Bill Text: IL HB1471 | 2019-2020 | 101st General Assembly | Chaptered


Bill Title: Creates the Illinois Trust Code. Provides that the Code applies to express trusts, charitable or noncharitable, and trusts created pursuant to a statute, judgment, or decree that requires the trust to be administered in the manner of an express trust. Defines terms. Adds provisions governing: judicial proceedings; representation; creation, validity, modification, and termination of trusts; creditor's claims; spendthrift and discretionary trusts; revocable trusts; the office of trustee; duties and powers of the trustee; the Illinois Prudent Investor Law; life insurance; affiliated investments; liability of trustees and rights of persons dealing with a trustee; total return trusts; trust decanting; the Uniform Powers of Appointment Law; perpetuities; and application of the Code to existing trusts. Repeals the Trusts and Trustees Act, the Trusts and Dissolutions of Marriage Act, the Uniform Powers of Appointment Act (added by Public Act 100-1044), the Statute Concerning Perpetuities, the Perpetuities Vesting Act, and the Trust Accumulation Act. Makes corresponding changes in the Public Use Trust Act, the Township Code, the Corporate Fiduciary Act, the Community-Integrated Living Arrangements Licensure and Certification Act, the Title Insurance Act, the Illinois Funeral or Burial Funds Act, the Mental Health and Developmental Disabilities Code, the Illinois Marriage and Dissolution of Marriage Act, the Probate Act of 1975, the Illinois Power of Attorney Act, the Common Trust Fund Act, the Religious Corporation Act, and the Illinois Pre-Need Cemetery Sales Act. Effective January 1, 2020.

Spectrum: Bipartisan Bill

Status: (Passed) 2019-07-12 - Public Act . . . . . . . . . 101-0048 [HB1471 Detail]

Download: Illinois-2019-HB1471-Chaptered.html



Public Act 101-0048
HB1471 EnrolledLRB101 06784 LNS 51811 b
AN ACT concerning civil law.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Article 1. General Provisions and Definitions.
Section 101. Short title. This Act may be cited as the
Illinois Trust Code.
Section 102. Scope. Except as otherwise provided, this Code
applies to express trusts, charitable or noncharitable, and
trusts created pursuant to a statute, judgment, or decree that
requires the trust to be administered in the manner of an
express trust. This Code does not apply to any:
(1) land trust;
(2) voting trust;
(3) security instrument such as a trust deed or
mortgage;
(4) liquidation trust;
(5) escrow;
(6) instrument under which a nominee, custodian for
property, or paying or receiving agent is appointed;
(7) trust created by a deposit arrangement in a banking
or savings institution, commonly known as a "Totten trust"
unless in the trust instrument any of the provisions of
this Code are made applicable by specific reference; or
(8) Grain Indemnity Trust Account or any other trust
created under the Grain Code.
Section 103. Definitions. In this Code:
(1) "Action", with respect to an act of a trustee, includes
a failure to act.
(2) "Ascertainable standard" means a standard relating to
an individual's health, education, support, or maintenance
within the meaning of Section 2041(b)(1)(A) or 2514(c)(1) of
the Internal Revenue Code and any applicable regulations.
(3) "Beneficiary" means a person that:
(A) has a present or future beneficial interest in a
trust, vested or contingent, assuming nonexercise of
powers of appointment;
(B) in a capacity other than that of trustee, holds a
power of appointment over trust property; or
(C) is an identified charitable organization that will
or may receive distributions under the terms of the trust.
(4) "Charitable interest" means an interest in a trust
that:
(A) is held by an identified charitable organization
and makes the organization a qualified beneficiary;
(B) benefits only charitable organizations and, if the
interest were held by an identified charitable
organization, would make the organization a qualified
beneficiary; or
(C) is held solely for charitable purposes and, if the
interest were held by an identified charitable
organization, would make the organization a qualified
beneficiary.
(5) "Charitable organization" means:
(A) a person, other than an individual, organized and
operated exclusively for charitable purposes; or
(B) a government or governmental subdivision, agency,
or instrumentality, to the extent it holds funds
exclusively for a charitable purpose.
(6) "Charitable purpose" means the relief of poverty, the
advancement of education or religion, the promotion of health,
municipal or other governmental purpose, or another purpose the
achievement of which is beneficial to the community.
(7) "Charitable trust" means a trust, or portion of a
trust, created for a charitable purpose.
(8) "Community property" means all personal property,
wherever situated, that was acquired as or became, and
remained, community property under the laws of another
jurisdiction, and all real property situated in another
jurisdiction that is community property under the laws of that
jurisdiction.
(9) "Current beneficiary" means a beneficiary that on the
date the beneficiary's qualification is determined is a
distributee or permissible distributee of trust income or
principal. The term "current beneficiary" includes the holder
of a presently exercisable general power of appointment but
does not include a person who is a beneficiary only because the
person holds any other power of appointment.
(10) "Directing party" means any investment trust advisor,
distribution trust advisor, or trust protector.
(11) "Donor", with reference to a power of appointment,
means a person that creates a power of appointment.
(12) "Environmental law" means a federal, state, or local
law, rule, regulation, or ordinance relating to protection of
the environment.
(13) "General power of appointment" means a power of
appointment exercisable in favor of a powerholder, the
powerholder's estate, a creditor of the powerholder, or a
creditor of the powerholder's estate.
(14) "Guardian of the estate" means a person appointed by a
court to administer the estate of a minor or adult individual.
(15) "Guardian of the person" means a person appointed by a
court to make decisions regarding the support, care, education,
health, and welfare of a minor or adult individual.
(16) "Incapacitated" or "incapacity" means the inability
of an individual to manage property or business affairs because
the individual is a minor, adjudicated incompetent, has an
impairment in the ability to receive and evaluate information
or make or communicate decisions even with the use of
technological assistance; or is at a location that is unknown
and not reasonably ascertainable. Without limiting the ways in
which incapacity may be established, an individual is
incapacitated if:
(i) a plenary guardian has been appointed for the
individual under subsection (c) of Section 11a-12 of the
Probate Act of 1975;
(ii) a limited guardian has been appointed for the
individual under subsection (b) of Section 11a-12 of the
Probate Act of 1975 and the court has found that the
individual lacks testamentary capacity; or
(iii) the individual was examined by a licensed
physician who determined that the individual was
incapacitated and the physician made a signed written
record of the physician's determination within 90 days
after the examination and no licensed physician
subsequently made a signed written record of the
physician's determination that the individual was not
incapacitated within 90 days after examining the
individual.
(17) "Internal Revenue Code" means the Internal Revenue
Code of 1986 as amended from time to time and includes
corresponding provisions of any subsequent federal tax law.
(18) "Interested persons" means: (A) the trustee; and (B)
all beneficiaries, or their respective representatives
determined after giving effect to the provisions of Article 3,
whose consent or joinder would be required in order to achieve
a binding settlement were the settlement to be approved by the
court. "Interested persons" includes a trust advisor,
investment advisor, distribution advisor, trust protector, or
other holder, or committee of holders, of fiduciary or
nonfiduciary powers, if the person then holds powers material
to a particular question or dispute to be resolved or affected
by a nonjudicial settlement in accordance with Section 111 or
by a judicial proceeding.
(19) "Interests of the beneficiaries" means the beneficial
interests provided in the trust instrument.
(20) "Jurisdiction", with respect to a geographic area,
includes a State or country.
(21) "Legal capacity" means that the person is not
incapacitated.
(22) "Nongeneral power of appointment" means a power of
appointment that is not a general power of appointment.
(23) "Person" means an individual, estate, business or
nonprofit entity, public corporation, government or
governmental subdivision, agency, or instrumentality, or other
legal entity.
(24) "Power of appointment" means a power that enables a
powerholder acting in a nonfiduciary capacity to designate a
recipient of an ownership interest in or another power of
appointment over the appointive property. The term "power of
appointment" does not include a power of attorney.
(25) "Power of withdrawal" means a presently exercisable
general power of appointment other than a power:
(A) exercisable by the powerholder as trustee that is
limited by an ascertainable standard; or
(B) exercisable by another person only upon consent of
the trustee or a person holding an adverse interest.
(26) "Powerholder" means a person in which a donor creates
a power of appointment.
(27) "Presently exercisable power of appointment" means a
power of appointment exercisable by the powerholder at the
relevant time. The term "presently exercisable power of
appointment":
(A) includes a power of appointment exercisable only
after the occurrence of a specified event, the satisfaction
of an ascertainable standard, or the passage of a specified
time only after:
(i) the occurrence of the specified event;
(ii) the satisfaction of the ascertainable
standard; or
(iii) the passage of the specified time; and
(B) does not include a power exercisable only at the
powerholder's death.
(28) "Presumptive remainder beneficiary" means a
beneficiary of a trust, as of the date of determination and
assuming nonexercise of all powers of appointment, who either:
(A) would be eligible to receive a distribution of income or
principal if the trust terminated on that date; or (B) would be
eligible to receive a distribution of income or principal if
the interests of all beneficiaries currently eligible to
receive income or principal from the trust ended on that date
without causing the trust to terminate.
(29) "Property" means anything that may be the subject of
ownership, whether real or personal, legal or equitable, or any
interest therein.
(30) "Qualified beneficiary" means a beneficiary who, on
the date the beneficiary's qualification is determined and
assuming nonexercise of powers of appointment:
(A) is a distributee or permissible distributee of
trust income or principal;
(B) would be a distributee or permissible distributee
of trust income or principal if the interests of the
distributees described in subparagraph (A) terminated on
that date without causing the trust to terminate; or
(C) would be a distributee or permissible distributee
of trust income or principal if the trust terminated on
that date.
(31) "Revocable", as applied to a trust, means revocable by
the settlor without the consent of the trustee or a person
holding an adverse interest. A revocable trust is deemed
revocable during the settlor's lifetime.
(32) "Settlor", except as otherwise provided in Sections
113 and 1225, means a person, including a testator, who
creates, or contributes property to, a trust. If more than one
person creates or contributes property to a trust, each person
is a settlor of the portion of the trust property attributable
to that person's contribution except to the extent another
person has the power to revoke or withdraw that portion.
(33) "Sign" means, with present intent to authenticate or
adopt a record:
(A) to execute or adopt a tangible symbol; or
(B) to attach to or logically associate with the record
an electronic symbol, sound, or process.
(34) "Spendthrift provision" means a term of a trust that
restrains both voluntary and involuntary transfer of a
beneficiary's interest.
(35) "State" means a State of the United States, the
District of Columbia, Puerto Rico, the United States Virgin
Islands, or any territory or insular possession subject to the
jurisdiction of the United States. The term "state" includes an
Indian tribe or band recognized by federal law or formally
acknowledged by a state.
(36) "Terms of the trust" means:
(A) except as otherwise provided in paragraph (B), the
manifestation of the settlor's intent regarding a trust's
provisions as:
(i) expressed in the trust instrument; or
(ii) established by other evidence that would be
admissible in a judicial proceeding; or
(B) the trust's provisions as established, determined,
or modified by:
(i) a trustee or other person in accordance with
applicable law;
(ii) a court order; or
(iii) a nonjudicial settlement agreement under
Section 111.
(37) "Trust" means a trust created by will, deed,
agreement, declaration, or other written instrument.
(38) "Trust accounting" means one or more written
communications from the trustee with respect to the accounting
year that describe: (A) the trust property, liabilities,
receipts, and disbursements, including the amount of the
trustee's compensation; (B) the value of the trust assets on
hand at the close of the accounting period, to the extent
feasible; and (C) all other material facts related to the
trustee's administration of the trust.
(39) "Trust instrument" means the written instrument
stating the terms of a trust, including any amendment, any
court order or nonjudicial settlement agreement establishing,
construing, or modifying the terms of the trust in accordance
with Section 111, Sections 410 through 416, or other applicable
law, and any additional trust instrument under Article 12.
(40) "Trustee" includes an original, additional, and
successor trustee, and a co-trustee.
(41) "Unascertainable beneficiary" means a beneficiary
whose identity is uncertain or not reasonably ascertainable.
Section 104. Knowledge.
(a) Except as provided in subsection (b), a person has
knowledge of a fact if the person:
(1) has actual knowledge of it;
(2) has received a notice or notification of it; or
(3) from all the facts and circumstances known to the
person at the time in question, has reason to know it.
(b) An organization that conducts activities through
employees has notice or knowledge of a fact involving a trust
only from the time the information was received by an employee
having responsibility to act for the trust, or would have been
brought to the employee's attention if the organization had
exercised reasonable diligence. An organization exercises
reasonable diligence if it maintains reasonable routines for
communicating significant information to the employee having
responsibility to act for the trust and there is reasonable
compliance with the routines. Reasonable diligence does not
require an employee of the organization to communicate
information unless the communication is part of the
individual's regular duties or the individual knows a matter
involving the trust would be materially affected by the
information.
Section 105. Default and mandatory rules.
(a) The trust instrument may specify the rights, powers,
duties, limitations, and immunities applicable to the trustee,
beneficiary, and others and those terms, if not otherwise
contrary to law, shall control, except to the extent
specifically provided otherwise in this Section. The
provisions of this Code apply to the trust to the extent that
they are not inconsistent with specific terms of the trust.
(b) Specific terms of the trust prevail over any provision
of this Code except:
(1) the requirements for creating a trust;
(2) the duty of a trustee to act in good faith;
(3) the requirement that a trust have a purpose that is
lawful and not contrary to public policy;
(4) the rules governing designated representatives as
provided in Section 307;
(5) the 21-year limitation contained in subsection (a)
of Section 409;
(6) the power of the court to modify or terminate a
trust under Sections 411 through 417;
(7) the effect of a spendthrift provision and the
rights of certain creditors and assignees to reach a trust
as provided in Article 5;
(8) the requirement under subsection (e) of Section 602
that an agent under a power of attorney must have express
authorization in the agency to exercise a settlor's powers
with respect to a revocable trust;
(9) the power of the court under subsection (b) of
Section 708 to adjust a trustee's compensation specified in
the trust instrument that is unreasonably low or high;
(10) for trusts becoming irrevocable after the
effective date of this Code, the trustee's duty under
paragraph (b)(1) of Section 813.1 to provide information to
the qualified beneficiaries;
(11) for trusts becoming irrevocable after the
effective date of this Code, the trustee's duty under
paragraph (b)(2) of Section 813.1 to provide accountings to
the current beneficiaries of the trust;
(12) for trusts becoming irrevocable after the
effective date of this Code, the trustee's duty under
paragraph (b)(4) of Section 813.1 to provide accountings to
beneficiaries receiving a distribution of the residue of
the trust upon a trust's termination;
(13) the effect of an exculpatory term under Section
1008;
(14) the rights under Sections 1010 through 1013 of a
person other than a trustee or beneficiary; and
(15) the power of the court to take such action and
exercise such jurisdiction as may be necessary in the
interests of equity.
Section 106. Common law of trusts; principles of equity.
The common law of trusts and principles of equity supplement
this Code, except to the extent modified by this Code or
another statute of this State.
Section 107. Governing law.
(a) The meaning and effect of a trust instrument are
determined by:
(1) the law of the jurisdiction designated in the trust
instrument; or
(2) in the absence of a designation in the trust
instrument, the law of the jurisdiction having the most
significant relationship to the matter at issue.
(b) Except as otherwise expressly provided by the trust
instrument or by court order, the laws of this State govern the
administration of a trust while the trust is administered in
this State.
Section 108. Principal place of administration.
(a) Without precluding other means for establishing a
sufficient connection with the designated jurisdiction, the
terms of a trust designating the principal place of
administration are valid and controlling if:
(1) a trustee's principal place of business is located
in or a trustee is a resident of the designated
jurisdiction; or
(2) all or part of the administration occurs in the
designated jurisdiction.
(b) A trustee is under a continuing duty to administer the
trust at a place appropriate to its purposes, its
administration, and the interests of the beneficiaries.
(c) Without precluding the right of the court to order,
approve, or disapprove a transfer, the trustee, in furtherance
of the duty prescribed by subsection (b), may transfer the
trust's principal place of administration to another State or
to a jurisdiction outside of the United States.
(d) The trustee shall notify the qualified beneficiaries of
a proposed transfer of a trust's principal place of
administration not less than 60 days before initiating the
transfer. The notice of proposed transfer must include:
(1) the name of the jurisdiction to which the principal
place of administration is to be transferred;
(2) the address and telephone number at the new
location at which the trustee can be contacted;
(3) an explanation of the reasons for the proposed
transfer;
(4) the date on which the proposed transfer is
anticipated to occur; and
(5) the date, not less than 60 days after the giving of
the notice, by which the qualified beneficiary must notify
the trustee of an objection to the proposed transfer.
(e) The authority of a trustee under this Section to
transfer a trust's principal place of administration
terminates if a qualified beneficiary notifies the trustee of
an objection to the proposed transfer on or before the date
specified in the notice.
(f) Notwithstanding any other provision of this Code, the
trustee has no duty to inform the beneficiaries, or any other
interested party, about the availability of this Section and
further has no duty to review the trust instrument to determine
whether any action should be taken under this Section unless
requested to do so by a qualified beneficiary.
(g) In connection with a transfer of the trust's principal
place of administration, the trustee may transfer some or all
of the trust property to a successor trustee designated in the
terms of the trust or appointed pursuant to Section 704.
Section 109. Methods and waiver of notice.
(a) Notice to a person under this Code or the sending of a
document to a person under this Code must be accomplished in a
manner reasonably suitable under the circumstances and likely
to result in receipt of the notice or document. Permissible
methods of notice or for sending a document include first-class
mail, personal delivery, delivery to the person's last known
place of residence or place of business, or a properly directed
electronic message.
(b) Notice otherwise required under this Code or a document
otherwise required to be sent under this Code need not be
provided to a person whose identity or location is unknown to
and not reasonably ascertainable by the trustee.
(c) Notice under this Code or the sending of a document
under this Code may be waived by the person to be notified or
sent the document.
(d) Notice of a judicial proceeding must be given as
provided in the applicable rules of civil procedure.
(e) Subject to subsection (d), receipt by a beneficiary or
other person of a trustee's notice, account, or other report is
presumed if the trustee has reasonable procedures in place
requiring the mailing or delivery of the notice, account, or
report to the beneficiary or other person. This presumption
applies to the mailing or delivery of a notice, account, or
other report, including any communication required in writing,
by electronic means or the provision of access to the
information by electronic means so long as the beneficiary or
other person has agreed to receive the information by
electronic delivery or access.
Section 110. Others treated as qualified beneficiaries.
(a) A person appointed to enforce a trust created for the
care of an animal or another noncharitable purpose as provided
in Section 408 or 409 has the rights of a qualified beneficiary
under this Code.
(b) The Attorney General has the rights of a qualified
beneficiary with respect to a charitable trust having its
principal place of administration in this State.
Section 111. Nonjudicial settlement agreements.
(a) Interested persons, or their respective
representatives determined after giving effect to Article 3,
may enter into a binding nonjudicial settlement agreement with
respect to any matter involving a trust as provided in this
Section.
(b) The following matters may be resolved by a nonjudicial
settlement agreement:
(1) Validity, interpretation, or construction of the
terms of the trust.
(2) Approval of a trustee's report or accounting.
(3) Exercise or nonexercise of any power by a trustee.
(4) The grant to a trustee of any necessary or
desirable administrative power if the grant does not
conflict with a clear material purpose of the trust.
(5) Questions relating to property or an interest in
property held by the trust if the resolution does not
conflict with a clear material purpose of the trust.
(6) Removal, appointment, or removal and appointment
of a trustee, trust advisor, investment advisor,
distribution advisor, trust protector, or other holder, or
committee of holders, of fiduciary or nonfiduciary powers,
including without limitation designation of a plan of
succession or procedure to determine successors to any such
office.
(7) Determination of a trustee's or other fiduciary's
compensation.
(8) Transfer of a trust's principal place of
administration, including, without limitation, to change
the law governing administration of the trust.
(9) Liability or indemnification of a trustee for an
action relating to the trust.
(10) Resolution of bona fide disputes related to trust
administration, investment, distribution, or other
matters.
(11) Modification of the terms of the trust pertaining
to the administration of the trust.
(12) Determining whether the aggregate interests of
each beneficiary in severed trusts are substantially
equivalent to the beneficiary's interests in the trusts
before severance.
(13) Termination of the trust, except that court
approval of the termination must be obtained in accordance
with subsection (d), and the court must find that
continuance of the trust is not necessary to achieve any
clear material purpose of the trust. The court shall
consider spendthrift provisions as a factor in making a
decision under this subsection, but a spendthrift
provision is not necessarily a material purpose of a trust,
and the court is not precluded from modifying or
terminating a trust because the trust instrument contains
spendthrift provisions. Upon termination, the court shall
order the distribution of the trust property as agreed by
the parties to the agreement, or if the parties cannot
agree, then as the court determines is equitable and
consistent with the purposes of the trust.
(c) If a trust contains a charitable interest, the parties
to any proposed nonjudicial settlement agreement affecting the
trust shall deliver to the Attorney General written notice of
the proposed agreement at least 60 days before its effective
date. The Bureau is not required to take action, but if it
objects in a writing delivered to one or more of the parties
before the proposed effective date, the agreement shall not
take effect unless the parties obtain court approval.
(d) Any beneficiary or other interested person may request
the court to approve any part or all of a nonjudicial
settlement agreement, including, without limitation, whether
any representation is adequate and without material conflict of
interest, if the petition for approval is filed within 60 days
after the effective date of the agreement.
(e) An agreement entered into in accordance with this
Section, or a judicial proceeding pursued in accordance with
this Section, is final and binding on the trustee, on all
beneficiaries of the trust, both current and future, and on all
other interested persons as if ordered by a court with
competent jurisdiction over the trust, the trust property, and
all parties in interest.
(f) In the trustee's sole discretion, the trustee may, but
is not required to, obtain and rely upon an opinion of counsel
on any matter relevant to this Section, including, without
limitation:
(1) if required by this Section, that the agreement
proposed to be made in accordance with this Section does
not conflict with a clear material purpose of the trust;
(2) in the case of a trust termination, that
continuance of the trust is not necessary to achieve any
clear material purpose of the trust;
(3) that there is no material conflict of interest
between a representative and the person represented with
respect to the particular question or dispute; and
(4) that the representative and the person represented
have substantially similar interests with respect to the
particular question or dispute.
(g) This Section shall be construed as pertaining to the
administration of a trust and shall be available to any trust
that is administered in this State or that is governed by
Illinois law with respect to the meaning and effect of its
terms, except to the extent the trust instrument expressly
prohibits the use of this Section by specific reference to this
Section or a prior corresponding law. A provision in the trust
instrument in the form: "Neither the provisions of Section 111
of the Illinois Trust Code nor any corresponding provision of
future law may be used in the administration of this trust", or
a similar provision demonstrating that intent, is sufficient to
preclude the use of this Section.
Section 112. Rules of construction. The rules of
construction that apply in this State to the interpretation of
wills and the disposition of property by will also apply as
appropriate to the interpretation of the trust instrument and
the disposition of the trust property. This Code shall be
liberally construed and the rule that statutes in derogation of
the common law shall be strictly construed does not apply.
Section 113. Insurable interest of trustee.
(a) A trustee of a trust has an insurable interest in the
life of an individual insured under a life insurance policy
that is owned by the trustee of the trust acting in a fiduciary
capacity or that designates the trust itself as the owner if,
on the date the policy is issued:
(1) the insured is:
(A) a settlor or beneficiary of the trust; or
(B) an individual in whom a settlor of the trust
has, or would have had if living at the time the policy
was issued, an insurable interest; and
(2) the trustee determines the life insurance
proceeds:
(A) are for the benefit of one or more trust
beneficiaries that have an insurable interest in the
life of the insured; or
(B) will carry out a purpose of the trust.
(b) If a trustee of a trust would have an insurable
interest in the life of an individual insured as described in
this Section, then the insurable interest includes the joint
lives of such an individual and his or her spouse.
(c) Nothing in this Section limits or affects any provision
of the Viatical Settlements Act of 2009.
Section 114. Gift to a deceased beneficiary under an inter
vivos trust.
(a) If a gift of a present or future interest is to a
descendant of the settlor who dies before or after the settlor,
the descendants of the deceased beneficiary living when the
gift is to take effect in possession or enjoyment take per
stirpes the gift so bequeathed.
(b) If a gift of a present or future interest is to a class
and any member of the class dies before or after the settlor,
the members of the class living when the gift is to take effect
in possession or enjoyment take the share or shares that the
deceased member would have taken if he or she were then living,
except that, if the deceased member of the class is a
descendant of the settlor, the descendants of the deceased
member then living shall take per stirpes the share or shares
that the deceased member would have taken if he or she were
then living.
(c) Except as provided in subsections (a) and (b), if the
gift is not to a descendant of the settlor or is not to a class
as provided in subsections (a) and (b) and if the beneficiary
dies either before or after the settlor and before the gift is
to take effect in possession or enjoyment, then the gift shall
lapse. If the gift lapses by reason of the death of the
beneficiary before the gift is to take effect in possession or
enjoyment, then the gift so given shall be included in and pass
as part of the residue of the trust under the trust. If the
gift is or becomes part of the residue, the gift so bequeathed
shall pass to and be taken by the beneficiaries remaining, if
any, of the residue in proportions and upon trusts
corresponding to their respective interests in the residue of
the trust. Subsections (a) and (b) do not apply to a future
interest that is or becomes indefeasibly vested at the
settlor's death or at any time thereafter before it takes
effect in possession or enjoyment. This Section applies on and
after January 1, 2005 for any gifts to a deceased beneficiary
under an inter vivos trust if the deceased beneficiary dies
after January 1, 2005 and before the gift is to take effect in
possession or enjoyment.
Section 115. Transfer of real property to trust. The
transfer of real property to a trust requires a transfer of
legal title to the trustee evidenced by a written instrument of
conveyance.
Article 2. Judicial Proceedings.
Section 201. Role of court in administration of trusts.
(a) The court may adjudicate any matter arising in the
administration of a trust to the extent its jurisdiction is
invoked by an interested person or as provided by law.
(b) A trust is not subject to continuing judicial
supervision unless ordered by the court.
(c) A judicial proceeding involving a trust may relate to
any matter involving the trust's administration, including a
request for instructions.
Section 202. Jurisdiction over trustee and beneficiary.
(a) By accepting the trusteeship of a trust having its
principal place of administration in this State or by moving
the principal place of administration to this State, the
trustee is subject to the jurisdiction of the courts of this
State regarding any matter involving the trust.
(b) With respect to their interests in the trust, the
beneficiaries of a trust having its principal place of
administration in this State are subject to the jurisdiction of
the courts of this State regarding any matter involving the
trust. By accepting a distribution from such a trust, the
recipient personally submits to the jurisdiction of the courts
of this State regarding any matter involving the trust.
(c) Service of process upon any person who is subject to
the jurisdiction of the courts of this State, as provided in
this Section, may be made by personally serving the summons
upon the defendant outside this State, as provided in the Code
of Civil Procedure, with the same force and effect as though
summons had been personally served within this State.
(d) This Section does not preclude other methods of
obtaining jurisdiction over a trustee, beneficiary, or other
person receiving property from the trust.
Section 203. (Reserved).
Section 204. Venue.
(a) Except as otherwise provided in subsection (b), venue
for a judicial proceeding involving a trust is in the county of
this State in which the trust's principal place of
administration is or will be located and, if the trust is
created by will and the estate is not yet closed, in the county
in which the decedent's estate is being administered.
(b) If a trust has no trustee, venue for a judicial
proceeding for the appointment of a trustee is proper in a
county of this State in which a beneficiary resides, in a
county in which any real or tangible trust property is located,
and if the trust is created by will, in the county in which the
decedent's estate was or is being administered.
(c) At the election of the Attorney General, venue for a
judicial proceeding involving a trust with a charitable
interest is also proper in any county where the Attorney
General accepts and maintains the list of registrations under
the Charitable Trust Act.
Article 3. Representation.
Section 301. Representation: basic effect.
(a) Except as provided in Section 602 and subsection (c):
(1) Notice, information, accountings, or reports given
to a person who may represent and bind another person under
this Article have the same effect as if given directly to
the person represented.
(2) Actions, including, but not limited to, the
execution of an agreement, taken by a person who may
represent and bind another person under this Article are
binding on the person represented to the same extent as if
the actions had been taken by the person represented.
(b) Except as otherwise provided in Section 602, a person
under this Article who represents a settlor who is
incapacitated may, on the settlor's behalf: (i) receive notice,
information, accountings, or reports; (ii) give a binding
consent; or (iii) enter a binding agreement.
(c) A settlor may not represent and bind a beneficiary
under this Article with respect to a nonjudicial settlement
agreement under Section 111, the termination or modification of
a trust under subsection (a) of Section 411, or an exercise of
the decanting power under Article 12.
(d) If pursuant to this Article a person may be represented
by 2 or more representatives, then the representative who has
legal capacity, in the following order of priority, shall
represent and bind the person:
(1) a representative or guardian ad litem appointed by
a court under Section 305;
(2) the holder of a power of appointment under Section
302;
(3) a designated representative under Section 307;
(4) a court-appointed guardian of the estate, or, if
none, a court-appointed guardian of the person under
subsection (b) of Section 303;
(5) an agent under a power of attorney for property
under subsection (c) of Section 303;
(6) a parent of a person under subsection (d) of
Section 303;
(7) another person having a substantially similar
interest with respect to the particular question or dispute
under subsection (a) of Section 304; and
(8) a representative under this Article for a person
who has a substantially similar interest to a person who
has a representative under subsection (b) of Section 304.
(e) A trustee is not liable for giving notice, information,
accountings, or reports to a person who is represented by
another person under this Article, and nothing in this Article
prohibits the trustee from giving notice, information,
accountings, or reports to the person represented.
Section 302. Representation by holders of certain powers.
(a) The holder of a testamentary or a presently exercisable
power of appointment that is: (1) a general power of
appointment; or (2) exercisable in favor of all persons other
than the powerholder, the powerholder's estate, a creditor of
the powerholder, or a creditor of the powerholder's estate, may
represent and bind all persons, including permissible
appointees and takers in default, whose interests may be
eliminated by the exercise or nonexercise of the power.
(b) To the extent there is no conflict of interest between
a holder and the persons represented with respect to the
particular question or dispute, the holder of a testamentary or
presently exercisable power of appointment, other than a power
described in subsection (a), may represent and bind all
persons, including permissible appointees and takers in
default, whose interests may be eliminated by the exercise or
nonexercise of the power.
Section 303. Representation by others.
(a) If all qualified beneficiaries of a trust either have
legal capacity or have representatives under this Article who
have legal capacity, an action taken by all qualified
beneficiaries, in each case either by the beneficiary or by the
beneficiary's representative, shall represent and bind all
other beneficiaries who have a successor, contingent, future,
or other interest in the trust.
(b) If a person is represented by a court-appointed
guardian of the estate or, if none, guardian of the person,
then the guardian may represent and bind the person.
(c) If an individual is incapacitated, an agent under a
power of attorney for property who has authority to act with
respect to the particular question or dispute and who does not
have a material conflict of interest with respect to the
particular question or dispute may represent and bind the
principal. An agent is deemed to have authority under this
subsection if the power of attorney grants the agent the power
to settle claims and to exercise powers with respect to trusts
and estates, even if the powers do not include powers to make a
will, to revoke or amend a trust, or to require the trustee to
pay income or principal.
(d) If a person is incapacitated, a parent of the person
may represent and bind the person if there is no material
conflict of interest between the represented person and either
of the person's parents with respect to the particular question
or dispute. If a disagreement arises between parents who
otherwise qualify to represent a child in accordance with this
subsection and who are seeking to represent the same child, the
parent who is a lineal descendant of the settlor of the trust
that is the subject of the representation is entitled to
represent the child; or if none, the parent who is a
beneficiary of the trust is entitled to represent the child.
Section 304. Representation by person having substantially
identical interest.
(a) To the extent there is no material conflict of interest
between the representative and the represented beneficiary
with respect to the particular question or dispute, a
beneficiary who is incapacitated, unborn, or unascertainable
may, for all purposes, be represented by and bound by another
beneficiary having a substantially similar interest with
respect to the particular question or dispute.
(b) A guardian, agent, or parent who is the representative
for a beneficiary under subsection (b), (c), or (d) of Section
303 may, for all purposes, represent and bind any other
beneficiary who is incapacitated, unborn, or unascertainable
and who has an interest, with respect to the particular
question or dispute, that is substantially similar to the
interest of the beneficiary represented by the representative,
but only to the extent that there is no material conflict of
interest between the beneficiary represented by the
representative and the other beneficiary with respect to the
particular question or dispute.
Section 305. Appointment of representative.
(a) If the court determines that representation of an
incapacitated, unborn, or unascertainable beneficiary might
otherwise be inadequate, the court may appoint a representative
for any nonjudicial matter to receive any notice, information,
accounting, or report on behalf of the beneficiary and to
represent and bind the beneficiary, or may appoint a guardian
ad litem in any judicial proceeding to represent the interests
of, bind, and approve any order or agreement on behalf of the
beneficiary.
(b) A representative may act on behalf of the individual
represented with respect to any matter arising under this Code,
regardless of whether a judicial proceeding concerning the
trust or estate is pending.
(c) If not precluded by a conflict of interest with respect
to the particular question or dispute, a representative or
guardian ad litem may be appointed to represent several persons
or interests.
(d) In giving any consent or agreement, a representative or
guardian ad litem may consider general family benefit accruing
to the living members of the family of the person represented.
Section 306. Representation of charity. If a trust contains
a charitable interest, the Attorney General may, in accordance
with this Section, represent, bind, and act on behalf of the
charitable interest with respect to any particular question or
dispute, including without limitation representing the
charitable interest in a nonjudicial settlement agreement
under Section 111, in an agreement to convert a trust to a
total return trust under Article 11, or in a distribution in
further trust under Article 12. A charitable organization that
is specifically named as beneficiary of a trust or otherwise
has a beneficial interest in a trust may act for itself.
Notwithstanding any other provision, nothing in this Section
shall be construed to limit or affect the Attorney General's
authority to file an action or take other steps as he or she
deems advisable at any time to enforce or protect the general
public interest as to a trust that provides a beneficial
interest or expectancy for one or more charitable organizations
or charitable purposes whether or not a specific charitable
organization is named in the trust. This Section shall be
construed as declarative of existing law and not as a new
enactment.
Section 307. Designated representative.
(a) If specifically nominated in the trust instrument, one
or more individuals with legal capacity may be designated to
represent and bind an individual who is a qualified
beneficiary. The trust instrument may also authorize any person
or persons, other than a trustee of the trust, to designate one
or more individuals with legal capacity to represent and bind
an individual who is a qualified beneficiary. Any person so
nominated or designated is referred to in this Section as a
"designated representative".
(b) Notwithstanding subsection (a):
(1) A designated representative may not represent and
bind a current beneficiary who is age 30 or older and is
not incapacitated.
(2) A designated representative may not represent and
bind a qualified beneficiary while the designated
representative is serving as a trustee.
(3) Subject to paragraphs (1) and (2) of this
subsection (b), a designated representative may not
represent and bind a qualified beneficiary if the
designated representative is also a qualified beneficiary
of the trust, unless:
(A) the designated representative was specifically
nominated in the trust instrument; or
(B) the designated representative is the qualified
beneficiary's spouse or a grandparent or descendant of
a grandparent of the qualified beneficiary or of the
qualified beneficiary's spouse.
(c) Each designated representative is a fiduciary of the
trust subject to the standards applicable to a trustee of a
trust under applicable law.
(d) In no event may a designated representative be relieved
or exonerated from the duty to act, or withhold from acting, in
good faith and as the designated representative reasonably
believes is in the best interest of the represented qualified
beneficiary.
Article 4. Creation, Validity, Modification, and Termination
of Trust.
Section 401. Methods of creating trust. A trust may be
created by:
(1) transfer of property to another person as trustee
during the settlor's lifetime or by will or other
disposition taking effect upon the settlor's death;
(2) declaration by the owner of property that the owner
holds identifiable property as trustee; or
(3) exercise of a power of appointment in favor of a
trustee.
