Full Text of SB1294 97th General Assembly
SB1294eng 97TH GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning civil law.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Trusts and Trustees Act is amended by adding | 5 | | Sections 16.3 and 16.7 as follows: | 6 | | (760 ILCS 5/16.3 new) | 7 | | Sec. 16.3. Directed trusts. | 8 | | (a) Definitions. In this Section: | 9 | | (1) "Directing party" means any investment trust | 10 | | advisor, distribution trust advisor, or trust protector as | 11 | | provided in this Section. | 12 | | (2) "Distribution trust advisor" means any one or more | 13 | | persons given authority by the governing instrument to | 14 | | direct, consent to, veto, or otherwise exercise all or any | 15 | | portion of the distribution powers and discretions of the | 16 | | trust, including but not limited to authority to make | 17 | | discretionary distribution of income or principal. | 18 | | (3) "Excluded fiduciary" means any fiduciary that by | 19 | | the governing instrument is directed to act in accordance | 20 | | with the exercise of specified powers by a directing party, | 21 | | in which case such specified powers shall be deemed granted | 22 | | not to the fiduciary but to the directing party and such | 23 | | fiduciary shall be deemed excluded from exercising such |
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| 1 | | specified powers. If a governing instrument provides that a | 2 | | fiduciary as to one or more specified matters is to act, | 3 | | omit action, or make decisions only with the consent of a | 4 | | directing party, then such fiduciary is an excluded | 5 | | fiduciary with respect to such matters. | 6 | | (4) "Fiduciary" means any person expressly given one or | 7 | | more fiduciary duties by the governing instrument, | 8 | | including but not limited to a trustee. | 9 | | (5) "Governing instrument" refers to the instrument | 10 | | stating the terms of a trust, including but not limited to | 11 | | any court order or nonjudicial settlement agreement | 12 | | establishing, construing, or modifying the terms of the | 13 | | trust in accordance with Section 16.1, 16.4, or 16.6 or | 14 | | other applicable law. | 15 | | (6) "Investment trust advisor" means any one or more | 16 | | persons given authority by the governing instrument to | 17 | | direct, consent to, veto, or otherwise exercise all or any | 18 | | portion of the investment powers of the trust. | 19 | | (7) "Power" means authority to take or withhold an | 20 | | action or decision, including but not limited to an | 21 | | expressly specified power, the implied power necessary to | 22 | | exercise a specified power, and authority inherent in a | 23 | | general grant of discretion. | 24 | | (8) "Trust protector" means any one or more persons | 25 | | given any one or more of the powers specified in subsection | 26 | | (d), whether or not designated with the title of trust |
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| 1 | | protector by the governing instrument. | 2 | | (b) Powers of investment trust advisor. An investment trust | 3 | | advisor may be designated in the governing instrument of a | 4 | | trust. The powers of an investment trust advisor may be | 5 | | exercised or not exercised in the sole and absolute discretion | 6 | | of the investment trust advisor, and are binding on all other | 7 | | persons, including but not limited to each beneficiary, | 8 | | fiduciary, excluded fiduciary, and any other party having an | 9 | | interest in the trust. The governing instrument may use the | 10 | | title "investment trust advisor" or any similar name or | 11 | | description demonstrating the intent to provide for the office | 12 | | and function of an investment trust advisor. Unless the terms | 13 | | of the governing instrument provide otherwise, the investment | 14 | | trust advisor has the authority to: | 15 | | (1) direct the trustee with respect to the retention, | 16 | | purchase, transfer, assignment, sale, or encumbrance of | 17 | | trust property and the investment and reinvestment of | 18 | | principal and income of the trust; | 19 | | (2) direct the trustee with respect to all management, | 20 | | control, and voting powers related directly or indirectly | 21 | | to trust assets, including but not limited to voting | 22 | | proxies for securities held in trust; | 23 | | (3) select and determine reasonable compensation of | 24 | | one or more advisors, managers, consultants, or | 25 | | counselors, including the trustee, and to delegate to them | 26 | | any of the powers of the investment trust advisor in |
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| 1 | | accordance with subsection (b) of Section 5.1; and | 2 | | (4) determine the frequency and methodology for | 3 | | valuing any asset for which there is no readily available | 4 | | market value. | 5 | | (c) Powers of distribution trust advisor. A distribution | 6 | | trust advisor may be designated in the governing instrument of | 7 | | a trust. The powers of a distribution trust advisor may be | 8 | | exercised or not exercised in the sole and absolute discretion | 9 | | of the distribution trust advisor, and are binding on all other | 10 | | persons, including but not limited to each beneficiary, | 11 | | fiduciary, excluded fiduciary, and any other party having an | 12 | | interest in the trust. The governing instrument may use the | 13 | | title "distribution trust advisor" or any similar name or | 14 | | description demonstrating the intent to provide for the office | 15 | | and function of a distribution trust advisor. Unless the terms | 16 | | of the governing instrument provide otherwise, the | 17 | | distribution trust advisor has authority to direct the trustee | 18 | | with regard to all decisions relating directly or indirectly to | 19 | | discretionary distributions to or for one or more | 20 | | beneficiaries. | 21 | | (d) Powers of trust protector. A trust protector may be | 22 | | designated in the governing instrument of a trust. The powers | 23 | | of a trust protector may be exercised or not exercised in the | 24 | | sole and absolute discretion of the trust protector, and are | 25 | | binding on all other persons, including but not limited to each | 26 | | beneficiary, investment trust advisor, distribution trust |
