Full Text of SB2984 98th General Assembly
SB2984sam001 98TH GENERAL ASSEMBLY | Sen. Kirk W. Dillard Filed: 3/19/2014
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| 1 | | AMENDMENT TO SENATE BILL 2984
| 2 | | AMENDMENT NO. ______. Amend Senate Bill 2984 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 5. The Trusts and Trustees Act is amended by | 5 | | changing Sections 5.3 and 16.1 as follows:
| 6 | | (760 ILCS 5/5.3)
| 7 | | Sec. 5.3. Total return trusts.
| 8 | | (a) Conversion by trustee. A trustee may convert a trust to | 9 | | a
total return trust as described in this Section if all of the
| 10 | | following apply:
| 11 | | (1) The trust describes the amount that may or must
be | 12 | | distributed to a beneficiary by referring to the
trust's | 13 | | income, and the trustee determines that
conversion to a | 14 | | total return trust will enable the
trustee to better carry | 15 | | out the purposes of the trust and the conversion is in
the | 16 | | best interests of the beneficiaries;
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| 1 | | (2) conversion to a total return trust means the | 2 | | trustee will invest and
manage trust assets seeking a total | 3 | | return without regard to whether that
return is from income | 4 | | or appreciation of principal, and will make distributions
| 5 | | in accordance with this Section (such a trust is called a | 6 | | "total return trust"
in this Section);
| 7 | | (3) the trustee sends a written notice of the trustee's | 8 | | decision to
convert the trust to a total return trust, | 9 | | specifying a prospective effective
date for the conversion | 10 | | and including a copy of this Section, to the following
| 11 | | beneficiaries, determined as of the date the notice is sent | 12 | | and assuming
nonexercise of all powers of appointment:
| 13 | | (A) all of the legally competent beneficiaries who | 14 | | are currently
receiving or eligible to receive income | 15 | | from the trust; and
| 16 | | (B) all of the legally competent beneficiaries who | 17 | | would receive or be
eligible to receive a distribution | 18 | | of principal or income if the current
interests of | 19 | | beneficiaries currently receiving or eligible to | 20 | | receive income
ended;
| 21 | | (4) there are one or more legally competent income | 22 | | beneficiaries
under subdivision (3)(A) of this subsection | 23 | | (a) and one or more legally
competent remainder | 24 | | beneficiaries under subdivision (3)(B) of this subsection
| 25 | | (a), determined as of the date of sending the notice;
| 26 | | (5) no beneficiary objects to the conversion to a total |
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| 1 | | return trust in a
writing delivered to the trustee within | 2 | | 60 days after the notice is sent; and
| 3 | | (6) the trustee has signed acknowledgments of receipt | 4 | | confirming that
notice was received by each beneficiary | 5 | | required to be sent notice under
subdivision (3) of this | 6 | | subsection (a).
| 7 | | (b) Conversion by agreement. Conversion to a total return | 8 | | trust may be made
by agreement between a trustee and (i) all | 9 | | primary beneficiaries, acting either individually or by their | 10 | | respective representatives in accordance with Section | 11 | | subsection 16.1 (a)(2) of this Act , or (ii) all beneficiaries | 12 | | currently eligible to receive income or principal from the | 13 | | trust and all beneficiaries who are presumptive remaindermen, | 14 | | either individually or by their respective representatives in | 15 | | accordance with subsection 16.1(a)(3) of this Act . The | 16 | | agreement may include any actions a court
could properly order | 17 | | under subsection (g) of this Section; however, any
distribution | 18 | | percentage determined by the agreement may not be less than 3%
| 19 | | nor greater than 5%.
| 20 | | (c) Conversion or reconversion by court.
| 21 | | (1) The trustee may for any reason elect to petition | 22 | | the court to order
conversion to a total return trust, | 23 | | including without limitation the reason
that conversion | 24 | | under subsection (a) is unavailable because:
| 25 | | (A) a beneficiary timely objects to the conversion | 26 | | to a total return
trust;
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| 1 | | (B) there are no legally competent beneficiaries | 2 | | described in
subdivision (3)(A) of subsection (a); or
| 3 | | (C) there are no legally competent beneficiaries | 4 | | described in
subdivision (3)(B) of subsection (a).
| 5 | | (2) A beneficiary may request the trustee to convert to | 6 | | a total return
trust or adjust the distribution percentage. | 7 | | If the trustee declines or fails
to act within 6 months | 8 | | after receiving
a written request to do so, the beneficiary | 9 | | may petition the court to order the
conversion or | 10 | | adjustment.
| 11 | | (3) The trustee may petition the court prospectively to | 12 | | reconvert from a
total return trust or adjust the | 13 | | distribution percentage if the trustee
determines that the | 14 | | reconversion or adjustment will enable
the trustee to | 15 | | better carry out the purposes of the trust. A beneficiary | 16 | | may
request the trustee to petition the court prospectively | 17 | | to reconvert from a
total return trust or adjust the | 18 | | distribution percentage. If the trustee
declines or fails | 19 | | to act within 6 months
after receiving a written request to | 20 | | do so, the beneficiary may petition the
court to order the | 21 | | reconversion or adjustment.