Section 402. Requirements for creation.
(a) A trust is created only if:
(1) the settlor has capacity to create a trust;
(2) the settlor indicates an intention to create the
trust;
(3) the trust has a definite beneficiary or is:
(A) a charitable trust;
(B) a trust for the care of an animal, as provided
in Section 408; or
(C) a trust for a noncharitable purpose, as
provided in Section 409;
(4) the trustee has duties to perform; and
(5) the same person is not the sole trustee and sole
beneficiary.
(b) A beneficiary is definite if the beneficiary can be
ascertained now or in the future, subject to any applicable
rule against perpetuities.
(c) A power in a trustee to select a beneficiary from an
indefinite class is valid. If the power is not exercised within
a reasonable time, the power fails and the property subject to
the power passes to the persons who would have taken the
property had the power not been conferred.
Section 403. Trusts created in other jurisdictions. A trust
not created by will is validly created if its creation complies
with the law of the jurisdiction in which the trust instrument
was executed, or the law of the jurisdiction in which, at the
time of creation:
(1) the settlor was domiciled, had a place of abode, or
was a national;
(2) a trustee was domiciled or had a place of business;
or
(3) any trust property was located.
Section 404. Trust purposes. A trust may be created only to
the extent its purposes are lawful and not contrary to public
policy.
Section 405. Charitable purposes; enforcement.
(a) A charitable trust may be created for any charitable
purpose.
(b) If the terms of a charitable trust do not indicate a
particular charitable purpose or beneficiary and do not
delegate to the trustee or others willing to exercise the
authority to select one or more charitable purposes or
beneficiaries, then the court may select one or more charitable
purposes or beneficiaries. The selection must be consistent
with the settlor's intention to the extent it can be
ascertained.
(c) The settlor of a charitable trust, among others, may
maintain a proceeding to enforce the trust.
Section 406. Creation of trust induced by fraud, duress, or
undue influence. If the creation, amendment, or restatement of
a trust is procured by fraud, duress, mistake, or undue
influence, the trust or any part so procured is void. The
remainder of the trust not procured by such means is valid if
the remainder is not invalid for other reasons. If the
revocation of a trust, or any part of the trust, is procured by
fraud, duress, mistake, or undue influence, the revocation is
void.
Section 407. Evidence of oral trust. Except as required by
a statute other than this Code, a trust need not be evidenced
by a trust instrument, but the creation of an oral trust and
its terms may be established only by clear and convincing
evidence.
Section 408. Trusts for domestic or pet animals.
(a) A trust for the care of one or more designated domestic
or pet animals is valid. The trust terminates when no living
animal is covered by the trust. A trust instrument shall be
liberally construed to bring the transfer within this Section,
to presume against a merely precatory or honorary nature of its
disposition, and to carry out the general intent of the
transferor. Extrinsic evidence is admissible in determining
the transferor's intent.
(b) A trust for the care of one or more designated domestic
or pet animals is subject to the following provisions:
(1) Except as expressly provided otherwise in the
instrument creating the trust, no portion of the principal
or income of the trust may be converted to the use of the
trustee or to a use other than for the trust's purposes or
for the benefit of a covered animal.
(2) Upon termination, the trustee shall transfer the
unexpended trust property in the following order:
(A) as directed in the trust instrument;
(B) to the settlor, if then living;
(C) if there is no direction in the trust
instrument and if the trust was created in a
non-residuary clause in the transferor's will, then
under the residuary clause in the transferor's will;
(D) to the transferor's heirs under Section 2-1 of
the Probate Act of 1975.
(3) The intended use of the principal or income may be
enforced by an individual designated for that purpose in
the trust instrument or, if none, by an individual
appointed by a court having jurisdiction of the matter and
parties, upon petition to it by an individual.
(4) Except as ordered by the court or required by the
trust instrument, no filing, report, registration,
periodic accounting, separate maintenance of funds,
appointment, or fee is required by reason of the existence
of the fiduciary relationship of the trustee.
(5) The court may reduce the amount of the property
transferred if it determines that the amount substantially
exceeds the amount required for the intended use. The
amount of the reduction, if any, passes as unexpended trust
property under paragraph (2).
(6) If a trustee is not designated or no designated
trustee is willing and able to serve, the court shall name
a trustee. The court may order the transfer of the property
to another trustee if the transfer is necessary to ensure
that the intended use is carried out, and if a successor
trustee is not designated in the trust instrument or if no
designated successor trustee agrees to serve and is able to
serve. The court may also make other orders and
determinations as are advisable to carry out the intent of
the transferor and the purpose of this Section.
(7) The trust is exempt from the operation of the
common law rule against perpetuities.
Section 409. Noncharitable trust without ascertainable
beneficiary.
(a) Except as otherwise provided in Section 408 or by
another statute, a trust may be created for a noncharitable
purpose without a definite or definitely ascertainable
beneficiary or for a noncharitable but otherwise valid purpose
to be selected by the trustee.
(b) The trust may not be enforced for more than 21 years.
If the trust is still in existence after 21 years, the trust
shall terminate. The unexpended trust property shall be
distributed in the following order:
(1) as directed in the trust instrument;
(2) to the settlor, if then living;
(3) if the trust was created in a non-residuary clause
in the settlor's will, then pursuant to the residuary
clause in the settlor's will;
(4) to the transferor's heirs under Section 2-1 of the
Probate Act of 1975.
(c) A trust authorized by this Section may be enforced by a
person appointed in the trust instrument or, if no person is so
appointed, by a person appointed by the court.
(d) Property of a trust authorized by this Section may be
applied only to its intended use, except to the extent the
court determines that the value of the trust property exceeds
the amount required for the intended use. Property not required
for the intended use must be distributed as provided in
subsection (b).
Section 410. Modification or termination of trust;
proceedings for approval or disapproval.
(a) In addition to the methods of termination prescribed by
Sections 411 through 414, a trust terminates to the extent the
trust is revoked or expires pursuant to the trust instrument,
no purpose of the trust remains to be achieved, or the purposes
of the trust have become unlawful, contrary to public policy,
or impossible to achieve.
(b) A proceeding to approve or disapprove a proposed
modification or termination under Sections 411 through 416, or
trust combination or division under Section 417, may be
commenced by a trustee or beneficiary or by the Attorney
General for a trust with a charitable interest. The settlor of
a charitable trust may maintain a proceeding to modify the
trust under Section 413.
Section 411. Modification or termination of noncharitable
irrevocable trust by consent.
(a) A noncharitable irrevocable trust may be terminated
upon consent of all of the beneficiaries if the court concludes
that continuance of the trust is not necessary to achieve any
material purpose of the trust.
(b) A noncharitable irrevocable trust may be modified upon
consent of all of the beneficiaries if the court concludes that
modification is not inconsistent with any material purpose of
the trust.
(c) The court shall consider spendthrift provisions as a
factor in making a decision under this Section, but the court
is not precluded from modifying or terminating a trust because
the trust contains spendthrift provisions.
(d) Upon termination of a trust under subsection (a), the
trustee shall distribute the trust property as agreed by the
beneficiaries.
(e) If not all of the beneficiaries consent to a proposed
modification or termination of the trust under subsection (a)
or (b), the modification or termination may be approved by the
court if the court is satisfied that:
(1) if all of the beneficiaries had consented, the
trust could have been modified or terminated under this
Section; and
(2) a beneficiary who does not consent is treated
equitably and consistent with the purposes of the trust.
Section 412. Modification or termination because of
unanticipated circumstances or inability to administer trust
effectively.
(a) The court may modify the administrative or dispositive
terms of a trust or terminate the trust if, because of
circumstances not anticipated by the settlor, modification or
termination will further the purposes of the trust. To the
extent practicable, the modification must be made in accordance
with the settlor's probable intention.
(b) The court may modify the administrative terms of a
trust if continuation of the trust on its existing terms would
be impracticable or wasteful or impair the trust's
administration.
(c) Upon termination of a trust under this Section, the
court shall order the distribution of the trust property as
agreed by the beneficiaries, or if the beneficiaries cannot
agree, then as the court determines is equitable and consistent
with the purposes of the trust.
(d) Notwithstanding any other provision in this Section, if
the trust contains a charitable interest, the modification
cannot diminish the charitable interest or alter the charitable
purpose, except as would be permitted under Section 413, and
upon termination of a trust under this Section, any charitable
distribution shall be made in a manner consistent with the
settlor's charitable purpose as determined by the court.
Section 413. Cy pres.
(a) Except as otherwise provided in subsection (b), if a
particular charitable purpose becomes unlawful, impracticable,
impossible to achieve, or wasteful:
(1) the trust does not fail, in whole or in part;
(2) the trust property does not revert to the settlor
or the settlor's successors in interest; and
(3) the court may apply cy pres to modify or terminate
the trust by directing that the trust property be applied
or distributed, in whole or in part, in a manner consistent
with the settlor's charitable purposes.
(b) A provision in the terms of a charitable trust that
would result in distribution of the trust property to a
noncharitable beneficiary prevails over the power of the court
under subsection (a) to apply cy pres to modify or terminate
the trust only if, when the provision takes effect:
(1) the trust property is to revert to the settlor and
the settlor is still living; or
(2) fewer than 21 years have elapsed since the date of
the trust's creation.
Section 414. Modification or termination of uneconomic
trust.
(a) After notice to the qualified beneficiaries, the
trustee of a trust consisting of trust property having a total
value less than $100,000 may terminate the trust if the trustee
concludes that the costs of continuing the trust will
substantially impair accomplishment of the purpose of the
trust.
(b) The court may modify or terminate a trust or remove the
trustee and appoint a different trustee if it determines that
the value of the trust property is insufficient to justify the
cost of administration.
(c) Upon termination of a trust under this Section, the
trustee shall distribute the trust property to the current
beneficiaries in the proportions to which they are entitled to
mandatory current distributions, or if their interests are
indefinite, to the current beneficiaries per stirpes if they
have a common ancestor, or if not, then in equal shares. The
trustee shall give notice to the current beneficiaries at least
30 days before the effective date of the termination.
(d) This Section does not apply to an easement for
conservation or preservation.
(e) If a particular trustee is a current beneficiary of the
trust or is legally obligated to a current beneficiary, then
that particular trustee may not participate as a trustee in the
exercise of this termination power; however, if the trust has
one or more co-trustees who are not so disqualified from
participating, the co-trustee or co-trustees may exercise this
power.
(f) This Section does not apply to the extent that it would
cause a trust otherwise qualifying for a federal or state tax
benefit or other benefit not to qualify, nor does it apply to
trusts for domestic or pet animals.
Section 415. Reformation to correct mistakes. The court may
reform the terms of a trust, even if unambiguous, to conform
the terms to the settlor's intention if it is proved by clear
and convincing evidence what the settlor's intention was and
that the terms of the trust were affected by a mistake of fact
or law, whether in expression or inducement.
Section 416. Modification to achieve settlor's tax
objectives. To achieve the settlor's tax objectives, the court
may modify the terms of a trust in a manner that is not
contrary to the settlor's probable intention. The court may
provide that the modification has retroactive effect.
Section 417. Combination and division of trusts.
(a) Subject to subsections (b), (c), and (d), after notice
to the qualified beneficiaries, a trustee may:
(1) consolidate 2 or more trusts having substantially
similar terms into a single trust;
(2) sever any trust estate on a fractional basis into 2
or more separate trusts; and
(3) segregate by allocation to a separate account or
trust a specific amount or specific property.
(b) No consolidation, severance, or segregation may be made
if the result impairs the rights of any beneficiary or
adversely affects achievement of the material purposes of the
subject trust or trusts.
(c) A severance or consolidation may be made for any reason
including to reflect a partial disclaimer, to reflect
differences in perpetuities periods, to reflect or result in
differences in federal or state tax attributes, to satisfy any
federal tax requirement or election, or to reduce potential
generation-skipping transfer tax liability, and shall be made
in a manner consistent with the rules governing disclaimers,
federal tax attributes, requirements or elections, or any
applicable federal or state tax rules or regulations.
(d) A separate account or trust created by severance or
segregation:
(1) shall be treated as a separate trust for all
purposes on and after the effective date of the severance
or segregation; and
(2) shall be held on terms and conditions that are
substantially equivalent to the terms of the trust from
which it was severed or segregated so that the aggregate
interests of each beneficiary in the several trusts are
substantially equivalent to the beneficiary's interests in
the trust before severance, except that any terms of the
trust before severance that would affect the perpetuities
period or qualification of the trust for any federal or
state tax deduction, exclusion, election, exemption, or
other special federal or state tax status must remain
identical in each of the separate trusts created.
(e) Income earned on a severed or segregated amount or
property after severance or segregation occurs shall pass to
the designated taker of the amount or property.
(f) In managing, investing, administering, and
distributing the trust property of any separate account or
trust and in making applicable federal or state tax elections,
the trustee may consider the differences in federal or state
tax attributes and all other factors the trustee believes
pertinent and may make disproportionate distributions from the
separate accounts or trusts.
Article 5. Creditor's Claims; Spendthrift and Discretionary
Trusts.
Section 501. Rights of beneficiary's creditor or assignee.
Except as provided in Section 504, to the extent a
beneficiary's interest is not subject to a spendthrift
provision, the court may authorize a creditor or assignee of
the beneficiary to reach the beneficiary's interest by
attachment of present or future distributions to or for the
benefit of the beneficiary or other means. The court may limit
the award to such relief as is appropriate under the
circumstances.
Section 502. Spendthrift provision.
(a) A spendthrift provision is valid only if it prohibits
both voluntary and involuntary transfer of a beneficiary's
interest.
(b) A term of a trust providing that the interest of a
beneficiary is held subject to a "spendthrift trust", or words
of similar import, is sufficient to restrain both voluntary and
involuntary transfer of the beneficiary's interest.
(c) A beneficiary may not transfer an interest in a trust
in violation of a valid spendthrift provision and, except as
otherwise provided in this Article, a creditor or assignee of
the beneficiary may not reach the interest or a distribution by
the trustee before its receipt by the beneficiary.
(d) A valid spendthrift provision does not prevent the
appointment of interests through the exercise of a power of
appointment.
Section 503. Exceptions to spendthrift provision.
(a) In this Section, "child" includes any person for whom
an order or judgment for child support has been entered in this
or another state.
(b) A spendthrift provision is unenforceable against:
(1) a beneficiary's child, spouse, or former spouse who
has a judgment or court order against the beneficiary for
child support obligations owed by the beneficiary as
provided in the Income Withholding for Support Act, the
Non-Support Punishment Act, the Illinois Parentage Act of
2015, the Illinois Marriage and Dissolution of Marriage
Act, and similar provisions of other Acts that provide for
the support of a child;
(2) a judgment creditor who has provided services for
the protection of a beneficiary's interest in the trust;
and
(3) a claim of this State or the United States to the
extent a statute of this State or federal law so provides.
(c) Except as otherwise provided in this subsection and in
Section 504, a claimant against which a spendthrift provision
cannot be enforced may obtain from a court an order attaching
present or future distributions to or for the benefit of the
beneficiary. The court may limit the award to such relief as is
appropriate under the circumstances. Notwithstanding this
subsection, the remedies provided in this subsection apply to a
claim for unpaid child support obligations by a beneficiary's
child, spouse, former spouse, judgment creditor, or claim
described in subsection (b) only as a last resort upon an
initial showing that traditional methods of enforcing the claim
are insufficient.
Section 504. Discretionary distributions; effect of
standard.
(a) As used in this Section, "discretionary distribution"
means a distribution that is subject to the trustee's
discretion regardless of whether the discretion is expressed in
the form of a standard of distribution and regardless of
whether the trustee has abused the discretion.
(b) Regardless of whether a trust contains a spendthrift
provision, and regardless of whether the beneficiary is acting
as trustee, if a trustee may make discretionary distributions
to or for the benefit of a beneficiary, a creditor of the
beneficiary, including a creditor described in subsection (b)
of Section 503, may not:
(1) compel a distribution that is subject to the
trustee's discretion; or
(2) obtain from a court an order attaching present or
future distributions to or for the benefit of the
beneficiary, except as provided in Section 2-1403 of the
Code of Civil Procedure.
(c) If the trustee's discretion to make distributions for
the trustee's own benefit is limited by an ascertainable
standard, a creditor may not reach or compel distribution of
the beneficial interest except to the extent the interest would
be subject to the creditor's claim were the beneficiary not
acting as trustee.
(d) This Section does not limit the right of a beneficiary
to maintain a judicial proceeding against a trustee for an
abuse of discretion or failure to comply with a standard for
distribution.
Section 505. Creditor's claim against settlor.
(a) Whether or not the terms of a trust contain a
spendthrift provision, the following rules apply:
(1) During the lifetime of the settlor, the property of
a revocable trust is subject to claims of the settlor's
creditors to the extent the property would not otherwise be
exempt by law if owned directly by the settlor.
(2) With respect to an irrevocable trust, a creditor or
assignee of the settlor may reach the maximum amount that
can be distributed to or for the settlor's benefit. If a
trust has more than one settlor, the amount the creditor or
assignee of a particular settlor may reach may not exceed
the settlor's interest in the portion of the trust
attributable to that settlor's contribution.
(3) Notwithstanding paragraph (2), the assets of an
irrevocable trust may not be subject to the claims of an
existing or subsequent creditor or assignee of the settlor,
in whole or in part, solely because of the existence of a
discretionary power granted to the trustee by the terms of
the trust, or any other provision of law, to pay directly
to the taxing authorities or to reimburse the settlor for
any tax on trust income or principal that is payable by the
settlor under the law imposing the tax.
(4) Paragraph (2) does not apply to the assets of an
irrevocable trust established for the benefit of a person
with a disability that meets the requirements of 42 U.S.C.
1396p(d)(4) or similar federal law governing the transfer
to such a trust.
(5) After the death of a settlor, and subject to the
settlor's right to direct the source from which liabilities
will be paid, the property of a trust that was revocable at
the settlor's death is subject to claims of the settlor's
creditors, costs of administration of the settlor's
estate, the expenses of the settlor's funeral and disposal
of remains, and statutory allowances to a surviving spouse
and children to the extent the settlor's probate estate is
inadequate to satisfy those claims, costs, expenses, and
allowances. Distributees of the trust take property
distributed after payment of such claims; subject to the
following conditions:
(A) sums recovered by the personal representative
of the settlor's estate must be administered as part of
the decedent's probate estate, and the liability
created by this subsection does not apply to any assets
to the extent that the assets are otherwise exempt
under the laws of this State or under federal law;
(B) with respect to claims, expenses, and taxes in
connection with the settlement of the settlor's
estate, any claim of a creditor that would be barred
against the personal representative of a settlor's
estate or the estate of the settlor is barred against
the trust property of a trust that was revocable at the
settlor's death, the trustee of the revocable trust,
and the beneficiaries of the trust; and
(C) Sections 18-10 and 18-13 of the Probate Act of
1975, detailing the classification and priority of
payment of claims, expenses, and taxes from the probate
estate of a decedent, or comparable provisions of the
law of the deceased settlor's domicile at death if not
Illinois, apply to a revocable trust to the extent the
assets of the settlor's probate estate are inadequate
and the personal representative or creditor or taxing
authority of the settlor's estate has perfected its
right to collect from the settlor's revocable trust.
(6) After the death of a settlor, a trustee of a trust
that was revocable at the settlor's death is released from
liability under this Section for any assets distributed to
the trust's beneficiaries in accordance with the governing
trust instrument if:
(A) the trustee made the distribution 6 months or
later after the settlor's death; and
(B) the trustee did not receive a written notice
from the decedent's personal representative asserting
that the decedent's probate estate is or may be
insufficient to pay allowed claims or, if the trustee
received such a notice, the notice was withdrawn by the
personal representative or revoked by the court before
the distribution.
(b) For purposes of this Section:
(1) during the period the power may be exercised, the
holder of a power of withdrawal is treated in the same
manner as the settlor of a revocable trust to the extent of
the property subject to the power; and
(2) upon the lapse, release, or waiver of the power,
the holder is treated as the settlor of the trust only to
the extent the value of the property affected by the lapse,
release, or waiver exceeds the greater of the amount
specified in Section 2041(b)(2) or 2514(e) of the Internal
Revenue Code.
Section 506. Overdue distribution.
(a) In this Section, "mandatory distribution" means a
distribution of income or principal that the trustee is
required to make to a beneficiary under the trust instrument,
including a distribution upon termination of the trust. The
term does not include a distribution subject to the exercise of
the trustee's discretion even if (1) the discretion is
expressed in the form of a standard of distribution, or (2) the
terms of the trust authorizing a distribution couple language
of discretion with language of direction.
(b) Whether or not a trust contains a spendthrift
provision, a creditor or assignee of a beneficiary may reach a
mandatory distribution of income or principal, including a
distribution upon termination of the trust, if the trustee has
not made the distribution to the beneficiary within a
reasonable time after the designated distribution date.
Section 507. Personal obligations of trustee. Trust
property is not subject to personal obligations of the trustee,
even if the trustee becomes insolvent or bankrupt.
Section 508. Lapse of power to withdraw. A beneficiary of a
trust may not be considered to be a settlor or to have made a
transfer to the trust merely because of a lapse, release, or
waiver of his or her power of withdrawal to the extent that the
value of the affected property does not exceed the greatest of
the amounts specified in Sections 2041(b)(2), 2514(e), and
2503(b) of the Internal Revenue Code.
Section 509. Trust for beneficiary with a disability.
(a) As used in this Section:
(1) "Discretionary trust" means a trust in which the
trustee has discretionary power to determine distributions
to be made under the trust.
(2) "Resources" includes, but is not limited to, any
interest in real or personal property, judgment,
settlement, annuity, maintenance, support for minor
children, and support for non-minor children.
(b) A discretionary trust for the benefit of an individual
who has a disability that substantially impairs the
individual's ability to provide for his or her own care or
custody and constitutes a substantial disability, is not liable
to pay or reimburse this State or any public agency for
financial aid or services to the individual except to the
extent the trust was created by the individual or trust
property has been distributed directly to or is otherwise under
the control of the individual, except that this exception does
not apply to a trust created with the property of the
individual with a disability or property within his or her
control if the trust complies with Medicaid reimbursement
requirements of federal law. Notwithstanding any other
provisions to the contrary, a trust created with the property
of the individual with a disability or property within his or
her control is liable, after the reimbursement of Medicaid
expenditures, to this State for reimbursement of any other
service charges outstanding at the death of the individual with
a disability. Property, goods, and services purchased or owned
by a trust for and used or consumed by a beneficiary with a
disability shall not be considered trust property distributed
to or under the control of the beneficiary.
(c) Except as otherwise prohibited by law, the court or a
person with a disability may irrevocably assign resources of
that person to either or both of: (i) an ABLE account, as
defined under Section 16.6 of the State Treasurer Act; or (ii)
a discretionary trust that complies with the Medicaid
reimbursement requirements of federal law. A court may reserve
the right to determine the amount, duration, or enforcement of
the irrevocable assignment.
Article 6. Revocable Trusts.
Section 601. Capacity of settlor of revocable trust. The
capacity required of the settlor to create, amend, revoke in
whole or in part, or add property to a revocable trust is the
same as that required to make a will.
Section 602. Revocation or amendment of revocable trust.
(a) The settlor may revoke a trust only if the trust
instrument expressly provides that the trust is revocable or
that the settlor has an unrestricted power of amendment. The
settlor may amend a trust only if the trust expressly provides
that the trust is revocable or amendable by the settlor.
(b) If a revocable trust has more than one settlor:
(1) to the extent the trust consists of community
property, the trust may be revoked by either spouse acting
alone but may be amended only by joint action of both
spouses;
(2) to the extent the trust consists of property other
than community property, each settlor may revoke or amend
the trust only with regard to the portion of the trust
property attributable to that settlor's contribution; and
(3) upon the revocation or amendment of the trust by
fewer than all of the settlors, the trustee shall promptly
notify the other settlors of the revocation or amendment.
(c) The settlor may revoke or amend a revocable trust
instrument:
(1) by substantially complying with a method provided
in the trust instrument; or
(2) if the trust instrument does not provide a method
or the method provided in the terms is not expressly made
exclusive, by a later instrument in writing other than a
will, signed by the settlor and specifically referring to
the trust.
(d) Upon revocation of a revocable trust, the trustee shall
deliver the trust property to the settlor or as the settlor
directs.
(e) A settlor's powers with respect to revocation,
amendment, or distribution of trust property may not be
exercised by an agent under a power of attorney unless
expressly authorized by the power and not prohibited by the
trust instrument.
(f) A guardian of the estate of the settlor, if any, or a
guardian of the person of the settlor may not exercise a
settlor's powers with respect to revocation, amendment, or
distribution of trust property unless ordered by the court
supervising the guardianship.
(g) A trustee who does not know that a trust has been
revoked or amended is not liable for distributions made and
other actions taken or not taken on the assumption that the
trust had not been amended or revoked.
Section 603. Settlor's powers; powers of withdrawal.
(a) To the extent a trust is revocable by a settlor, and
the settlor personally has capacity to revoke the trust, a
trustee may follow a direction of the settlor that is contrary
to the terms of the trust. To the extent a trust is revocable
by a settlor in conjunction with a person other than a trustee
or person holding an adverse interest, and the settlor and such
other person personally have the capacity to revoke the trust,
the trustee may follow a direction from the settlor and the
other person holding the power to revoke even if the direction
is contrary to the terms of the trust.
(b) To the extent a trust is revocable by a settlor, and
the settlor personally has capacity to revoke the trust, rights
of the beneficiaries are subject to the control of, and the
duties of the trustee are owed exclusively to, the settlor.
(c) While a trust is revocable by a settlor but the settlor
does not personally have the capacity to revoke the trust, the
duties of the trustee are owed only to the settlor and current
beneficiaries. If the settlor is a beneficiary, the settlor's
interests as a beneficiary take priority over the interests of
all other beneficiaries.
(d) Except as provided in subsection (e), only the settlor,
a representative of the settlor under Article 3 during the
settlor's lifetime if the settlor is incapacitated, and the
representative of the settlor's estate after the settlor's
death have standing to contest, challenge, or bring any
proceeding in any court regarding any action of the trustee of
a revocable trust taken or not taken while the trust is
revocable.
(e) An individual who is or was a current beneficiary
during the settlor's lifetime, a representative of such an
individual under Article 3 or the representative of such
individual's estate after the individual's death, has standing
to contest, challenge, or bring any proceeding in any court
regarding any action of the trustee of a revocable trust while
the trust is revocable but the settlor does not personally have
capacity to revoke the trust, but only to the extent the action
of the trustee affects the interest of the individual as a
current beneficiary of the trust during the lifetime of the
settlor while the settlor does not personally have the capacity
to revoke the trust.
(f) The holder of a non-lapsing power of withdrawal, during
the period the power may be exercised, has the rights of a
settlor of a revocable trust to the extent of the property
subject to the power.
Section 604. Limitation on action contesting validity of
revocable trust; distribution of trust property.
(a) A person may commence a judicial proceeding to contest
the validity of a trust that was revocable at the settlor's
death only within the earlier of:
(1) 2 years after the settlor's death; or
(2)(A) in the case of a trust to which a legacy is
provided by the settlor's will that is admitted to probate,
the time to contest the validity of the settlor's will as
provided in the Probate Act of 1975; or
(B) in the case of a trust other than a trust described
in subdivision (A), 6 months after the trustee sent the
person a copy of the trust instrument and a notice
informing the person of the trust's existence, of the
trustee's name and address, and of the 6-month period
allowed for commencing a proceeding.
(b) Nine months after the death of the settlor of a trust
that was revocable at the settlor's death, the trustee may
proceed to distribute the trust property in accordance with the
trust instrument. The trustee is not subject to liability for
doing so unless:
(1) the trustee knows of a pending judicial proceeding
contesting the validity of the trust; or
(2) a potential contestant has notified the trustee of
a possible judicial proceeding to contest the trust and a
judicial proceeding is commenced within 60 days after the
contestant sent the notification.
(c) A beneficiary of a trust that was revocable at the
settlor's death that is determined to have been invalid is
liable to return any distribution received and all income and
appreciation associated with the distribution from the date of
receipt until the date of return of the distribution.
Section 605. Revocation of provisions in revocable trust by
divorce or annulment
(a) As used in this Section:
(1) "Judicial termination of marriage" includes, but
is not limited to, divorce, dissolution, annulment or
declaration of invalidity of marriage.
(2) "Provision pertaining to the settlor's former
spouse" includes, but is not limited to, every present or
future gift or interest or power of appointment given to
the settlor's former spouse or right of the settlor's
former spouse to serve in a fiduciary capacity.
(3) "Trust" means a trust created by a nontestamentary
instrument executed after January 1, 1982.
(4) Notwithstanding the definition of "revocable" in
Section 103, a provision is revocable by the settlor if the
settlor has the power at the time of the entry of the
judgment or judicial termination of marriage of the settlor
to revoke, modify, or amend the provision, either alone or
in conjunction with any other person or persons.
(b) Unless the trust instrument or the judgment of judicial
termination of marriage expressly provides otherwise, judicial
termination of marriage of the settlor of a trust revokes every
provision that is revocable by the settlor pertaining to the
settlor's former spouse in a trust instrument or amendment
executed by the settlor before the entry of the judgment of
judicial termination of marriage of the settlor and any such
trust shall be administered and construed as if the settlor's
former spouse had died upon entry of the judgment of judicial
termination of marriage.
(c) A trustee who has no actual knowledge of a judgment of
judicial termination of marriage of the settlor is not liable
for any action taken or omitted in good faith on the assumption
that the settlor is married. The preceding sentence is intended
to affect only the liability of the trustee and shall not
affect the disposition of beneficial interests in any trust.
(d) Notwithstanding Section 102, this Section may be made
applicable by specific reference in the trust instrument to
this Section in any (1) land trust; (2) voting trust; (3)
security instrument such as a trust deed or mortgage; (4)
liquidation trust; (5) escrow; (6) instrument under which a
nominee, custodian for property or paying or receiving agent is
appointed; or (7) trust created by a deposit arrangement in a
bank or savings institution, commonly known as "Totten Trust".
(e) If provisions of a trust are revoked solely by this
Section, they are revived by the settlor's remarriage to the
former spouse.
Article 7. Office of Trustee.
Section 701. Accepting or declining trusteeship.
(a) Except as otherwise provided in subsection (c), a
person designated as trustee accepts the trusteeship:
(1) by substantially complying with a method of
acceptance provided in the trust instrument; or
(2) if the trust instrument does not provide a method
or the method provided in the trust instrument is not
expressly made exclusive, by accepting delivery of the
trust property, exercising powers or performing duties as
trustee, or otherwise indicating acceptance of the
trusteeship.
(b) A person designated as trustee who has not yet accepted
the trusteeship may decline the trusteeship. A designated
trustee who does not accept the trusteeship within 120 days
after receiving notice of the designation is deemed to have
declined the trusteeship.
(c) A person designated as trustee, without accepting the
trusteeship, may, but need not:
(1) act to preserve the trust property if, within 120
days after receiving notice of the designation, the person
sends a declination of the trusteeship to the settlor or,
if the settlor is deceased or incapacitated, to the
qualified beneficiaries; and
(2) inspect or investigate trust property to determine
potential liability under environmental or other law or for
any other purpose.
(d) A person acting under subsection (c) is not liable for
actions taken in good faith.
Section 702. Trustee's bond.
(a) A trustee shall give bond to secure performance of the
trustee's duties only if the court finds that a bond is needed
to protect the interests of the beneficiaries or is required by
the terms of the trust and the court has not dispensed with the
requirement.
(b) The court may specify the amount of a bond, its
liabilities, and whether sureties are necessary. The court may
modify or terminate a bond at any time.
(c) A corporate fiduciary, as defined in Section 1-5.505 of
the Corporate Fiduciary Act, qualified to do trust business in
this State need not give bond, even if required by the terms of
the trust.
Section 703. Co-trustees.
(a) Co-trustees who are unable to reach a unanimous
decision may act by majority decision after prior written
notice to, or written waiver of notice by, each other
co-trustee.
(b) If a vacancy occurs in a co-trusteeship, subsection (b)
of Section 704 applies.
(c) A co-trustee must participate in the performance of a
trustee's function unless the co-trustee is unavailable to
perform the function because of absence, illness,
disqualification under other law, or other temporary
incapacity or the co-trustee has properly delegated the
performance of the function to another trustee.
(d) If a co-trustee is unavailable to perform duties
because of absence, illness, disqualification under other law,
or other temporary incapacity, and prompt action is necessary
to achieve the purposes of the trust or to avoid injury to the
trust property, the remaining co-trustee or a majority of the
remaining co-trustees may act for the trust.
(e) A trustee may delegate to a co-trustee for any period
of time any or all of the trustee's rights, powers, and duties.
Unless a delegation was irrevocable, a trustee may revoke a
delegation previously made.
(f) Except as otherwise provided in subsection (g), a
trustee who is not qualified to participate in an action or who
does not join in an action of another trustee is not liable for
the action.
(g) Each trustee who is not an excluded fiduciary under
Section 808 shall exercise reasonable care to:
(1) prevent a co-trustee from committing a serious
breach of trust; and
(2) compel a co-trustee to redress a serious breach of
trust.
(h) A dissenting trustee who joins in an action at the
direction of the majority of the trustees and who notified any
co-trustee of the dissent at or before the time of the action
is not liable for the action unless the action is a serious
breach of trust.
Section 704. Vacancy in trusteeship; appointment of
successor.
(a) A vacancy in a trusteeship occurs if:
(1) a person designated as trustee declines the
trusteeship;
(2) a person designated as trustee cannot be identified
or does not exist;
(3) a trustee resigns;
(4) a trustee is disqualified or removed;
(5) a trustee dies;
(6) a guardian is appointed for an individual serving
as trustee; or
(7) an individual serving as trustee becomes
incapacitated.
(b) If one or more co-trustees remain in office, a vacancy
in a trusteeship need not be filled and the remaining
co-trustees or trustee may act for the trust. A vacancy in a
trusteeship must be filled if the trust has no remaining
trustee, or if the existing vacancy impairs the administration
of the trust as determined by the remaining trustees.
(c) A vacancy in a trusteeship of a trust that is required
to be filled must be filled in the following order of priority:
(1) by a person designated in accordance with the trust
instrument to act as successor trustee;
(2) by a person appointed by a majority of the
beneficiaries who are distributees or permissible
distributees of trust income; or
(3) by a person appointed by the court.
(d) If a trust contains a charitable interest, then the
appointment of a successor trustee provided under paragraph (2)
of subsection (c) shall not take effect until 30 days after
written notice is delivered to the Attorney General's
Charitable Trust Bureau. The Attorney General may waive this
notice requirement.
Section 705. Resignation of trustee.
(a) A trustee may resign:
(1) upon notice to the settlor, if living, to the
beneficiaries who are distributees or permissible
distributees of trust income, and all co-trustees; or
(2) with the approval of the court.
(b) In approving a resignation, the court may issue orders
and impose conditions reasonably necessary for the protection
of the trust property.
(c) Any liability of a resigning trustee or of any sureties
on the trustee's bond for acts or omissions of the trustee is
not discharged or affected by the trustee's resignation.
Section 706. Removal of trustee.
(a) A settlor, a co-trustee, or a qualified beneficiary may
request the court to remove a trustee, or a trustee may be
removed by the court on its own initiative.
(b) The court may remove a trustee if:
(1) the trustee has committed a serious breach of
trust;
(2) lack of cooperation among co-trustees
substantially impairs the administration of the trust;
(3) because of unfitness, unwillingness, or persistent
failure of the trustee to administer the trust effectively,
the court determines that removal of the trustee best
serves the purposes of the trust and the interests of the
beneficiaries; or
(4) there has been a substantial change of
circumstances or removal is requested by all of the
qualified beneficiaries, the court finds that removal of
the trustee best serves the interests of all of the
beneficiaries and is not inconsistent with any material
purpose of the trust, and a suitable co-trustee or
successor trustee is available.