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| 1 | | advisor, fiduciary, excluded fiduciary, and any other party | 2 | | having an interest in the trust. The governing instrument may | 3 | | use the title "trust protector" or any similar name or | 4 | | description demonstrating the intent to provide for the office | 5 | | and function of a trust protector. The powers granted to a | 6 | | trust protector by the governing instrument may include but are | 7 | | not limited to authority to do any one or more of the | 8 | | following: | 9 | | (1) modify or amend the trust instrument to achieve | 10 | | favorable tax status or respond to changes in the Internal | 11 | | Revenue Code, federal laws, State law, or the rulings and | 12 | | regulations under such laws; | 13 | | (2) increase, decrease, or modify the interests of any | 14 | | beneficiary or beneficiaries of the trust; | 15 | | (3) modify the terms of any power of appointment | 16 | | granted by the trust; provided, however, such modification | 17 | | or amendment may not grant a beneficial interest to any | 18 | | individual, class of individuals, or other parties not | 19 | | specifically provided for under the trust instrument; | 20 | | (4) remove, appoint, or remove and appoint, a trustee, | 21 | | investment trust advisor, distribution trust advisor, | 22 | | another directing party, investment committee member, or | 23 | | distribution committee member, including designation of a | 24 | | plan of succession for future holders of any such office; | 25 | | (5) terminate the trust, including determination of | 26 | | how the trustee shall distribute the trust property to be |
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| 1 | | consistent with the purposes of the trust; | 2 | | (6) change the situs of the trust, the governing law of | 3 | | the trust, or both; | 4 | | (7) appoint one or more successor trust protectors, | 5 | | including designation of a plan of succession for future | 6 | | trust protectors; | 7 | | (8) interpret terms of the trust instrument at the | 8 | | request of the trustee; | 9 | | (9) advise the trustee on matters concerning a | 10 | | beneficiary; or | 11 | | (10) amend or modify the trust instrument to take | 12 | | advantage of laws governing restraints on alienation, | 13 | | distribution of trust property, or to improve the | 14 | | administration of the trust. | 15 | | (e) Duty and liability of directing party. Each directing | 16 | | party is a fiduciary of the trust unless the governing | 17 | | instrument provides otherwise; provided, however, the | 18 | | governing instrument may not exonerate a directing party from | 19 | | the duty to act or withhold acting as the directing party in | 20 | | good faith reasonably believes is in the best interests of the | 21 | | trust. A directing party who the governing instrument specifies | 22 | | is a fiduciary is subject to the same duties and standards that | 23 | | are applicable to a trustee of a trust as provided by | 24 | | applicable law, except to the extent the governing instrument | 25 | | provides otherwise. | 26 | | (f) Duty and liability of excluded fiduciary. The excluded |
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| 1 | | fiduciary shall act in accordance with the governing instrument | 2 | | and comply with the directing party's exercise of the powers | 3 | | granted to the directing party by the governing instrument. | 4 | | Unless otherwise provided in the governing instrument, an | 5 | | excluded fiduciary has no duty to monitor, review, inquire, | 6 | | investigate, recommend, evaluate, or warn with respect to a | 7 | | directing party's exercise or failure to exercise any power | 8 | | granted to the directing party by the governing instrument, | 9 | | including but not limited to any power related to the | 10 | | acquisition, disposition, retention, management, or valuation | 11 | | of any asset or investment. Except as otherwise provided in | 12 | | this Section or the governing instrument, an excluded fiduciary | 13 | | is not liable, either individually or as a fiduciary, for any | 14 | | action, inaction, consent, or failure to consent by a directing | 15 | | party, including but not limited to any of the following: | 16 | | (1) if a governing instrument provides that an excluded | 17 | | fiduciary is to follow the direction of a directing party, | 18 | | and such excluded fiduciary acts in accordance with such a | 19 | | direction, then except in cases of willful misconduct on | 20 | | the part of the excluded fiduciary in complying with the | 21 | | direction of the directing party, the excluded fiduciary is | 22 | | not liable for any loss resulting directly or indirectly | 23 | | from following any such direction, including but not | 24 | | limited to compliance regarding the valuation of assets for | 25 | | which there is no readily available market value; | 26 | | (2) if a governing instrument provides that an excluded |