| 22 | | (4) In a judicial proceeding under this subsection (c), | 23 | | the trustee may,
but need not, present the trustee's | 24 | | opinions and reasons (A) for supporting or
opposing | 25 | | conversion to (or reconversion from or adjustment of the | 26 | | distribution
percentage of) a total return trust, |
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| 1 | | including
whether the trustee believes conversion (or | 2 | | reconversion
or adjustment of the distribution
percentage)
| 3 | | would enable the
trustee to better carry out the purposes | 4 | | of the trust, and (B) about any other
matters relevant to | 5 | | the proposed conversion (or reconversion
or adjustment of | 6 | | the distribution
percentage).
A trustee's
actions in | 7 | | accordance with this subsection (c) shall not be deemed | 8 | | improper or
inconsistent with the trustee's duty of | 9 | | impartiality unless the court finds
from all the evidence | 10 | | that the trustee acted in bad faith.
| 11 | | (5) The court shall order conversion to (or | 12 | | reconversion prospectively
from
or adjustment of the | 13 | | distribution percentage
of)
a total return trust if the | 14 | | court determines that the conversion (or
reconversion or | 15 | | adjustment of the distribution percentage) will enable the
| 16 | | trustee to better carry out the purposes of the
trust and | 17 | | the conversion
(or reconversion or adjustment of the
| 18 | | distribution percentage)
is in the best interests of the | 19 | | beneficiaries.
| 20 | | (6) Notwithstanding any other provision of this | 21 | | Section, a trustee has no
duty to inform beneficiaries | 22 | | about the availability of this Section and has no
duty to | 23 | | review the trust to determine whether any action should be | 24 | | taken under
this Section unless requested to do so in | 25 | | writing by a beneficiary described in
subdivision (3) of | 26 | | subsection (a).
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| 1 | | (d) Post conversion. While a trust is a total return trust, | 2 | | all
of the following shall apply to the trust:
| 3 | | (1) the trustee shall make income distributions in | 4 | | accordance with the
governing instrument subject to the | 5 | | provisions of this Section;
| 6 | | (2) the term "income" in the governing instrument means | 7 | | an annual amount
(the "distribution amount") equal to a | 8 | | percentage (the "distribution
percentage") of the net fair | 9 | | market value of the trust's assets, whether the
assets are | 10 | | considered income or principal under the Principal and | 11 | | Income Act,
averaged over the lesser of:
| 12 | | (i) the 3 preceding years; or
| 13 | | (ii) the period during which the trust has been in | 14 | | existence;
| 15 | | (3) the distribution percentage for any trust | 16 | | converted to a total return
trust by a trustee in | 17 | | accordance with subsection (a) shall be 4%;
| 18 | | (4) the trustee shall pay to a beneficiary (in the case | 19 | | of an
underpayment) and shall recover from a beneficiary | 20 | | (in the case of an
overpayment) an amount equal to the | 21 | | difference between the amount properly
payable and the | 22 | | amount actually paid, plus interest compounded annually at | 23 | | a
rate per annum equal to the distribution percentage in | 24 | | the year or years while
the underpayment or overpayment | 25 | | exists; and
| 26 | | (5) a change in the method of determining a reasonable |
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| 1 | | current return by converting to a total return trust in | 2 | | accordance with this Section and substituting the | 3 | | distribution amount for net trust accounting income is a | 4 | | proper change in the definition of trust income | 5 | | notwithstanding any contrary provision of the Principal | 6 | | and Income Act, and the distribution amount shall be deemed | 7 | | a reasonable current return that fairly apportions the | 8 | | total return of a total return trust.