(c) Pending a final decision on a request to remove a
trustee, or in lieu of or in addition to removing a trustee,
the court may order such appropriate relief under subsection
(b) of Section 1001 as may be necessary to protect the trust
property or the interests of the beneficiaries.
Section 707. Delivery of property by former trustee.
(a) Unless a co-trustee remains in office or the court
otherwise orders, and until the trust property is delivered to
a successor trustee or other person entitled to it, a trustee
who has resigned or been removed has the duties of a trustee
and the powers necessary to protect the trust property.
(b) A trustee who has resigned or been removed shall
proceed expeditiously to deliver the trust property within the
trustee's possession to the co-trustee, successor trustee, or
other person entitled to it.
Section 708. Compensation of trustee.
(a) If the trust instrument does not specify the trustee's
compensation, a trustee is entitled to compensation that is
reasonable under the circumstances.
(b) If the trust instrument specifies the trustee's
compensation, the trustee is entitled to be compensated as
specified, but the court may allow more or less compensation
if:
(1) the duties of the trustee are substantially
different from those contemplated when the trust was
created; or
(2) the compensation specified by the trust instrument
would be unreasonably low or high.
Section 709. Reimbursement of expenses.
(a) A trustee is entitled to be reimbursed out of the trust
property, with interest as appropriate, for:
(1) expenses that were properly incurred in the
administration and protection of the trust; and
(2) to the extent necessary to prevent unjust
enrichment of the trust, expenses that were not properly
incurred in the administration of the trust.
(b) An advance by the trustee of money for the protection
of the trust gives rise to a right to reimbursement with
reasonable interest.
Article 8. Duties and Powers of Trustee.
Section 801. Duty to administer trust. Upon acceptance of a
trusteeship, the trustee shall administer the trust in good
faith, in accordance with its purposes and the terms of the
trust, and in accordance with this Code.
Section 802. Duty of loyalty.
(a) Subject to the rights of persons dealing with or
assisting the trustee as provided in Section 1012, a sale,
encumbrance, or other transaction involving the investment or
management of trust property entered into by the trustee for
the trustee's own personal account or that is otherwise
affected by a conflict between the trustee's fiduciary and
personal interests is voidable by a beneficiary affected by the
transaction and a trustee must disgorge to the trust any profit
from such transaction if voided, unless:
(1) the transaction was authorized by the trust
instrument or applicable law;
(2) the transaction was approved by the court or by
nonjudicial settlement agreement in accordance with
Section 111;
(3) the beneficiary did not commence a judicial
proceeding within the time allowed by Section 1005;
(4) the beneficiary consented to the trustee's
conduct, ratified the transaction, or released the trustee
in compliance with Section 1009; or
(5) the transaction involves a contract entered into or
claim acquired by the trustee before the person became or
contemplated becoming trustee.
(b) A sale, encumbrance, or other transaction involving the
investment or management of trust property is presumed to be
affected by a conflict between personal and fiduciary interests
if it is entered into by the trustee with:
(1) the trustee's spouse;
(2) the trustee's descendants, siblings, parents, or
their spouses; or
(3) a corporation or other person or enterprise in
which the trustee, or a person that owns a significant
interest in the trustee, has an interest that might affect
the trustee's best judgment, except as otherwise
authorized by law.
(c) A transaction between a trustee and a beneficiary that
does not concern trust property, that occurs during the
existence of the trust and from which the trustee obtains an
advantage, is voidable by the beneficiary unless the trustee
establishes that the transaction was fair to the beneficiary.
(d) A transaction not concerning trust property in which
the trustee engages in the trustee's individual capacity
involves a conflict between personal and fiduciary interests if
the transaction concerns an opportunity properly belonging to
the trust.
(e) An investment by a trustee in securities of an
investment company or investment trust to which the trustee, or
its affiliate, provides services in a capacity other than as
trustee is not presumed to be affected by a conflict between
personal and fiduciary interests if the investment otherwise
complies with the prudent investor rule. In addition to its
compensation for acting as trustee, the trustee may be
compensated by the investment company or investment trust for
providing those services out of fees charged to the trust so
long as the total compensation paid by the trust as trustee's
fees and mutual fund or other investment fees is reasonable.
(f) In voting shares of stock or in exercising powers of
control over similar interests in other forms of enterprise,
the trustee shall act in the best interests of the
beneficiaries.
(g) This Section does not preclude the following
transactions, if fair to the beneficiaries:
(1) an agreement between a trustee and a beneficiary
relating to the appointment or compensation of the trustee;
(2) payment of reasonable compensation to the trustee;
(3) a transaction between a trust and another trust,
decedent's estate, or guardianship of which the trustee is
a fiduciary or in which a beneficiary has an interest;
(4) the entry of an agreement for a bank or other
deposit account, safe deposit box, custodian, agency, or
depository arrangement for all or any part of the trust
property, including an agreement for services provided by a
bank operated by or affiliated with the trustee, and the
payment of reasonable compensation for those services,
including compensation to the bank operated by or
affiliated with the trustee, except that nothing in this
paragraph shall be construed as removing any depository
arrangements from the requirements of the prudent investor
rule; or
(5) an advance by the trustee of money for the
protection of the trust.
(h) The court may appoint a special fiduciary to make a
decision with respect to any proposed transaction that might
violate this Section if entered into by the trustee.
Section 803. Impartiality. If a trust has 2 or more
beneficiaries, the trustee shall act impartially in investing,
managing, and distributing the trust property giving due regard
to the beneficiaries respective interests. The trustee must
treat the beneficiaries equitably in light of the purposes and
terms of the trust, including any manifestation of an intention
to favor one or more beneficiaries.
Section 804. Prudent administration. A trustee shall
administer the trust as a prudent person would, by considering
the purposes, terms, distribution requirements, and other
circumstances of the trust. In satisfying this standard, the
trustee shall exercise reasonable care, skill, and caution.
Section 805. Costs of administration. In administering a
trust, the trustee may incur only costs that are reasonable in
relation to the trust property and the purposes of the trust.
Section 806. (Reserved).
Section 807. Delegation by trustee.
(a) Except as provided in subsection (b), the trustee has a
duty not to delegate to others the performance of any acts
involving the exercise of judgment and discretion.
(b) A trustee may delegate duties and powers that a prudent
trustee of comparable skills could properly delegate under the
circumstances. The trustee shall exercise reasonable care,
skill, and caution in:
(1) selecting an agent;
(2) establishing the scope and terms of the delegation,
consistent with the purposes of the trust and the trust
instrument; and
(3) periodically reviewing the agent's actions in
order to monitor the agent's performance and compliance
with the terms of the delegation.
(c) In performing a delegated function, an agent owes a
duty to the trust to exercise reasonable care to comply with
the terms of the delegation.
(d) A trustee who complies with subsection (b) is not
liable to the beneficiaries or to the trust for an action of
the agent to whom the function was delegated.
(e) By accepting a delegation of powers or duties from the
trustee of a trust that is subject to the law of this State, an
agent submits to the jurisdiction of the courts of this State.
Section 808. Directed trusts.
(a) In this Section:
(1) "Distribution trust advisor" means any one or more
persons given authority by the trust instrument to direct,
consent to, veto, or otherwise exercise all or any portion
of the distribution powers and discretions of the trust,
including, but not limited to, authority to make
discretionary distribution of income or principal.
(2) "Excluded fiduciary" means any fiduciary that by
the trust instrument is directed to act in accordance with
the exercise of specified powers by a directing party, in
which case the specified powers are deemed granted not to
the fiduciary but to the directing party and the fiduciary
is deemed excluded from exercising the specified powers. If
a trust instrument provides that a fiduciary as to one or
more specified matters is to act, omit action, or make
decisions only with the consent of a directing party, then
the fiduciary is an excluded fiduciary with respect to the
matters. Notwithstanding any provision of this Section, a
person does not fail to qualify as an excluded fiduciary
solely by reason of having effectuated, participated in, or
consented to a transaction, including, but not limited to,
any transaction described in Section 111 or 411 or Article
12 invoking this Section with respect to any new or
existing trust.
(3) "Fiduciary" means any person expressly given one or
more fiduciary duties by the trust instrument, including,
but not limited to, a trustee.
(4) "Investment trust advisor" means any one or more
persons given authority by the trust instrument to direct,
consent to, veto, or otherwise exercise all or any portion
of the investment powers of the trust.
(5) "Power" means authority to take or withhold an
action or decision, including, but not limited to, an
expressly specified power, the implied power necessary to
exercise a specified power, and authority inherent in a
general grant of discretion.
(6) "Trust protector" means any one or more persons
given any one or more of the powers specified in subsection
(d), regardless of whether the power is designated with the
title of trust protector by the trust instrument.
(b) An investment trust advisor may be designated in the
trust instrument of a trust. The powers of an investment trust
advisor may be exercised or not exercised in the sole and
absolute discretion of the investment trust advisor, and are
binding on all other persons, including, but not limited to,
each beneficiary, fiduciary, excluded fiduciary, and any other
party having an interest in the trust. The trust instrument may
use the title "investment trust advisor" or any similar name or
description demonstrating the intent to provide for the office
and function of an investment trust advisor. Unless the terms
of the trust provide otherwise, the investment trust advisor
has the authority to:
(1) direct the trustee with respect to the retention,
purchase, transfer, assignment, sale, or encumbrance of
trust property and the investment and reinvestment of
principal and income of the trust;
(2) direct the trustee with respect to all management,
control, and voting powers related directly or indirectly
to trust assets, including, but not limited to, voting
proxies for securities held in trust;
(3) select and determine reasonable compensation of
one or more advisors, managers, consultants, or
counselors, including the trustee, and to delegate to them
any of the powers of the investment trust advisor in
accordance with Section 807; and
(4) determine the frequency and methodology for
valuing any asset for which there is no readily available
market value.
(c) A distribution trust advisor may be designated in the
trust instrument of a trust. The powers of a distribution trust
advisor may be exercised or not exercised in the sole and
absolute discretion of the distribution trust advisor, and are
binding on all other persons, including, but not limited to,
each beneficiary, fiduciary, excluded fiduciary, and any other
party having an interest in the trust. The trust instrument may
use the title "distribution trust advisor" or any similar name
or description demonstrating the intent to provide for the
office and function of a distribution trust advisor. Unless the
terms of the trust provide otherwise, the distribution trust
advisor has authority to direct the trustee with regard to all
decisions relating directly or indirectly to discretionary
distributions to or for one or more beneficiaries.
(d) A trust protector may be designated in the trust
instrument of a trust. The powers of a trust protector may be
exercised or not exercised in the sole and absolute discretion
of the trust protector, and are binding on all other persons,
including, but not limited to, each beneficiary, investment
trust advisor, distribution trust advisor, fiduciary, excluded
fiduciary, and any other party having an interest in the trust.
The trust instrument may use the title "trust protector" or any
similar name or description demonstrating the intent to provide
for the office and function of a trust protector. The powers
granted to a trust protector by the trust instrument may
include but are not limited to authority to do any one or more
of the following:
(1) modify or amend the trust instrument to achieve
favorable tax status or respond to changes in the Internal
Revenue Code, federal laws, state law, or the rulings and
regulations under such laws;
(2) increase, decrease, or modify the interests of any
beneficiary or beneficiaries of the trust;
(3) modify the terms of any power of appointment
granted by the trust; however, such modification or
amendment may not grant a beneficial interest to any
individual, class of individuals, or other parties not
specifically provided for under the trust instrument;
(4) remove, appoint, or remove and appoint, a trustee,
investment trust advisor, distribution trust advisor,
another directing party, investment committee member, or
distribution committee member, including designation of a
plan of succession for future holders of any such office;
(5) terminate the trust, including determination of
how the trustee shall distribute the trust property to be
consistent with the purposes of the trust;
(6) change the situs of the trust, the governing law of
the trust, or both;
(7) appoint one or more successor trust protectors,
including designation of a plan of succession for future
trust protectors;
(8) interpret terms of the trust at the request of the
trustee;
(9) advise the trustee on matters concerning a
beneficiary; or
(10) amend or modify the trust instrument to take
advantage of laws governing restraints on alienation,
distribution of trust property, or to improve the
administration of the trust.
If a trust contains a charitable interest, a trust protector
must give notice to the Attorney General's Charitable Trust
Bureau at least 60 days before taking any of the actions
authorized under paragraph (2), (3), (4), (5), or (6) of this
subsection. The Attorney General may waive this notice
requirement.
(e) A directing party is a fiduciary of the trust subject
to the same duties and standards applicable to a trustee of a
trust as provided by applicable law unless the trust instrument
provides otherwise, but the trust instrument may not, however,
relieve or exonerate a directing party from the duty to act or
withhold acting as the directing party in good faith reasonably
believes is in the best interests of the trust.
(f) The excluded fiduciary shall act in accordance with the
trust instrument and comply with the directing party's exercise
of the powers granted to the directing party by the trust
instrument. Unless otherwise provided in the trust instrument,
an excluded fiduciary has no duty to monitor, review, inquire,
investigate, recommend, evaluate, or warn with respect to a
directing party's exercise or failure to exercise any power
granted to the directing party by the trust instrument,
including, but not limited to, any power related to the
acquisition, disposition, retention, management, or valuation
of any asset or investment. Except as otherwise provided in
this Section or the trust instrument, an excluded fiduciary is
not liable, either individually or as a fiduciary, for any
action, inaction, consent, or failure to consent by a directing
party, including, but not limited to, any of the following:
(1) if a trust instrument provides that an excluded
fiduciary is to follow the direction of a directing party,
and such excluded fiduciary acts in accordance with such a
direction, then except in cases of willful misconduct on
the part of the excluded fiduciary in complying with the
direction of the directing party, the excluded fiduciary is
not liable for any loss resulting directly or indirectly
from following any such direction, including but not
limited to compliance regarding the valuation of assets for
which there is no readily available market value;
(2) if a trust instrument provides that an excluded
fiduciary is to act or omit to act only with the consent of
a directing party, then except in cases of willful
misconduct on the part of the excluded fiduciary, the
excluded fiduciary is not liable for any loss resulting
directly or indirectly from any act taken or omitted as a
result of such directing party's failure to provide such
consent after having been asked to do so by the excluded
fiduciary; or
(3) if a trust instrument provides that, or for any
other reason, an excluded fiduciary is required to assume
the role or responsibilities of a directing party, or if
the excluded fiduciary appoints a directing party or
successor to a directing party other than in a nonjudicial
settlement agreement under Section 111 or in a second trust
under Article 12, then the excluded fiduciary shall also
assume the same fiduciary and other duties and standards
that applied to such directing party.
(g) By accepting an appointment to serve as a directing
party of a trust that is subject to the laws of this State, the
directing party submits to the jurisdiction of the courts of
this State even if investment advisory agreements or other
related agreements provide otherwise, and the directing party
may be made a party to any action or proceeding if issues
relate to a decision or action of the directing party.
(h) Each directing party shall keep the excluded fiduciary
and any other directing party reasonably informed regarding the
administration of the trust with respect to any specific duty
or function being performed by the directing party to the
extent that the duty or function would normally be performed by
the excluded fiduciary or to the extent that providing such
information to the excluded fiduciary or other directing party
is reasonably necessary for the excluded fiduciary or other
directing party to perform its duties, and the directing party
shall provide such information as reasonably requested by the
excluded fiduciary or other directing party. Neither the
performance nor the failure to perform of a directing party's
duty to inform as provided in this subsection affects
whatsoever the limitation on the liability of the excluded
fiduciary as provided in this Section.
(i) Other required notices.
(1) A directing party shall:
(A) within 90 days after becoming a directing
party, notify each qualified beneficiary of the
acceptance and of the directing party's name, address,
and telephone number, except that the notice
requirement of this subdivision (A) does not apply with
respect to a succession of a business entity by merger
or consolidation with another business entity or by
transfer between holding company affiliates if there
is no change in the contact information for the
directing party, in which case the successor entity has
discretion to determine what timing and manner of
notice is appropriate;
(B) notify each qualified beneficiary in advance
of any change in the rate of or the method of
determining the directing party's compensation; and
(C) notify each qualified beneficiary of the
directing party's resignation.
(2) In the event of the incapacity, death,
disqualification, or removal of any directing party, a
directing party who continues acting as directing party
following such an event shall notify each qualified
beneficiary of the incapacity, death, disqualification, or
removal of any other directing party within 90 days after
the event.
(j) An excluded fiduciary may, but is not required to,
obtain and rely upon an opinion of counsel on any matter
relevant to this Section.
(k) On and after January 1, 2013, this Section applies to:
(1) all existing and future trusts that appoint or
provide for a directing party, including, but not limited
to, a party granted power or authority effectively
comparable in substance to that of a directing party as
provided in this Section; or
(2) any existing or future trust that:
(A) is modified in accordance with applicable law
or the terms of the trust to appoint or provide for a
directing party; or
(B) is modified to appoint or provide for a
directing party, including, but not limited to, a party
granted power or authority effectively comparable in
substance to that of a directing party, in accordance
with: (i) a court order; (ii) a nonjudicial settlement
agreement made in accordance with Section 111; or (iii)
an exercise of decanting power under Article 12,
regardless of whether the order, agreement, or
second-trust instrument specifies that this Section
governs the responsibilities, actions, and liabilities
of a person designated as a directing party or excluded
fiduciary.
Section 809. Control and protection of trust property. A
trustee shall take reasonable steps to take control of and
protect the trust property. If a corporation is acting as
co-trustee with one or more individuals, the corporate trustee
shall have custody of the trust estate unless all the trustees
otherwise agree.
Section 810. Recordkeeping and identification of trust
property.
(a) A trustee shall keep adequate records of the
administration of the trust.
(b) A trustee shall keep trust property separate from the
trustee's own property.
(c) Except as otherwise provided in subsection (d), a
trustee not subject to federal or state banking regulation
shall cause the trust property to be designated so that the
interest of the trust, to the extent feasible, appears in
records maintained by a party other than a trustee or
beneficiary to whom the trustee has delivered the property.
(d) If the trustee maintains records clearly indicating the
respective interests, a trustee may invest as a whole the
property of 2 or more separate trusts.
Section 811. Enforcement and defense of claims. A trustee
shall take reasonable steps to enforce claims of the trust and
to defend claims against the trust. It may be reasonable for a
trustee not to enforce a claim, not to defend an action, to
settle an action, or to suffer a default, depending upon the
likelihood of recovery and the cost of suit and enforcement.
Section 812. Powers and duties of successor; liability for
acts of predecessor; approval of accounts.
(a) A successor trustee shall have all the rights, powers,
and duties that are granted to or imposed on the predecessor
trustee.
(b) A successor trustee is under no duty to inquire into
the acts or doings of a predecessor trustee, and is not liable
for any act or failure to act of a predecessor trustee.
(c) With the approval of a majority in interest of the
beneficiaries then entitled to receive or eligible to have the
benefit of the income from the trust, a successor trustee may
accept the account rendered by, and the property received from,
the predecessor trustee as a full and complete discharge of the
predecessor trustee without incurring any liability.
Section 813.1. Duty to inform and account; trusts
irrevocable and trustees accepting appointment after effective
date of Code.
(a) This Section is prospective only and does not apply to
any trust that was irrevocable before the effective date of
this Code, or to a trustee who accepts a trusteeship before the
effective date of this Code. Subject to Section 105, this
Section supplants any common law duty of a trustee to inform
and account to trust beneficiaries. This Section does not apply
to trusts that became irrevocable before the effective date of
this Code.
(b) General principles.
(1) The trustee shall notify each qualified
beneficiary:
(A) of the trust's existence;
(B) of the beneficiary's right to request a
complete copy of the trust instrument; and
(C) whether the beneficiary has a right to receive
or request trust accountings.
The notice required by this paragraph (1) must be
given: (i) within 90 days of the trust becoming irrevocable
or if no trustee is then acting within 90 days of the
trustee's acceptance of the trusteeship; (ii) within 90
days of the trustee acquiring knowledge that a qualified
beneficiary has a representative under Article 3 who did
not previously receive notice; (iii) within 90 days of the
trustee acquiring knowledge that a qualified beneficiary
who previously had a representative under Article 3 no
longer has a representative under Article 3; and (iv)
within 90 days of the trustee acquiring knowledge that
there is a new qualified beneficiary.
(2) A trustee shall send at least annually a trust
accounting to all current beneficiaries.
(3) A trustee shall send at least annually a trust
accounting to all presumptive remainder beneficiaries.
(4) Upon termination of a trust, a trustee shall send a
trust accounting to all beneficiaries entitled to receive a
distribution of the residue of the trust.
(5) Notwithstanding any other provision, a trustee in
its discretion may provide notice, information, trust
accountings, or reports to any beneficiary of the trust
regardless of whether the communication is otherwise
required to be provided.
(6) Upon the reasonable request of a qualified
beneficiary, the trustee shall promptly furnish to the
qualified beneficiary a complete copy of the trust
instrument.
(7) Notwithstanding any other provision, a trustee is
deemed to have fully and completely discharged the
trustee's duties under this Section to inform and account
to all beneficiaries, at common law or otherwise, if the
trustee provides the notice required under paragraph (1) to
each qualified beneficiary and if the trustee provides at
least annually and on termination of the trust a trust
accounting required by paragraph (2), (3), or (4) to each
beneficiary entitled to a trust accounting.
(8) For each asset or class of assets described in a
trust accounting for which there is no readily available
market value, the trustee, in the trustee's discretion, may
determine whether to estimate the value or use a nominal
carrying value for such an asset, how to estimate the value
of such an asset, and whether and how often to engage a
professional appraiser to value such an asset.
(c) Upon a vacancy in a trusteeship, unless a co-trustee
remains in office, the trust accounting required by subsection
(b) must be sent to the beneficiaries entitled to the
accounting by the former trustee. A personal representative,
guardian of the estate, or guardian of the person may send the
trust accounting to the beneficiaries entitled to the
accounting on behalf of a deceased or incapacitated trustee.
(d) Other required notices.
(1) A trustee shall:
(A) within 90 days after accepting a trusteeship,
notify each qualified beneficiary of the acceptance
and of the trustee's name, address, and telephone
number, except that the notice requirement of this
subdivision (A) does not apply with respect to a
succession of a corporate trustee by merger or
consolidation with another corporate fiduciary or by
transfer between holding company affiliates if there
is no change in the contact information for the
trustee, in which case the successor trustee has
discretion to determine what timing and manner of
notice is appropriate;
(B) notify each qualified beneficiary in advance
of any change in the rate of or the method of
determining the trustee's compensation; and
(C) notify each qualified beneficiary of the
trustee's resignation.
(2) In the event of the incapacity, death,
disqualification, or removal of any trustee, a trustee who
continues acting as trustee following such an event shall
notify each qualified beneficiary of the incapacity,
death, disqualification, or removal of any other trustee
within 90 days after the event.
(3) A trustee shall notify each qualified beneficiary
of any change in the address, telephone number, or other
contact information for the trustee no later than 90 days
after the change goes into effect.
(e) Each request for information under this Section must be
with respect to a single trust that is sufficiently identified
to enable the trustee to locate the trust's records. A trustee
may charge a reasonable fee for providing information under
this Section to:
(1) a beneficiary who is not a qualified beneficiary;
(2) a qualified beneficiary for providing information
that was previously provided to the qualified beneficiary
or a representative under Article 3 for the qualified
beneficiary; or
(3) a representative under Article 3 for a qualified
beneficiary for information that was previously provided
to the qualified beneficiary or a representative under
Article 3 for the qualified beneficiary.
(f) If a trustee is bound by any confidentiality
restrictions regarding a trust asset, then, before receiving
the information, a beneficiary eligible under this Section to
receive any information about that asset must agree to be bound
by the same confidentiality restrictions. The trustee has no
duty or obligation to disclose to any beneficiary any
information that is otherwise prohibited to be disclosed by
applicable law.
(g) A qualified beneficiary may waive the right to receive
information otherwise required to be furnished under this
Section, such as a trust accounting, by an instrument in
writing delivered to the trustee. A qualified beneficiary may
at any time, by an instrument in writing delivered to the
trustee, withdraw a waiver previously given with respect to
future trust accountings.
(h) Receipt of information, notices, or a trust accounting
by a beneficiary is presumed if the trustee has procedures in
place requiring the mailing or delivery of information,
notices, or trust accountings to the beneficiary. This
presumption applies to the mailing or delivery of information,
notices, or trust accountings by electronic means or the
provision of access to an account by electronic means for so
long as the beneficiary has agreed to receive electronic
delivery or access.
(i) A trustee may request approval of the trustee's current
or final trust accounting in a judicial proceeding at the
trustee's election, with all reasonable and necessary costs of
the proceeding payable by the trust and allocated between
income and principal in accordance with the Principal and
Income Act.
(j) Notwithstanding any other provision, this Section is
not intended to and does not impose on any trustee a duty to
inform any beneficiary in advance of transactions relating to
the trust property.
Section 813.2. Duty to inform and account; trusts
irrevocable and trustees accepting appointment before the
effective date of Code.
(a) This Section applies to all trusts that were
irrevocable before the effective date of this Code and to a
trustee who accepts a trusteeship before the effective date of
this Code.
(b) Every trustee at least annually shall furnish to the
beneficiaries then entitled to receive or receiving the income
from the trust estate, or, if none, then to those beneficiaries
eligible to have the benefit of the income from the trust
estate, a current account showing the receipts, disbursements,
and inventory of the trust estate.
(c) Every trustee shall on termination of the trust furnish
to the beneficiaries then entitled to distribution of the trust
estate a final account for the period from the date of the last
current account to the date of distribution showing the
inventory of the trust estate, the receipts, disbursements, and
distributions and shall make available to the beneficiaries
copies of prior accounts not previously furnished.
(d) If a beneficiary is incapacitated, the account shall be
provided to the representative of the estate of the
beneficiary. If no representative for the estate of a
beneficiary under legal disability has been appointed, the
account shall be provided to a spouse, parent, adult child, or
guardian of the person of the beneficiary.
(e) For each asset or class of assets described in the
account for which there is no readily available market value,
the trustee, in the trustee's discretion, may determine whether
to estimate the value or use a nominal carrying value for such
an asset, how to estimate the value of such an asset, and
whether and how often to engage a professional appraiser to
value such an asset.
Section 814. Discretionary powers; tax savings.
(a) Notwithstanding the breadth of discretion granted to a
trustee or other fiduciary in the trust instrument, including
the use of such terms as "absolute", "sole", or "uncontrolled",
such fiduciary shall exercise a discretionary power in good
faith and in accordance with the terms and purposes of the
trust instrument.
(b) Subject to subsection (e), and unless the trust
instrument expressly indicates that a rule in this subsection
does not apply:
(1) a person other than a settlor who is a beneficiary
and a trustee or other fiduciary of a trust that confers on
that fiduciary a power to make discretionary distributions
to or for that fiduciary's personal benefit may exercise
the power only in accordance with an ascertainable
standard; and
(2) a trustee or other fiduciary may not exercise a
power to make discretionary distributions to satisfy a
legal obligation of support that such fiduciary personally
owes another person.
(c) Subject to subsections (d) and (e), if a beneficiary of
a trust, in an individual, trustee, or other capacity, removes
a fiduciary and appoints a successor fiduciary who would be
related or subordinate to that beneficiary within the meaning
of Section 672(c) of the Internal Revenue Code if the
beneficiary were the grantor, that successor fiduciary's
discretionary powers are limited as follows:
(1) the fiduciary's discretionary power to make
distributions to or for the benefit of that beneficiary is
limited to an ascertainable standard;
(2) the fiduciary's discretionary power may not be
exercised to satisfy any of that beneficiary's legal
obligations for support or other purposes; and
(3) the fiduciary's discretionary power may not be
exercised to grant to that beneficiary a general power of
appointment.
(d) Subsection (c) does not apply if:
(1) the appointment of the trustee or other fiduciary
by the beneficiary may be made only in conjunction with
another person having a substantial interest in the
property of the trust subject to the power that is adverse
to the interest of the beneficiary within the meaning of
Section 2041(b)(1)(C)(ii) of the Internal Revenue Code; or
(2) the appointment is in conformity with a procedure
governing appointments approved by the court before the
effective date of this Code.
(e) Subsections (b) and (c) do not apply to:
(1) a person other than a settlor who is a beneficiary
and trustee or other fiduciary of a trust that confers on
such fiduciary a power exercisable only in conjunction with
another person having a substantial interest in the
property subject to the power that is adverse to the
interest of that fiduciary within the meaning of Section
2041(b)(1)(C)(ii) of the Internal Revenue Code;
(2) a power held by the settlor's spouse who is the
trustee or other fiduciary of a trust for which a marital
deduction, as defined in Section 2056(b)(5) or 2523(e) of
the Internal Revenue Code, was previously allowed;
(3) any trust during any period that the trust may be
revoked or amended by its settlor;
(4) a trust if contributions to the trust qualify for
the annual exclusion under Section 2503(c) of the Internal
Revenue Code; or
(5) any portion of a trust over which the trustee or
other fiduciary is expressly granted in the trust
instrument a presently exercisable or testamentary general
power of appointment.
(f) A power whose exercise is limited or prohibited by
subsections (b) and (c) may be exercised by a majority of the
remaining trustees or other fiduciaries whose exercise of the
power is not so limited or prohibited. If the power of all
trustees or other fiduciaries is so limited or prohibited, the
court may appoint a special fiduciary with authority to
exercise the power.
Section 815. General powers of trustee.
(a) A trustee, without authorization by the court, may
exercise:
(1) powers conferred by the trust instrument; or
(2) except as limited by the trust instrument:
(A) all powers over the trust property that an
unmarried owner with legal capacity has over
individually owned property;
(B) any other powers appropriate to achieve the
proper investment, management, and distribution of the
trust property; and
(C) any other powers conferred by this Code.
(b) The exercise of a power is subject to the fiduciary
duties prescribed by this Code.
Section 816. Specific powers of trustee. Without limiting
the authority conferred by Section 815, a trustee may:
(1) collect trust property and accept or reject
additions to the trust property from a settlor or any other
person;
(2) acquire or sell property, for cash or on credit, at
public or private sale;
(3) exchange, partition, or otherwise change the
character of trust property;
(4) deposit trust money in an account in a regulated
financial-service institution;
(5) borrow money, with or without security, and
mortgage or pledge or otherwise encumber trust property for
a period within or extending beyond the duration of the
trust;
(6) with respect to an interest in a proprietorship,
partnership, limited liability company, business trust,
corporation, or other form of business or enterprise,
continue the business or other enterprise and take any
action that may be taken by shareholders, members, or
property owners, including merging, dissolving, pledging
other trust assets or guaranteeing a debt obligation of the
business or enterprise, or otherwise changing the form of
business organization or contributing additional capital;
(7) with respect to stocks or other securities,
exercise the rights of an absolute owner, including the
right to:
(A) vote, or give proxies to vote, with or without
power of substitution, or enter into or continue a
voting trust agreement;
(B) hold a security in the name of a nominee or in
other form without disclosure of the trust so that
title may pass by delivery;
(C) pay calls, assessments, and other sums
chargeable or accruing against the securities, and
sell or exercise stock subscription or conversion
rights;
(D) deposit the securities with a depository or
other regulated financial-service institution; and
(E) participate in mergers, consolidations,
foreclosures, reorganizations, and liquidations;
(8) with respect to an interest in real property,
construct, or make ordinary or extraordinary repairs to,
alterations to, or improvements in, buildings or other
structures, demolish improvements, raze existing or erect
new party walls or buildings, subdivide or develop land,
dedicate any interest in real estate, dedicate land to
public use or grant public or private easements, enter into
contracts relating to real estate, and make or vacate plats
and adjust boundaries;
(9) enter into a lease for any purpose as lessor or
lessee, including a lease or other arrangement for
exploration and removal of natural resources, with or
without the option to purchase or renew, for a period
within or extending beyond the duration of the trust;
(10) grant an option involving a sale, lease, or other
disposition of trust property or acquire an option for the
acquisition of property, including an option exercisable
beyond the duration of the trust, and exercise an option so
acquired;
(11) insure the property of the trust against damage or
loss and insure the trustee, the trustee's agents, and
beneficiaries against liability arising from the
administration of the trust;
(12) abandon or decline to administer property of no
value or of insufficient value to justify its collection or
continued administration;
(13) with respect to possible liability for violation
of environmental law:
(A) inspect or investigate property the trustee
holds or has been asked to hold, or property owned or
operated by an organization in which the trustee holds
or has been asked to hold an interest, for the purpose
of determining the application of environmental law
with respect to the property;
(B) take action to prevent, abate, or otherwise
remedy any actual or potential violation of any
environmental law affecting property held directly or
indirectly by the trustee, whether taken before or
after the assertion of a claim or the initiation of
governmental enforcement;
(C) decline to accept property into trust or
disclaim any power with respect to property that is or
may be burdened with liability for violation of
environmental law;
(D) compromise claims against the trust that may be
asserted for an alleged violation of environmental
law; and
(E) pay the expense of any inspection, review,
abatement, or remedial action to comply with
environmental law;
(14) pay, contest, prosecute, or abandon any claim,
settle a claim or charges in favor of or against the trust,
and release, in whole or in part, a claim belonging to the
trust;
(15) pay taxes, assessments, compensation of the
trustee and of employees and agents of the trust, and other
expenses incurred in the administration of the trust;
(16) exercise elections with respect to federal,
state, and local taxes;
(17) select a mode of payment under any employee
benefit or retirement plan, annuity, or life insurance
payable to the trustee, exercise rights related to the
employee benefit or retirement plan, annuity, or life
insurance payable to the trustee, including exercise the
right to indemnification for expenses and against
liabilities, and take appropriate action to collect the
proceeds;
(18) make loans out of trust property, including loans
to a beneficiary on terms and conditions the trustee
considers to be fair and reasonable under the
circumstances, and the trustee has a lien on future
distributions for repayment of those loans;
(19) pledge trust property to guarantee loans made by
others to the beneficiary;
(20) appoint a trustee to act in another jurisdiction
to act as sole or co-trustee with respect to any part or
all of trust property located in the other jurisdiction,
confer upon the appointed trustee any or all of the rights,
powers, and duties of the appointing trustee, require that
the appointed trustee furnish security, and remove any
trustee so appointed;
(21) distribute income and principal in one or more of
the following ways, without being required to see to the
application of any distribution, as the trustee believes to
be for the best interests of any beneficiary who at the
time of distribution is incapacitated or in the opinion of
the trustee is unable to manage property or business
affairs because of incapacity:
(A) directly to the beneficiary;
(B) to the guardian of the estate, or if none, the
guardian of the person of the beneficiary;
(C) to a custodian for the beneficiary under any
state's Uniform Transfers to Minors Act, Uniform Gifts
to Minors Act or Uniform Custodial Trust Act, and, for
that purpose, to create a custodianship or custodial
trust;
(D) to an adult relative of the beneficiary to be
expended on the beneficiary's behalf;
(E) by expending the money or using the property
directly for the benefit of the beneficiary;
(F) to a trust, created before the distribution
becomes payable, for the sole benefit of the
beneficiary and those dependent upon the beneficiary
during his or her lifetime, to be administered as a
part of the trust, except that any amount distributed
to the trust under this subparagraph (F) shall be
separately accounted for by the trustee of the trust
and shall be indefeasibly vested in the beneficiary so
that if the beneficiary dies before complete
distribution of the amounts, the amounts and the
accretions, earnings, and income, if any, shall be paid
to the beneficiary's estate, except that this
subparagraph (F) does not apply to the extent that it
would cause a trust otherwise qualifying for the
federal estate tax marital deduction not to qualify;
and
(G) by managing it as a separate fund on the
beneficiary's behalf, subject to the beneficiary's
continuing right to withdraw the distribution;
(22) on distribution of trust property or the division
or termination of a trust, make distributions in divided or
undivided interests, allocate particular assets in
proportionate or disproportionate shares, value the trust
property for those purposes, and adjust for resulting
differences in valuation;
(23) resolve a dispute concerning the interpretation
of the trust or its administration by judicial proceeding,
nonjudicial settlement agreement under Section 111,
mediation, arbitration, or other procedure for alternative
dispute resolution;
(24) prosecute or defend an action, claim, or judicial
proceeding in any jurisdiction to protect trust property
and the trustee in the performance of the trustee's duties;
(25) execute contracts, notes, conveyances, and other
instruments that are useful to achieve or facilitate the
exercise of the trustee's powers, regardless of whether the
instruments contain covenants and warranties binding upon
and creating a charge against the trust estate or excluding
personal liability;
(26) on termination of the trust, exercise the powers
appropriate to wind up the administration of the trust and
distribute the trust property to the persons entitled to
it;
(27) enter into agreements for bank or other deposit
accounts, safe deposit boxes, or custodian, agency, or
depository arrangements for all or any part of the trust
estate, including, to the extent fair to the beneficiaries,
agreements for services provided by a bank operated by or
affiliated with the trustee, and to pay reasonable
compensation for those services, including, to the extent
fair to the beneficiaries, compensation to the bank
operated by or affiliated with the trustee, except that
nothing in this Section shall be construed as removing any
depository arrangements from the requirements of the
prudent investor rule;
(28) engage attorneys, auditors, financial advisors,
and other agents and pay reasonable compensation to such
persons;
(29) invest in or hold undivided interests in property;
(30) if fair to the beneficiaries, deal with the
executor, trustee, or other representative of any other
trust or estate in which a beneficiary of the trust has an
interest, even if the trustee is an executor, trustee, or
other representative of the other trust or estate;
(31) make equitable division or distribution in cash or
in kind, or both, and for that purpose may value any
property divided or distributed in kind;
(32) rely upon an affidavit, certificate, letter, or
other evidence reasonably believed to be genuine and on the
basis of any such evidence to make any payment or
distribution in good faith without liability;
(33) except as otherwise directed by the court, have
all of the rights, powers, and duties given to or imposed
upon the trustee by law and the terms of the trust during
the period between the termination of the trust and the
distribution of the trust assets and during any period in
which any litigation is pending that may void or invalidate
the trust in whole or in part or affect the rights, powers,
duties, or discretions of the trustee;
(34) plant and harvest crops; breed, raise, purchase,
and sell livestock; lease land, equipment, or livestock for
cash or on shares, purchase and sell, exchange or otherwise
acquire or dispose of farm equipment and farm produce of
all kinds; make improvements, construct, repair, or
demolish and remove any buildings, structures, or fences,
engage agents, managers, and employees and delegate powers
to them; engage in drainage and conservation programs;
terrace, clear, ditch, and drain lands and install
irrigation systems; replace improvements and equipment;
fertilize and improve the soil; engage in the growing,
improvement, and sale of trees and other forest crops;
participate or decline to participate in governmental
agricultural or land programs; and perform such acts as the
trustee deems appropriate using such methods as are
commonly employed by other farm owners in the community in
which the farm property is located;
(35) drill, mine, and otherwise operate for the
development of oil, gas, and other minerals; enter into
contracts relating to the installation and operation of
absorption and repressuring plants; enter into unitization
or pooling agreements for any purpose including primary,
secondary, or tertiary recovery; place and maintain pipe
lines; execute oil, gas, and mineral leases, division and
transfer orders, grants, deeds, releases and assignments,
and other instruments; participate in a cooperative coal
marketing association or similar entity; and perform such
other acts as the trustee deems appropriate using such
methods as are commonly employed by owners of similar
interests in the community in which the interests are
located;
(36) continue an unincorporated business and
participate in its management by having the trustee or one
or more agents of the trustee act as a manager with
appropriate compensation from the business and incorporate
the business;
(37) continue a business in the partnership form and
participate in its management by having the trustee or one
or more agents of the trustee act as a partner, limited
partner, or employee with appropriate compensation from
the business; enter into new partnership agreements and
incorporate the business; and, with respect to activities
under this paragraph (37), the trustee or the agent or
agents of the trustee shall not be personally liable to
third persons with respect to actions not sounding in tort
unless the trustee or agent fails to identify the trust
estate and disclose that the trustee or agent is acting in
a representative capacity, except that nothing in this
paragraph impairs in any way the liability of the trust
estate with respect to activities under this paragraph (37)
to the extent of the assets of the trust estate.
