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[ Introduced ] | [ Engrossed ] | [ House Amendment 002 ] |
92_HB0774ham003 LRB9205859WHcsam01 1 AMENDMENT TO HOUSE BILL 774 2 AMENDMENT NO. . Amend House Bill 774 by replacing 3 everything after the enacting clause with the following: 4 "Section 5. The Trusts and Trustees Act is amended by 5 adding Section 5.3 as follows: 6 (760 ILCS 5/5.3 new) 7 Sec. 5.3. Investing for total return. With the consent 8 of the beneficiaries then entitled to receive or eligible to 9 have the benefit of the income, and in the absence of 10 specific direction to the contrary by the settlor in the 11 trust document, a trustee may, but is not required to, invest 12 for total return. A trustee invests for total return when the 13 trustee, exercising reasonable business judgment, invests the 14 trust's portfolio with the object of increasing the total 15 return from the trust's investments expected over the life of 16 the trust without regard to whether the return takes the form 17 of current income or capital gain. 18 If a trustee invests for total return, the income of the 19 trust shall be credited with income from the trust's 20 investments in accordance with the Principal and Income Act, 21 and shall also be credited, first from realized capital gain, 22 and then from unrealized capital gain, but only to the extent -2- LRB9205859WHcsam01 1 either gain exists, with the additional income amount. As 2 used in this Section, "additional income amount" means the 3 amount of additional trust accounting income, if any, that 4 would have been earned by the trust had the trustee invested 5 without regard to a total return approach and the trust's 6 portfolio had been allocated among asset classes solely in 7 accordance with the duty to balance the needs of income 8 beneficiaries for trust accounting income and the interests 9 of remaindermen in growth of principal. In determining the 10 amount of additional trust accounting income that would have 11 been generated from the portfolio allocation, the trustee 12 may use the average current income return for market indices 13 that are customarily used by trustees in the measurement of 14 investment performance for each such asset class. 15 The trustee shall credit the income of the trust with the 16 additional income amount within a reasonable time after the 17 close of the trust's tax year, and shall calculate realized 18 and unrealized capital gains as of the close of the trust's 19 tax year on average over the 3 preceding tax years (or, if 20 the trust has existed for less than 3 years, over the lesser 21 number of years). 22 A trustee's judgment concerning any portfolio allocation, 23 any additional income amount, or investing for total return 24 under this Section may be challenged if it was an abuse of 25 discretion. A court may determine that a trustee abused its 26 discretion only if the trustee's judgment was inconsistent 27 with the prudent investor rule, but not merely because the 28 court would have made a different judgment. A beneficiary 29 who challenges a trustee's judgment has the burden of 30 establishing that it was an abuse of discretion. 31 A trustee shall notify the primary beneficiaries, as 32 defined in Section 16.1 of this Act, of its election to 33 invest for total return and the election shall remain in 34 effect until revoked by a notice from the trustee to the then -3- LRB9205859WHcsam01 1 primary beneficiaries.".