| 9 | | (e) Administration. The trustee, in the trustee's | 10 | | discretion, may determine
any of the following matters in | 11 | | administering a total return trust as the
trustee from time to | 12 | | time determines necessary or helpful for the
proper functioning | 13 | | of the trust:
| 14 | | (1) the effective date of a conversion to a total | 15 | | return trust;
| 16 | | (2) the manner of prorating the distribution amount for | 17 | | a short year in
which a beneficiary's interest commences or | 18 | | ceases;
| 19 | | (3) whether distributions are made in cash or in kind;
| 20 | | (4) the manner of adjusting valuations and | 21 | | calculations of the
distribution amount to account for | 22 | | other payments from or contributions to the
trust;
| 23 | | (5) whether to value the trust's assets annually or | 24 | | more frequently;
| 25 | | (6) what valuation dates and how many valuation dates | 26 | | to use;
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| 1 | | (7) valuation decisions about any asset for which there | 2 | | is no
readily available market value, including:
| 3 | | (A) how frequently to value such an asset;
| 4 | | (B) whether and how often to engage a professional | 5 | | appraiser
to value such an asset; and
| 6 | | (C) whether to exclude the value of such an asset | 7 | | from the net
fair market value of the trust's assets | 8 | | under subdivision (d)(2) for
purposes of determining | 9 | | the distribution amount. Any such asset so
excluded is | 10 | | referred to as an "excluded asset" in this subsection
| 11 | | (e), and the trustee shall distribute any net income | 12 | | received from
the excluded asset as provided for in the | 13 | | governing instrument,
subject to the following | 14 | | principles:
| 15 | | (i) unless the trustee determines there are | 16 | | compelling reasons to the
contrary considering all | 17 | | relevant factors including the best interests of | 18 | | the
beneficiaries, the trustee shall treat each | 19 | | asset for which there is no readily
available | 20 | | market value as an excluded asset;
| 21 | | (ii) if tangible personal property or real | 22 | | property is possessed or
occupied by a | 23 | | beneficiary, the trustee shall not limit or | 24 | | restrict any right of
the beneficiary to use the | 25 | | property in accordance with the governing | 26 | | instrument
whether or not the trustee treats the |
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| 1 | | property as an excluded asset;
| 2 | | (iii) examples of assets for which there is a | 3 | | readily available market
value include: cash and | 4 | | cash equivalents; stocks, bonds, and other | 5 | | securities
and instruments for which there is an | 6 | | established market on a stock exchange,
in an | 7 | | over-the-counter market, or otherwise; and any | 8 | | other property that can
reasonably be expected to | 9 | | be sold within one week of the decision to sell
| 10 | | without extraordinary efforts by the seller;
| 11 | | (iv) examples of assets for which there is no | 12 | | readily available market
value include: stocks, | 13 | | bonds, and other securities and instruments for | 14 | | which
there is no established market on a stock | 15 | | exchange, in an over-the-counter
market, or | 16 | | otherwise; real property; tangible personal | 17 | | property; and artwork
and other collectibles; and
| 18 | | (8) any other administrative matters as the trustee | 19 | | determines necessary
or helpful for the proper functioning | 20 | | of the total return trust.
| 21 | | (f) Allocations.
| 22 | | (1) Expenses, taxes, and other charges that would be | 23 | | deducted from income
if the trust were not a total return | 24 | | trust shall not be deducted from the
distribution amount.
| 25 | | (2) Unless otherwise provided by the governing | 26 | | instrument, the trustee
shall fund the distribution amount |
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| 1 | | each year from the following sources for
that year in the | 2 | | order listed: first from net income (as the term would be
| 3 | | determined if the trust were not a total return trust), | 4 | | then from other
ordinary income as determined for federal | 5 | | income tax purposes, then from net
realized short-term | 6 | | capital gains as determined for federal income tax
| 7 | | purposes, then from net realized long-term capital gains as | 8 | | determined for
federal income tax purposes, then from trust | 9 | | principal comprised of assets for
which there is a readily | 10 | | available market value, and then from other trust
| 11 | | principal.
| 12 | | (g) Court orders. The court may order any of the following | 13 | | actions in a
proceeding brought by a trustee or a beneficiary | 14 | | in accordance with subdivision
(c)(1), (c)(2),
or (c)(3):
| 15 | | (1) select a distribution percentage other than 4%;
| 16 | | (2) average the valuation of the trust's net assets | 17 | | over a period other
than 3 years;
| 18 | | (3) reconvert prospectively from
or adjust the | 19 | | distribution percentage
of
a total return trust;
| 20 | | (4) direct the distribution of net income (determined | 21 | | as if the trust were
not a total return trust) in excess of | 22 | | the distribution amount as to any or all
trust assets if | 23 | | the distribution is necessary to preserve a tax benefit; or
| 24 | | (5) change or direct any administrative procedure as | 25 | | the court determines
necessary or helpful for the proper | 26 | | functioning of the total return trust.
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| 1 | | Nothing in this subsection (g) limits the equitable powers | 2 | | of the court to
grant
other
relief.
| 3 | | (h) Restrictions. Conversion to a total return trust does
| 4 | | not affect any provision in the governing instrument:
| 5 | | (1) directing or authorizing the trustee to distribute | 6 | | principal;
| 7 | | (2) directing or authorizing the trustee to distribute | 8 | | a fixed annuity or
a fixed fraction of the value of trust | 9 | | assets;
| 10 | | (3) authorizing a beneficiary to withdraw a portion or | 11 | | all of the
principal; or
| 12 | | (4) in any manner that would diminish an amount | 13 | | permanently set aside for
charitable purposes under the | 14 | | governing instrument unless both income and
principal are | 15 | | so set aside.