(38) Release, by means of any written renunciation,
relinquishment, surrender, refusal to accept,
extinguishment, and any other form of release, any power
granted to the trustee by applicable law or the terms of a
trust and held by such trustee in its fiduciary capacity,
including any power to invade property, any power to alter,
amend, or revoke any instrument, whether or not such
release causes a termination of any right or interest
thereunder, and any power remaining where one or more
partial releases have heretofore or hereafter been made
with respect to such power, whether heretofore or hereafter
created or reserved as to: (i) any property that is subject
thereto; (ii) any one or more of the objects thereof; or
(iii) limit in any other respect the extent to which it may
be exercised. The release may be permanent or applicable
only for a specific time and may apply only to the trustee
executing the release or the trustee and all future
trustees, successor trustees, and co-trustees of the trust
acting at any time or from time to time.
Section 817. Distribution upon termination. Upon the
occurrence of an event terminating a trust in whole or in part,
or upon the exercise by a beneficiary of a right to withdraw
trust principal, the trustee shall proceed expeditiously to
make the distribution to the beneficiary. The trustee has the
right to require from the beneficiary a written approval of the
trustee's accountings provided to the beneficiary and, at the
trustee's election, a refunding agreement from the beneficiary
for liabilities that would otherwise be payable from trust
property to the extent of the beneficiary's share of the
distribution. An accounting approved under this Section is
binding on the beneficiary providing the approval and on the
beneficiary's successors, heirs, representatives, and assigns.
A trustee may elect to withhold a reasonable amount of a
distribution or require a reasonable reserve for the payment of
debts, expenses, and taxes payable from the trust pending the
receipt of a written approval of the trustee's accountings
provided to the beneficiary and refunding agreement from a
beneficiary or a judicial settlement of accounts.
Section 818. (Reserved).
Section 819. Nominee registration. The trustee may cause
stocks, bonds, and other real or personal property belonging to
the trust to be registered and held in the name of a nominee
without mention of the trust in any instrument or record
constituting or evidencing title thereto. The trustee is liable
for the acts of the nominee with respect to any investment so
registered. The records of the trustee shall show at all times
the ownership of the investment by the trustee, and the stocks,
bonds, and other similar investments shall be in the possession
and control of the trustee and be kept separate and apart from
assets that are the individual property of the trustee.
Section 820. Proceeds of eminent domain or partition. If a
trustee is appointed by a court of this State to receive money
under eminent domain or partition proceedings and to invest it
for the benefit of the person who would be entitled to the real
estate or its income if it had not been taken or sold, on
petition of any interested person describing the real estate to
be purchased, the price to be paid, the probable income to be
derived and the state of the title, the court may authorize the
trustee to invest all or any part of the money in other real
estate in this State. Title to the real estate so purchased
shall be taken in the name of the trustee. If the interest of
the beneficiary in the real estate taken or sold was a legal
interest, the court shall direct the trustee to convey to the
beneficiary a legal estate upon the same conditions and
limitations of title, but the conveyance by the trustee shall
preserve any right of entry for condition broken, possibility
of reverter created by the instrument of title or any reversion
or other vested interest that arose by operation of law at the
time the instrument took effect. The court shall not direct the
conveyance by the trustee unless there is a person or class of
persons in being who would have a vested interest in the real
estate taken or sold under the instrument of title to the real
estate and who would be entitled to possession of the real
estate if it had not been taken or sold.
Section 821. Lands or estates subject to future interest or
power of appointment; waste; appointment of trustee. If lands
or any estate therein are subject to any legal or equitable
future interest of any kind or to any power of appointment,
whether a trust is involved or not, and it is made to appear
that such lands or estate are liable to waste or depreciation
in value, or that the sale thereof and the safe and proper
investment of the proceeds will inure to the benefit and
advantage of the persons entitled thereto, or that it is
otherwise necessary for the conservation, preservation, or
protection of the property or estate or of any present or
future interest therein that such lands or estate be sold,
mortgaged, leased, converted, exchanged, improved, managed or
otherwise dealt with, the court may, pending the happening of
the contingency, if any, and the vesting in possession of such
future interest, declare a trust, and appoint a trustee or
trustees for such lands or estate and vest in a trustee or
trustees title to the property, and authorize and direct the
sale of such property, either at a public sale or at private
sale, and upon such terms and conditions as the court may
direct, and in such case may authorize the trustee or trustees
to make such sale and to receive, hold and invest the proceeds
thereof under the direction of the court for the benefit of the
persons entitled or who may become entitled thereto according
to their respective rights and interests, authorize and direct
that all or any portion of the property, or the proceeds
thereof, so subject to such future interests or powers of
appointment, be leased, mortgaged, converted, exchanged,
improved, managed, invested, reinvested, or otherwise dealt
with, as the rights and interests of the parties and the
equities of the case may require, and to that end may confer
all necessary powers on the trustee or trustees. All orders of
every court entered pursuant to this Section after June 30,
1982 and before September 16, 1985 vesting title to property in
a trustee are hereby validated and such title is vested in such
trustee effective the day the court entered such order.
Article 9. Illinois Prudent Investor Law; Life Insurance;
Affiliated Investments.
Section 900. Article title. This Article may be referred to
as the Illinois Prudent Investor Law.
Section 901. Prudent investor rule.
(a) Except as otherwise provided in subsection (b), a
trustee administering a trust has a duty to invest and manage
the trust assets to comply with the prudent investor rule set
forth in this Article.
(b) The prudent investor rule, a default rule, may be
expanded, restricted, eliminated, or otherwise altered by
express terms of the trust. A trustee is not liable to a
beneficiary for the trustee's reasonable and good faith
reliance on those express provisions.
Section 902. Standard of care; portfolio strategy; risk and
return objectives.
(a) A trustee has a duty to invest and manage trust assets
as a prudent investor would, considering the purposes, terms,
distribution requirements, and other circumstances of the
trust. This standard requires the exercise of reasonable care,
skill, and caution and applies not in isolation, but in the
context of the trust portfolio as a whole and as a part of an
overall investment strategy that incorporates risk and return
objectives reasonably suitable to the trust.
(b) A trustee has a duty to pursue an investment strategy
that considers both the reasonable production of income and
safety of capital, consistent with the trustee's duty of
impartiality and the purposes of the trust. Whether investments
are underproductive or overproductive of income shall be judged
by the portfolio as a whole and not as to any particular asset.
(c) The circumstances that a trustee may consider in making
investment decisions include, without limitation:
(1) the general economic conditions;
(2) the possible effect of inflation or deflation;
(3) the expected tax consequences of investment
decisions or strategies;
(4) the role each investment or course of action plays
within the overall portfolio;
(5) the expected total return including both income
yield and appreciation of capital;
(6) the duty to incur only reasonable and appropriate
costs;
(7) environmental and social considerations;
(8) governance policies of the entities in which the
trustee may invest;
(9) needs for liquidity, regularity of income, and
preservation or appreciation of capital; and
(10) an asset's special relationship or value, if any,
to the purpose of the trust or to one or more of the
beneficiaries.
(d) In addition to the circumstances listed in subsection
(c), a trustee may, but need not, consider related trusts and
the assets of beneficiaries known to the trustee when making
investment decisions.
Section 903. Diversification. A trustee has a duty to
diversify the investments of the trust unless, under the
circumstances, the trustee reasonably believes it is in the
interests of the beneficiaries and furthers the purposes of the
trust not to diversify.
Section 904. Duties at inception of trusteeship. A trustee
has a duty, within a reasonable time after the acceptance of a
trusteeship, to review trust assets and to make and implement
decisions concerning the retention and disposition of original
preexisting investments, in order to conform to this Article. A
trustee's decision to retain or dispose of an asset may
properly be influenced by the asset's special relationship or
value to the purposes of the trust or to some or all of the
beneficiaries, consistent with the trustee's duty of
impartiality.
Section 905. Court action. Nothing in this Article
abrogates or restricts the power of an appropriate court in
proper cases to: (i) direct or permit the trustee to deviate
from the terms of the trust; or (ii) to direct or permit the
trustee to take, or to restrain the trustee from taking, any
action regarding the making or retention of investments.
Section 906. (Reserved).
Section 907. (Reserved).
Section 908. Reviewing compliance. No specific investment
course of action is, taken alone, prudent or imprudent. The
trustee may invest in every kind of property and type of
investment, subject to this Article. A trustee's investment
decisions and actions are to be judged in terms of the
trustee's reasonable business judgment regarding the
anticipated effect on the trust portfolio as a whole under the
facts and circumstances prevailing at the time of the decision
or action. This Article is a test of conduct and not of
resulting performance.
Section 909. Delegation of investment and management
functions. Notwithstanding any other provision of this Code,
before delegating any investment functions to an agent in
accordance with subsection (b) of Section 807, a trustee shall
conduct an inquiry into the experience, performance history,
professional licensing or registration, if any, and financial
stability of the investment agent.
Section 910. Language invoking standard of Article. The
following terms or comparable language in the investment powers
and related provisions of a trust instrument, unless otherwise
limited or modified by that instrument, shall be construed as
authorizing any investment or strategy permitted under this
Article: "investments permissible by law for investment of
trust funds", "legal investments", "authorized investments",
"using the judgment and care under the circumstances then
prevailing that persons of prudence, discretion, and
intelligence exercise in the management of their own affairs,
not in regard to speculation but in regard to the permanent
disposition of their funds, considering the probable income as
well as the probable safety of their capital", "prudent man
rule", "prudent trustee rule", "prudent person rule", and
"prudent investor rule".
Section 911. (See Section 900 for short title.)
Section 912. Application to existing trusts. The Sections
of this Article that precede this Section apply to all existing
and future trusts, but only as to actions or inactions
occurring on or after January 1, 1992.
Section 913. Life insurance.
(a) Notwithstanding any other provision, the duties of a
trustee with respect to acquiring or retaining as a trust asset
a contract of insurance upon the life of the settlor, upon the
lives of the settlor and the settlor's spouse, or upon the life
of any person for which the trustee has an insurable interest
in accordance with Section 113, do not include any of the
following duties:
(1) to determine whether any contract of life insurance
in the trust, or to be acquired by the trust, is or remains
a proper investment, including, without limitation, with
respect to:
(A) the type of insurance contract;
(B) the quality of the insurance contract;
(C) the quality of the insurance company; or
(D) the investments held within the insurance
contract.
(2) to diversify the investment among different
policies or insurers, among available asset classes, or
within an insurance contract;
(3) to inquire about or investigate into the health or
financial condition of an insured;
(4) to prevent the lapse of a life insurance contract
if the trust does not receive contributions or hold other
readily marketable assets to pay the life insurance
contract premiums; or
(5) to exercise any policy options, rights, or
privileges available under any contract of life insurance
in the trust, including any right to borrow the cash value
or reserve of the policy, acquire a paid-up policy, or
convert to a different policy.
(b) The trustee is not liable to the beneficiaries of the
trust, the beneficiaries of the contract of insurance, or to
any other party for loss arising from the absence of these
duties regarding insurance contracts under this Section.
(c) This Section applies to an irrevocable trust created
after the effective date of this Code or to a revocable trust
that becomes irrevocable after the effective date of this Code.
The trustee of a trust described under this Section established
before the effective date of this Code shall notify the settlor
in writing that, unless the settlor provides written notice to
the contrary to the trustee within 90 days of the trustee's
notice, this Section applies to the trust. This Section does
not apply if, within 90 days of the trustee's notice, the
settlor notifies the trustee in writing that this Section does
not apply. If the settlor is deceased, then the trustee shall
give notice to all of the legally competent current
beneficiaries, and this Section applies to the trust unless the
majority of the beneficiaries notify the trustee to the
contrary in writing within 90 days of the trustee's notice.
Section 914. Investments in affiliated investments;
transactions with affiliates.
(a) As used in this Section:
(1) "Affiliate" means any corporation or other entity
that directly or indirectly is controlled by a financial
institution acting in a fiduciary capacity, or is related
to the financial institution by shareholding or other means
of common ownership and control.
(2) "Affiliated investment" means an investment for
which the fiduciary or an affiliate of the fiduciary acts
as advisor, administrator, distributor, placement agent,
underwriter, broker, or in any other capacity for which the
fiduciary or an affiliate of the fiduciary receives or has
received compensation from the investment.
(3) "Fiduciary capacity" includes an agent with
investment discretion to determine what securities or
other assets to purchase or sell on behalf of a fiduciary
account.
(b) A financial institution acting in any fiduciary
capacity may purchase any affiliated investment, including,
but not limited to, insurance, equity derivatives, or
securities underwritten or otherwise distributed by the
financial institution or by an affiliate, through or directly
from the financial institution or an affiliate or from a
syndicate or selling group that includes the financial
institution or an affiliate, if the purchase is otherwise
prudent under the applicable fiduciary investment standard.
(c) The compensation paid to a financial institution acting
in any fiduciary capacity or an affiliate of the financial
institution for any affiliated investment under this Section
must be reasonable and may not be prohibited by the instrument
governing the fiduciary relationship. The compensation for the
affiliated investment may be in addition to the compensation
that the financial institution is otherwise entitled to receive
from the fiduciary account.
(d) A financial institution shall disclose, at least
annually:
(1) any purchase of an affiliated investment
authorized by this Section, including all compensation
paid or to be paid by the fiduciary account or to be
received by an affiliate arising from the affiliated
investment;
(2) the capacities in which the financial institution
or an affiliate acts for the issuer of the securities or
the provider of the products or services; and
(3) that the financial institution or an affiliate may
have an interest in the affiliated investment.
(e) The disclosure shall be given, in writing or
electronically by any document prepared for an affiliated
investment under federal or state securities laws or in a
written summary that includes all compensation received or to
be received by the financial institution or any affiliate and
an explanation of the manner in which the compensation is
calculated (either as a percentage of the assets invested or by
some other formula or method), to each principal in an agency
relationship and to all persons entitled to receive account
statements of any other fiduciary account.
(f) This Section applies to the purchase of securities made
at the time of the initial offering of the securities or at any
time thereafter.
(g) A financial institution that has complied with the
terms of this Section has full authority to administer an
affiliated investment, including the authority to vote proxies
on the affiliated investment.
Article 10. Liability of Trustees and Rights of Persons Dealing
with Trustee.
Section 1001. Remedies for breach of trust.
(a) A violation by a trustee of a duty the trustee owes to
a beneficiary is a breach of trust.
(b) To remedy a breach of trust that has occurred or may
occur, the court may:
(1) compel the trustee to perform the trustee's duties;
(2) enjoin the trustee from committing a breach of
trust;
(3) compel the trustee to redress a breach of trust by
paying money, restoring property, or other means;
(4) order a trustee to account;
(5) appoint a special fiduciary to take possession of
the trust property and administer the trust;
(6) suspend the trustee;
(7) remove the trustee as provided in Section 706;
(8) reduce or deny compensation to the trustee; or
(9) subject to Section 1012, void an act of the
trustee, impose a lien or a constructive trust on trust
property, or trace trust property wrongfully disposed of
and recover the property or its proceeds.
(c) Nothing in this Section limits the equitable powers of
the court to order other appropriate relief.
Section 1002. Damages for breach of trust.
(a) A trustee who commits a breach of trust is liable to
the beneficiaries affected for the greater of:
(1) the amount required to restore the value of the
trust property and trust distributions to what they would
have been had the breach not occurred; or
(2) the value of any benefit received by the trustee by
reason of the breach.
(b) Except as otherwise provided in this subsection, if
more than one trustee is liable to the beneficiaries for a
breach of trust, a trustee is entitled to contribution from the
other trustee or trustees liable for the breach. A trustee is
not entitled to contribution if the trustee was substantially
more at fault than another trustee or if the trustee committed
the breach of trust in bad faith or with reckless indifference
to the purposes of the trust or the interests of the
beneficiaries. A trustee who received a benefit from the breach
of trust is not entitled to contribution from another trustee
to the extent of the benefit received.
Section 1003. No damages in absence of breach. Except as
provided in Section 802, absent a breach of trust, a trustee is
not liable to a beneficiary for a loss or depreciation in the
value of trust property or for any benefit received by the
trustee by reason of the administration of the trust.
Section 1004. Attorney's fees and costs. In a judicial
proceeding involving the administration of a trust, the court,
as equity may require, may award costs and expenses, including
reasonable attorney's fees, to any party, to be paid by another
party or from the trust that is the subject of the controversy.
Section 1005. Limitation on action against trustee.
(a) A beneficiary may not commence a proceeding against a
trustee for breach of trust for any matter disclosed in writing
by a trust accounting, or otherwise as provided in Sections
813.1, 813.2, and Section 1102, after the date on which the
disclosure becomes binding upon the beneficiary as provided
below:
(1) With respect to a trust that becomes irrevocable
after the effective date of this Code and to trustees
accepting appointment after the effective date of this
Code, a matter disclosed in writing by a trust accounting
or otherwise pursuant to Section 813.1 and Section 1102 is
binding on each person who receives the information and
each person represented as provided in Article 3 by a
person who receives the information, and all of the
person's respective successors, representatives, heirs,
and assigns, unless an action against the trustee is
instituted within 2 years after the date the information is
furnished. A trust accounting or other communication
adequately discloses the existence of a potential claim for
breach of trust if it provides sufficient information so
that the person entitled to receive the information knows
of the potential claim or should have inquired into its
existence.
(2) With respect to a trust that became irrevocable
before the effective date of this Code or a trustee that
accepted appointment before the effective date of this
Code, a current account is binding on each beneficiary
receiving the account and on the beneficiary's heirs and
assigns unless an action against the trustee is instituted
by the beneficiary or the beneficiary's heirs and assigns
within 3 years after the date the current account is
furnished, and a final accounting is binding on each
beneficiary receiving the final accounting and all persons
claiming by or through the beneficiary, unless an action
against the trustee is instituted by the beneficiary or
person claiming by or through him or her within 3 years
after the date the final account is furnished. If the
account is provided to the representative of the estate of
the beneficiary or to a spouse, parent, adult child, or
guardian of the person of the beneficiary, the account is
binding on the beneficiary unless an action is instituted
against the trustee by the representative of the estate of
the beneficiary or by the spouse, parent, adult child, or
guardian of the person to whom the account is furnished
within 3 years after the date it is furnished.
(3) Notwithstanding paragraphs (1) and (2), with
respect to trust estates that terminated and were
distributed 10 years or less before January 1, 1988, the
final account furnished to the beneficiaries entitled to
distribution of the trust estate is binding on the
beneficiaries receiving the final account, and all persons
claiming by or through them, unless an action against the
trustee is instituted by the beneficiary or person claiming
by or through him or her within 5 years after January 1,
1988 or within 10 years after the date the final account
was furnished, whichever is longer.
(4) Notwithstanding paragraphs (1), (2) and (3), with
respect to trust estates that terminated and were
distributed more than 10 years before January 1, 1988, the
final account furnished to the beneficiaries entitled to
distribution of the trust estate is binding on the
beneficiaries receiving the final account, and all persons
claiming by or through them, unless an action against the
trustee is instituted by the beneficiary or person claiming
by or through him or her within 2 years after January 1,
1988.
(b) Unless barred earlier under subsection (a), a judicial
proceeding by a beneficiary against a trustee for breach of
trust must be commenced within 5 years after the first to occur
of:
(1) the removal, resignation, or death of the trustee;
(2) the termination of the beneficiary's interest in
the trust; or
(3) the termination of the trust.
(c) Notwithstanding any other provision of this Section, a
beneficiary may bring any action against the trustee for
fraudulent concealment within the time limit set forth in
Section 13-215 of the Code of Civil Procedure.
Section 1006. Reliance on trust instrument. A trustee who
acts in reasonable reliance on the express language of the
trust instrument is not liable to a beneficiary for a breach of
trust to the extent the breach resulted from the reliance.
Section 1007. Event affecting administration or
distribution. If the happening of an event, including, but not
limited to, marriage, divorce, performance of educational
requirements, or death, affects the administration or
distribution of a trust, a trustee who has exercised reasonable
care to ascertain the happening of the event is not liable for
a loss resulting from the trustee's lack of knowledge.
Section 1008. Exculpation of trustee.
(a) A term of a trust relieving a trustee of liability for
breach of trust is unenforceable to the extent that it:
(1) relieves the trustee of liability for breach of
trust committed in bad faith or with reckless indifference
to the purposes of the trust or the interests of the
beneficiaries; or
(2) was inserted as the result of an abuse by the
trustee of a fiduciary or confidential relationship to the
settlor.
(b) An exculpatory term drafted or caused to be drafted by
the trustee is invalid as an abuse of a fiduciary or
confidential relationship unless the trustee proves that the
exculpatory term is fair under the circumstances and that its
existence and contents were adequately communicated to the
settlor. These conditions are satisfied if the settlor was
represented by independent counsel.
Section 1009. Beneficiary's consent, release, or
ratification.
(a) A trustee is not liable to a beneficiary, or to anyone
claiming by or through the beneficiary, for breach of trust if
the beneficiary consented to the conduct constituting the
breach, released the trustee from liability for the breach, or
ratified the transaction constituting the breach, unless:
(1) the consent, release, or ratification of the
beneficiary was induced by improper conduct of the trustee;
or
(2) at the time of the consent, release, or
ratification, the beneficiary did not know of the
beneficiary's rights or of the material facts relating to
the breach.
(b) If the beneficiary's consent, release, or ratification
involves a self-dealing transaction, the consent, release, or
ratification is binding only if the transaction was fair and
reasonable. The condition that a self-dealing transaction must
be fair and reasonable is satisfied if the beneficiary was
represented by independent counsel. No consideration is
required for the consent, release, or ratification to be valid.
Section 1010. Limitation on personal liability of trustee.
(a) Except as otherwise provided in the contract, a trustee
is not personally liable on a contract properly entered into in
the trustee's fiduciary capacity in the course of administering
the trust if the trustee in the contract disclosed the
fiduciary capacity.
(b) A trustee is personally liable for torts committed in
the course of administering a trust, or for obligations arising
from ownership or control of trust property, including
liability for violation of environmental law, only if the
trustee is personally at fault.
(c) A claim based on a contract entered into by a trustee
in the trustee's fiduciary capacity, on an obligation arising
from ownership or control of trust property, or on a tort
committed in the course of administering a trust, may be
asserted in a judicial proceeding against the trustee in the
trustee's fiduciary capacity, whether or not the trustee is
personally liable for the claim.
Section 1011. Interest as general partner.
(a) Except as otherwise provided in subsection (c) or
unless personal liability is imposed in the contract, a trustee
who holds an interest as a general partner in a general or
limited partnership is not personally liable on a contract
entered into by the partnership after the trust's acquisition
of the interest if the fiduciary capacity was disclosed in the
contract or in a statement previously filed pursuant to the
Uniform Partnership Act (1997) or Uniform Limited Partnership
Act (2001) or any other similar state law.
(b) Except as otherwise provided in subsection (c), a
trustee who holds an interest as a general partner is not
personally liable for torts committed by the partnership or for
obligations arising from ownership or control of the interest
unless the trustee is personally at fault.
(c) The immunity provided by this Section does not apply if
an interest in the partnership is held by the trustee in a
capacity other than that of trustee or is held by the trustee's
spouse or one or more of the trustee's descendants, siblings,
or parents, or the spouse of any of them.
(d) If the trustee of a revocable trust holds an interest
as a general partner, the settlor is personally liable for
contracts and other obligations of the partnership as if the
settlor were a general partner.
Section 1012. Protection of person dealing with trustee.
(a) A person other than a beneficiary or a beneficiary's
representative under Article 3 acting in a representative
capacity who in good faith assists a trustee, or who in good
faith and for value deals with a trustee, without knowledge
that the trustee is exceeding or improperly exercising the
trustee's powers is protected from liability as if the trustee
properly exercised the power.
(b) A person other than a beneficiary or a beneficiary's
representative under Article 3 acting in a representative
capacity who in good faith deals with a trustee is not required
to inquire into the extent of the trustee's powers or the
propriety of their exercise.
(c) A person, including a beneficiary, who in good faith
delivers assets to a trustee need not ensure their proper
application.
(d) A person other than a beneficiary who in good faith
assists a former trustee, or who in good faith and for value
deals with a former trustee, without knowledge that the
trusteeship has terminated is protected from liability as if
the former trustee were still a trustee.
(e) Comparable protective provisions of other laws
relating to commercial transactions or transfer of securities
by fiduciaries prevail over the protection provided by this
Section.
Section 1013. Certification of trust.
(a) Instead of furnishing a copy of the trust instrument to
a person other than a beneficiary, the trustee may furnish to
the person a certification of trust containing the following
information:
(1) a statement that the trust exists and the date the
trust instrument was executed;
(2) the identity of the settlor;
(3) the identity and address of the currently acting
trustee;
(4) the powers of the trustee;
(5) the revocability or irrevocability of the trust,
whether the trust is amendable or unamendable, and the
identity of any person holding a power to revoke the trust;
(6) the authority of co-trustees to sign or otherwise
authenticate and whether all or less than all are required
in order to exercise powers of the trustee;
(7) the trust's taxpayer identification number; and
(8) the manner of taking title to trust property.
(b) A certification of trust must be signed or otherwise
authenticated by one or more of the trustees. A third party may
require that the certification of trust be acknowledged.
(c) A certification of trust must state that the trust has
not been revoked, modified, or amended in any manner that would
cause the representations contained in the certification of
trust to be incorrect.
(d) A certification of trust need not contain the
dispositive terms of a trust.
(e) A recipient of a certification of trust may require the
trustee to furnish copies of those excerpts from the original
trust instrument and later amendments that designate the
trustee and confer upon the trustee the power to act in the
pending transaction.
(f) A person who acts in reliance upon a certification of
trust without actual knowledge that the representations
contained therein are incorrect is not liable to any person for
so acting and may assume without inquiry the existence of the
facts contained in the certification. Knowledge of the trust
instrument may not be inferred solely from the fact that a copy
of all or part of the trust instrument is held by the person
relying upon the certification.
(g) A person who in good faith enters into a transaction in
reliance upon a certification of trust may enforce the
transaction against the trust property as if the
representations contained in the certification were correct.
(h) A person making a demand for the trust instrument in
addition to a certification of trust or excerpts is liable for
damages if the court determines that the person did not act in
good faith in demanding the trust instrument. A person required
to examine a complete copy of the trust instrument for purposes
of complying with applicable federal, state, or local law, a
person acting in a fiduciary capacity with respect to a trust,
and the Attorney General's Charitable Trust Bureau are deemed
to be acting in good faith when demanding a copy of the trust
instrument. This Section does not modify or limit any
obligation a trustee may have to furnish a copy of a trust
instrument to the Attorney General under the Charitable Trust
Act or the Solicitation for Charity Act.
(i) This Section does not limit the right of a person to
obtain a copy of the trust instrument in a judicial proceeding
concerning the trust.
(j) A certification of trust may be substantially as
follows, but nothing in this subsection invalidates or bars the
use of a certification of trust in any other or different form:
CERTIFICATION OF TRUST
Name of trust:...............................................
Date trust instrument was executed:..........................
Tax Identification Number of trust (SSN or EIN):.............
Name(s) of settlor(s) of trust:..............................
Name(s) of currently acting trustee(s):......................
Address(es) of currently acting trustee(s):..................
.... This trust states that .... of .... co-trustee(s) are
required to exercise the powers of the trustee.
.... The co-trustees authorized to sign or otherwise
authenticate on behalf of the trust are:.....................
.... There are no co-trustees authorized to sign or otherwise
authenticate on behalf of the trust.
Name(s) of successor trustee(s):.............................
The trustee(s) has (have) the power to (state, synopsize, or
describe relevant powers):.
Title to the trust property shall be taken as follows (for
example, "John Doe and Jane Doe, co-trustees of the Doe Family
Living Trust, dated January 4, 1999"):.......................
.... This is an irrevocable trust.
.... This is a revocable trust. Name(s) of person(s) holding
power to revoke the trust:...................................
.... This is an unamendable trust.
.... This trust is amendable. Name(s) of person(s) holding
power to amend the trust:....................................
I (we) certify that the above-named trust is in full force and
has not been revoked, modified, or amended in any manner that
would cause the representations in this Certification of Trust
to be incorrect.
IN WITNESS THEREOF, each of the undersigned, being a trustee of
the above-named trust with the authority to execute this
Certification of Trust, does hereby execute it this ..... day
of .........., .......
Trustee Signature: .............
Printed Name: ..................
Trustee Signature: .............
Printed Name: ..................
[OPTIONAL:
State of .................)
County of ................)
This instrument was signed and acknowledged before me on
.........., ...... (date) by (name/s of person/s):.........
(Signature of Notary Public):
............................
(SEAL)]
Section 1014. Reliance on Secretary of Financial and
Professional Regulation. No trustee or other person is liable
under this Code for any act done or omitted in good faith in
conformity with any rule, interpretation, or opinion issued by
the Secretary of Financial and Professional Regulation,
notwithstanding that after the act or omission has occurred,
the rule, opinion, or interpretation upon which reliance is
placed is amended, rescinded, or determined by judicial or
other authority to be invalid for any reason.
Article 11. Total Return Trusts.
Section 1101. Total return trust defined; trustee duty to
inform.
(a) In this Article, "total return trust" means a trust
converted in accordance with this Article that the trustee
shall manage and invest seeking a total return without regard
to whether the return is from income or appreciation of
principal.
(b) Notwithstanding any other provision of this Article, a
trustee has no duty to inform beneficiaries about the
availability of this Article and has no duty to review the
trust to determine whether any action should be taken under
this Article unless requested to do so in writing by a
qualified beneficiary.
Section 1102. Conversion by trustee. A trustee may convert
a trust to a total return trust as described in this Article if
all of the following apply:
(1) The trust describes the amount that may or must be
distributed to a beneficiary by referring to the trust's
income, and the trustee determines that conversion to a
total return trust will enable the trustee to better carry
out the purposes of the trust and the conversion is in the
best interests of the beneficiaries;
(2) the trustee sends a written notice of the trustee's
decision to convert the trust to a total return trust,
specifying a prospective effective date for the conversion
and including a copy of this Article, to all of the
qualified beneficiaries; and
(3) no qualified beneficiary objects to the conversion
to a total return trust in a writing delivered to the
trustee within 60 days after the notice is sent.
Section 1103. Conversion by agreement. Conversion to a
total return trust may be made by agreement between a trustee
and all qualified beneficiaries. The agreement may include any
actions a court could properly order under Section 1108;
however, any distribution percentage determined by the
agreement may not be less than 3% nor greater than 5%.
Section 1104. Conversion or reconversion by court.
(a) The trustee may for any reason elect to petition the
court to order conversion to a total return trust, including
without limitation the reason that conversion under Section
1102 is unavailable because a beneficiary timely objects to the
conversion to a total return trust.
(b) A beneficiary may request the trustee to convert to a
total return trust or adjust the distribution percentage. If
the trustee declines or fails to act within 6 months after
receiving a written request to do so, the beneficiary may
petition the court to order the conversion or adjustment.
(c) The trustee may petition the court prospectively to
reconvert from a total return trust or adjust the distribution
percentage if the trustee determines that the reconversion or
adjustment will enable the trustee to better carry out the
purposes of the trust. A beneficiary may request the trustee to
petition the court prospectively to reconvert from a total
return trust or adjust the distribution percentage. If the
trustee declines or fails to act within 6 months after
receiving a written request to do so, the beneficiary may
petition the court to order the reconversion or adjustment.
(d) In a judicial proceeding under this Section, the
trustee may, but need not, present the trustee's opinions and
reasons (1) for supporting or opposing conversion to (or
reconversion from or adjustment of the distribution percentage
of) a total return trust, including whether the trustee
believes conversion (or reconversion or adjustment of the
distribution percentage) would enable the trustee to better
carry out the purposes of the trust, and (2) about any other
matters relevant to the proposed conversion (or reconversion or
adjustment of the distribution percentage). A trustee's
actions in accordance with this Section shall not be deemed
improper or inconsistent with the trustee's duty of
impartiality unless the court finds from all the evidence that
the trustee acted in bad faith.