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| 1 | | fiduciary is to act or omit to act only with the consent of | 2 | | a directing party, then except in cases of willful | 3 | | misconduct on the part of the excluded fiduciary, the | 4 | | excluded fiduciary is not liable for any loss resulting | 5 | | directly or indirectly from any act taken or omitted as a | 6 | | result of such directing party's failure to provide such | 7 | | consent after having been asked to do so by the excluded | 8 | | fiduciary; or | 9 | | (3) if a governing instrument provides that, or for any | 10 | | other reason, an excluded fiduciary is required to assume | 11 | | the role or responsibilities of a directing party, then | 12 | | except in cases of willful misconduct, the excluded | 13 | | fiduciary is not liable for any loss resulting directly or | 14 | | indirectly from any act taken or omitted in complying with | 15 | | that requirement. | 16 | | (g) Submission to court jurisdiction; effect on directing | 17 | | party. By accepting an appointment to serve as a directing | 18 | | party of a trust that is subject to the laws of this State, the | 19 | | directing party submits to the jurisdiction of the courts of | 20 | | this State even if investment advisory agreements or other | 21 | | related agreements provide otherwise, and the directing party | 22 | | may be made a party to any action or proceeding if issues | 23 | | relate to a decision or action of the directing party. | 24 | | (h) Duty to inform excluded fiduciary. Each directing party | 25 | | shall keep the excluded fiduciary and any other directing party | 26 | | reasonably informed regarding the administration of the trust |
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| 1 | | with respect to any specific duty or function being performed | 2 | | by the directing party to the extent that the duty or function | 3 | | would normally be performed by the excluded fiduciary or to the | 4 | | extent that providing such information to the excluded | 5 | | fiduciary or other directing party is reasonably necessary for | 6 | | the excluded fiduciary or other directing party to perform its | 7 | | duties, and the directing party shall provide such information | 8 | | as reasonably requested by the excluded fiduciary or other | 9 | | directing party. Neither the performance nor the failure to | 10 | | perform of a directing party's duty to inform as provided in | 11 | | this subsection affects whatsoever the limitation on the | 12 | | liability of the excluded fiduciary as provided in this | 13 | | Section. | 14 | | (i) Reliance on counsel. An excluded fiduciary may, but is | 15 | | not required to, obtain and rely upon an opinion of counsel on | 16 | | any matter relevant to this Section. | 17 | | (j) Applicability. On and after its effective date, this | 18 | | Section applies to: | 19 | | (1) all existing and future trusts that appoint or | 20 | | provide for a directing party, including but not limited to | 21 | | a party granted power or authority effectively comparable | 22 | | in substance to that of a directing party as provided in | 23 | | this Section; or | 24 | | (2) any existing or future trust that: | 25 | | (A) is modified in accordance with applicable law | 26 | | or the terms of the governing instrument to appoint or |
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| 1 | | provide for a directing party; or | 2 | | (B) is modified to appoint or provide for a | 3 | | directing party, including but not limited to a party | 4 | | granted power or authority effectively comparable in | 5 | | substance to that of a directing party, in accordance | 6 | | with (i) a court order, or (ii) a nonjudicial | 7 | | settlement agreement made in accordance with Section | 8 | | 16.1, whether or not such order or agreement specifies | 9 | | that this Section governs the responsibilities, | 10 | | actions, and liabilities of persons designated as a | 11 | | directing party or excluded fiduciary. | 12 | | (760 ILCS 5/16.7 new) | 13 | | Sec. 16.7. Application. Section 16.3 applies to all trusts | 14 | | in existence on the effective date of this amendatory Act of | 15 | | the 97th General Assembly or created after that date. Section | 16 | | 16.3 shall be construed as pertaining to the administration of | 17 | | a trust and shall be available to any trust that is | 18 | | administered in Illinois under Illinois law or that is governed | 19 | | by Illinois law with respect to the meaning and effect of its | 20 | | terms, except to the extent the governing instrument expressly | 21 | | prohibits that Section by specific reference to that Section. A | 22 | | provision in the governing instrument in the form: "The | 23 | | provisions of Section 16.3 of the Trusts and Trustees Act and | 24 | | any corresponding provision of future law may not be used in | 25 | | the administration of this trust." or a similar provision |
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| 1 | | demonstrating that intent is sufficient to preclude the use of | 2 | | Section 16.3.
| 3 | | Section 99. Effective date. This Act takes effect upon | 4 | | becoming law.
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