| 16 | | (i) Tax limitations. If a particular trustee is a | 17 | | beneficiary of the trust
and conversion or failure to convert | 18 | | would enhance or diminish the beneficial
interest of the | 19 | | trustee, or if possession or exercise of the conversion power
| 20 | | by a particular trustee would alone cause any individual to be | 21 | | treated as owner
of a part of the trust for income tax purposes | 22 | | or cause a part of the trust to
be included in the gross estate | 23 | | of any individual for estate tax purposes, then
that particular | 24 | | trustee may not participate as a trustee in the exercise of the
| 25 | | conversion power; however:
| 26 | | (1) the trustee may petition the court under |
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| 1 | | subdivision (c)(1) to order
conversion in accordance with | 2 | | this Section; and
| 3 | | (2) if the trustee has one or more co-trustees to whom | 4 | | this subsection (i)
does not apply, the co-trustee or | 5 | | co-trustees may convert the trust to a total
return trust | 6 | | in accordance with this Section.
| 7 | | (j) Releases. A trustee may irrevocably release the power | 8 | | granted by this
Section if the trustee reasonably believes the | 9 | | release is in the best interests
of the trust and its | 10 | | beneficiaries. The release may be personal to the
releasing | 11 | | trustee or may apply generally to some or all subsequent | 12 | | trustees,
and the release may be for any specified period, | 13 | | including a period measured by
the life of an individual.
| 14 | | (k) Remedies. A trustee who reasonably and in good faith | 15 | | takes or omits to
take any action under this Section is not | 16 | | liable to any person interested in
the trust.
If a trustee | 17 | | reasonably and
in good faith takes or omits to take any action | 18 | | under this Section and a person
interested in the trust opposes | 19 | | the act or omission, the person's exclusive
remedy is to obtain | 20 | | an order of the court directing the trustee to convert the
| 21 | | trust to a total return trust, to reconvert from a total return | 22 | | trust, to
change the distribution percentage, or to order any | 23 | | administrative procedures
the court determines necessary or | 24 | | helpful for the proper functioning of the
trust. An act or | 25 | | omission by a trustee under this Section is presumed taken or
| 26 | | omitted reasonably and in good faith unless it is
determined by |
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| 1 | | the court to have been an abuse of discretion. Any claim by any
| 2 | | person interested in the trust that an act or omission by a | 3 | | trustee under this
Section was an abuse of discretion is barred | 4 | | if not asserted in a proceeding
commenced by or on behalf of | 5 | | the person within 2 years after the trustee has
sent to the | 6 | | person or the person's personal representative a notice or
| 7 | | report in writing sufficiently disclosing facts fundamental to | 8 | | the claim such
that the person knew or reasonably should have | 9 | | known of the claim.
The preceding sentence shall not apply to a | 10 | | person who was under a legal
disability at the time the notice | 11 | | or report was sent and who then had no
personal representative. | 12 | | For purposes of this subsection (k), a personal
representative | 13 | | refers to a court appointed guardian or conservator of the
| 14 | | estate of a person.
| 15 | | (l) Application. This Section is available to trusts in | 16 | | existence on the
effective date of this amendatory Act of the | 17 | | 92nd General Assembly or created
after that date. This Section | 18 | | shall be construed as pertaining to the
administration of a | 19 | | trust and shall be available to any trust that
is administered | 20 | | in Illinois under Illinois law or that
is governed by Illinois | 21 | | law with respect to the meaning and effect of
its terms unless:
| 22 | | (1) the trust is a trust described in Internal
Revenue | 23 | | Code Section 642(c)(5), 664(d),
2702(a)(3), or 2702(b); or
| 24 | | (2) the governing instrument expressly prohibits use | 25 | | of this Section by
specific reference to this Section. A | 26 | | provision in the governing instrument in
the form: "Neither |
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| 1 | | the provisions of Section 5.3 of the Trusts and Trustees | 2 | | Act
nor any corresponding provision of future law may be | 3 | | used in the administration
of this trust" or a similar | 4 | | provision demonstrating that intent is sufficient
to | 5 | | preclude the use of this Section.
| 6 | | (m) Application to express trusts.
| 7 | | (1) This subsection (m) does not apply to a charitable | 8 | | remainder unitrust as defined by Section 664(d), Internal | 9 | | Revenue Code of 1986 (26 U.S.C. Section 664), as amended.
| 10 | | (2) In this subsection (m):
| 11 | | (A) "Unitrust" means a trust the terms of which | 12 | | require distribution of a unitrust amount, without | 13 | | regard to whether the trust has been converted to a | 14 | | total return trust in accordance with this Section or | 15 | | whether the trust is established by express terms of | 16 | | the governing instrument.
| 17 | | (B) "Unitrust amount" means an amount equal to a | 18 | | percentage of a trust's assets that may or must be | 19 | | distributed to one or more beneficiaries annually in | 20 | | accordance with the terms of the trust. The unitrust | 21 | | amount may be determined by reference to the net fair | 22 | | market value of the trust's assets as of a particular | 23 | | date or as an average determined on a multiple year | 24 | | basis.