(e) The court shall order conversion to (or reconversion
prospectively from or adjustment of the distribution
percentage of) a total return trust if the court determines
that the conversion (or reconversion or adjustment of the
distribution percentage) will enable the trustee to better
carry out the purposes of the trust and the conversion (or
reconversion or adjustment of the distribution percentage) is
in the best interests of the beneficiaries.
(f) The court may order any of the following actions in a
proceeding brought by a trustee or a beneficiary under this
Section:
(1) select a distribution percentage other than 4%;
(2) average the valuation of the trust's net assets
over a period other than 3 years;
(3) reconvert prospectively from or adjust the
distribution percentage of a total return trust;
(4) direct the distribution of net income (determined
as if the trust were not a total return trust) in excess of
the distribution amount as to any or all trust assets if
the distribution is necessary to preserve a tax benefit; or
(5) change or direct any administrative procedure as
the court determines necessary or helpful for the proper
functioning of the total return trust.
(g) Nothing in this Section limits the equitable powers of
the court to grant other relief.
Section 1105. Post conversion. While a trust is a total
return trust, all of the following apply to the trust:
(1) the trustee shall make income distributions in
accordance with the trust instrument subject to this
Article;
(2) the term "income" in the trust instrument means an
annual amount (the "distribution amount") equal to a
percentage (the "distribution percentage") of the net fair
market value of the trust's assets, whether the assets are
considered income or principal under the Principal and
Income Act, averaged over the lesser of:
(A) the 3 preceding years; or
(B) the period during which the trust has been in
existence;
(3) the distribution percentage for any trust
converted to a total return trust by a trustee in
accordance with Section 1102 shall be 4%;
(4) the trustee shall pay to a beneficiary (in the case
of an underpayment) and shall recover from a beneficiary
(in the case of an overpayment) an amount equal to the
difference between the amount properly payable and the
amount actually paid, plus interest compounded annually at
a rate per annum equal to the distribution percentage in
the year or years while the underpayment or overpayment
exists; and
(5) a change in the method of determining a reasonable
current return by converting to a total return trust in
accordance with this Article and substituting the
distribution amount for net trust accounting income is a
proper change in the definition of trust income
notwithstanding any contrary provision of the Principal
and Income Act, and the distribution amount shall be deemed
a reasonable current return that fairly apportions the
total return of a total return trust.
Section 1106. Administration.
(a) As used in this Section, "excluded asset" means an
asset for which there is no readily available market value and
that the trustee determines in accordance with subsection (d)
shall be excluded from the net fair market value of the trust's
assets for purposes of determining the distribution amount
under paragraph (2) of Section 1105.
(b) The trustee, in the trustee's discretion, may determine
any of the following matters in administering a total return
trust as the trustee from time to time determines necessary or
helpful for the proper functioning of the trust:
(1) the effective date of a conversion to a total
return trust;
(2) the manner of prorating the distribution amount for
a short year in which a beneficiary's interest commences or
ceases;
(3) whether distributions are made in cash or in kind;
(4) the manner of adjusting valuations and
calculations of the distribution amount to account for
other payments from or contributions to the trust;
(5) whether to value the trust's assets annually or
more frequently;
(6) what valuation dates and how many valuation dates
to use;
(7) valuation decisions about any asset for which there
is no readily available market value, including:
(A) how frequently to value such an asset; and
(B) whether and how often to engage a professional
appraiser to value such an asset;
(8) which trust assets are excluded assets; and
(9) any other administrative matters as the trustee
determines necessary or helpful for the proper functioning
of the total return trust.
(c) The trustee shall distribute any net income received
from excluded assets as provided in the trust instrument.
(d) Unless the trustee determines there are compelling
reasons to the contrary considering all relevant factors
including the best interests of the beneficiaries, the trustee
shall treat each asset for which there is no readily available
market value as an excluded asset. Examples of assets for which
there is a readily available market value include: cash and
cash equivalents; stocks, bonds, and other securities and
instruments for which there is an established market on a stock
exchange, in an over-the-counter market, or otherwise; and any
other property that can reasonably be expected to be sold
within one week of the decision to sell without extraordinary
efforts by the seller. Examples of assets for which there is no
readily available market value include: stocks, bonds, and
other securities and instruments for which there is no
established market on a stock exchange, in an over-the-counter
market, or otherwise; real property; tangible personal
property; and artwork and other collectibles.
(e) If tangible personal property or real property is
possessed or occupied by a beneficiary, the trustee shall not
limit or restrict any right of the beneficiary to use the
property in accordance with the trust instrument regardless of
whether the trustee treats the property as an excluded asset.
Section 1107. Allocations.
(a) Expenses, taxes, and other charges that would be
deducted from income if the trust were not a total return trust
shall not be deducted from the distribution amount.
(b) Unless otherwise provided by the trust instrument, the
trustee shall fund the distribution amount each year from the
following sources for that year in the order listed:
(1) first from net income (as the term would be
determined if the trust were not a total return trust);
(2) then from other ordinary income as determined for
federal income tax purposes;
(3) then from net realized short-term capital gains as
determined for federal income tax purposes;
(4) then from net realized long-term capital gains as
determined for federal income tax purposes;
(5) then from trust principal comprised of assets for
which there is a readily available market value; and
(6) then from other trust principal.
Section 1108. Restrictions. Conversion to a total return
trust does not affect any provision in the trust instrument:
(1) directing or authorizing the trustee to distribute
principal;
(2) directing or authorizing the trustee to distribute
a fixed annuity or a fixed fraction of the value of trust
assets;
(3) authorizing a beneficiary to withdraw a portion or
all of the principal; or
(4) in any manner that would diminish an amount
permanently set aside for charitable purposes under the
trust instrument unless both income and principal are so
set aside.
Section 1109. Tax limitations.
(a) If a particular trustee is a beneficiary of the trust
and conversion or failure to convert would enhance or diminish
the beneficial interest of the trustee, or if possession or
exercise of the conversion power by a particular trustee would
alone cause any individual to be treated as owner of a part of
the trust for income tax purposes or cause a part of the trust
to be included in the gross estate of any individual for estate
tax purposes, then the particular trustee may not participate
as a trustee in the exercise of the conversion power except
that the particular trustee may petition the court under
subsection (a) of Section 1104 to order conversion in
accordance with this Article.
(b) If the particular trustee has one or more co-trustees
to whom subsection (a) does not apply, the co-trustee or
co-trustees may convert the trust to a total return trust in
accordance with this Article.
Section 1110. Releases. A trustee may irrevocably release
the power granted by this Article if the trustee reasonably
believes the release is in the best interests of the trust and
its beneficiaries. The release may be personal to the releasing
trustee or may apply generally to some or all subsequent
trustees, and the release may be for any specified period,
including a period measured by the life of an individual.
Section 1111. Remedies. A trustee who reasonably and in
good faith takes any action under this Article is not liable to
any interested person. If a trustee reasonably and in good
faith takes any action under this Article and an interested
person opposes the action, the person's exclusive remedy is to
obtain an order of the court directing the trustee to convert
the trust to a total return trust, to reconvert from a total
return trust, to change the distribution percentage, or to
order any administrative procedures the court determines
necessary or helpful for the proper functioning of the trust.
An action by a trustee under this Article is presumed taken or
omitted reasonably and in good faith unless it is determined by
the court to have been an abuse of discretion.
Section 1112. Application. This Article is available to
trusts in existence on or after August 22, 2002. This Article
shall be construed as pertaining to the administration of a
trust and shall be available to any trust that is administered
in Illinois or that is governed by Illinois law with respect to
the meaning and effect of its terms unless one of the following
apply:
(1) The trust is a trust described in Section
642(c)(5), 664(d), 2702(a)(3), or 2702(b) of the Internal
Revenue Code.
(2) The trust instrument expressly prohibits use of
this Article by specific reference to this Article or a
prior corresponding law. A provision in the trust
instrument in the form: "Neither the provisions of Article
11 of the Illinois Trust Code nor any corresponding
provision of future law may be used in the administration
of this trust" or a similar provision demonstrating that
intent is sufficient to preclude the use of this Article.
Section 1113. Application to express trusts.
(a) In this Section:
(1) "Unitrust" means a trust the terms of which require
distribution of a unitrust amount, without regard to
whether the trust has been converted to a total return
trust in accordance with this Article or whether the trust
is established by express terms of the trust.
(2) "Unitrust amount" means an amount equal to a
percentage of a trust's assets that may or must be
distributed to one or more beneficiaries annually in
accordance with the terms of the trust. The unitrust amount
may be determined by reference to the net fair market value
of the trust's assets as of a particular date or as an
average determined on a multiple-year basis.
(b) A unitrust changes the definition of income by
substituting the unitrust amount for net trust accounting
income as the method of determining current return and shall be
given effect notwithstanding any contrary provision of the
Principal and Income Act. By way of example and not limitation,
a unitrust amount determined by a percentage of not less than
3% nor greater than 5% is conclusively presumed a reasonable
current return that fairly apportions the total return of a
unitrust.
(c) Subsection (b) of Section 1107 applies to a unitrust
except to the extent its trust instrument expressly provides
otherwise.
(d) This Section does not apply to a charitable remainder
unitrust as defined by Section 664(d) of the Internal Revenue
Code.
Article 12. Trust Decanting.
Section 1201. Article title. This Article may be referred
to as the Trust Decanting Law.
Section 1202. Definitions. In this Article:
(1) "Appointive property" means the property or property
interest subject to a power of appointment.
(2) "Authorized fiduciary" means:
(A) a trustee or other fiduciary, other than a settlor,
that has discretion to distribute or direct a trustee to
distribute part or all of the principal of the first trust
to one or more current beneficiaries;
(B) a special fiduciary appointed under Section 1209;
or
(C) a special-needs fiduciary under Section 1213.
(3) "Court" means the court in this State having
jurisdiction in matters relating to trusts.
(4) "Decanting power" or "the decanting power" means the
power of an authorized fiduciary under this Article to
distribute property of a first trust to one or more second
trusts or to modify the terms of the first trust.
(5) "Expanded distributive discretion" means a
discretionary power of distribution that is not limited to an
ascertainable standard or a reasonably definite standard.
(6) "First trust" means a trust over which an authorized
fiduciary may exercise the decanting power.
(7) "First-trust instrument" means the trust instrument
for a first trust.
(8) "Reasonably definite standard" means a clearly
measurable standard under which a holder of a power of
distribution is legally accountable within the meaning of
Section 674(b)(5)(A) of the Internal Revenue Code, as amended,
and any applicable regulations.
(9) "Record" means information that is inscribed on a
tangible medium or that is stored in an electronic or other
medium and is retrievable in perceivable form.
(10) "Second trust" means:
(A) a first trust after modification under this
Article; or
(B) a trust to which a distribution of property from a
first trust is or may be made under this Article.
(11) "Second-trust instrument" means the trust instrument
for a second trust.
Section 1203. Scope.
(a) Except as otherwise provided in subsections (b) and
(c), this Article applies to an express trust that is
irrevocable or revocable by the settlor only with the consent
of the trustee or a person holding an adverse interest.
(b) This Article does not apply to a trust held solely for
charitable purposes.
(c) Subject to Section 1215, a trust instrument may
restrict or prohibit exercise of the decanting power.
(d) This Article does not limit the power of a trustee,
powerholder, or other person to distribute or appoint property
in further trust or to modify a trust under the trust
instrument, law of this State other than this Article, common
law, a court order, or a nonjudicial settlement agreement.
(e) This Article does not affect the ability of a settlor
to provide in a trust instrument for the distribution or
appointment in further trust of the trust property or for
modification of the trust instrument.
Section 1204. Fiduciary duty.
(a) In exercising the decanting power, an authorized
fiduciary shall act in accordance with its fiduciary duties,
including the duty to act in accordance with the purposes of
the first trust.
(b) This Article does not create or imply a duty to
exercise the decanting power or to inform beneficiaries about
the applicability of this Article.
(c) Except as otherwise provided in a first-trust
instrument, for purposes of this Article and Section 801, the
terms of the first trust are deemed to include the decanting
power.
Section 1205. Application; governing law. This Article
applies to a trust created before, on, or after the effective
date of this Code that:
(1) has its principal place of administration in this
State, including a trust whose principal place of
administration has been changed to this State; or
(2) provides by its trust instrument that it is
governed by the law of this State or is governed by the law
of this State for the purpose of:
(A) administration, including administration of a
trust whose governing law for purposes of
administration has been changed to the law of this
State;
(B) construction of terms of the trust; or
(C) determining the meaning or effect of terms of
the trust.
Section 1206. Reasonable reliance. A trustee or other
person that reasonably relies on the validity of a distribution
of part or all of the property of a trust to another trust, or a
modification of a trust, under this Article, law of this State
other than this Article or the law of another jurisdiction is
not liable to any person for any action or failure to act as a
result of the reliance.
Section 1207. Notice.
(a) In this Section, a notice period begins on the day
notice is given under subsection (c) and ends 59 days after the
day notice is given.
(b) Except as otherwise provided in this Article, an
authorized fiduciary may exercise the decanting power without
the consent of any person and without court approval.
(c) Except as otherwise provided in subsection (f), an
authorized fiduciary shall give notice in a record of the
intended exercise of the decanting power not later than 60 days
before the exercise to:
(1) each settlor of the first trust, if living or then
in existence;
(2) each qualified beneficiary of the first trust;
(3) each holder of a presently exercisable power of
appointment over any part or all of the first trust;
(4) each person that currently has the right to remove
or replace the authorized fiduciary;
(5) each other fiduciary of the first trust;
(6) each fiduciary of the second trust; and
(7) the Attorney General's Charitable Trust Bureau, if
the first trust contains a charitable interest.
(d) An authorized fiduciary is not required to give notice
under subsection (c) to a qualified beneficiary who is a minor
and has no representative. The authorized fiduciary is not
required to give notice under subsection (c) to a person that
is not known to the fiduciary or is known to the fiduciary but
cannot be located by the fiduciary after reasonable diligence.
(e) A notice under subsection (c) must:
(1) specify the manner in which the authorized
fiduciary intends to exercise the decanting power;
(2) specify the proposed effective date for exercise of
the power;
(3) include a copy of the first-trust instrument; and
(4) include a copy of all second-trust instruments.
(f) The decanting power may be exercised before expiration
of the notice period under subsection (a) if all persons
entitled to receive notice waive the period in a signed record.
(g) The receipt of notice, waiver of the notice period, or
expiration of the notice period does not affect the right of a
person to file an application under Section 1209 with the court
asserting that:
(1) an attempted exercise of the decanting power is
ineffective because it did not comply with this Article or
was an abuse of discretion or breach of fiduciary duty; or
(2) Section 1222 applies to the exercise of the
decanting power.
(h) An exercise of the decanting power is not ineffective
because of the failure to give notice to one or more persons
under subsection (c) if the authorized fiduciary acted with
reasonable care to comply with subsection (c).
(i) If the first trust contains a charitable interest and
the Attorney General objects to the proposed exercise of the
decanting power in writing delivered to the authorized
fiduciary before the end of the notice period, the authorized
fiduciary may proceed with the proposed exercise of the
decanting power only with either court approval or the later
written consent of the Attorney General.
Section 1208. (Reserved).
Section 1209. Court involvement.
(a) On application of an authorized fiduciary, a person
entitled to notice under Section 1207(c), a beneficiary, or,
with respect to a charitable interest, the Attorney General or
any other person that has standing to enforce the charitable
interest, the court may:
(1) provide instructions to the authorized fiduciary
regarding whether a proposed exercise of the decanting
power is permitted under this Article and consistent with
the fiduciary duties of the authorized fiduciary;
(2) appoint a special fiduciary and authorize the
special fiduciary to determine whether the decanting power
should be exercised under this Article and to exercise the
decanting power;
(3) approve an exercise of the decanting power;
(4) determine that a proposed or attempted exercise of
the decanting power is ineffective because:
(A) after applying Section 1222, the proposed or
attempted exercise does not or did not comply with this
Article; or
(B) the proposed or attempted exercise would be or
was an abuse of the fiduciary's discretion or a breach
of fiduciary duty;
(5) determine the extent to which Section 1222 applies
to a prior exercise of the decanting power;
(6) provide instructions to the trustee regarding the
application of Section 1222 to a prior exercise of the
decanting power; or
(7) order other appropriate relief to carry out the
purposes of this Article.
(b) On application of an authorized fiduciary, the court
may approve:
(1) an increase in the fiduciary's compensation under
Section 1216; or
(2) a modification under Section 1218 of a provision
granting a person the right to remove or replace the
fiduciary.
Section 1210. Formalities. An exercise of the decanting
power must be made in a record signed by an authorized
fiduciary. The signed record must, directly or by reference to
the notice required by Section 1207, identify the first trust
and the second trust or trusts and state the property of the
first trust being distributed to each second trust and the
property, if any, that remains in the first trust.
Section 1211. Decanting power under expanded distributive
discretion.
(a) In this Section:
(1) "Noncontingent" right means a right that is not
subject to the exercise of discretion or the occurrence of
a specified event that is not certain to occur. The term
does not include a right held by a beneficiary if any
person has discretion to distribute property subject to the
right of any person other than the beneficiary or the
beneficiary's estate.
(2) "Successor beneficiary" means a beneficiary that
on the date the beneficiary's qualification is determined
is not a qualified beneficiary. The term does not include a
person that is a beneficiary only because the person holds
a nongeneral power of appointment.
(3) "Vested interest" means:
(A) a right to a mandatory distribution that is a
noncontingent right as of the date of the exercise of
the decanting power;
(B) a current and noncontingent right, annually or
more frequently, to a mandatory distribution of
income, a specified dollar amount, or a percentage of
value of some or all of the trust property;
(C) a current and noncontingent right, annually or
more frequently, to withdraw income, a specified
dollar amount, or a percentage of value of some or all
of the trust property;
(D) a presently exercisable general power of
appointment; or
(E) a right to receive an ascertainable part of the
trust property on the trust's termination that is not
subject to the exercise of discretion or to the
occurrence of a specified event that is not certain to
occur.
(b) Subject to subsection (c) and Section 1214, an
authorized fiduciary that has expanded distributive discretion
to distribute the principal of a first trust to one or more
current beneficiaries may exercise the decanting power over the
principal of the first trust.
(c) Subject to Section 1213, in an exercise of the
decanting power under this Section, a second trust may not:
(1) include as a current beneficiary a person that is
not a current beneficiary of the first trust, except as
otherwise provided in subsection (d);
(2) include as a presumptive remainder beneficiary or
successor beneficiary a person that is not a current
beneficiary, presumptive remainder beneficiary, or
successor beneficiary of the first trust, except as
otherwise provided in subsection (d); or
(3) reduce or eliminate a vested interest.
(d) Subject to subsection (c)(3) and Section 1214, in an
exercise of the decanting power under this Section, a second
trust may be a trust created or administered under the law of
any jurisdiction and may:
(1) retain a power of appointment granted in the first
trust;
(2) omit a power of appointment granted in the first
trust, other than a presently exercisable general power of
appointment;
(3) create or modify a power of appointment if the
powerholder is a current beneficiary of the first trust and
the authorized fiduciary has expanded distributive
discretion to distribute principal to the beneficiary; and
(4) create or modify a power of appointment if the
powerholder is a presumptive remainder beneficiary or
successor beneficiary of the first trust, but the exercise
of the power may take effect only after the powerholder
becomes, or would have become if then living, a current
beneficiary.
(e) A power of appointment described in subsection (d)(1)
through (4) of subsection (d) may be general or nongeneral. The
class of permissible appointees in favor of which the power may
be exercised may be broader than or different from the
beneficiaries of the first trust.
(f) If an authorized fiduciary has expanded distributive
discretion to distribute part but not all of the principal of a
first trust, the fiduciary may exercise the decanting power
under this Section over that part of the principal over which
the authorized fiduciary has expanded distributive discretion.
Section 1212. Decanting power under limited distributive
discretion.
(a) In this Section, "limited distributive discretion"
means a discretionary power of distribution that is limited to
an ascertainable standard or a reasonably definite standard.
(b) An authorized fiduciary that has limited distributive
discretion over the principal of the first trust for the
benefit of one or more current beneficiaries may exercise the
decanting power over the principal of the first trust.
(c) Under this Section and subject to Section 1214, a
second trust may be created or administered under the law of
any jurisdiction. Under this Section, the second trusts, in the
aggregate, must grant each beneficiary of the first trust
beneficial interests that are substantially similar to the
beneficial interests of the beneficiary in the first trust.
(d) A power to make a distribution under a second trust for
the benefit of a beneficiary who is an individual is
substantially similar to a power under the first trust to make
a distribution directly to the beneficiary. A distribution is
for the benefit of a beneficiary if:
(1) the distribution is applied for the benefit of the
beneficiary;
(2) the beneficiary is incapacitated or in the opinion
of the trustee is unable to manage property or business
affairs, and the distribution is made as permitted under
this Code; or
(3) the distribution is made as permitted under the
terms of the first-trust instrument and the second-trust
instrument for the benefit of the beneficiary.
(e) If an authorized fiduciary has limited distributive
discretion over part but not all of the principal of a first
trust, the fiduciary may exercise the decanting power under
this Section over that part of the principal over which the
authorized fiduciary has limited distributive discretion.
Section 1213. Trust for beneficiary with disability.
(a) In this Section:
(1) "Beneficiary with a disability" means a
beneficiary of the first trust who the special-needs
fiduciary believes may qualify for governmental benefits
based on disability, whether or not the beneficiary
currently receives those benefits or is an individual who
has been adjudicated incompetent.
(2) "Best interests" of a beneficiary with a disability
include, without limitation, consideration of the
financial impact to the family of the beneficiary who has a
disability.
(3) "Governmental benefits" means financial aid or
services from a state, federal, or other public agency.
(4) "Special-needs fiduciary" means, with respect to a
trust that has a beneficiary with a disability:
(A) a trustee or other fiduciary, other than a
settlor, that has discretion to distribute part or all
of the principal of a first trust to one or more
current beneficiaries;
(B) if no trustee or fiduciary has discretion under
subparagraph (A), a trustee or other fiduciary, other
than a settlor, that has discretion to distribute part
or all of the income of the first trust to one or more
current beneficiaries; or
(C) if no trustee or fiduciary has discretion under
subparagraphs (A) and (B), a trustee or other
fiduciary, other than a settlor, that is required to
distribute part or all of the income or principal of
the first trust to one or more current beneficiaries.
(5) "Special-needs trust" means a trust the trustee
believes would not be considered a resource for purposes of
determining whether the beneficiary with a disability is
eligible for governmental benefits.
(b) A special-needs fiduciary may exercise the decanting
power under Section 1211 over the principal of a first trust as
if the fiduciary had authority to distribute principal to a
beneficiary with a disability subject to expanded distributive
discretion if:
(1) a second trust is a special-needs trust that
benefits the beneficiary with a disability; and
(2) the special-needs fiduciary determines that
exercise of the decanting power will further the purposes
of the first trust or the best interests of the beneficiary
with a disability.
(c) In an exercise of the decanting power under this
Section, the following rules apply:
(1) If the first trust was created by the beneficiary
with a disability, or to the extent the first trust was
funded by the beneficiary with a disability, then
notwithstanding paragraph (2) of subsection (c) of Section
1211, the interest in the second trust of a beneficiary
with a disability may:
(A) be a pooled trust as defined by Medicaid law
for the benefit of the beneficiary with a disability
under 42 U.S.C. 1396p(d)(4)(C), as amended; or
(B) contain payback provisions complying with
reimbursement requirements of Medicaid law under 42
U.S.C. 1396p(d)(4)(A), as amended.
(2) Paragraph (3) of subsection (c) of Section 1211
does not apply to the interests of the beneficiary with a
disability.
(3) Except as affected by any change to the interests
of the beneficiary with a disability, the second trusts, in
the aggregate, must grant each other beneficiary of the
first trust beneficial interests in the second trusts that
are substantially similar to the beneficiary's beneficial
interests in the first trust.
Section 1214. Protection of charitable interests.
(a) In this Section:
(1) "Determinable charitable interest" means a
charitable interest that is a right to a mandatory
distribution currently, periodically, on the occurrence of
a specified event, or after the passage of a specified time
and that is unconditional or that will in all events be
held for charitable purposes.
(2) "Unconditional" means not subject to the
occurrence of a specified event that is not certain to
occur, other than a requirement in a trust instrument that
a charitable organization be in existence or qualify under
a particular provision of the Internal Revenue Code on the
date of the distribution if the charitable organization
meets the requirement on the date of determination.
(b) If a first trust contains a determinable charitable
interest, the Attorney General has the rights of a qualified
beneficiary and may represent and bind the charitable interest.
(c) If a first trust contains a charitable interest, the
second trusts in the aggregate may not:
(1) diminish the charitable interest;
(2) diminish the interest of an identified charitable
organization that holds the charitable interest;
(3) alter any charitable purpose stated in the
first-trust instrument; or
(4) alter any condition or restriction related to the
charitable interest.
(d) If there are 2 or more second trusts, the second trusts
shall be treated as one trust for purposes of determining
whether the exercise of the decanting power diminishes the
charitable interest or diminishes the interest of an identified
charitable organization for purposes of subsection (c).
(e) If a first trust contains a determinable charitable
interest, the second trusts that include charitable interests
pursuant to subsection (c) must be administered under the law
of this State unless:
(1) the Attorney General, after receiving notice under
Section 1207, fails to object in a signed record delivered
to the authorized fiduciary within the notice period;
(2) the Attorney General consents in a signed record to
the second trusts being administered under the law of
another jurisdiction; or
(3) the court approves the exercise of the decanting
power.
(f) This Article does not limit the powers and duties of
the Attorney General under Illinois law.
Section 1215. Trust limitation on decanting.
(a) An authorized fiduciary may not exercise the decanting
power to the extent the first-trust instrument expressly
prohibits exercise of:
(1) the decanting power; or
(2) a power granted by state law to the fiduciary to
distribute part or all of the principal of the trust to
another trust or to modify the trust.
(b) Exercise of the decanting power is subject to any
restriction in the first-trust instrument that expressly
applies to exercise of:
(1) the decanting power; or
(2) a power granted by state law to a fiduciary to
distribute part or all of the principal of the trust to
another trust or to modify the trust.
(c) A general prohibition of the amendment or revocation of
a first trust, a spendthrift clause, or a clause restraining
the voluntary or involuntary transfer of a beneficiary's
interest does not preclude exercise of the decanting power.
(d) Subject to subsections (a) and (b), an authorized
fiduciary may exercise the decanting power under this Article
even if the first-trust instrument permits the authorized
fiduciary or another person to modify the first-trust
instrument or to distribute part or all of the principal of the
first trust to another trust.
(e) If a first-trust instrument contains an express
prohibition described in subsection (a) or an express
restriction described in subsection (b), that provision must be
included in the second-trust instrument.
Section 1216. Change in compensation.
(a) If a first-trust instrument specifies an authorized
fiduciary's compensation, the fiduciary may not exercise the
decanting power to increase the fiduciary's compensation
beyond the specified compensation unless:
(1) all qualified beneficiaries of the second trust
consent to the increase in a signed record; or
(2) the increase is approved by the court.
(b) If a first-trust instrument does not specify an
authorized fiduciary's compensation, the fiduciary may not
exercise the decanting power to increase the fiduciary's
compensation above the compensation permitted by Section 708
unless:
(1) all qualified beneficiaries of the second trust
consent to the increase in a signed record; or
(2) the increase is approved by the court.
(c) A change in an authorized fiduciary's compensation that
is incidental to other changes made by the exercise of the
decanting power is not an increase in the fiduciary's
compensation for purposes of subsections (a) and (b).
Section 1217. Relief from liability and indemnification.
(a) Except as otherwise provided in this Section, a
second-trust instrument may not relieve an authorized
fiduciary from liability for breach of trust to a greater
extent than the first-trust instrument.
(b) A second-trust instrument may provide for
indemnification of an authorized fiduciary of the first trust
or another person acting in a fiduciary capacity under the
first trust for any liability or claim that would have been
payable from the first trust if the decanting power had not
been exercised.
(c) A second-trust instrument may not reduce fiduciary
liability in the aggregate.
(d) Subject to subsection (c), a second-trust instrument
may divide and reallocate fiduciary powers among fiduciaries,
including one or more trustees, distribution advisors,
investment advisors, trust protectors, or other persons, and
relieve a fiduciary from liability for an act or failure to act
of another fiduciary as permitted by law of this State other
than this Article.
Section 1218. Removal or replacement of authorized
fiduciary. An authorized fiduciary may not exercise the
decanting power to modify a provision in the first-trust
instrument granting another person power to remove or replace
the fiduciary unless:
(1) the person holding the power consents to the
modification in a signed record and the modification
applies only to the person;
(2) the person holding the power and the qualified
beneficiaries of the second trust consent to the
modification in a signed record and the modification grants
a substantially similar power to another person; or
(3) the court approves the modification and the
modification grants a substantially similar power to
another person.
Section 1219. Tax-related limitations.
(a) In this Section:
(1) "Grantor trust" means a trust as to which a settlor
of a first trust is considered the owner under Sections 671
through 677 of the Internal Revenue Code or Section 679 of
the Internal Revenue Code.
(2) "Nongrantor trust" means a trust that is not a
grantor trust.
(3) "Qualified benefits property" means property
subject to the minimum distribution requirements of
Section 401(a)(9) of the Internal Revenue Code, and any
applicable regulations, or to any similar requirements
that refer to Section 401(a)(9) of the Internal Revenue
Code or the regulations.
(b) An exercise of the decanting power is subject to the
following limitations:
(1) If a first trust contains property that qualified,
or would have qualified but for provisions of this Article
other than this Section, for a marital deduction for
purposes of the gift or estate tax under the Internal
Revenue Code or a state gift, estate, or inheritance tax,
the second-trust instrument must not include or omit any
term that, if included in or omitted from the trust
instrument for the trust to which the property was
transferred, would have prevented the transfer from
qualifying for the deduction, or would have reduced the
amount of the deduction, under the same provisions of the
Internal Revenue Code or state law under which the transfer
qualified.
(2) If the first trust contains property that
qualified, or would have qualified but for provisions of
this Article other than this Section, for a charitable
deduction for purposes of the income, gift, or estate tax
under the Internal Revenue Code or a state income, gift,
estate, or inheritance tax, the second-trust instrument
must not include or omit any term that, if included in or
omitted from the trust instrument for the trust to which
the property was transferred, would have prevented the
transfer from qualifying for the deduction, or would have
reduced the amount of the deduction, under the same
provisions of the Internal Revenue Code or state law under
which the transfer qualified.
(3) If the first trust contains property that
qualified, or would have qualified but for provisions of
this Article other than this Section, for the exclusion
from the gift tax described in Section 2503(b) of the
Internal Revenue Code, the second-trust instrument must
not include or omit a term that, if included in or omitted
from the trust instrument for the trust to which the
property was transferred, would have prevented the
transfer from qualifying under the same provision of
Section 2503 of the Internal Revenue Code. If the first
trust contains property that qualified, or would have
qualified but for provisions of this Article other than
this Section, for the exclusion from the gift tax described
in Section 2503(b) of the Internal Revenue Code, by
application of Section 2503(c) of the Internal Revenue
Code, the second-trust instrument must not include or omit
a term that, if included or omitted from the trust
instrument for the trust to which the property was
transferred, would have prevented the transfer from
qualifying under Section 2503(c) of the Internal Revenue
Code.
(4) If the property of the first trust includes shares
of stock in an S corporation, as defined in Section 1361 of
the Internal Revenue Code and the first trust is, or but
for provisions of this Article other than this Section
would be, a permitted shareholder under any provision of
Section 1361 of the Internal Revenue Code, an authorized
fiduciary may exercise the power with respect to part or
all of the S-corporation stock only if any second trust
receiving the stock is a permitted shareholder under
Section 1361(c)(2) of the Internal Revenue Code. If the
property of the first trust includes shares of stock in an
S corporation and the first trust is, or but for provisions
of this Article other than this Section, would be, a
qualified subchapter-S trust within the meaning of Section
1361(d) of the Internal Revenue Code, the second-trust
instrument must not include or omit a term that prevents
the second trust from qualifying as a qualified
subchapter-S trust.
(5) If the first trust contains property that
qualified, or would have qualified but for provisions of
this Article other than this Section, for a zero inclusion
ratio for purposes of the generation-skipping transfer tax
under Section 2642(c) of the Internal Revenue Code the
second-trust instrument must not include or omit a term
that, if included in or omitted from the first-trust
instrument, would have prevented the transfer to the first
trust from qualifying for a zero inclusion ratio under
Section 2642(a) of the Internal Revenue Code.
(6) If the first trust is directly or indirectly the
beneficiary of qualified benefits property, the
second-trust instrument may not include or omit any term
that, if included in or omitted from the first-trust
instrument, would have increased the minimum distributions
required with respect to the qualified benefits property
under Section 401(a)(9) of the Internal Revenue Code and
any applicable regulations, or any similar requirements
that refer to Section 401(a)(9) of the Internal Revenue
Code or the regulations. If an attempted exercise of the
decanting power violates the preceding sentence, the
trustee is deemed to have held the qualified benefits
property and any reinvested distributions of the property
as a separate share from the date of the exercise of the
power and Section 1222 applies to the separate share.
(7) If the first trust qualifies as a grantor trust
because of the application of Section 672(f)(2)(A) of the
Internal Revenue Code the second trust may not include or
omit a term that, if included in or omitted from the
first-trust instrument, would have prevented the first
trust from qualifying under Section 672(f)(2)(A) of the
Internal Revenue Code.
(8) In this paragraph (8), "tax benefit" means a
federal or state tax deduction, exemption, exclusion, or
other benefit not otherwise listed in this Section, except
for a benefit arising from being a grantor trust. Subject
to paragraph (9) of this subsection (b), a second-trust
instrument may not include or omit a term that, if included
in or omitted from the first-trust instrument, would have
prevented qualification for a tax benefit if:
(A) the first-trust instrument expressly indicates
an intent to qualify for the benefit or the first-trust
instrument clearly is designed to enable the first
trust to qualify for the benefit; and
(B) the transfer of property held by the first
trust or the first trust qualified, or but for
provisions of this Article other than this Section,
would have qualified for the tax benefit.
(9) Subject to paragraph (4) of this subsection (b):
(A) except as otherwise provided in paragraph (7)
of this subsection (b), the second trust may be a
nongrantor trust, even if the first trust is a grantor
trust; and
(B) except as otherwise provided in paragraph (10)
of this subsection (b), the second trust may be a
grantor trust, even if the first trust is a nongrantor
trust.
(10) An authorized fiduciary may not exercise the
decanting power if a settlor objects in a signed record
delivered to the fiduciary within the notice period and:
(A) the first trust and second trusts are both
grantor trusts, in whole or in part, the first trust
grants the settlor or another person the power to cause
the second trust to cease to be a grantor trust, and
the second trust does not grant an equivalent power to
the settlor or other person; or
(B) the first trust is a nongrantor trust and the
second trust is a grantor trust, in whole or in part,
with respect to the settlor, unless:
(i) the settlor has the power at all times to
cause the second trust to cease to be a grantor
trust; or
(ii) the first-trust instrument contains a
provision granting the settlor or another person a
power that would cause the first trust to cease to
be a grantor trust and the second-trust instrument
contains the same provision.
Section 1220. Duration of second trust.
(a) Subject to subsection (b), a second trust may have a
duration that is the same as or different from the duration of
the first trust.
(b) To the extent that property of a second trust is
attributable to property of the first trust, the second trust
is subject to any rules governing maximum perpetuity,
accumulation, or suspension of the power of alienation
applicable to property of the first trust.
