solely for benefit of the beneficiary, to increase the quality of the beneficiary's life by providing those amenities that cannot otherwise be provided by public assistance or entitlements or other available sources. Permissible expenditures include, but are not limited to, dental, medical, and diagnostic work or treatment that is not otherwise available from public benefits or assistance; private rehabilitative training; supplementary education aid; entertainment; periodic vacations and outings; expenditures to foster the interests, talents, and hobbies of the beneficiary; and expenditures to purchase personal property and services that will make life more comfortable and enjoyable for the beneficiary, but that will not defeat his or her eligibility for public benefits or assistance. The Trustee, with consultation of the co-trustee, may make payments for a person to accompany the beneficiary on vacations and outings and for the transportation of the beneficiary or of friends and relatives of the beneficiary to visit the beneficiary.

(3) Expenditures of trust account funds shall not be made for the primary support or maintenance of the beneficiary, including basic food or shelter, if, as a result, the beneficiary would no longer be eligible to receive public benefits or assistance to which the beneficiary is then entitled.

(4) The co-trustee, with consent of the Trustee, shall not less frequently than annually determine the amount of income or principal which may be used to provide noncash benefits and the nature and type of benefits to be provided for the beneficiary. Any net income which is not used shall be added to the principal annually.

(5) In the event that the Trustee and the co-trustee shall be unable to agree either on:

(a) the amount of income or principal to be used;

(b) the benefits to be provided; or

(c) the administration of the trust account, then the co-trustee shall have the right to appeal the decision of the trustee in accordance with the rules and regulations established by the Board.

Section 50. Charitable trust account.

(a) The Board of Trustees shall establish a charitable trust account for the benefit of individuals with disabilities.

(b) The Board of Trustees shall accept contributions to the charitable trust account at the termination of trust accounts and other contributions from donors in accordance with policies and procedures adopted by the Board of Trustees.

(c) The Trustees shall as necessary determine the amount of income and principal of the charitable trust account to be used to provide benefits for individuals with disabilities. Benefits provided shall only be those that have no negative effect on the individual's entitlement to government benefits. Any income not used to provide benefits shall be added to the principal annually.

(d) Any person with the consent of the Board of Trustees may establish a restricted account within the charitable trust account and may determine, with the consent of the Board of Trustees, the class of individuals eligible to be recipients of funds from the restricted account, so long as the eligible recipients are individuals with disabilities as defined in Section 15.

Section 55. Fees.

(a) The Board may establish and collect fees for administering trust accounts established pursuant to the provisions of this Act.

(b) The Board shall establish policies and procedures for providing periodic reports to the co-trustees of each trust account established pursuant to the provisions of Section 30 or 35.

(c) No beneficiary shall have any vested or property rights or interests in any trust account, nor shall any beneficiary have the power to anticipate, assign, convey, alienate, or otherwise encumber any interest in the income or principal of any trust account.

(d) The income or the principal or any interest of any beneficiary in the trust account shall not be liable for any debt incurred by such beneficiary, nor shall the principal or income of any trust account be subject to seizure by any creditor or any beneficiary under any writ or proceeding in law or in equity.

(e) Except for the right of a settlor to withdraw from or revoke any revocable trust account under Section 40, and the right of any acting co-trustee, other than the original settlor, to withdraw all or a portion of the principal balance of a revocable trust account under Section 40, neither the settlor nor any acting co-trustee shall have the right to sell, assign, convey, alienate, or otherwise encumber, for consideration or otherwise, any interest in the income or principal of the trust account. The income or the principal or any interest of any beneficiary of a revocable trust account shall not be liable for any debt incurred by the settlor or any acting co-trustee, nor shall the principal or income of the trust account be subject to seizure by any creditor of any settlor or any acting co-trustee under any writ or proceeding in law or in equity.

Section 60. Distributions.

(a) Distribution to a distributee may be made to the distributee or to a person holding a power of attorney properly executed by the distributee in accordance with the law of the place of execution, or to the distributee's personal representative, guardian, or conservator.

(b) Distribution may be made to the trustees of a trust account established pursuant to this Act if the court finds that such distribution qualifies as a life beneficiary as defined in Section 15 and that such distribution would be in the best interest of the distributee.

Section 65. Protectee.

(a) If the court finds that the establishment of a trust would be in the protectee's best interest, the court may authorize the establishment of a trust account for the benefit of a protectee pursuant to this Act if it finds that the protectee qualifies as a life beneficiary as defined in Section 15, or the court may authorize the establishment of such trust for the benefit of a protectee.

(b) A trust account established pursuant to this Act will be in the best interest of the protectee, notwithstanding the fact that a sum not exceeding 25% of the principal balance as defined in Section 15 will be distributed to the charitable trust account of the Illinois Family Trust as prescribed by Section 30.