| 25 | | (3) A unitrust changes the definition of income by | 26 | | substituting the unitrust amount for net trust accounting |
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| 1 | | income as the method of determining current return and | 2 | | shall be given effect notwithstanding any contrary | 3 | | provision of the Principal and Income Act. By way of | 4 | | example and not limitation, a unitrust amount determined by | 5 | | a percentage of not less than 3% nor greater than 5% is | 6 | | conclusively presumed a reasonable current return that | 7 | | fairly apportions the total return of a unitrust.
| 8 | | (4) The allocations provision of subdivision (2) of | 9 | | subsection (f) of Section 5.3 applies to a unitrust except | 10 | | to the extent its governing instrument expressly provides | 11 | | otherwise.
| 12 | | (Source: P.A. 96-479, eff. 1-1-10.)
| 13 | | (760 ILCS 5/16.1)
| 14 | | Sec. 16.1. Virtual representation.
| 15 | | (a) Representation by a beneficiary with a person having | 16 | | substantially similar identical interest , by the primary | 17 | | beneficiaries and by others ; contingent remainder | 18 | | beneficiaries . | 19 | | (1) To the extent there is no conflict of interest | 20 | | between the representative and the person represented | 21 | | beneficiary with respect to the particular question or | 22 | | dispute , a beneficiary who is a minor , or a disabled , or | 23 | | unborn beneficiary person , or a beneficiary person whose | 24 | | identity or location is unknown and not reasonably | 25 | | ascertainable (hereinafter referred to as an |
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| 1 | | "unascertainable beneficiary") , may for all purposes be | 2 | | represented by and bound by another beneficiary individual | 3 | | having a substantially similar identical interest with | 4 | | respect to the particular question or dispute; provided, | 5 | | however, that the represented beneficiary such person is | 6 | | not otherwise represented by a court appointed guardian or | 7 | | agent in accordance with subdivision (a)(4) or by a parent | 8 | | in accordance with subdivision (a)(5) as provided in the | 9 | | next sentence . If a person is represented by a court | 10 | | appointed guardian of the estate or, if none, by a court | 11 | | appointed guardian of the person, the actions of such | 12 | | guardian shall represent and bind that person for purposes | 13 | | of this subsection (a)(1). | 14 | | (2) If all primary beneficiaries of a trust either have | 15 | | legal capacity are adults and not disabled, or have | 16 | | representatives in accordance with this subsection (a) (1) | 17 | | who have legal capacity are adults and not disabled , the | 18 | | actions of such primary beneficiaries, in each case either | 19 | | by the beneficiary or by the beneficiary's representative | 20 | | or their respective representatives , shall represent and | 21 | | bind all other beneficiaries persons who have a successor, | 22 | | contingent, future, or other interest in the trust and who | 23 | | would become primary beneficiaries only by reason of | 24 | | surviving a primary beneficiary . | 25 | | For purposes of this Section, "primary beneficiary" | 26 | | means a beneficiary who is either: (i) currently eligible |
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| 1 | | to receive income or principal from the trust or (ii) | 2 | | assuming nonexercise of all powers of appointment, will be | 3 | | eligible to receive a distribution of principal from the | 4 | | trust if the beneficiary survives to the final date of | 5 | | distribution with respect to the beneficiary's share. | 6 | | (3) For purposes of this Act: | 7 | | (A) "Primary beneficiary" means a beneficiary of a | 8 | | trust who as of the date of determination is either: | 9 | | (i) currently eligible to receive income or principal | 10 | | from the trust, or (ii) a presumptive remainder | 11 | | beneficiary. If all presumptive remainder | 12 | | beneficiaries either are adults and not disabled, or | 13 | | have representatives in accordance with subsection | 14 | | (a)(1) who are adults and not disabled, the actions of | 15 | | such presumptive remainder beneficiaries, or their | 16 | | respective representatives, shall represent and bind | 17 | | all other beneficiaries who have a successor, | 18 | | contingent, or other future interest in the trust. For | 19 | | purposes of this Section, "presumptive remainder | 20 | | beneficiaries" means, | 21 | | (B) "Presumptive remainder beneficiary" means a | 22 | | beneficiary of a trust, as of the date of determination | 23 | | and assuming nonexercise of all powers of appointment, | 24 | | all beneficiaries who either : (i) (A) would be eligible | 25 | | to receive a distribution of income or principal if the | 26 | | trust terminated on that date, or (ii) (B) would be |