Section 1221. Need to distribute not required. An
authorized fiduciary may exercise the decanting power whether
or not under the first trust's discretionary distribution
standard the fiduciary would have made or could have been
compelled to make a discretionary distribution of principal at
the time of the exercise.
Section 1222. Savings provision.
(a) If exercise of the decanting power would be effective
under this Article except that the second-trust instrument in
part does not comply with this Article, the exercise of the
power is effective and the following rules apply to the
principal of the first trust subject to the exercise of the
power:
(1) A provision in the second-trust instrument that is
not permitted under this Article is void to the extent
necessary to comply with this Article.
(2) A provision required by this Article to be in the
second-trust instrument that is not contained in the
instrument is deemed to be included in the instrument to
the extent necessary to comply with this Article.
(b) If a trustee or other fiduciary of a second trust
discovers that subsection (a) applies to a prior exercise of
the decanting power, the fiduciary shall take such appropriate
corrective action as is consistent with the fiduciary's duties.
Section 1223. Trust for care of animal.
(a) In this Section:
(1) "Animal trust" means a trust or an interest in a
trust created to provide for the care of one or more
designated domestic or pet animals.
(2) "Protector" means a person described in paragraph
(3) of subsection (b) of Section 408.
(b) The decanting power may be exercised over an animal
trust that has a protector to the extent the trust could be
decanted under this Article as if each animal that benefits
from the trust were an individual, if the protector consents in
a signed record to the exercise of the decanting power.
(c) A protector for an animal has the rights under this
Article of a qualified beneficiary.
(d) Notwithstanding any other provision of this Article, if
a first trust is an animal trust, in an exercise of the
decanting power, the second trust must provide that trust
property may be applied only to its intended purpose for the
period the first trust benefited the animal.
Section 1224. (Reserved).
Section 1225. Settlor.
(a) For purposes of the laws of this State other than this
Article and subject to subsection (b), a settlor of a first
trust is deemed to be the settlor of the second trust with
respect to the portion of the principal of the first trust
subject to the exercise of the decanting power.
(b) In determining settlor intent with respect to a second
trust, the intent of a settlor of the first trust, the intent
of a settlor of the second trust, and the intent of the
authorized fiduciary may be considered.
Section 1226. Later-discovered property.
(a) Except as otherwise provided in subsection (c), if
exercise of the decanting power was intended to distribute all
the principal of the first trust to one or more second trusts,
later-discovered property otherwise belonging to the first
trust and property paid to or acquired by the first trust after
the exercise of the power is part of the trust estate of the
second trust.
(b) Except as otherwise provided in subsection (c), if
exercise of the decanting power was intended to distribute less
than all the principal of the first trust to one or more second
trusts, later-discovered property belonging to the first trust
or property paid to or acquired by the first trust after
exercise of the decanting power remains part of the trust
estate of the first trust.
(c) An authorized fiduciary may provide in an exercise of
the decanting power or by the terms of a second trust for
disposition of later-discovered property belonging to the
first trust or property paid to or acquired by the first trust
after exercise of the decanting power.
Section 1227. Obligations. A debt, liability, or other
obligation enforceable against property of a first trust is
enforceable to the same extent against that property when held
by the second trust after exercise of the decanting power.
Article 13. Uniform Powers of Appointment Law.
Section 1301. Article title. This Article may be referred
to as the Uniform Powers of Appointment Law.
Section 1302. Definitions. In this Article:
(1) "Appointee" means a person to which a powerholder makes
an appointment of appointive property.
(2) "Appointive property" means the property or property
interest subject to a power of appointment.
(3) "Blanket-exercise clause" means a clause in an
instrument that exercises a power of appointment and is not a
specific-exercise clause. The term includes a clause that:
(A) expressly uses the words "any power" in exercising
any power of appointment the powerholder has;
(B) expressly uses the words "any property" in
appointing any property over which the powerholder has a
power of appointment; or
(C) disposes of all property subject to disposition by
the powerholder.
(4) "Exclusionary power of appointment" means a power of
appointment exercisable in favor of any one or more of the
permissible appointees to the exclusion of the other
permissible appointees.
(5) "Gift-in-default clause" means a clause identifying a
taker in default of appointment.
(6) "Impermissible appointee" means a person that is not a
permissible appointee.
(7) "Instrument" means a writing.
(8) "Permissible appointee" means a person in whose favor a
powerholder may exercise a power of appointment.
(9) "Record" means information that is inscribed on a
tangible medium or that is stored in an electronic or other
medium and is retrievable in perceivable form.
(10) "Specific-exercise clause" means a clause in an
instrument that specifically refers to and exercises a
particular power of appointment.
(11) "Taker in default of appointment" means a person that
takes part or all of the appointive property to the extent the
powerholder does not effectively exercise the power of
appointment.
(12) "Terms of the instrument" means the manifestation of
the intent of the maker of the instrument regarding the
instrument's provisions as expressed in the instrument or as
may be established by other evidence that would be admissible
in a legal proceeding.
Section 1303. Governing law. Unless the terms of the
instrument creating a power of appointment manifest a contrary
intent:
(1) the creation, revocation, or amendment of the power is
governed by the law of the donor's domicile at the relevant
time; and
(2) the exercise, release, or disclaimer of the power, or
the revocation or amendment of the exercise, release, or
disclaimer of the power, is governed by the law of the
powerholder's domicile at the relevant time.
Section 1304. Creation of power of appointment.
(a) A power of appointment is created only if:
(1) the instrument creating the power:
(A) is valid under applicable law; and
(B) except as otherwise provided in subsection
(b), transfers the appointive property; and
(2) the terms of the instrument creating the power
manifest the donor's intent to create, in a powerholder, a
power of appointment over the appointive property
exercisable in favor of a permissible appointee.
(b) Subdivision (a)(1)(B) does not apply to the creation of
a power of appointment by the exercise of a power of
appointment.
(c) A power of appointment may not be created in a deceased
individual.
(d) Subject to an applicable rule against perpetuities, a
power of appointment may be created in an unborn or
unascertained powerholder.
Section 1305. Nontransferability. A powerholder may not
transfer a power of appointment. If the powerholder dies
without exercising or releasing the power, the power lapses.
Section 1306. Presumption of unlimited authority. Subject
to Section 1308, and unless the terms of the instrument
creating a power of appointment manifest a contrary intent, the
power is:
(1) presently exercisable;
(2) exclusionary; and
(3) except as otherwise provided in Section 1307,
general.
Section 1307. Exception to presumption of unlimited
authority. Unless the terms of the instrument creating a power
of appointment manifest a contrary intent, the power is
nongeneral if:
(1) the power is exercisable only at the powerholder's
death; and
(2) the permissible appointees of the power are a
defined and limited class that does not include the
powerholder's estate, the powerholder's creditors, or the
creditors of the powerholder's estate.
Section 1308. Rules of classification.
(a) In this Section, "adverse party" means a person with a
substantial beneficial interest in property that would be
affected adversely by a powerholder's exercise or nonexercise
of a power of appointment in favor of the powerholder, the
powerholder's estate, a creditor of the powerholder, or a
creditor of the powerholder's estate.
(b) If a powerholder may exercise a power of appointment
only with the consent or joinder of an adverse party, the power
is nongeneral.
(c) If the permissible appointees of a power of appointment
are not defined and limited, the power is exclusionary.
Section 1309. Power to revoke or amend. A donor may revoke
or amend a power of appointment only to the extent that:
(1) the instrument creating the power is revocable by
the donor; or
(2) the donor reserves a power of revocation or
amendment in the instrument creating the power of
appointment.
Section 1310. Requisites for exercise of power of
appointment. A power of appointment is exercised only:
(1) if the instrument exercising the power is valid
under applicable law;
(2) if the terms of the instrument exercising the
power:
(A) manifest the powerholder's intent to exercise
the power; and
(B) subject to Section 1313, satisfy the
requirements of exercise, if any, imposed by the donor;
and
(3) to the extent the appointment is a permissible
exercise of the power.
Section 1311. Intent to exercise: determining intent from
residuary clause.
(a) In this Section:
(1) "Residuary clause" does not include a residuary
clause containing a blanket-exercise clause or a
specific-exercise clause.
(2) "Will" includes a codicil and a testamentary
instrument that revises another will.
(b) A residuary clause in a powerholder's will, or a
comparable clause in the powerholder's revocable trust,
manifests the powerholder's intent to exercise a power of
appointment only if:
(1) the terms of the instrument containing the
residuary clause do not manifest a contrary intent;
(2) the power is a general power exercisable in favor
of the powerholder's estate;
(3) there is no gift-in-default clause or it is
ineffective; and
(4) the powerholder did not release the power.
Section 1312. Intent to exercise: after-acquired power.
Unless the terms of the instrument exercising a power of
appointment manifest a contrary intent:
(1) except as otherwise provided in paragraph (2), a
blanket-exercise clause extends to a power acquired by the
powerholder after executing the instrument containing the
clause; and
(2) if the powerholder is also the donor of the power,
the clause does not extend to the power unless there is no
gift-in-default clause or it is ineffective.
Section 1313. Substantial compliance with donor-imposed
formal requirement. A powerholder's substantial compliance
with a formal requirement of an appointment imposed by the
donor, including a requirement that the instrument exercising
the power of appointment make reference or specific reference
to the power, is sufficient if:
(1) the powerholder knows of and intends to exercise
the power; and
(2) the powerholder's manner of attempted exercise of
the power does not impair a material purpose of the donor
in imposing the requirement.
Section 1314. Permissible appointment.
(a) A powerholder of a general power of appointment that
permits appointment to the powerholder or the powerholder's
estate may make any appointment, including an appointment in
trust or creating a new power of appointment, that the
powerholder could make in disposing of the powerholder's own
property.
(b) A powerholder of a general power of appointment that
permits appointment only to the creditors of the powerholder or
of the powerholder's estate is restricted to appointing to
those creditors.
(c) Unless the terms of the instrument creating a power of
appointment manifest a contrary intent, the powerholder of a
nongeneral power may:
(1) make an appointment in any form, with any
conditions and limitations, including an appointment in
trust to any trustee, in favor of a permissible appointee;
(2) create a general or nongeneral power in a
permissible appointee that may be exercisable in favor of
persons other than permissible appointees of the original
nongeneral power; or
(3) create a nongeneral power in any person to appoint
to one or more of the permissible appointees of the
original nongeneral power.
Section 1315. Appointment to deceased appointee. Subject
to Section 4-11 of the Probate Act of 1975, an appointment to a
deceased appointee is ineffective.
Section 1316. Impermissible appointment.
(a) Except as otherwise provided in Section 1315, an
exercise of a power of appointment in favor of an impermissible
appointee is ineffective.
(b) An exercise of a power of appointment in favor of a
permissible appointee is ineffective to the extent the
appointment is a fraud on the power.
Section 1317. Selective allocation doctrine. If a
powerholder exercises a power of appointment in a disposition
that also disposes of property the powerholder owns, the owned
property and the appointive property must be allocated in the
permissible manner that best carries out the powerholder's
intent.
Section 1318. Capture doctrine: disposition of
ineffectively appointed property under general power. To the
extent a powerholder of a general power of appointment, other
than a power to revoke, amend, or withdraw property from a
trust, makes an ineffective appointment:
(1) the gift-in-default clause controls the
disposition of the ineffectively appointed property; or
(2) if there is no gift-in-default clause or to the
extent the clause is ineffective, the ineffectively
appointed property:
(A) passes to:
(i) the powerholder if the powerholder is a
permissible appointee and living; or
(ii) if the powerholder is an impermissible
appointee or not living, the powerholder's estate
if the estate is a permissible appointee; or
(B) if there is no taker under subparagraph (A),
passes under a reversionary interest to the donor or
the donor's transferee or successor in interest.
Section 1319. Disposition of unappointed property under
released or unexercised general power. To the extent a
powerholder releases or fails to exercise a general power of
appointment other than a power to revoke, amend, or withdraw
property from a trust:
(1) the gift-in-default clause controls the
disposition of the unappointed property; or
(2) if there is no gift-in-default clause or to the
extent the clause is ineffective:
(A) except as otherwise provided in subparagraph
(B), the unappointed property passes to:
(i) the powerholder if the powerholder is a
permissible appointee and living; or
(ii) if the powerholder is an impermissible
appointee or not living, the powerholder's estate
if the estate is a permissible appointee; or
(B) to the extent the powerholder released the
power, or if there is no taker under subparagraph (A),
the unappointed property passes under a reversionary
interest to the donor or the donor's transferee or
successor in interest.
Section 1320. Disposition of unappointed property under
released or unexercised nongeneral power. To the extent a
powerholder releases, ineffectively exercises, or fails to
exercise a nongeneral power of appointment:
(1) the gift-in-default clause controls the disposition of
the unappointed property; or
(2) if there is no gift-in-default clause or to the extent
the clause is ineffective, the unappointed property:
(A) passes to the permissible appointees if:
(i) the permissible appointees are defined and
limited; and
(ii) the terms of the instrument creating the power
do not manifest a contrary intent; or
(B) if there is no taker under subparagraph (A), passes
under a reversionary interest to the donor or the donor's
transferee or successor in interest.
Section 1321. Disposition of unappointed property if
partial appointment to taker in default. Unless the terms of
the instrument creating or exercising a power of appointment
manifest a contrary intent, if the powerholder makes a valid
partial appointment to a taker in default of appointment, the
taker in default of appointment may share fully in unappointed
property.
Section 1322. Appointment to taker in default. If a
powerholder of a general power makes an appointment to a taker
in default of appointment and the appointee would have taken
the property under a gift-in-default clause had the property
not been appointed, the power of appointment is deemed not to
have been exercised, and the appointee takes under the
gift-in-default clause.
Section 1323. Powerholder's authority to revoke or amend
exercise. A powerholder may revoke or amend an exercise of a
power of appointment only to the extent that:
(1) the powerholder reserves a power of revocation or
amendment in the instrument exercising the power of
appointment and, if the power is nongeneral, the terms of
the instrument creating the power of appointment do not
prohibit the reservation; or
(2) the terms of the instrument creating the power of
appointment provide that the exercise is revocable or
amendable.
Section 1324. Disposition of trust property subject to
power. In disposing of trust property subject to a power of
appointment exercisable by an instrument other than a will, a
trustee acting in good faith shall have no liability to any
appointee or taker in default of appointment for relying upon
an instrument believed to be genuine purporting to exercise a
power of appointment or for assuming that there is no
instrument exercising the power of appointment in the absence
of actual knowledge thereof within 3 months of the last date on
which the power of appointment may be exercised.
Section 1325. Disclaimer. As provided by Section 2-7 of the
Probate Act of 1975:
(1) A powerholder may disclaim all or part of a power
of appointment.
(2) A permissible appointee, appointee, or taker in
default of appointment may disclaim all or part of an
interest in appointive property.
Section 1326. Authority to release. A powerholder may
release a power of appointment, in whole or in part, except to
the extent the terms of the instrument creating the power
prevent the release.
Section 1327. Method of release. A powerholder of a
releasable power of appointment may release the power in whole
or in part:
(1) by substantial compliance with a method provided in
the terms of the instrument creating the power; or
(2) if the terms of the instrument creating the power
do not provide a method or the method provided in the terms
of the instrument is not expressly made exclusive, by an
instrument manifesting the powerholder's intent by clear
and convincing evidence.
Section 1328. Revocation or amendment of release. A
powerholder may revoke or amend a release of a power of
appointment only to the extent that:
(1) the instrument of release is revocable by the
powerholder; or
(2) the powerholder reserves a power of revocation or
amendment in the instrument of release.
Section 1329. Power to contract: presently exercisable
power of appointment. A powerholder of a presently exercisable
power of appointment may contract:
(1) not to exercise the power; or
(2) to exercise the power if the contract when made
does not confer a benefit on an impermissible appointee.
Section 1330. Power to contract: power of appointment not
presently exercisable. A powerholder of a power of appointment
that is not presently exercisable may contract to exercise or
not to exercise the power only if the powerholder:
(1) is also the donor of the power; and
(2) has reserved the power in a revocable trust.
Section 1331. Remedy for breach of contract to appoint or
not to appoint. The remedy for a powerholder's breach of a
contract to appoint or not to appoint is limited to damages
payable out of the appointive property or, if appropriate,
specific performance of the contract.
Section 1332. Creditor claim: general power created by
powerholder.
(a) In this Section, "power of appointment created by the
powerholder" includes a power of appointment created in a
transfer by another person to the extent the powerholder
contributed value to the transfer.
(b) Appointive property subject to a general power of
appointment created by the powerholder is subject to a claim of
a creditor of the powerholder or of the powerholder's estate to
the extent provided in the Uniform Fraudulent Transfer Act.
(c) Subject to subsection (b), appointive property subject
to a general power of appointment created by the powerholder is
not subject to a claim of a creditor of the powerholder or the
powerholder's estate to the extent the powerholder irrevocably
appointed the property in favor of a person other than the
powerholder or the powerholder's estate.
(d) Subject to subsections (b) and (c), and notwithstanding
the presence of a spendthrift provision or whether the claim
arose before or after the creation of the power of appointment,
appointive property subject to a general power of appointment
created by the powerholder is subject to a claim of a creditor
of:
(1) the powerholder, to the same extent as if the
powerholder owned the appointive property, if the power is
presently exercisable; and
(2) the powerholder's estate, to the extent the estate
is insufficient to satisfy the claim and subject to the
right of a decedent to direct the source from which
liabilities are paid, if the power is exercisable at the
powerholder's death.
Section 1333. Creditor claim: general power not created by
powerholder.
(a) Except as otherwise provided in subsection (b),
appointive property subject to a general power of appointment
created by a person other than the powerholder is subject to a
claim of a creditor of:
(1) the powerholder, to the extent the powerholder's
property is insufficient, if the power is presently
exercisable; and
(2) the powerholder's estate if the power is exercised
at the powerholder's death, to the extent the estate is
insufficient, subject to the right of the deceased
powerholder to direct the source from which liabilities are
paid.
(b) Subject to subsection (c) of Section 1335, a power of
appointment created by a person other than the powerholder that
is subject to an ascertainable standard relating to an
individual's health, education, support, or maintenance within
the meaning of Section 2041(b)(1)(A) of the Internal Revenue
Code or Section 2514(c)(1) of the Internal Revenue Code, as
amended, is treated for purposes of this Article as a
nongeneral power.
Section 1334. Power to withdraw.
(a) For purposes of Sections 1333 through 1336, and except
as otherwise provided in subsection (b), a power to withdraw
property from a trust is treated, during the time the power may
be exercised, as a presently exercisable general power of
appointment to the extent of the property subject to the power
to withdraw.
(b) A power to withdraw property from a trust ceases to be
treated as a presently exercisable general power of appointment
upon its lapse, release, or waiver.
Section 1335. Creditor claim: nongeneral power.
(a) Except as otherwise provided in subsections (b) and
(c), appointive property subject to a nongeneral power of
appointment is exempt from a claim of a creditor of the
powerholder or the powerholder's estate.
(b) Appointive property subject to a nongeneral power of
appointment is subject to a claim of a creditor of the
powerholder or the powerholder's estate to the extent that the
powerholder owned the property and, reserving the nongeneral
power, transferred the property in violation of the Uniform
Fraudulent Transfer Act.
(c) If the initial gift in default of appointment is to the
powerholder or the powerholder's estate, a nongeneral power of
appointment is treated for purposes of this Section as a
general power.
Section 1336. Application to existing relationships.
(a) Except as otherwise provided in this Article, on and
after the effective date of this Code:
(1) this Article applies to a power of appointment
created before, on, or after its effective date;
(2) this Article applies to a judicial proceeding
concerning a power of appointment commenced on or after its
effective date;
(3) this Article applies to a judicial proceeding
concerning a power of appointment commenced before its
effective date unless the court finds that application of a
particular provision of this Article would substantially
interfere with the effective conduct of the judicial
proceeding or prejudice a right of a party, in which case
the particular provision of this Article does not apply and
the superseded law applies;
(4) a rule of construction or presumption provided in
this Article applies to an instrument executed before the
effective date of the Article unless there is a clear
indication of a contrary intent in the terms of the
instrument; and
(5) an act done before the effective date of this Code
is not affected by this Article.
(b) If a right is acquired, extinguished, or barred on the
expiration of a prescribed period that commenced under law of
this State other than this Article before the effective date of
this Code, the law continues to apply to the right.
(c) No trustee is liable to any person in whose favor a
power of appointment may have been exercised for any
distribution of property made to persons entitled to take in
default of the effective exercise of the power of appointment
to the extent that the distribution shall have been completed
before the effective date of this Code.
Article 14. Perpetuities.
Section 1401. Article title. Except for Section 1407, this
Article may be referred to as the Law Concerning Perpetuities.
Section 1402. Purpose. This Article modifies the common law
rule of property known as the rule against perpetuities, that,
except as modified by statutes in force at the effective date
of this Article and by this Article, shall remain in full force
and effect.
Section 1403. Definitions and terms. As used in this
Article unless the context otherwise requires:
(a) Any reference in this Article to income to be "paid" or
to income "payments" or to "receiving" income includes income
payable or distributable to or applicable for the benefit of a
beneficiary.
(b) "Instrument" means any writing pursuant to which any
legal or equitable interest in property or in the income
therefrom is affected, disposed of, or created.
(c) "Qualified perpetual trust" means any trust created by
any written instrument executed on or after January 1, 1998,
including an amendment to an instrument in existence before
that date and the exercise of a power of appointment granted by
an instrument executed or amended on or after that date:
(1) to which, by the specific terms governing the
trust, the rule against perpetuities does not apply; and
(2) the power of the trustee (or other person to whom
the power is properly granted or delegated) to sell
property of which is not limited by the trust instrument or
any provision of law for any period of time beyond the
period of the rule against perpetuities.
Section 1404. Application of rule against perpetuities.
(a) The rule against perpetuities does not apply:
(1) to any disposition of property or interest therein
that, at the effective date of this Code, does not violate,
or is exempted by statute from the operation of, the common
law rule against perpetuities;
(2) to powers of a trustee to sell, lease, or mortgage
property or to powers that relate to the administration or
management of trust assets, including, but not limited to,
discretionary powers of a trustee to determine what
receipts constitute principal and what receipts constitute
income and powers to appoint a successor trustee;
(3) to mandatory powers of a trustee to distribute
income, or to discretionary powers of a trustee to
distribute principal before termination of a trust, to a
beneficiary having an interest in the principal that is
irrevocably vested in quality and quantity;
(4) to discretionary powers of a trustee to allocate
income and principal among beneficiaries, but no exercise
of any such power after the expiration of the period of the
rule against perpetuities is valid;
(5) to leases to commence in the future or upon the
happening of a future event, but no such lease is valid
unless the term of the lease actually commences in
possession within 40 years from the date of execution of
the lease;
(6) to commitments (A) by a lessor to enter into a
lease with a subtenant or with the holder of a leasehold
mortgage or (B) by a lessee or sublessee to enter into a
lease with the holder of a mortgage;
(7) to options in gross or to preemptive rights in the
nature of a right of first refusal, but no option in gross
shall be valid for more than 40 years from the date of its
creation; or
(8) to qualified perpetual trusts as defined in Section
1403.
(b) The period of the rule against perpetuities shall not
commence to run in connection with any disposition of property
or interest therein, and no instrument shall be regarded as
becoming effective for purposes of the rule against
perpetuities, and no interest or power shall be deemed to be
created for purposes of the rule against perpetuities as long
as, by the terms of the instrument, the maker of the instrument
has the power to revoke the instrument or to transfer or direct
to be transferred to himself or herself the entire legal and
equitable ownership of the property or interest therein.
(c) In determining whether an interest violates the rule
against perpetuities:
(1) it is presumed:
(A) that the interest was intended to be valid;
(B) in the case of an interest conditioned upon the
probate of a will, the appointment of an executor,
administrator or trustee, the completion of the
administration of an estate, the payment of debts, the
sale or distribution of property, the determination of
federal or state tax liabilities or the happening of
any administrative contingency, that the contingency
must occur, if at all, within the period of the rule
against perpetuities; and
(C) if the instrument creates an interest in the
"widow", "widower", or "spouse" of another person,
that the maker of the instrument intended to refer to a
person who was living at the date that the period of
the rule against perpetuities commences to run;
(2) if any interest, but for this subsection, would be
invalid because it is made to depend upon any person
attaining or failing to attain an age in excess of 21
years, the age specified shall be reduced to 21 years as to
every person to whom the age contingency applies;
(3) notwithstanding paragraphs (1) and (2), if the
validity of any interest depends upon the possibility of
the birth or adoption of a child, the following apply:
(A) no person shall be deemed capable of having a
child until he or she has attained the age of 13 years;
(B) any person who has attained the age of 65 years
shall be deemed incapable of having a child;
(C) evidence is admissible as to the incapacity of
having a child by a living person who has not attained
the age of 65 years; and
(D) the possibility of having a child or more
remote descendant by adoption shall be disregarded.
(d) Paragraphs (2), (3), and (6) of subsection (a) and
subsection (b) are declaratory of existing law.
Section 1405. Trusts.
(a) Subject to subsections (e) and (f), a trust containing
any limitation that, but for this subsection, would violate the
rule against perpetuities as modified by Section 1404 shall
terminate at the expiration of a period of:
(1) 21 years after the death of the last to die of all
of the beneficiaries of the instrument who were living at
the date when the period of the rule against perpetuities
commenced to run; or
(2) 21 years after that date if no beneficiary of the
instrument was then living, unless events occur that cause
an earlier termination in accordance with the terms of the
instrument and then the principal shall be distributed as
provided by the instrument.
(b) Subject to subsections (c), (d) and (e), when a trust
terminates because of the application of subsection (a), the
trustee shall distribute the principal to those persons who
would be the heirs at law of the maker of the instrument if he
or she died at the expiration of the period specified in
subsection (a) and in the proportions then specified by
statute, unless the trust was created by the exercise of a
power of appointment and then the principal shall be
distributed to the person who would have received it if the
power had not been exercised.
(c) Before any distribution of principal is made pursuant
to subsection (b), the trustee shall distribute, out of
principal, to each living beneficiary who, but for termination
of the trust because of the application of subsection (a),
would have been entitled to be paid income after the expiration
of the period specified in subsection (a), an amount equal to
the present value (determined as provided in subsection (d)) of
the income that the beneficiary would have been entitled to be
paid after the expiration of that period.
(d) In determining the present value of income for purposes
of any distribution to a beneficiary pursuant to subsection
(c):
(1) when income payments would have been subject in
whole or in part to any discretionary power, it shall be
assumed:
(A) that the income that would have been paid to an
individual income beneficiary would have been the
maximum amount of income that could have been paid to
him or her in the exercise of the power;
(B) if the income would or might have been payable
to more than one beneficiary, that (except as
hereinafter provided) each beneficiary would have
received an equal share of the income, unless the
instrument specifies less than an equal share as the
maximum amount or proportion of income that would have
been paid to any beneficiary in the exercise of the
power, in which event the maximum specified shall
control; and
(C) if the income would or might have been payable
to the descendants of the maker of the instrument or of
another person, that, unless the instrument provides
otherwise, the descendants would have received the
income per stirpes;
(2)(A) present value shall be computed on an actuarial
basis and there shall be assumed a return of 5%, at simple
interest, on the value of the principal from which the
beneficiary would have been entitled to receive income; and
(B) if the interest in income was to be for the life of
the beneficiary or for the life of another, the computation
shall be made on the expectancy set forth in the most
recently published American Experience Tables of Mortality
and no other evidence of duration or expectancy shall be
considered;
(3) if the trustee cannot determine the present value
of any income interest in accordance with the provisions of
the instrument and the foregoing rules concerning income
payments, the present value of the interest shall be deemed
to be zero.
(e) This Section applies only when a trust would violate
the rule against perpetuities as modified by Section 1404 and
does not apply to any trust that would have been valid apart
from this Article.
(f) This Section does not apply when a trust violates the
rule against perpetuities because the trust estate may not vest
in the trustee within the period of the rule.
Section 1406. Applicability. Sections 1401 through 1405
apply only to instruments, including instruments that exercise
a power of appointment, that become effective after September
22, 1969.
Section 1407. Vesting of any limitation of property.
(a) This Section may be referred to as the Perpetuities
Vesting Law.
(b) The vesting of any limitation of property, whether
created in the exercise of a power of appointment or in any
other manner, shall not be regarded as deferred for purposes of
the rule against perpetuities merely because the limitation is
made to the estate of a person or to a personal representative,
or to a trustee under a will, or to take effect on the probate
of a will.
(c) This Section applies only to limitations created after
July 1, 1952.
Article 15. Miscellaneous Provisions.
Section 1501. Uniformity of application and construction.
In applying and construing this Code, consideration must be
given to the need to promote uniformity of the law with respect
to its subject matter among states that enact comparable
provisions of the Uniform Trust Code.
Section 1502. Severability. If any provision of this Code
or its application to any person or circumstances is held
invalid, the invalidity does not affect other provisions or
applications of this Code which can be given effect without the
invalid provision or application, and to this end the
provisions of this Code are severable.
Section 1503. Rights retained by Attorney General. Nothing
in this Code is intended to derogate any right the Attorney
General has under the common law of this State to represent a
charitable interest in trust. Nothing in this Code relieves a
trustee of duties to file documents under, and otherwise comply
with, the Charitable Trust Act or the Solicitation for Charity
Act.
Section 1504. (See Section 9999 for effective date.)
(760 ILCS 5/Act rep.)
Section 1505. The Trusts and Trustees Act is repealed.
(760 ILCS 35/Act rep.)
Section 1505.1. The Trusts and Dissolutions of Marriage Act
is repealed.
(760 ILCS 105/Act rep.)
Section 1505.2. The Uniform Powers of Appointment Act is
repealed.
(765 ILCS 305/Act rep.)
Section 1505.3. The Statute Concerning Perpetuities is
repealed.
(765 ILCS 310/Act rep.)
Section 1505.4. The Perpetuities Vesting Act is repealed.
(765 ILCS 315/Act rep.)
Section 1505.5. The Trust Accumulation Act is repealed.
Section 1506. Application to existing relationships.
Except as otherwise provided in this Code, on the effective
date of this Code:
(1) This Code applies to all trusts created before, on,
or after its effective date.
(2) This Code applies to all judicial proceedings
concerning trusts commenced on or after its effective date.
As used in this Section, "judicial proceedings" includes
any proceeding before a court or administrative tribunal of
this State and any arbitration or mediation proceedings.
(3) this Code applies to all nonjudicial matters
concerning trusts commenced before, on, or after its
effective date. As used in this Section, "nonjudicial
matters" includes, but is not limited to, nonjudicial
settlement agreements entered into under Section 111 and
the grant of any consent, release, ratification, or
indemnification.
(4) This Code applies to judicial proceedings
concerning trusts commenced before its effective date
unless the court finds that application of a particular
provision of this Code would substantially interfere with
the effective conduct of the judicial proceedings or
prejudice the rights of the parties, in which case the
particular provision of this Code does not apply and the
superseded law applies.
(5) Any rule of construction or presumption provided in
this Code applies to trust instruments executed before the
effective date of this Code unless there is a clear
indication of a contrary intent in the trust instrument.
(6) An act done before the effective date of this Code
is not affected by this Code.
(7) If a right is acquired, extinguished, or barred
upon the expiration of a prescribed period that has
commenced to run under any other statute before the
effective date of this Code, that statute continues to
apply to the right even if it has been repealed or
superseded.
(8) This Code shall be construed as pertaining to
administration of a trust and applies to any trust that is
administered in Illinois under Illinois law or that is
governed by Illinois law with respect to the meaning and
effect of its terms, except to the extent the trust
instrument expressly prohibits use of this Code by specific
reference to this Code.
Article 16. Amendatory Provisions.
Section 1601. The Public Use Trust Act is amended by
changing Section 2 as follows:
(30 ILCS 160/2) (from Ch. 127, par. 4002)
Sec. 2. (a) The Department of Agriculture and the
Department of Natural Resources have the power to enter into a
trust agreement with a person or group of persons under which
the State agency may receive or collect money or other property
from the person or group of persons and may expend such money
or property solely for a public purpose within the powers and
duties of that State agency and stated in the trust agreement.
The State agency shall be the trustee under any such trust
agreement.
(b) Money or property received under a trust agreement
shall not be deposited in the State treasury and is not subject
to appropriation by the General Assembly, but shall be held and
invested by the trustee separate and apart from the State
treasury. The trustee shall invest money or property received
under a trust agreement as provided for trustees under the
Illinois Trust Code Trusts and Trustees Act or as otherwise
provided in the trust agreement.
(c) The trustee shall maintain detailed records of all
receipts and disbursements in the same manner as required for
trustees under the Illinois Trust Code Trusts and Trustees Act.
The trustee shall provide an annual accounting of all receipts,
disbursements, and inventory to all donors to the trust and the
Auditor General. The annual accounting shall be made available
to any member of the public upon request.
(Source: P.A. 100-695, eff. 8-3-18.)
Section 1602. The Township Code is amended by changing
Section 135-20 as follows:
(60 ILCS 1/135-20)
Sec. 135-20. Powers of board of managers. The board of
managers shall control and manage the cemeteries jointly
acquired by the townships or road districts. The board of
managers may receive in trust from the proprietors or owners of
any lot in the cemeteries, or any person, corporation,
association, or society interested in the maintenance of those
cemeteries, any gift or legacy of money or real, personal, or
mixed property that is donated or bequeathed to the board of
managers for the use and maintenance of the lot or cemeteries.
The board of managers may convert the property into money, may
invest the money in securities in which trust funds may be
invested under the Illinois Trust Code Trusts and Trustees Act,
and may apply the income perpetually for the care of the lot or
the care and maintenance of the cemeteries as specified in the
gift or legacy or as provided by the board of managers if the
gift or legacy does not specify the manner in which the income
is to be expended.
(Source: P.A. 83-1362; 88-62.)
Section 1603. The Corporate Fiduciary Act is amended by
changing Sections 1-6, 6-10, and 9-5 as follows:
(205 ILCS 620/1-6) (from Ch. 17, par. 1551-6)
Sec. 1-6. General Corporate Powers. A corporate fiduciary
shall have the powers:
(a) if it is a State bank, those powers granted under
Sections 3 and 5 of the Illinois Banking Act; and
(b) if it is a State savings and loan association,
those powers granted under Sections 1-6 through 1-8 of the
Illinois Savings and Loan Act of 1985; and
(c) if it is a State savings bank, those powers granted
under the Savings Bank Act; and
(d) if it is a corporation organized under the Business
Corporation Act of 1983, as now or hereafter amended, or a
limited liability company organized under the Limited
Liability Company Act, those powers granted in Article 8
Sections 4.01 through 4.24 of the Illinois Trust Code
Trusts and Trustees Act, as now or hereafter amended, to
the extent the exercise of such powers by the corporate
fiduciary are not contrary to the instrument containing the
appointment of the corporate fiduciary, the court order
appointing the corporate fiduciary or any other statute
specifically limiting the power of the corporate fiduciary
under the circumstances; and
(e) subject to Article XLIV of the Illinois Insurance
Code, to act as the agent for any fire, life, or other
insurance company authorized by the State of Illinois, by
soliciting and selling insurance and collecting premiums
on policies issued by such company; and may receive for
services so rendered such fees or commissions as may be
agreed upon between the said corporate fiduciary and the
insurance company for which it may act as agent; provided,
however, that no such corporate fiduciary shall in any case
assume or guarantee the payment of any premium on insurance
policies issued through its agency by its principal; and
provided further, that the corporate fiduciary shall not
guarantee the truth of any statement made by an assured in
filing his application for insurance.
The Commissioner may specify powers of corporate
fiduciaries generally or of a particular corporate fiduciary
and by rule or order limit or restrict such powers of corporate
fiduciaries or a particular corporate fiduciary if he finds the
exercise of such power by corporate fiduciaries generally or of
the corporate fiduciary in particular may tend to be an unsafe
or unsound practice, or if such power is otherwise not in the
interest of beneficiaries of any fiduciary appointment.