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| 1 | | eligible to receive a distribution of income or | 2 | | principal if the interests of all beneficiaries | 3 | | currently eligible to receive income or principal from | 4 | | the trust ended on that date without causing the trust | 5 | | to terminate. | 6 | | (C) "Disabled person" as of any date means either a | 7 | | disabled person within the meaning of Section 11a-2 of | 8 | | the Probate Act of 1975 or a person who, within the 365 | 9 | | days immediately preceding that date, was examined by a | 10 | | licensed physician who determined that the person | 11 | | lacked the capacity to make prudent financial | 12 | | decisions, and the physician made a written record of | 13 | | the physician's determination and signed the written | 14 | | record within 90 days after the examination. | 15 | | (D) A person has legal capacity unless the person | 16 | | is a minor or a disabled person. | 17 | | (4) If a trust beneficiary is represented by a court | 18 | | appointed guardian of the estate or, if none, guardian of | 19 | | the person, the guardian shall represent and bind the | 20 | | beneficiary. If a trust beneficiary is a disabled person, | 21 | | an agent under a power of attorney for property who has | 22 | | authority to act with respect to the particular question or | 23 | | dispute and who does not have a conflict of interest with | 24 | | respect to the particular question or dispute may represent | 25 | | and bind the principal. An agent is deemed to have such | 26 | | authority if the power of attorney grants the agent the |
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| 1 | | power to settle claims and to exercise powers with respect | 2 | | to trusts and estates, even if the powers do not include | 3 | | powers to make a will, to revoke or amend a trust, or to | 4 | | require the trustee to pay income or principal. Absent a | 5 | | court order pursuant to the Illinois Power of Attorney Act | 6 | | directing a guardian to exercise powers of the principal | 7 | | under an agency that survives disability, an agent under a | 8 | | power of attorney for property who in accordance with this | 9 | | subdivision has authority to represent and bind a disabled | 10 | | principal takes precedence over a court appointed guardian | 11 | | unless the court specifies otherwise. This subdivision | 12 | | applies to all agencies, whenever and wherever executed. | 13 | | The consent of a person who may represent and bind another | 14 | | person in accordance with this Section is binding on the | 15 | | person represented, and notice to a person who may | 16 | | represent and bind another person in accordance with this | 17 | | Section has the same effect as if notice were given | 18 | | directly to the other person. | 19 | | (5) If a trust beneficiary is a minor or a disabled or | 20 | | unborn person and is not represented by a guardian or agent | 21 | | in accordance with subdivision (a)(4), then a parent of the | 22 | | beneficiary may represent and bind the beneficiary, | 23 | | provided that there is no conflict of interest between the | 24 | | represented person and either of the person's parents with | 25 | | respect to the particular question or dispute. If a | 26 | | disagreement arises between parents who otherwise qualify |
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| 1 | | to represent a child in accordance with this subsection (a) | 2 | | and who are seeking to represent the same child, the parent | 3 | | who is a lineal descendant of the settlor of the trust that | 4 | | is the subject of the representation is entitled to | 5 | | represent the child; or if none, the parent who is a | 6 | | beneficiary of the trust is entitled to represent the | 7 | | child. | 8 | | (6) A guardian, agent or parent who is the | 9 | | representative for a beneficiary under subdivision (a)(4) | 10 | | or (a)(5) may, for all purposes, represent and bind any | 11 | | other beneficiary who is a minor or a disabled, unborn, or | 12 | | unascertainable beneficiary who has an interest, with | 13 | | respect to the particular question or dispute, that is | 14 | | substantially similar to the interest of the beneficiary | 15 | | represented by the representative, but only to the extent | 16 | | that there is no conflict of interest between the | 17 | | beneficiary represented by the representative and the | 18 | | other beneficiary with respect to the particular question | 19 | | or dispute; provided, however, that the other beneficiary | 20 | | is not otherwise represented by a guardian or agent in | 21 | | accordance with subdivision (a)(4) or by a parent in | 22 | | accordance with subdivision (a)(5). | 23 | | (7) The action or consent of a representative who may | 24 | | represent and bind a beneficiary in accordance with this | 25 | | Section is binding on the beneficiary represented, and | 26 | | notice or service of process to the representative has the |
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| 1 | | same effect as if the notice or service of process were | 2 | | given directly to the beneficiary represented. | 3 | | (8) Nothing in this Section limits the discretionary | 4 | | power of a court in a judicial proceeding to appoint a | 5 | | guardian ad litem for any minor, disabled, unborn, or | 6 | | unascertainable beneficiary with respect to a particular | 7 | | question or dispute, but appointment of a guardian ad litem | 8 | | need not be considered and is not necessary if such | 9 | | beneficiary is otherwise represented in accordance with | 10 | | this Section. | 11 | | (b) Total return trusts. This Section shall apply to enable | 12 | | conversion to a total return trust by agreement in accordance | 13 | | with subsection (b) 5.3(b) of the total return trust provisions | 14 | | of Section 5.3 of this Act, by whether such agreement is made | 15 | | between the trustee and (A) all primary beneficiaries of the | 16 | | trust, in each case either by the beneficiary or by the | 17 | | beneficiary's representative in accordance with this Section , | 18 | | either individually or by their respective representatives in | 19 | | accordance with subsection (a)(1), or (B) all beneficiaries | 20 | | currently eligible to receive income or principal from the | 21 | | trust and all beneficiaries who are presumptive remaindermen of | 22 | | the trust, in each case either individually or by their | 23 | | respective representatives in accordance with subsection | 24 | | (a)(1) . | 25 | | (c) Representation of charity. If a trust provides a | 26 | | beneficial interest or expectancy for one or more charities or |
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| 1 | | charitable purposes that are not specifically named or | 2 | | otherwise represented (the "charitable interest"), the | 3 | | Illinois Attorney General may, in accordance with this Section, | 4 | | represent, bind, and act on behalf of the charitable interest | 5 | | with respect to any particular question or dispute, including | 6 | | without limitation representing the charitable interest in a | 7 | | nonjudicial settlement agreement or in an agreement to convert | 8 | | a trust to a total return trust in accordance with subsection | 9 | | (b) 5.3(b) of the total return trust provisions of Section 5.3 | 10 | | of this Act. A charity that is specifically named as | 11 | | beneficiary of a trust or that otherwise has an express | 12 | | beneficial interest in a trust may act for itself. This | 13 | | subsection (c) shall be construed as being declarative of | 14 | | existing law and not as a new enactment. Notwithstanding any | 15 | | other provision, nothing in this Section shall be construed to | 16 | | limit or affect the Illinois Attorney General's authority to | 17 | | file an action or take other steps as he or she deems advisable | 18 | | at any time to enforce or protect the general public interest | 19 | | as to a trust that provides a beneficial interest or expectancy | 20 | | for one or more charities or charitable purposes whether or not | 21 | | a specific charity is named in the trust. This subsection (c) | 22 | | shall be construed as being declarative of existing law and not | 23 | | as a new enactment. | 24 | | (d) Nonjudicial settlement agreements. | 25 | | (1) For purposes of this Section, "interested persons" | 26 | | means the trustee and all beneficiaries, or their |
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| 1 | | respective representatives determined after giving effect | 2 | | to the preceding provisions of this Section, other persons | 3 | | and parties in interest whose consent or joinder would be | 4 | | required in order to achieve a binding settlement were the | 5 | | settlement to be approved by the court. "Interested | 6 | | persons" also includes a trust advisor, investment | 7 | | advisor, distribution advisor, trust protector or other | 8 | | holder, or committee of holders, of fiduciary or | 9 | | nonfiduciary powers, if the person then holds powers | 10 | | material to a particular question or dispute to be resolved | 11 | | or affected by a nonjudicial settlement agreement in | 12 | | accordance with this Section or by the court. | 13 | | (2) Interested Except as otherwise provided in | 14 | | subsection (d)(3), interested persons, or their respective | 15 | | representatives determined after giving effect to the | 16 | | preceding provisions of this Section, may enter into a | 17 | | binding nonjudicial settlement agreement with respect to | 18 | | any matter involving a trust as provided in this Section . | 19 | | (3) (Blank). A nonjudicial settlement agreement is | 20 | | valid only to the extent its terms and conditions could be | 21 | | properly approved under applicable law by a court of | 22 | | competent jurisdiction. | 23 | | (4) The following matters Matters that may be resolved | 24 | | by a nonjudicial settlement agreement include but are not | 25 | | limited to : | 26 | | (A) Validity, interpretation , or construction of |
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| 1 | | the terms of the trust . ; | 2 | | (B) Approval approval of a trustee's report or | 3 | | accounting . ; | 4 | | (C) Exercise exercise or nonexercise of any power | 5 | | by a trustee . ; | 6 | | (D) The the grant to a trustee of any necessary or | 7 | | desirable administrative power , provided the grant | 8 | | does not conflict with a clear material purpose of the | 9 | | trust. ; | 10 | | (E) Questions questions relating to property or an | 11 | | interest in property held by the trust , provided the | 12 | | resolution does not conflict with a clear material | 13 | | purpose of the trust. ; | 14 | | (F) Removal, appointment, or removal and | 15 | | appointment of a trustee, trust advisor, investment | 16 | | advisor, distribution advisor, trust protector or | 17 | | other holder, or committee of holders, of fiduciary or | 18 | | nonfiduciary powers, including without limitation | 19 | | designation of a plan of succession or procedure to | 20 | | determine successors to any such office. resignation | 21 | | or appointment of a trustee; | 22 | | (G) Determination determination of a trustee's | 23 | | compensation . ; | 24 | | (H) Transfer transfer of a trust's principal place | 25 | | of administration , including without limitation to | 26 | | change the law governing administration of the trust. ; |