(Source: P.A. 90-41, eff. 10-1-97; 90-424, eff. 1-1-98; 90-655,
eff. 7-30-98; 91-97, eff. 7-9-99.)
(205 ILCS 620/6-10) (from Ch. 17, par. 1556-10)
Sec. 6-10. The receiver for a corporate fiduciary, under
the direction of the Commissioner, shall have the power and
authority and is charged with the duties and responsibilities
as follows:
(1) To take possession of, and for the purpose of the
receivership, the title to the books, records and assets of
every description of the corporate fiduciary.
(2) To proceed to collect all debts, dues and claims
belonging to the corporate fiduciary.
(3) To file with the Commissioner a copy of each report
which he makes to the court, together with such other
reports and records as the Commissioner may require.
(4) The receiver shall have authority to sue and defend
in the receiver's own name and with respect to the affairs,
assets, claims, debts and choses chooses in action of the
corporate fiduciary.
(5) The receiver shall have authority, and it shall be
the receiver's duty, to surrender to the customers of such
corporate fiduciary, when requested in writing directed to
the receiver by such customers, the assets, private papers
and valuables left with the corporate fiduciary for
safekeeping, under a custodial or agency agreement, upon
satisfactory proof of ownership.
(6) As soon as can reasonably be done, the receiver
shall resign on behalf of the corporate fiduciary, all
trusteeships, guardianships, and all appointments as
executor and administrator, or as custodian under the
Illinois Uniform Transfers to Minors Act, as now or
hereafter amended, or as fiduciary under custodial or
agency agreements or under the terms of any other written
agreement or court order whereunder the corporate
fiduciary is holding property in a fiduciary capacity for
the benefit of another person, making in each case, from
the records and documents available to the receiver, a
proper accounting, in the manner and scope as determined by
the Commissioner to be practical and advisable under the
circumstances, on behalf of the corporate fiduciary. The
receiver, prior to resigning, shall cause a successor
trustee or fiduciary to be appointed pursuant to the terms
set forth in the governing instrument or pursuant to the
provisions of the Illinois Trust Code Trusts and Trustees
Act, as now or hereafter amended, if applicable, then the
receiver shall make application to the court having
jurisdiction over the liquidation or winding up of the
corporate fiduciary, for the appointment of a successor.
The receiver, if a corporate fiduciary, shall not be
disqualified from acting as successor trustee or fiduciary
if appointed under the terms of the governing instrument,
by court order or by the customer of the corporate
fiduciary whose affairs are being liquidated or wound up
and, in such case, no guardian ad litem need be appointed
to review the accounting of the receiver unless the
beneficiaries or customers of the corporate fiduciary so
request in writing.
(7) The receiver shall have authority to redeem or take
down collateral hypothecated by the corporate fiduciary to
secure its notes and other evidence of indebtedness
whenever the Commissioner deems it to be in the best
interest of the creditors of the corporate fiduciary and
directs the receiver so to do.
(8) Whenever the receiver shall find it necessary in
the receiver's opinion to use and employ money of the
corporate fiduciary, in order to protect fully and benefit
the corporate fiduciary, by the purchase or redemption of
any property, real or personal, in which the corporate
fiduciary may have any rights by reason of any bond,
mortgage, assignment, or other claim thereto, the receiver
may certify the facts together with the receiver's opinions
as to the value of the property involved, and the value of
the equity the corporate fiduciary may have in the property
to the Commissioner, together with a request for the right
and authority to use and employ so much of the money of the
corporate fiduciary as may be necessary to purchase the
property, or to redeem the same from a sale if there was a
sale, and if such request is granted, the receiver may use
so much of the money of the corporate fiduciary as the
Commissioner may have authorized to purchase said property
at such sale.
(9) The receiver shall deposit daily all monies
collected by the receiver in any State or national bank
selected by the Commissioner, who may require (and the bank
so selected may furnish) of such depository satisfactory
securities or satisfactory surety bond for the safekeeping
and prompt payment of the money so deposited. The deposits
shall be made in the name of the Commissioner in trust for
the receiver and be subject to withdrawal upon the
receiver's order or upon the order of such persons as the
Commissioner may designate. Such monies may be deposited
without interest, unless otherwise agreed. However, if any
interest was paid by such depository, it shall accrue to
the benefit of the particular trust or fiduciary account to
which the deposit belongs. Except as otherwise directed by
the Commissioner, notwithstanding any other provision of
this paragraph, the receiver's investment and other powers
shall be those under the governing instrument or under the
Illinois Trust Code Trusts and Trustees Act, as now or
hereafter amended, and shall include the power to pay out
income and principal in accordance with the terms of the
governing instrument.
(10) The receiver shall do such things and take such
steps from time to time under the direction and approval of
the Commissioner as may reasonably appear to be necessary
to conserve the corporate fiduciary's assets and secure the
best interests of the creditors of the corporate fiduciary.
(11) The receiver shall record any judgment of
dissolution entered in a dissolution proceeding and
thereupon turn over to the Commissioner a certified copy
thereof, together with all books of accounts and ledgers of
such corporate fiduciary for preservation, as
distinguished from the books of accounts and ledgers of the
corporate fiduciary relating to the assets of the
beneficiaries of such fiduciary relations, all of which
books of accounts and ledgers shall be turned over by the
receiver to the successor trustee or fiduciary.
(12) The receiver may cause all assets of the
beneficiaries of such fiduciary relations to be registered
in the name of the receiver or in the name of the
receiver's nominee.
(13) The receiver shall have a reasonable period of
time in which to review all of the trust accounts,
executorships, administrationships, guardianships, or
other fiduciary relationships, in order to ascertain that
the investments by the corporate fiduciary of the assets of
such trust accounts, executorships, administrationships,
guardianships, or other fiduciary relationships comply
with the terms of the governing instrument, the prudent
person rule governing the investment of such funds, or any
other law regulating the investment of such funds.
(14) For its services in administering the trusts and
other fiduciary accounts of the corporate fiduciary during
the period of winding up the affairs of the corporate
fiduciary, the receiver shall be entitled to be reimbursed
for all costs and expenses incurred by the receiver and
shall also be entitled to receive out of the assets of the
individual fiduciary accounts being administered by the
receiver during the period of winding up the affairs of the
corporate fiduciary and prior to the appointment of a
successor trustee or fiduciary, the usual and customary
fees charged by the receiver in the administration of its
own fiduciary accounts or reasonable fees approved by the
Commissioner.
(15) The receiver, during its administration of the
trusts and other fiduciary accounts of the corporate
fiduciary during the winding up of the affairs of the
corporate fiduciary, shall have all of the powers which are
vested in trustees under the terms and provisions of the
Illinois Trust Code Trusts and Trustees Act, as now or
hereafter amended.
(16) Upon the appointment of a successor trustee or
fiduciary, the receiver shall deliver to such successor
trustee or fiduciary all of the assets belonging to the
individual trust or fiduciary account as to which the
successor trustee or fiduciary succeeds, and the receiver
shall thereupon be relieved of any further duties or
obligations with respect thereto.
(Source: P.A. 90-655, eff. 7-30-98; revised 10-18-18.)
(205 ILCS 620/9-5) (from Ch. 17, par. 1559-5)
Sec. 9-5. Applicability of other Acts by reference.
Corporate fiduciaries subject to the provisions of this Act
shall continue to be subject to the provisions of other Acts
which govern actions of trustees including, but not limited to:
(a) "An Act to provide for the appointment of successor
trustees in land trust agreements", approved August 13, 1965,
as amended.
(b) "An Act to require disclosure, under certification of
perjury, of all beneficial interests in real property held in a
land trust, in certain cases", approved September 21, 1973, as
amended.
(c) "An Act in relation to land trusts and the power and
authority of trustees of land trusts to deal with trust
property", approved August 6, 1982, as amended.
(d) "An Act concerning the powers of corporations
authorized to accept and execute trusts, to register and hold
securities of fiduciary accounts in bulk and to deposit same
with a depository", approved September 1, 1972, as amended.
(e) the "Common Trust Fund Act", approved July 29, 1943, as
amended.
(f) the Illinois Trust Code "Trusts and Trustees Act",
approved September 10, 1973, as amended.
(g) "An Act concerning liability for participation in
breaches of fiduciary obligations", approved July 7, 1931, as
amended.
(Source: P.A. 85-858.)
Section 1604. The Community-Integrated Living Arrangements
Licensure and Certification Act is amended by changing Section
3 as follows:
(210 ILCS 135/3) (from Ch. 91 1/2, par. 1703)
Sec. 3. As used in this Act, unless the context requires
otherwise:
(a) "Applicant" means a person, group of persons,
association, partnership or corporation that applies for a
license as a community mental health or developmental services
agency under this Act.
(b) "Community mental health or developmental services
agency" or "agency" means a public or private agency,
association, partnership, corporation or organization which,
pursuant to this Act, certifies community-integrated living
arrangements for persons with mental illness or persons with a
developmental disability.
(c) "Department" means the Department of Human Services (as
successor to the Department of Mental Health and Developmental
Disabilities).
(d) "Community-integrated living arrangement" means a
living arrangement certified by a community mental health or
developmental services agency under this Act where 8 or fewer
recipients with mental illness or recipients with a
developmental disability who reside under the supervision of
the agency. Examples of community-integrated community
integrated living arrangements include but are not limited to
the following:
(1) "Adult foster care", a living arrangement for
recipients in residences of families unrelated to them, for
the purpose of providing family care for the recipients on
a full-time basis;
(2) "Assisted residential care", an independent living
arrangement where recipients are intermittently supervised
by off-site staff;
(3) "Crisis residential care", a non-medical living
arrangement where recipients in need of non-medical,
crisis services are supervised by on-site staff 24 hours a
day;
(4) "Home individual programs", living arrangements
for 2 unrelated adults outside the family home;
(5) "Supported residential care", a living arrangement
where recipients are supervised by on-site staff and such
supervision is provided less than 24 hours a day;
(6) "Community residential alternatives", as defined
in the Community Residential Alternatives Licensing Act;
and
(7) "Special needs trust-supported residential care",
a living arrangement where recipients are supervised by
on-site staff and that supervision is provided 24 hours per
day or less, as dictated by the needs of the recipients,
and determined by service providers. As used in this item
(7), "special needs trust" means a trust for the benefit of
a beneficiary with a disability as described in Section
1213 15.1 of the Illinois Trust Code Trusts and Trustees
Act.
(e) "Recipient" means a person who has received, is
receiving, or is in need of treatment or habilitation as those
terms are defined in the Mental Health and Developmental
Disabilities Code.
(f) "Unrelated" means that persons residing together in
programs or placements certified by a community mental health
or developmental services agency under this Act do not have any
of the following relationships by blood, marriage or adoption:
parent, son, daughter, brother, sister, grandparent, uncle,
aunt, nephew, niece, great grandparent, great uncle, great
aunt, stepbrother, stepsister, stepson, stepdaughter,
stepparent or first cousin.
(Source: P.A. 99-143, eff. 7-27-15.)
Section 1605. The Title Insurance Act is amended by
changing Section 21.1 as follows:
(215 ILCS 155/21.1)
Sec. 21.1. Receiver and involuntary liquidation.
(a) The Secretary's proceedings under this Section shall be
the exclusive remedy and the only proceedings commenced in any
court for the dissolution of, the winding up of the affairs of,
or the appointment of a receiver for a title insurance company.
(b) If the Secretary, with respect to a title insurance
company, finds that (i) its capital is impaired or it is
otherwise in an unsound condition, (ii) its business is being
conducted in an unlawful, fraudulent, or unsafe manner, (iii)
it is unable to continue operations, or (iv) its examination
has been obstructed or impeded, the Secretary may give notice
to the board of directors of the title insurance company of his
or her finding or findings. If the Secretary's findings are not
corrected to his or her satisfaction within 60 days after the
company receives the notice, the Secretary shall take
possession and control of the title insurance company, its
assets, and assets held by it for any person for the purpose of
examination, reorganization, or liquidation through
receivership.
If, in addition to making a finding as provided in this
subsection (b), the Secretary is of the opinion and finds that
an emergency that may result in serious losses to any person
exists, the Secretary may, in his or her discretion, without
having given the notice provided for in this subsection, and
whether or not proceedings under subsection (a) of this Section
have been instituted or are then pending, take possession and
control of the title insurance company and its assets for the
purpose of examination, reorganization, or liquidation through
receivership.
(c) The Secretary may take possession and control of a
title insurance company, its assets, and assets held by it for
any person by posting upon the premises of each office located
in the State of Illinois at which it transacts its business as
a title insurance company a notice reciting that the Secretary
is assuming possession pursuant to this Act and the time when
the possession shall be deemed to commence.
(d) Promptly after taking possession and control of a title
insurance company the Secretary, represented by the Attorney
General, shall file a copy of the notice posted upon the
premises in the Circuit Court of either Cook County or Sangamon
County, which cause shall be entered as a court action upon the
dockets of the court under the name and style of "In the matter
of the possession and control by the Secretary of the
Department of Financial and Professional Regulation of (insert
the name of the title insurance company)". If the Secretary
determines (which determination may be made at the time of, or
at any time subsequent to, taking possession and control of a
title insurance company) that no practical possibility exists
to reorganize the title insurance company after reasonable
efforts have been made, the Secretary, represented by the
Attorney General, shall also file a complaint, if it has not
already been done, for the appointment of a receiver or other
proceeding as is appropriate under the circumstances. The court
where the cause is docketed shall be vested with the exclusive
jurisdiction to hear and determine all issues and matters
pertaining to or connected with the Secretary's possession and
control of the title insurance company as provided in this Act,
and any further issues and matters pertaining to or connected
with the Secretary's possession and control as may be submitted
to the court for its adjudication.
The Secretary, upon taking possession and control of a
title insurance company, may, and if not previously done shall,
immediately upon filing a complaint for dissolution make an
examination of the affairs of the title insurance company or
appoint a suitable person to make the examination as the
Secretary's agent. The examination shall be conducted in
accordance with and pursuant to the authority granted under
Section 12 of this Act. The person conducting the examination
shall have and may exercise on behalf of the Secretary all of
the powers and authority granted to the Secretary under Section
12. A copy of the report shall be filed in any dissolution
proceeding filed by the Secretary. The reasonable fees and
necessary expenses of the examining person, as approved by the
Secretary or as recommended by the Secretary and approved by
the court if a dissolution proceeding has been filed, shall be
borne by the subject title insurance company and shall have the
same priority for payment as the reasonable and necessary
expenses of the Secretary in conducting an examination. The
person appointed to make the examination shall make a proper
accounting, in the manner and scope as determined by the
Secretary to be practical and advisable under the
circumstances, on behalf of the title insurance company and no
guardian ad litem need be appointed to review the accounting.
(e) The Secretary, upon taking possession and control of a
title insurance company and its assets, shall be vested with
the full powers of management and control including, but not
limited to, the following:
(1) the power to continue or to discontinue the
business;
(2) the power to stop or to limit the payment of its
obligations;
(3) the power to collect and to use its assets and to
give valid receipts and acquittances therefor;
(4) the power to transfer title and liquidate any bond
or deposit made under Section 4 of this Act;
(5) the power to employ and to pay any necessary
assistants;
(6) the power to execute any instrument in the name of
the title insurance company;
(7) the power to commence, defend, and conduct in the
title insurance company's name any action or proceeding in
which it may be a party;
(8) the power, upon the order of the court, to sell and
convey the title insurance company's assets, in whole or in
part, and to sell or compound bad or doubtful debts upon
such terms and conditions as may be fixed in that order;
(9) the power, upon the order of the court, to make and
to carry out agreements with other title insurance
companies, financial institutions, or with the United
States or any agency of the United States for the payment
or assumption of the title insurance company's
liabilities, in whole or in part, and to transfer assets
and to make guaranties, in whole or in part, in connection
therewith;
(10) the power, upon the order of the court, to borrow
money in the name of the title insurance company and to
pledge its assets as security for the loan;
(11) the power to terminate his or her possession and
control by restoring the title insurance company to its
board of directors;
(12) the power to appoint a receiver which may be the
Secretary of the Department of Financial and Professional
Regulation, another title insurance company, or another
suitable person and to order liquidation of the title
insurance company as provided in this Act; and
(13) the power, upon the order of the court and without
the appointment of a receiver, to determine that the title
insurance company has been closed for the purpose of
liquidation without adequate provision being made for
payment of its obligations, and thereupon the title
insurance company shall be deemed to have been closed on
account of inability to meet its obligations to its
insureds or escrow depositors.
(f) Upon taking possession, the Secretary shall make an
examination of the condition of the title insurance company, an
inventory of the assets and, unless the time shall be extended
by order of the court or unless the Secretary shall have
otherwise settled the affairs of the title insurance company
pursuant to the provisions of this Act, within 90 days after
the time of taking possession and control of the title
insurance company, the Secretary shall either terminate his or
her possession and control by restoring the title insurance
company to its board of directors or appoint a receiver, which
may be the Secretary of the Department of Financial and
Professional Regulation, another title insurance company, or
another suitable person and order the liquidation of the title
insurance company as provided in this Act. All necessary and
reasonable expenses of the Secretary's possession and control
shall be a priority claim and shall be borne by the title
insurance company and may be paid by the Secretary from the
title insurance company's own assets as distinguished from
assets held for any other person.
(g) If the Secretary takes possession and control of a
title insurance company and its assets, any period of
limitation fixed by a statute or agreement that would otherwise
expire on a claim or right of action of the title insurance
company, on its own behalf or on behalf of its insureds or
escrow depositors, or upon which an appeal must be taken or a
pleading or other document filed by the title insurance company
in any pending action or proceeding, shall be tolled until 6
months after the commencement of the possession, and no
judgment, lien, levy, attachment, or other similar legal
process may be enforced upon or satisfied, in whole or in part,
from any asset of the title insurance company or from any asset
of an insured or escrow depositor while it is in the possession
of the Secretary.
(h) If the Secretary appoints a receiver to take possession
and control of the assets of insureds or escrow depositors for
the purpose of holding those assets as fiduciary for the
benefit of the insureds or escrow depositors pending the
winding up of the affairs of the title insurance company being
liquidated and the appointment of a successor escrowee for
those assets, any period of limitation fixed by statute, rule
of court, or agreement that would otherwise expire on a claim
or right of action in favor of or against the insureds or
escrow depositors of those assets or upon which an appeal must
be taken or a pleading or other document filed by a title
insurance company on behalf of an insured or escrow depositor
in any pending action or proceeding shall be tolled for a
period of 6 months after the appointment of a receiver, and no
judgment, lien, levy, attachment, or other similar legal
process shall be enforced upon or satisfied, in whole or in
part, from any asset of the insured or escrow depositor while
it is in the possession of the receiver.
(i) If the Secretary determines at any time that no
reasonable possibility exists for the title insurance company
to be operated by its board of directors in accordance with the
provisions of this Act after reasonable efforts have been made
and that it should be liquidated through receivership, he or
she shall appoint a receiver. The Secretary may require of the
receiver such bond and security as the Secretary deems proper.
The Secretary, represented by the Attorney General, shall file
a complaint for the dissolution or winding up of the affairs of
the title insurance company in a court of the county in which
the principal office of the title insurance company is located
and shall cause notice to be given in a newspaper of general
circulation once each week for 4 consecutive weeks so that
persons who may have claims against the title insurance company
may present them to the receiver and make legal proof thereof
and notifying those persons and all to whom it may concern of
the filing of a complaint for the dissolution or winding up of
the affairs of the title insurance company and stating the name
and location of the court. All persons who may have claims
against the assets of the title insurance company, as
distinguished from the assets of insureds and escrow depositors
held by the title insurance company, and the receiver to whom
those persons have presented their claims may present the
claims to the clerk of the court, and the allowance or
disallowance of the claims by the court in connection with the
proceedings shall be deemed an adjudication in a court of
competent jurisdiction. Within a reasonable time after
completion of publication, the receiver shall file with the
court a correct list of all creditors of the title insurance
company as shown by its books, who have not presented their
claims and the amount of their respective claims after allowing
adjusted credit, deductions, and set-offs as shown by the books
of the title insurance company. The claims so filed shall be
deemed proven unless objections are filed thereto by a party or
parties interested therein within the time fixed by the court.
(j) The receiver for a title insurance company has the
power and authority and is charged with the duties and
responsibilities as follows:
(1) To take possession of and, for the purpose of the
receivership, title to the books, records, and assets of
every description of the title insurance company.
(2) To proceed to collect all debts, dues, and claims
belonging to the title insurance company.
(3) To sell and compound all bad and doubtful debts on
such terms as the court shall direct.
(4) To sell the real and personal property of the title
insurance company, as distinguished from the real and
personal property of the insureds or escrow depositors, on
such terms as the court shall direct.
(5) To file with the Secretary a copy of each report
that he or she makes to the court, together with such other
reports and records as the Secretary may require.
(6) To sue and defend in his or her own name and with
respect to the affairs, assets, claims, debts, and choses
in action of the title insurance company.
(7) To surrender to the insureds and escrow depositors
of the title insurance company, when requested in writing
directed to the receiver by them, the escrowed funds (on a
pro rata basis), and escrowed documents in the receiver's
possession upon satisfactory proof of ownership and
determination by the receiver of available escrow funds.
(8) To redeem or take down collateral hypothecated by
the title insurance company to secure its notes and other
evidence of indebtedness whenever the court deems it to be
in the best interest of the creditors of the title
insurance company and directs the receiver so to do.
(k) Whenever the receiver finds it necessary in his or her
opinion to use and employ money of the title insurance company
in order to protect fully and benefit the title insurance
company by the purchase or redemption of property, real or
personal, in which the title insurance company may have any
rights by reason of any bond, mortgage, assignment, or other
claim thereto, the receiver may certify the facts together with
the receiver's opinions as to the value of the property
involved and the value of the equity the title insurance
company may have in the property to the court, together with a
request for the right and authority to use and employ so much
of the money of the title insurance company as may be necessary
to purchase the property, or to redeem the property from a sale
if there was a sale, and if the request is granted, the
receiver may use so much of the money of the title insurance
company as the court may have authorized to purchase the
property at the sale.
The receiver shall deposit daily all moneys collected by
him or her in any State or national bank approved by the court.
The deposits shall be made in the name of the Secretary, in
trust for the receiver, and be subject to withdrawal upon the
receiver's order or upon the order of those persons the
Secretary may designate. The moneys may be deposited without
interest, unless otherwise agreed. The receiver shall do the
things and take the steps from time to time under the direction
and approval of the court that may reasonably appear to be
necessary to conserve the title insurance company's assets and
secure the best interests of the creditors, insureds, and
escrow depositors of the title insurance company. The receiver
shall record any judgment of dissolution entered in a
dissolution proceeding and thereupon turn over to the Secretary
a certified copy of the judgment.
The receiver may cause all assets of the insureds and
escrow depositors of the title insurance company to be
registered in the name of the receiver or in the name of the
receiver's nominee.
For its services in administering the escrows held by the
title insurance company during the period of winding up the
affairs of the title insurance company, the receiver is
entitled to be reimbursed for all costs and expenses incurred
by the receiver and shall also be entitled to receive out of
the assets of the individual escrows being administered by the
receiver during the period of winding up the affairs of the
title insurance company and prior to the appointment of a
successor escrowee the usual and customary fees charged by an
escrowee for escrows or reasonable fees approved by the court.
The receiver, during its administration of the escrows of
the title insurance company during the winding up of the
affairs of the title insurance company, shall have all of the
powers that are vested in trustees under the terms and
provisions of the Illinois Trust Code Trusts and Trustees Act.
Upon the appointment of a successor escrowee, the receiver
shall deliver to the successor escrowee all of the assets
belonging to each individual escrow to which the successor
escrowee succeeds, and the receiver shall thereupon be relieved
of any further duties or obligations with respect thereto.
(l) The receiver shall, upon approval by the court, pay all
claims against the assets of the title insurance company
allowed by the court pursuant to subsection (i) of this
Section, as well as claims against the assets of insureds and
escrow depositors of the title insurance company in accordance
with the following priority:
(1) All necessary and reasonable expenses of the
Secretary's possession and control and of its receivership
shall be paid from the assets of the title insurance
company.
(2) All usual and customary fees charged for services
in administering escrows shall be paid from the assets of
the individual escrows being administered. If the assets of
the individual escrows being administered are
insufficient, the fees shall be paid from the assets of the
title insurance company.
(3) Secured claims, including claims for taxes and
debts due the federal or any state or local government,
that are secured by liens perfected prior to the date of
filing of the complaint for dissolution, shall be paid from
the assets of the title insurance company.
(4) Claims by policyholders, beneficiaries, insureds,
and escrow depositors of the title insurance company shall
be paid from the assets of the insureds and escrow
depositors. If there are insufficient assets of the
insureds and escrow depositors, claims shall be paid from
the assets of the title insurance company.
(5) Any other claims due the federal government shall
be paid from the assets of the title insurance company.
(6) Claims for wages or salaries, excluding vacation,
severance, and sick leave pay earned by employees for
services rendered within 90 days prior to the date of
filing of the complaint for dissolution, shall be paid from
the assets of the title insurance company.
(7) All other claims of general creditors not falling
within any priority under this subsection (l) including
claims for taxes and debts due any state or local
government which are not secured claims and claims for
attorney's fees incurred by the title insurance company in
contesting the dissolution shall be paid from the assets of
the title insurance company.
(8) Proprietary claims asserted by an owner, member, or
stockholder of the title insurance company in receivership
shall be paid from the assets of the title insurance
company.
The receiver shall pay all claims of equal priority
according to the schedule set out in this subsection, and shall
not pay claims of lower priority until all higher priority
claims are satisfied. If insufficient assets are available to
meet all claims of equal priority, those assets shall be
distributed pro rata among those claims. All unclaimed assets
of the title insurance company shall be deposited with the
receiver to be paid out by him or her when such claims are
submitted and allowed by the court.
(m) At the termination of the receiver's administration,
the receiver shall petition the court for the entry of a
judgment of dissolution. After a hearing upon the notice as the
court may prescribe, the court may enter a judgment of
dissolution whereupon the title insurance company's corporate
existence shall be terminated and the receivership concluded.
(n) The receiver shall serve at the pleasure of the
Secretary and upon the death, inability to act, resignation, or
removal by the Secretary of a receiver, the Secretary may
appoint a successor, and upon the appointment, all rights and
duties of the predecessor shall at once devolve upon the
appointee.
(o) Whenever the Secretary shall have taken possession and
control of a title insurance company or a title insurance agent
and its assets for the purpose of examination, reorganization,
or liquidation through receivership, or whenever the Secretary
shall have appointed a receiver for a title insurance company
or title insurance agent and filed a complaint for the
dissolution or winding up of its affairs, and the title
insurance company or title insurance agent denies the grounds
for such actions, it may at any time within 10 days apply to
the Circuit Court of Cook or Sangamon County to enjoin further
proceedings in the premises; and the Court shall cite the
Secretary to show cause why further proceedings should not be
enjoined, and if the Court shall find that grounds do not
exist, the Court shall make an order enjoining the Secretary or
any receiver acting under his direction from all further
proceedings on account of the alleged grounds.
(Source: P.A. 94-893, eff. 6-20-06.)
Section 1606. The Illinois Funeral or Burial Funds Act is
amended by changing Sections 4a and 5 as follows:
(225 ILCS 45/4a)
Sec. 4a. Investment of funds.
(a) A trustee has a duty to invest and manage the trust
assets pursuant to the Illinois Prudent Investor Law Rule under
Article 9 of the Illinois Trust Code Trusts and Trustees Act.
(b) The trust shall be a single-purpose trust fund. In the
event of the seller's bankruptcy, insolvency or assignment for
the benefit of creditors, or an adverse judgment, the trust
funds shall not be available to any creditor as assets of the
seller or to pay any expenses of any bankruptcy or similar
proceeding, but shall be distributed to the purchasers or
managed for their benefit by the trustee holding the funds.
Except in an action by the Comptroller to revoke a license
issued pursuant to this Act and for creation of a receivership
as provided in this Act, the trust shall not be subject to
judgment, execution, garnishment, attachment, or other seizure
by process in bankruptcy or otherwise, nor to sale, pledge,
mortgage, or other alienation, and shall not be assignable
except as approved by the Comptroller. The changes made by
Public Act 91-7 are intended to clarify existing law regarding
the inability of licensees to pledge the trust.
(c) Because it is not known at the time of deposit or at
the time that income is earned on the trust account to whom the
principal and the accumulated earnings will be distributed for
the purpose of determining the Illinois income tax due on these
trust funds, the principal and any accrued earnings or losses
related to each individual account shall be held in suspense
until the final determination is made as to whom the account
shall be paid. The beneficiary's estate shall not be
responsible for any funeral and burial purchases listed in a
pre-need contract if the pre-need contract is entered into on a
guaranteed price basis.
If a pre-need contract is not a guaranteed price contract,
then to the extent the proceeds of a non-guaranteed price
pre-need contract cover the funeral and burial expenses for the
beneficiary, no claim may be made against the estate of the
beneficiary. A claim may be made against the beneficiary's
estate if the charges for the funeral services and merchandise
at the time of use exceed the amount of the amount in trust
plus the percentage of the sale proceeds initially retained by
the seller or the face value of the life insurance policy or
tax-deferred annuity.
(Source: P.A. 96-879, eff. 2-2-10.)
(225 ILCS 45/5) (from Ch. 111 1/2, par. 73.105)
Sec. 5. This Act shall not be construed to prohibit the
trustee and trustee's depositary from being reimbursed and
receiving from such funds their reasonable compensation and
expenses in the custody and administration of such funds
pursuant to the Illinois Trust Code Trusts and Trustees Act.
(Source: P.A. 96-879, eff. 2-2-10.)
Section 1607. The Mental Health and Developmental
Disabilities Code is amended by changing Sections 3-605, 5-105,
and 3-819 as follows:
(405 ILCS 5/3-605) (from Ch. 91 1/2, par. 3-605)
Sec. 3-605. (a) In counties with a population of 3,000,000
or more, upon receipt of a petition and certificate prepared
pursuant to this Article, the county sheriff of the county in
which a respondent is found shall take a respondent into
custody and transport him to a mental health facility, or may
make arrangements with another public or private entity
including a licensed ambulance service to transport the
respondent to the mental health facility. In the event it is
determined by such facility that the respondent is in need of
commitment or treatment at another mental health facility, the
county sheriff shall transport the respondent to the
appropriate mental health facility, or the county sheriff may
make arrangements with another public or private entity
including a licensed ambulance service to transport the
respondent to the mental health facility.
(b) The county sheriff may delegate his duties under
subsection (a) to another law enforcement body within that
county if that law enforcement body agrees.
(b-5) In counties with a population under 3,000,000, upon
receipt of a petition and certificate prepared pursuant to this
Article, the Department shall make arrangements to
appropriately transport the respondent to a mental health
facility. In the event it is determined by the facility that
the respondent is in need of commitment or treatment at another
mental health facility, the Department shall make arrangements
to appropriately transport the respondent to another mental
health facility. The making of such arrangements and agreements
with public or private entities is independent of the
Department's role as a provider of mental health services and
does not indicate that the respondent is admitted to any
Department facility. In making such arrangements and
agreements with other public or private entities, the
Department shall include provisions to ensure (i) the provision
of trained personnel and the use of an appropriate vehicle for
the safe transport of the respondent and (ii) that the
respondent's insurance carrier as well as other programs, both
public and private, that provide payment for such
transportation services are fully utilized to the maximum
extent possible.
The Department may not make arrangements with an existing
hospital or grant-in-aid or fee-for-service community provider
for transportation services under this Section unless the
hospital or provider has voluntarily submitted a proposal for
its transportation services. This requirement does not
eliminate or reduce any responsibility on the part of a
hospital or community provider to ensure transportation that
may arise independently through other State or federal law or
regulation.
(c) The transporting authority acting in good faith and
without negligence in connection with the transportation of
respondents shall incur no liability, civil or criminal, by
reason of such transportation.
(d) The respondent and the estate of that respondent are
liable for the payment of transportation costs for transporting
the respondent to a mental health facility. If the respondent
is a beneficiary of a trust described in Section 1213 15.1 of
the Illinois Trust Code Trusts and Trustees Act, the trust
shall not be considered a part of the respondent's estate and
shall not be subject to payment for transportation costs for
transporting the respondent to a mental health facility under
this Section except to the extent permitted under Section 1213
15.1 of the Illinois Trust Code Trusts and Trustees Act. If the
respondent is unable to pay or if the estate of the respondent
is insufficient, the responsible relatives are severally
liable for the payment of those sums or for the balance due in
case less than the amount owing has been paid. If the
respondent is covered by insurance, the insurance carrier shall
be liable for payment to the extent authorized by the
respondent's insurance policy.
(Source: P.A. 93-770, eff. 1-1-05.)
(405 ILCS 5/3-819) (from Ch. 91 1/2, par. 3-819)
Sec. 3-819. (a) In counties with a population of 3,000,000
or more, when a recipient is hospitalized upon court order, the
order may authorize a relative or friend of the recipient to
transport the recipient to the facility if such person is able
to do so safely and humanely. When the Department indicates
that it has transportation to the facility available, the order
may authorize the Department to transport the recipient there.
The court may order the sheriff of the county in which such
proceedings are held to transport the recipient to the
facility. When a recipient is hospitalized upon court order,
and the recipient has been transported to a mental health
facility, other than a state-operated mental health facility,
and it is determined by the facility that the recipient is in
need of commitment or treatment at another mental health
facility, the court shall determine whether a relative or
friend of the recipient or the Department is authorized to
transport the recipient between facilities, or whether the
county sheriff is responsible for transporting the recipient
between facilities. The sheriff may make arrangements with
another public or private entity including a licensed ambulance
service to transport the recipient to the facility. The
transporting entity acting in good faith and without negligence
in connection with the transportation of recipients shall incur
no liability, civil or criminal, by reason of such
transportation.
(a-5) In counties with a population under 3,000,000, when a
recipient is hospitalized upon court order, the order may
authorize a relative or friend of the recipient to transport
the recipient to the facility if the person is able to do so
safely and humanely. The court may order the Department to
transport the recipient to the facility. When a recipient is
hospitalized upon court order, and the recipient has been
transported to a mental health facility other than a
State-operated mental health facility, and it is determined by
the facility that the recipient is in need of commitment or
treatment at another mental health facility, the court shall
determine whether a relative or friend of the recipient is
authorized to transport the recipient between facilities, or
whether the Department is responsible for transporting the
recipient between facilities. If the court determines that the
Department is responsible for the transportation, the
Department shall make arrangements either directly or through
agreements with another public or private entity, including a
licensed ambulance service, to appropriately transport the
recipient to the facility. The making of such arrangements and
agreements with public or private entities is independent of
the Department's role as a provider of mental health services
and does not indicate that the recipient is admitted to any
Department facility. In making such arrangements and
agreements with other public or private entities, the
Department shall include provisions to ensure (i) the provision
of trained personnel and the use of an appropriate vehicle for
the safe transport of the recipient and (ii) that the
recipient's insurance carrier as well as other programs, both
public and private, that provide payment for such
transportation services are fully utilized to the maximum
extent possible.
The Department may not make arrangements with an existing
hospital or grant-in-aid or fee-for-service community provider
for transportation services under this Section unless the
hospital or provider has voluntarily submitted a proposal for
its transportation services. This requirement does not
eliminate or reduce any responsibility on the part of a
hospital or community provider to ensure transportation that
may arise independently through other State or federal law or
regulation.
A transporting entity acting in good faith and without
negligence in connection with the transportation of a recipient
incurs no liability, civil or criminal, by reason of that
transportation.