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| 1 | | (I) Liability liability or indemnification of a | 2 | | trustee for an action relating to the trust . ; | 3 | | (J) Resolution of bona fide resolution of disputes | 4 | | or issues related to administration, investment, | 5 | | distribution or other matters . ; | 6 | | (K) Modification modification of terms of the | 7 | | trust pertaining to administration of the trust . ; and | 8 | | (L) Termination termination of the trust, provided | 9 | | that court approval of such termination must be | 10 | | obtained in accordance with subdivision subsection | 11 | | (d)(5) of this Section , and the court must conclude | 12 | | continuance of the trust is not necessary to achieve | 13 | | any clear material purpose of the trust . ; upon The | 14 | | court may consider spendthrift provisions as a factor | 15 | | in making a decision under this subdivision, but a | 16 | | spendthrift provision is not necessarily a clear | 17 | | material purpose of a trust, and the court is not | 18 | | precluded from modifying or terminating a trust | 19 | | because the trust instrument contains a spendthrift | 20 | | provision. Upon such termination the court may order | 21 | | the trust property distributed as agreed by the parties | 22 | | to the agreement or otherwise as the court determines | 23 | | equitable consistent with the purposes of the trust. | 24 | | (M) Any other matter involving a trust to the | 25 | | extent the terms and conditions of the nonjudicial | 26 | | settlement agreement could be properly approved under |
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| 1 | | applicable law by a court of competent jurisdiction. | 2 | | (4.5) If a charitable interest or a specifically named | 3 | | charity is a current beneficiary, is a presumptive | 4 | | remainder beneficiary, or has any vested interest in a | 5 | | trust, the parties to any proposed nonjudicial settlement | 6 | | agreement affecting the trust shall deliver to the Attorney | 7 | | General's Charitable Trust Bureau written notice of the | 8 | | proposed agreement at least 60 days prior to its effective | 9 | | date. The Bureau need take no action, but if it objects in | 10 | | a writing delivered to one or more of the parties prior to | 11 | | the proposed effective date, the agreement shall not take | 12 | | effect unless the parties obtain court approval. | 13 | | (5) Any beneficiary or other interested person may | 14 | | request the court to approve any part or all of a | 15 | | nonjudicial settlement agreement, including whether any | 16 | | representation is adequate and without conflict of | 17 | | interest, provided that the petition for such approval must | 18 | | be filed before or within 60 days after the effective date | 19 | | of the agreement. | 20 | | (6) An agreement entered into in accordance with this | 21 | | Section shall be final and binding on the trustee , on and | 22 | | all beneficiaries of the trust, both current and future, | 23 | | and on all other interested persons as if ordered by a | 24 | | court with competent jurisdiction over the trust, the trust | 25 | | property, and all parties in interest. | 26 | | (7) In the trustee's sole discretion, the trustee may, |
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| 1 | | but is not required to, obtain and rely upon an opinion of | 2 | | counsel on any matter relevant to this Section, including | 3 | | without limitation: (i) where required by this Section, | 4 | | that the any agreement proposed to be made in accordance | 5 | | with this Section does not conflict with a clear material | 6 | | purpose of the trust or could be properly approved by the | 7 | | court under applicable law ; (ii) in the case of a trust | 8 | | termination, that continuance of the trust is not necessary | 9 | | to achieve any clear material purpose of the trust; (iii) , | 10 | | or that there is no conflict of interest between a | 11 | | representative and the person represented with respect to | 12 | | the particular question or dispute; or (iv) that the | 13 | | representative and the person represented have | 14 | | substantially similar interests with respect to the or | 15 | | among those being represented with respect to a particular | 16 | | question or dispute. | 17 | | (e) Application. On and after its effective date, this | 18 | | Section applies to all existing and future trusts, judicial | 19 | | proceedings, or agreements entered into in accordance with this | 20 | | Section on or after the effective date.
| 21 | | (f) This Section shall be construed as pertaining to the | 22 | | administration of a trust and shall be available to any trust | 23 | | that is administered in this State or that is governed by | 24 | | Illinois law with respect to the meaning and effect of its | 25 | | terms, except to the extent the governing instrument expressly | 26 | | prohibits the use of this Section by specific reference to this |
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| 1 | | Section. A provision in the governing instrument in the form: | 2 | | "Neither the provisions of Section 16.1 of the Illinois Trusts | 3 | | and Trustees Act nor any corresponding provision of future law | 4 | | may be used in the administration of this trust", or a similar | 5 | | provision demonstrating that intent, is sufficient to preclude | 6 | | the use of this Section. | 7 | | (g) The changes made by this amendatory Act of the 98th | 8 | | General Assembly apply to all trusts in existence on the | 9 | | effective date of this amendatory Act of the 98th General | 10 | | Assembly or created after that date, and are applicable to | 11 | | judicial proceedings and nonjudicial matters involving such | 12 | | trusts. For purposes of this Section: | 13 | | (i) judicial proceedings include any proceeding before | 14 | | a court or administrative tribunal of this State and any | 15 | | arbitration or mediation proceedings; and | 16 | | (ii) nonjudicial matters include, but are not limited | 17 | | to, nonjudicial settlement agreements entered into in | 18 | | accordance with this Section and the grant of any consent, | 19 | | release, ratification, or indemnification. | 20 | | (Source: P.A. 96-479, eff. 1-1-10.)".
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