(b) The transporting entity may bill the recipient, the
estate of the recipient, legally responsible relatives, or
insurance carrier for the cost of providing transportation of
the recipient to a mental health facility. The recipient and
the estate of the recipient are liable for the payment of
transportation costs for transporting the recipient to a mental
health facility. If the recipient is a beneficiary of a trust
described in Section 1213 15.1 of the Illinois Trust Code
Trusts and Trustees Act, the trust shall not be considered a
part of the recipient's estate and shall not be subject to
payment for transportation costs for transporting the
recipient to a mental health facility under this section,
except to the extent permitted under Section 1213 15.1 of the
Illinois Trust Code Trusts and Trustees Act. If the recipient
is unable to pay or if the estate of the recipient is
insufficient, the responsible relatives are severally liable
for the payment of those sums or for the balance due in case
less than the amount owing has been paid. If the recipient is
covered by insurance, the insurance carrier shall be liable for
payment to the extent authorized by the recipient's insurance
policy.
(c) Upon the delivery of a recipient to a facility, in
accordance with the procedure set forth in this Article, the
facility director of the facility shall sign a receipt
acknowledging custody of the recipient and for any personal
property belonging to him, which receipt shall be filed with
the clerk of the court entering the hospitalization order.
(Source: P.A. 93-770, eff. 1-1-05.)
(405 ILCS 5/5-105) (from Ch. 91 1/2, par. 5-105)
Sec. 5-105. Each recipient of services provided directly or
funded by the Department and the estate of that recipient is
liable for the payment of sums representing charges for
services to the recipient at a rate to be determined by the
Department in accordance with this Act. If a recipient is a
beneficiary of a trust described in Section 1213 15.1 of the
Illinois Trust Code Trusts and Trustees Act, the trust shall
not be considered a part of the recipient's estate and shall
not be subject to payment for services to the recipient under
this Section except to the extent permitted under Section 1213
15.1 of the Illinois Trust Code Trusts and Trustees Act. If the
recipient is unable to pay or if the estate of the recipient is
insufficient, the responsible relatives are severally liable
for the payment of those sums or for the balance due in case
less than the amount prescribed under this Act has been paid.
If the recipient is under the age of 18, the recipient and
responsible relative shall be liable for medical costs on a
case-by-case basis for services for the diagnosis and treatment
of conditions other than that child's disabling condition. The
liability shall be the lesser of the cost of medical care or
the amount of responsible relative liability established by the
Department under Section 5-116. Any person 18 through 21 years
of age who is receiving services under the Education for All
Handicapped Children Act of 1975 (Public Law 94-142) or that
person's responsible relative shall only be liable for medical
costs on a case-by-case basis for services for the diagnosis
and treatment of conditions other than the person's disabling
condition. The liability shall be the lesser of the cost of
medical care or the amount of responsible relative liability
established by the Department under Section 5-116. In the case
of any person who has received residential services from the
Department, whether directly from the Department or through a
public or private agency or entity funded by the Department,
the liability shall be the same regardless of the source of
services. The maximum services charges for each recipient
assessed against responsible relatives collectively may not
exceed financial liability determined from income in
accordance with Section 5-116. Where the recipient is placed in
a nursing home or other facility outside the Department, the
Department may pay the actual cost of services in that facility
and may collect reimbursement for the entire amount paid from
the recipient or an amount not to exceed those amounts
determined under Section 5-116 from responsible relatives
according to their proportionate ability to contribute to those
charges. The liability of each responsible relative for payment
of services charges ceases when payments on the basis of
financial ability have been made for a total of 12 years for
any recipient, and any portion of that 12 year period during
which a responsible relative has been determined by the
Department to be financially unable to pay any services charges
must be included in fixing the total period of liability. No
child is liable under this Act for services to a parent. No
spouse is liable under this Act for the services to the other
spouse who willfully wilfully failed to contribute to the
spouse's support for a period of 5 years immediately preceding
his or her admission. Any spouse claiming exemption because of
willful wilful failure to support during any such 5 year period
must furnish the Department with clear and convincing evidence
substantiating the claim. No parent is liable under this Act
for the services charges incurred by a child after the child
reaches the age of majority. Nothing in this Section shall
preclude the Department from applying federal benefits that are
specifically provided for the care and treatment of a person
with a disability toward the cost of care provided by a State
facility or private agency.
(Source: P.A. 99-143, eff. 7-27-15.)
Section 1608. The Illinois Marriage and Dissolution of
Marriage Act is amended by changing Section 513.5 as follows:
(750 ILCS 5/513.5)
Sec. 513.5. Support for a non-minor child with a
disability.
(a) The court may award sums of money out of the property
and income of either or both parties or the estate of a
deceased parent, as equity may require, for the support of a
child of the parties who has attained majority when the child
is mentally or physically disabled and not otherwise
emancipated. The sums awarded may be paid to one of the
parents, to a trust created by the parties for the benefit of
the non-minor child with a disability, or irrevocably to a
special needs trust, established by the parties and for the
sole benefit of the non-minor child with a disability, pursuant
to subdivisions (d)(4)(A) or (d)(4)(C) of 42 U.S.C. 1396p,
Section 1213 15.1 of the Illinois Trust Code Trusts and
Trustees Act, and applicable provisions of the Social Security
Administration Program Operating Manual System. An application
for support for a non-minor disabled child may be made before
or after the child has attained majority. Unless an application
for educational expenses is made for a mentally or physically
disabled child under Section 513, the disability that is the
basis for the application for support must have arisen while
the child was eligible for support under Section 505 or 513 of
this Act.
(b) In making awards under this Section, or pursuant to a
petition or motion to decrease, modify, or terminate any such
award, the court shall consider all relevant factors that
appear reasonable and necessary, including:
(1) the present and future financial resources of both
parties to meet their needs, including, but not limited to,
savings for retirement;
(2) the standard of living the child would have enjoyed
had the marriage not been dissolved. The court may consider
factors that are just and equitable;
(3) the financial resources of the child; and
(4) any financial or other resource provided to or for
the child including, but not limited to, any Supplemental
Security Income, any home-based support provided pursuant
to the Home-Based Support Services Law for Mentally
Disabled Adults, and any other State, federal, or local
benefit available to the non-minor disabled child.
(c) As used in this Section:
A "disabled" individual means an individual who has a
physical or mental impairment that substantially limits a major
life activity, has a record of such an impairment, or is
regarded as having such an impairment.
"Disability" means a mental or physical impairment that
substantially limits a major life activity.
(Source: P.A. 99-90, eff. 1-1-16.)
Section 1609. The Probate Act of 1975 is amended by
changing Sections 2-7 and 28-8 as follows:
(755 ILCS 5/2-7) (from Ch. 110 1/2, par. 2-7)
Sec. 2-7. Disclaimer.
(a) Right to Disclaim Interest in Property. A person to
whom any property or interest therein passes, by whatever
means, may disclaim the property or interest in whole or in
part by delivering or filing a written disclaimer as
hereinafter provided. A disclaimer may be of a fractional share
or undivided interest, a specifically identifiable asset,
portion or amount, any limited interest or estate or any
property or interest derived through right of survivorship. A
powerholder, as that term is defined in Section 103 of the
Illinois Trust Code 102 of the Uniform Powers of Appointment
Act, with respect to property shall be deemed to be a holder of
an interest in such property.
The representative of a decedent or ward may disclaim on
behalf of the decedent or ward with leave of court. The court
may approve the disclaimer by a representative of a decedent if
it finds that the disclaimer benefits the estate as a whole and
those interested in the estate generally even if the disclaimer
alters the distribution of the property, part or interest
disclaimed. The court may approve the disclaimer by a
representative of a ward if it finds that it benefits those
interested in the estate generally and is not materially
detrimental to the interests of the ward. A disclaimer by a
representative of a decedent or ward may be made without leave
of court if a will or other instrument signed by the decedent
or ward designating the representative specifically authorizes
the representative to disclaim without court approval.
The right to disclaim granted by this Section exists
irrespective of any limitation on the interest of the
disclaimant in the nature of a spendthrift provision or similar
restriction.
(b) Form of Disclaimer. The disclaimer shall (1) describe
the property or part or interest disclaimed, (2) be signed by
the disclaimant or his representative and (3) declare the
disclaimer and the extent thereof.
(c) Delivery of Disclaimer. The disclaimer shall be
delivered to the transferor or donor or his representative, or
to the trustee or other person who has legal title to the
property, part or interest disclaimed, or, if none of the
foregoing is readily determinable, shall be either delivered to
a person having possession of the property, part or interest or
who is entitled thereto by reason of the disclaimer, or filed
or recorded as hereinafter provided. In the case of an interest
passing by reason of the death of any person, an executed
counterpart of the disclaimer may be filed with the clerk of
the circuit court in the county in which the estate of the
decedent is administered, or, if administration has not been
commenced, in which it could be commenced. If an interest in
real property is disclaimed, an executed counterpart of the
disclaimer may be recorded in the office of the recorder in the
county in which the real estate lies, or, if the title to the
real estate is registered under "An Act concerning land
titles", approved May 1, 1897, as amended, may be filed in the
office of the registrar of titles of such county.
(d) Effect of Disclaimer. Unless expressly provided
otherwise in an instrument transferring the property or
creating the interest disclaimed, the property, part or
interest disclaimed shall descend or be distributed (1) if a
present interest (a) in the case of a transfer by reason of the
death of any person, as if the disclaimant had predeceased the
decedent; (b) in the case of a transfer by revocable instrument
or contract, as if the disclaimant had predeceased the date the
maker no longer has the power to transfer to himself or another
the entire legal and equitable ownership of the property or
interest; or (c) in the case of any other inter vivos transfer,
as if the disclaimant had predeceased the date of the transfer;
and (2) if a future interest, as if the disclaimant had
predeceased the event that determines that the taker of the
property or interest has become finally ascertained and his
interest has become indefeasibly fixed both in quality and
quantity; and in each case the disclaimer shall relate back to
such date for all purposes.
A disclaimer of property or an interest in property shall
not preclude any disclaimant from receiving the same property
in another capacity or from receiving other interests in the
property to which the disclaimer relates.
Unless expressly provided otherwise in an instrument
transferring the property or creating the interest disclaimed,
a future interest limited to take effect at or after the
termination of the estate or interest disclaimed shall
accelerate and take effect in possession and enjoyment to the
same extent as if the disclaimant had died before the date to
which the disclaimer relates back.
A disclaimer made pursuant to this Section shall be
irrevocable and shall be binding upon the disclaimant and all
persons claiming by, through or under the disclaimant.
(e) Waiver and Bar. The right to disclaim property or a
part thereof or an interest therein shall be barred by (1) a
judicial sale of the property, part or interest before the
disclaimer is effected; (2) an assignment, conveyance,
encumbrance, pledge, sale or other transfer of the property,
part or interest, or a contract therefor, by the disclaimant or
his representative; (3) a written waiver of the right to
disclaim; or (4) an acceptance of the property, part or
interest by the disclaimant or his representative. Any person
may presume, in the absence of actual knowledge to the
contrary, that a disclaimer delivered or filed as provided in
this Section is a valid disclaimer that is not barred by the
preceding provisions of this paragraph.
A written waiver of the right to disclaim may be made by
any person or his representative and an executed counterpart of
a waiver of the right to disclaim may be recorded or filed, all
in the same manner as provided in this Section with respect to
a disclaimer.
In every case, acceptance must be affirmatively proved in
order to constitute a bar to a disclaimer. An acceptance of
property or an interest in property shall include the taking of
possession, the acceptance of delivery or the receipt of
benefits of the property or interest; except that (1) in the
case of an interest in joint tenancy with right of survivorship
such acceptance shall extend only to the fractional share of
such property or interest determined by dividing the number one
by the number of joint tenants, and (2) in the case of a ward,
such acceptance shall extend only to property actually received
by or on behalf of the ward or his representative during his
minority or incapacity. The mere lapse of time or creation of
an interest, in joint tenancy with right of survivorship or
otherwise, with or without knowledge of the interest on the
part of the disclaimant, shall not constitute acceptance for
purposes of this Section.
This Section does not abridge the right of any person to
assign, convey, release, renounce or disclaim any property or
interest therein arising under any other statute or that arose
under prior law.
Any interest in real or personal property that exists on or
after the effective date of this Section may be disclaimed
after that date in the manner provided herein, but no interest
that has arisen prior to that date in any person other than the
disclaimant shall be destroyed or diminished by any action of
the disclaimant taken pursuant to this Section.
(Source: P.A. 100-1044, eff. 1-1-19.)
(755 ILCS 5/28-8) (from Ch. 110 1/2, par. 28-8)
Sec. 28-8. Administrative powers. An independent
representative acting reasonably for the best interests of the
estate has the powers granted in the will and the following
powers, all exercisable without court order, except to the
extent that the following powers are inconsistent with the
will:
(a) To lease, sell at public or private sale, for cash or
on credit, mortgage or pledge the personal estate of the
decedent and to distribute in kind any personal estate the sale
of which is not necessary;
(b) To borrow money with or without security;
(c) To mortgage or pledge agricultural commodities as
provided in Section 19-3;
(d) To continue the decedent's unincorporated business
without personal liability except for malfeasance or
misfeasance for losses incurred; and obligations incurred or
contracts entered into by the independent representative with
respect to the business are entitled to priority of payment out
of the assets of the business but, without approval of the
court first obtained, do not involve the estate beyond those
assets;
(e) To settle, compound or compromise any claim or interest
of the decedent in any property or exchange any such claim or
interest for other claims or property; and to settle compound
or compromise and pay all claims against the estate as provided
in Sections 18-11 and 18-13, but claims of the independent
representative or his attorney shall be subject to Section
18-8;
(f) To perform any contract of the decedent;
(g) To employ agents, accountants and counsel, including
legal and investment counsel; to delegate to them the
performance of any act of administration, whether or not
discretionary; and to pay them reasonable compensation;
(h) To hold stocks, bonds and other personal property in
the name of a nominee as provided in Section 19-12;
(i) To take possession, administer and grant possession of
the decedent's real estate, which term in this subsection
includes oil, gas, coal and other mineral interests therein; to
pay taxes on decedent's real estate whether or not in
possession of the representative; to lease the decedent's real
estate upon such terms and for such length of time as he deems
advisable; to sell at public or private sale, for cash or on
credit, or mortgage any real estate or interest therein to
which the decedent had claim or title, but real estate
specifically bequeathed shall not be leased, sold or mortgaged
without the written consent of the legatee; and to confirm the
title of any heir or legatee to real estate by recording and
delivering to the heir or legatee an instrument releasing the
estate's interest; and
(j) To retain property properly acquired, without regard to
its suitability for original purchase; and to invest money of
the estate (1) in any one or more of the investments described
in Section 21-1 or (2) if the independent representative
determines that the estate is solvent and all interested
persons other than creditors approve, in any investments
authorized for trustees under the prudent investor man rule
stated in Article 9 Section 5 of the Illinois Trust Code
"Trusts and Trustees Act", as now or hereafter amended.
(Source: P.A. 81-213.)
Section 1610. The Illinois Power of Attorney Act is amended
by changing Section 3-4 as follows:
(755 ILCS 45/3-4) (from Ch. 110 1/2, par. 803-4)
Sec. 3-4. Explanation of powers granted in the statutory
short form power of attorney for property. This Section defines
each category of powers listed in the statutory short form
power of attorney for property and the effect of granting
powers to an agent, and is incorporated by reference into the
statutory short form. Incorporation by reference does not
require physical attachment of a copy of this Section 3-4 to
the statutory short form power of attorney for property. When
the title of any of the following categories is retained (not
struck out) in a statutory property power form, the effect will
be to grant the agent all of the principal's rights, powers and
discretions with respect to the types of property and
transactions covered by the retained category, subject to any
limitations on the granted powers that appear on the face of
the form. The agent will have authority to exercise each
granted power for and in the name of the principal with respect
to all of the principal's interests in every type of property
or transaction covered by the granted power at the time of
exercise, whether the principal's interests are direct or
indirect, whole or fractional, legal, equitable or
contractual, as a joint tenant or tenant in common or held in
any other form; but the agent will not have power under any of
the statutory categories (a) through (o) to make gifts of the
principal's property, to exercise powers to appoint to others
or to change any beneficiary whom the principal has designated
to take the principal's interests at death under any will,
trust, joint tenancy, beneficiary form or contractual
arrangement. The agent will be under no duty to exercise
granted powers or to assume control of or responsibility for
the principal's property or affairs; but when granted powers
are exercised, the agent will be required to act in good faith
for the benefit of the principal using due care, competence,
and diligence in accordance with the terms of the statutory
property power and will be liable for negligent exercise. The
agent may act in person or through others reasonably employed
by the agent for that purpose and will have authority to sign
and deliver all instruments, negotiate and enter into all
agreements and do all other acts reasonably necessary to
implement the exercise of the powers granted to the agent.
(a) Real estate transactions. The agent is authorized to:
buy, sell, exchange, rent and lease real estate (which term
includes, without limitation, real estate subject to a land
trust and all beneficial interests in and powers of direction
under any land trust); collect all rent, sale proceeds and
earnings from real estate; convey, assign and accept title to
real estate; grant easements, create conditions and release
rights of homestead with respect to real estate; create land
trusts and exercise all powers under land trusts; hold,
possess, maintain, repair, improve, subdivide, manage, operate
and insure real estate; pay, contest, protest and compromise
real estate taxes and assessments; and, in general, exercise
all powers with respect to real estate which the principal
could if present and under no disability.
(b) Financial institution transactions. The agent is
authorized to: open, close, continue and control all accounts
and deposits in any type of financial institution (which term
includes, without limitation, banks, trust companies, savings
and building and loan associations, credit unions and brokerage
firms); deposit in and withdraw from and write checks on any
financial institution account or deposit; and, in general,
exercise all powers with respect to financial institution
transactions which the principal could if present and under no
disability. This authorization shall also apply to any Totten
Trust, Payable on Death Account, or comparable trust account
arrangement where the terms of such trust are contained
entirely on the financial institution's signature card,
insofar as an agent shall be permitted to withdraw income or
principal from such account, unless this authorization is
expressly limited or withheld under paragraph 2 of the form
prescribed under Section 3-3. This authorization shall not
apply to accounts titled in the name of any trust subject to
the provisions of the Illinois Trust Code Trusts and Trustees
Act, for which specific reference to the trust and a specific
grant of authority to the agent to withdraw income or principal
from such trust is required pursuant to Section 2-9 of the
Illinois Power of Attorney Act and subsection (n) of this
Section.
(c) Stock and bond transactions. The agent is authorized
to: buy and sell all types of securities (which term includes,
without limitation, stocks, bonds, mutual funds and all other
types of investment securities and financial instruments);
collect, hold and safekeep all dividends, interest, earnings,
proceeds of sale, distributions, shares, certificates and
other evidences of ownership paid or distributed with respect
to securities; exercise all voting rights with respect to
securities in person or by proxy, enter into voting trusts and
consent to limitations on the right to vote; and, in general,
exercise all powers with respect to securities which the
principal could if present and under no disability.
(d) Tangible personal property transactions. The agent is
authorized to: buy and sell, lease, exchange, collect, possess
and take title to all tangible personal property; move, store,
ship, restore, maintain, repair, improve, manage, preserve,
insure and safekeep tangible personal property; and, in
general, exercise all powers with respect to tangible personal
property which the principal could if present and under no
disability.
(e) Safe deposit box transactions. The agent is authorized
to: open, continue and have access to all safe deposit boxes;
sign, renew, release or terminate any safe deposit contract;
drill or surrender any safe deposit box; and, in general,
exercise all powers with respect to safe deposit matters which
the principal could if present and under no disability.
(f) Insurance and annuity transactions. The agent is
authorized to: procure, acquire, continue, renew, terminate or
otherwise deal with any type of insurance or annuity contract
(which terms include, without limitation, life, accident,
health, disability, automobile casualty, property or liability
insurance); pay premiums or assessments on or surrender and
collect all distributions, proceeds or benefits payable under
any insurance or annuity contract; and, in general, exercise
all powers with respect to insurance and annuity contracts
which the principal could if present and under no disability.
(g) Retirement plan transactions. The agent is authorized
to: contribute to, withdraw from and deposit funds in any type
of retirement plan (which term includes, without limitation,
any tax qualified or nonqualified pension, profit sharing,
stock bonus, employee savings and other retirement plan,
individual retirement account, deferred compensation plan and
any other type of employee benefit plan); select and change
payment options for the principal under any retirement plan;
make rollover contributions from any retirement plan to other
retirement plans or individual retirement accounts; exercise
all investment powers available under any type of self-directed
retirement plan; and, in general, exercise all powers with
respect to retirement plans and retirement plan account
balances which the principal could if present and under no
disability.
(h) Social Security, unemployment and military service
benefits. The agent is authorized to: prepare, sign and file
any claim or application for Social Security, unemployment or
military service benefits; sue for, settle or abandon any
claims to any benefit or assistance under any federal, state,
local or foreign statute or regulation; control, deposit to any
account, collect, receipt for, and take title to and hold all
benefits under any Social Security, unemployment, military
service or other state, federal, local or foreign statute or
regulation; and, in general, exercise all powers with respect
to Social Security, unemployment, military service and
governmental benefits which the principal could if present and
under no disability.
(i) Tax matters. The agent is authorized to: sign, verify
and file all the principal's federal, state and local income,
gift, estate, property and other tax returns, including joint
returns and declarations of estimated tax; pay all taxes;
claim, sue for and receive all tax refunds; examine and copy
all the principal's tax returns and records; represent the
principal before any federal, state or local revenue agency or
taxing body and sign and deliver all tax powers of attorney on
behalf of the principal that may be necessary for such
purposes; waive rights and sign all documents on behalf of the
principal as required to settle, pay and determine all tax
liabilities; and, in general, exercise all powers with respect
to tax matters which the principal could if present and under
no disability.
(j) Claims and litigation. The agent is authorized to:
institute, prosecute, defend, abandon, compromise, arbitrate,
settle and dispose of any claim in favor of or against the
principal or any property interests of the principal; collect
and receipt for any claim or settlement proceeds and waive or
release all rights of the principal; employ attorneys and
others and enter into contingency agreements and other
contracts as necessary in connection with litigation; and, in
general, exercise all powers with respect to claims and
litigation which the principal could if present and under no
disability. The statutory short form power of attorney for
property does not authorize the agent to appear in court or any
tribunal as an attorney-at-law for the principal or otherwise
to engage in the practice of law without being a licensed
attorney who is authorized to practice law in Illinois under
applicable Illinois Supreme Court Rules.
(k) Commodity and option transactions. The agent is
authorized to: buy, sell, exchange, assign, convey, settle and
exercise commodities futures contracts and call and put options
on stocks and stock indices traded on a regulated options
exchange and collect and receipt for all proceeds of any such
transactions; establish or continue option accounts for the
principal with any securities or futures broker; and, in
general, exercise all powers with respect to commodities and
options which the principal could if present and under no
disability.
(l) Business operations. The agent is authorized to:
organize or continue and conduct any business (which term
includes, without limitation, any farming, manufacturing,
service, mining, retailing or other type of business operation)
in any form, whether as a proprietorship, joint venture,
partnership, corporation, trust or other legal entity;
operate, buy, sell, expand, contract, terminate or liquidate
any business; direct, control, supervise, manage or
participate in the operation of any business and engage,
compensate and discharge business managers, employees, agents,
attorneys, accountants and consultants; and, in general,
exercise all powers with respect to business interests and
operations which the principal could if present and under no
disability.
(m) Borrowing transactions. The agent is authorized to:
borrow money; mortgage or pledge any real estate or tangible or
intangible personal property as security for such purposes;
sign, renew, extend, pay and satisfy any notes or other forms
of obligation; and, in general, exercise all powers with
respect to secured and unsecured borrowing which the principal
could if present and under no disability.
(n) Estate transactions. The agent is authorized to:
accept, receipt for, exercise, release, reject, renounce,
assign, disclaim, demand, sue for, claim and recover any
legacy, bequest, devise, gift or other property interest or
payment due or payable to or for the principal; assert any
interest in and exercise any power over any trust, estate or
property subject to fiduciary control; establish a revocable
trust solely for the benefit of the principal that terminates
at the death of the principal and is then distributable to the
legal representative of the estate of the principal; and, in
general, exercise all powers with respect to estates and trusts
which the principal could if present and under no disability;
provided, however, that the agent may not make or change a will
and may not revoke or amend a trust revocable or amendable by
the principal or require the trustee of any trust for the
benefit of the principal to pay income or principal to the
agent unless specific authority to that end is given, and
specific reference to the trust is made, in the statutory
property power form.
(o) All other property transactions. The agent is
authorized to: exercise all possible authority of the principal
with respect to all possible types of property and interests in
property, except to the extent limited in subsections (a)
through (n) of this Section 3-4 and to the extent that the
principal otherwise limits the generality of this category (o)
by striking out one or more of categories (a) through (n) or by
specifying other limitations in the statutory property power
form.
(Source: P.A. 96-1195, eff. 7-1-11.)
Section 1611. The Common Trust Fund Act is amended by
changing Section 3 as follows:
(760 ILCS 45/3) (from Ch. 17, par. 2103)
Sec. 3. Establishment of common trust fund. Any bank or
trust company may, at and during such time as it is qualified
to act as a fiduciary in this State, establish, maintain, and
administer one or more common trust funds for the purpose of
furnishing investments to itself as a fiduciary, or to itself
and another or others as co-fiduciaries. An investment in a
common trust fund does not constitute an investment in the
various securities composing the common trust fund, but is an
investment in the fund as an entity. A bank or trust company,
in its capacity as a fiduciary or co-fiduciary, whether that
fiduciary capacity arose before or is created after this Act
takes effect, may invest funds that it holds for investment in
that capacity in interests in one or more common trust funds,
subject to the following limitations:
(1) In the case of a fiduciary other than an
administrator, the investment may be made in a common trust
fund if such an investment is not expressly prohibited by
the instrument, judgment, or order creating the fiduciary
relationship, or by an amendment thereof, and if, under the
instrument, judgment, or order creating the fiduciary
relationship, or an amendment thereof, the funds so held
for investment might properly be invested in an investment
with the overall investment characteristics of the common
trust fund, considered as an entity, and if, in the case of
co-fiduciaries, the bank or trust company procures the
consent of its co-fiduciary or co-fiduciaries to the
investment in those interests. If the instrument creating
the fiduciary relationship gives to the bank or trust
company the exclusive right to select investments, the
consent of the co-fiduciary shall not be required. Any
person acting as co-fiduciary with any such bank or trust
company is hereby authorized to consent to the investment
in those interests.
(2) In the case of an administrator, the investment may
be made upon approval by the court.
(3) A bank or trust company in establishing,
maintaining and administering one or more common trust
funds for the purpose of furnishing investments to itself
as fiduciary shall have a duty to invest and manage such
common trust fund assets as follows:
(A) The bank or trust company has a duty to invest
and manage common trust fund assets as a prudent
investor would considering the purposes, terms,
distribution requirements, and other circumstances of
the common trust fund. This standard requires the
exercise of reasonable care, skill, and caution and is
to be applied to investments not in isolation, but in
the context of the common trust fund portfolio as a
whole and as a part of an overall investment strategy
that should incorporate risk and return objectives
reasonably suitable to the common trust fund.
(B) No specific investment or course of action is,
taken alone, prudent or imprudent. The bank or trust
company may invest in every kind of property and type
of investment, subject to this Section. The bank or
trust company's investment decisions and actions are
to be judged in terms of the bank or trust company's
reasonable business judgment regarding the anticipated
effect on the common trust fund portfolio as a whole
under the facts and circumstances prevailing at the
time of the decision or action. The standard set forth
in this paragraph (3) is a test of conduct and not of
resulting performance.
(C) The circumstances that the bank or trust
company may consider in making investment decisions
include, without limitation, the general economic
conditions, the possible effect of inflation, the role
each investment or course of action plays within the
overall portfolio, and the expected total return.
(D) The bank or trust company may invest and
reinvest common trust fund assets in interests in any
open-end or closed-end management type investment
company or investment trust (hereafter referred to as a
"mutual fund") registered under the Investment Company
Act of 1940 or may retain, sell, or exchange those
interests, provided that the portfolio of the mutual
fund, as an entity, is appropriate under the provisions
of this Act. The bank or trust company is not
prohibited from investing, reinvesting, retaining, or
exchanging as common fund assets any interests in any
mutual fund for which the bank or trust company or an
affiliate acts as advisor or manager solely on the
basis that the bank or trust company (or its affiliate)
provides services to the mutual fund and receives
reasonable remuneration for those services. A bank or
trust company or its affiliate is not required to
reduce or waive its compensation for services provided
in connection with the administration, investment, and
management of the common trust fund or a participant in
the common trust fund because the bank or trust company
invests, reinvests, or retains common trust fund
assets in a mutual fund, if the total compensation paid
by a participant to the bank or trust company and its
affiliates, directly or indirectly, including any
common trust fund fees, mutual fund fees, advisory
fees, and management fees, is reasonable. However, a
bank or trust company may receive fees equal to the
amount of those fees that would be paid to any other
party under Securities and Exchange Commission Rule
12b-1.
(4) A bank or trust company may not delegate the
investment functions of a common trust fund established or
operating under Section 584 of the Internal Revenue Code
pursuant to Section 807 5.1 of the Illinois Trust Code
Trusts and Trustees Act except as authorized by the Bureau
of the Comptroller of the Currency of the U. S. Department
of the Treasury. A bank or trust company may hire one or
more agents to give the trustee advice with respect to
investments of a common trust fund and pay reasonable and
appropriate compensation to the agent provided that the
final investment decisions and the exclusive management of
the common trust fund remain with the bank or trust
company.
(5) On or after the effective date of this amendatory
Act of 1991, this Section applies to all existing and
future common trust funds, but only as to actions or
inactions occurring after that effective date.
(Source: P.A. 89-344, eff. 8-17-95.)
Section 1612. The Religious Corporation Act is amended by
changing Section 46j as follows:
(805 ILCS 110/46j) (from Ch. 32, par. 185)
Sec. 46j. Any church, congregation, society or
corporation, heretofore or hereafter formed for religious
purposes or for the purpose of religious worship under any of
the provisions of this Act or under any law of this State
incorporating or for the incorporation of religious
corporations or societies, may receive land by gift, legacy or
purchase and make, erect, and build thereon such houses,
buildings, or other improvements as may be necessary for the
convenience, comfort and welfare of such church, congregation,
society or corporation, and may lay out and maintain thereon a
cemetery or cemeteries, or a burying ground or grounds and may
maintain and build thereon schools, orphan asylums, or such
other improvements or buildings as may be necessary for the
educational, eleemosynary, cemetery and religious purposes of
such congregation, church, society or corporation; but no such
property shall be used except in the manner expressed in the
gift, grant or legacy. However, this limitation on the
disposition of real property does not apply to the extent that
a restriction imposed by a donor on the use of an institutional
fund may be released by the governing board of an institution
under the Uniform Prudent Management of Institutional Funds
Act. Or if no use or trust is so expressed, no such property
shall be used except for the benefit of the congregation,
corporation, church or society, for which it was intended, or
for such religious, educational or eleemosynary purpose as may
be approved by such congregation, church, society or
corporation or the ecclesiastical body having jurisdiction or
patronage of or charge over such congregation, corporation,
church or society.
Any corporation, heretofore or hereafter formed for
religious purposes under any of the provisions of this Act or
under any other law of this State incorporating or for the
incorporation of religious corporations or societies, which
now or hereafter owns, operates, maintains or controls a
cemetery or cemeteries, or a burial ground or grounds, is
hereby authorized and empowered to accept by gift, grant,
contribution, payment, or legacy, or pursuant to contract, any
sum of money, funds, securities or property of any kind, or the
income or avails thereof, and to hold the same in trust in
perpetuity for the care of such cemetery or cemeteries, burial
ground or grounds, or for the care of any lot, grave or crypt
therein; or for the special care of any lot, grave or crypt or
of any family mausoleum or memorial, marker, or monument in
such cemetery or cemeteries, burial ground or grounds. No gift,
grant, legacy, payment or other contribution shall be invalid
by reason of any indefiniteness or uncertainty as to the
beneficiary designated in the instrument creating the gift,
grant, legacy, payment or other contribution. If any gift,
grant, legacy, payment or other contribution consists of
non-income producing property, such corporation is authorized
and empowered to sell such property and to invest the funds
obtained in accordance with the provisions of the Uniform
Prudent Management of Institutional Funds Act, or the
provisions of the next succeeding paragraph.
The trust funds authorized by this Section shall be held
intact and, unless otherwise restricted by the terms of the
gift, grant, legacy, contribution, payment, contract or other
payment shall be invested, from time to time reinvested, and
kept invested by such corporation in such investments as are
authorized by the Uniform Prudent Management of Institutional
Funds Act, and according to such standards as are prescribed,
for trustees under that Act and the Illinois Trust Code "Trusts
and Trustees Act", approved September 10, 1973, as amended, and
the net income only from such investments shall be allocated
and used for the purposes set forth in the paragraph
immediately preceding; but the trust funds authorized by this
Section may be commingled and may also be commingled with any
other trust funds received by such corporation for the care of
the cemetery or cemeteries, or burial ground or grounds, or for
the care or special care of any lot, grave, crypt, private
mausoleum, memorial, marker, or monument whether received by
gift, grant, legacy, contribution, payment, contract or other
conveyance heretofore or hereafter made to such corporation.
The trust funds authorized by this Section, and the income
therefrom, shall be exempt from taxation and exempt from the
operation of the laws against perpetuities and accumulations.
(Source: P.A. 96-29, eff. 6-30-09.)
Section 1613. The Illinois Pre-Need Cemetery Sales Act is
amended by changing Section 16 as follows:
(815 ILCS 390/16) (from Ch. 21, par. 216)
Sec. 16. Trust funds; disbursements.
(a) A trustee shall make no disbursements from the trust
fund except as provided in this Act.
(b) A trustee has a duty to invest and manage the trust
assets pursuant to the Illinois Prudent Investor Law Rule under
Article 9 of the Illinois Trust Code Trusts and Trustees Act.
Whenever the seller changes trustees pursuant to this Act, the
trustee must provide written notice of the change in trustees
to the Comptroller no less than 28 days prior to the effective
date of such a change in trustee. The trustee has an ongoing
duty to provide the Comptroller with a current and true copy of
the trust agreement under which the trust funds are held
pursuant to this Act.
(c) The trustee may rely upon certifications and affidavits
made to it under the provisions of this Act, and shall not be
liable to any person for such reliance.
(d) A trustee shall be allowed to withdraw from the trust
funds maintained pursuant to this Act a reasonable fee pursuant
to the Illinois Trust Code Trusts and Trustees Act.
(e) The trust shall be a single-purpose trust fund. In the
event of the seller's bankruptcy, insolvency or assignment for
the benefit of creditors, or an adverse judgment, the trust
funds shall not be available to any creditor as assets of the
seller or to pay any expenses of any bankruptcy or similar
proceeding, but shall be distributed to the purchasers or
managed for their benefit by the trustee holding the funds.
Except in an action by the Comptroller to revoke a license
issued pursuant to this Act and for creation of a receivership
as provided in this Act, the trust shall not be subject to
judgment, execution, garnishment, attachment, or other seizure
by process in bankruptcy or otherwise, nor to sale, pledge,
mortgage, or other alienation, and shall not be assignable
except as approved by the Comptroller. The changes made by this
amendatory Act of the 91st General Assembly are intended to
clarify existing law regarding the inability of licensees to
pledge the trust.
(f) Because it is not known at the time of deposit or at
the time that income is earned on the trust account to whom the
principal and the accumulated earnings will be distributed, for
purposes of determining the Illinois Income Tax due on these
trust funds, the principal and any accrued earnings or losses
relating to each individual account shall be held in suspense
until the final determination is made as to whom the account
shall be paid.
(g) A trustee shall at least annually furnish to each
purchaser a statement identifying: (1) the receipts,
disbursements, and inventory of the trust, including an
explanation of any fees or expenses charged by the trustee
under paragraph (d) of this Section or otherwise, (2) an
explanation of the purchaser's right to a refund, if any, under
this Act, and (3) the primary regulator of the trust as a
corporate fiduciary under state or federal law.
(Source: P.A. 96-879, eff. 2-2-10.)
Article 99. Effective Date.
Section 9999. Effective date. This Act takes effect January
1, 2020.
INDEX
Statutes amended in order of appearance