97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB4664

 

Introduced , by Rep. Emily McAsey

 

SYNOPSIS AS INTRODUCED:
 
760 ILCS 5/5.3
760 ILCS 5/16.1

    Amends the Trust and Trustees Act. Defines terms. Provides that an "unascertainable beneficiary" may be represented by and bound by another beneficiary having a substantially similar (instead of a substantially identical) interest on a particular question or dispute. Provides that if a trust beneficiary is an unrepresented minor, disabled, or unborn person, a parent of the beneficiary may represent and bind the beneficiary, provided that there is no material conflict of interest between the minor or disabled person and either of that person's parents on that particular question or dispute. Further provides that this representative may on a particular question or dispute represent and bind an unborn beneficiary or an unascertainable beneficiary who has an interest that is substantially similar to the interest of the minor or disabled person, but only if there is no material conflict of interest between the minor or the disabled person and the unborn or the unascertainable person. Makes other corresponding changes. Provides that conversion of a trust to a total return trust may be made with a trustee and all primary beneficiaries (instead of with a trustee and all beneficiaries and presumptive remaindermen beneficiaries) in accordance with other provisions of the Act. Provides that changes made apply to all trusts in existence on the effective date and to all trusts created after that date.


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A BILL FOR

 

HB4664LRB097 14224 AJO 62152 b

1    AN ACT concerning civil law.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Trusts and Trustees Act is amended by
5changing Sections 5.3 and 16.1 as follows:
 
6    (760 ILCS 5/5.3)
7    Sec. 5.3. Total return trusts.
8    (a) Conversion by trustee. A trustee may convert a trust to
9a total return trust as described in this Section if all of the
10following apply:
11        (1) The trust describes the amount that may or must be
12    distributed to a beneficiary by referring to the trust's
13    income, and the trustee determines that conversion to a
14    total return trust will enable the trustee to better carry
15    out the purposes of the trust and the conversion is in the
16    best interests of the beneficiaries;
17        (2) conversion to a total return trust means the
18    trustee will invest and manage trust assets seeking a total
19    return without regard to whether that return is from income
20    or appreciation of principal, and will make distributions
21    in accordance with this Section (such a trust is called a
22    "total return trust" in this Section);
23        (3) the trustee sends a written notice of the trustee's

 

 

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1    decision to convert the trust to a total return trust,
2    specifying a prospective effective date for the conversion
3    and including a copy of this Section, to the following
4    beneficiaries, determined as of the date the notice is sent
5    and assuming nonexercise of all powers of appointment:
6            (A) all of the legally competent beneficiaries who
7        are currently receiving or eligible to receive income
8        from the trust; and
9            (B) all of the legally competent beneficiaries who
10        would receive or be eligible to receive a distribution
11        of principal or income if the current interests of
12        beneficiaries currently receiving or eligible to
13        receive income ended;
14        (4) there are one or more legally competent income
15    beneficiaries under subdivision (3)(A) of this subsection
16    (a) and one or more legally competent remainder
17    beneficiaries under subdivision (3)(B) of this subsection
18    (a), determined as of the date of sending the notice;
19        (5) no beneficiary objects to the conversion to a total
20    return trust in a writing delivered to the trustee within
21    60 days after the notice is sent; and
22        (6) the trustee has signed acknowledgments of receipt
23    confirming that notice was received by each beneficiary
24    required to be sent notice under subdivision (3) of this
25    subsection (a).
26    (b) Conversion by agreement. Conversion to a total return

 

 

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1trust may be made by agreement between a trustee and (i) all
2primary beneficiaries, acting either individually or by their
3respective representatives in accordance with Section
4subsection 16.1(a)(2) of this Act, or (ii) all beneficiaries
5currently eligible to receive income or principal from the
6trust and all beneficiaries who are presumptive remaindermen,
7either individually or by their respective representatives in
8accordance with subsection 16.1(a)(3) of this Act. The
9agreement may include any actions a court could properly order
10under subsection (g) of this Section; however, any distribution
11percentage determined by the agreement may not be less than 3%
12nor greater than 5%.
13    (c) Conversion or reconversion by court.
14        (1) The trustee may for any reason elect to petition
15    the court to order conversion to a total return trust,
16    including without limitation the reason that conversion
17    under subsection (a) is unavailable because:
18            (A) a beneficiary timely objects to the conversion
19        to a total return trust;
20            (B) there are no legally competent beneficiaries
21        described in subdivision (3)(A) of subsection (a); or
22            (C) there are no legally competent beneficiaries
23        described in subdivision (3)(B) of subsection (a).
24        (2) A beneficiary may request the trustee to convert to
25    a total return trust or adjust the distribution percentage.
26    If the trustee declines or fails to act within 6 months

 

 

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1    after receiving a written request to do so, the beneficiary
2    may petition the court to order the conversion or
3    adjustment.
4        (3) The trustee may petition the court prospectively to
5    reconvert from a total return trust or adjust the
6    distribution percentage if the trustee determines that the
7    reconversion or adjustment will enable the trustee to
8    better carry out the purposes of the trust. A beneficiary
9    may request the trustee to petition the court prospectively
10    to reconvert from a total return trust or adjust the
11    distribution percentage. If the trustee declines or fails
12    to act within 6 months after receiving a written request to
13    do so, the beneficiary may petition the court to order the
14    reconversion or adjustment.
15        (4) In a judicial proceeding under this subsection (c),
16    the trustee may, but need not, present the trustee's
17    opinions and reasons (A) for supporting or opposing
18    conversion to (or reconversion from or adjustment of the
19    distribution percentage of) a total return trust,
20    including whether the trustee believes conversion (or
21    reconversion or adjustment of the distribution percentage)
22    would enable the trustee to better carry out the purposes
23    of the trust, and (B) about any other matters relevant to
24    the proposed conversion (or reconversion or adjustment of
25    the distribution percentage). A trustee's actions in
26    accordance with this subsection (c) shall not be deemed

 

 

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1    improper or inconsistent with the trustee's duty of
2    impartiality unless the court finds from all the evidence
3    that the trustee acted in bad faith.
4        (5) The court shall order conversion to (or
5    reconversion prospectively from or adjustment of the
6    distribution percentage of) a total return trust if the
7    court determines that the conversion (or reconversion or
8    adjustment of the distribution percentage) will enable the
9    trustee to better carry out the purposes of the trust and
10    the conversion (or reconversion or adjustment of the
11    distribution percentage) is in the best interests of the
12    beneficiaries.
13        (6) Notwithstanding any other provision of this
14    Section, a trustee has no duty to inform beneficiaries
15    about the availability of this Section and has no duty to
16    review the trust to determine whether any action should be
17    taken under this Section unless requested to do so in
18    writing by a beneficiary described in subdivision (3) of
19    subsection (a).
20    (d) Post conversion. While a trust is a total return trust,
21all of the following shall apply to the trust:
22        (1) the trustee shall make income distributions in
23    accordance with the governing instrument subject to the
24    provisions of this Section;
25        (2) the term "income" in the governing instrument means
26    an annual amount (the "distribution amount") equal to a

 

 

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1    percentage (the "distribution percentage") of the net fair
2    market value of the trust's assets, whether the assets are
3    considered income or principal under the Principal and
4    Income Act, averaged over the lesser of:
5            (i) the 3 preceding years; or
6            (ii) the period during which the trust has been in
7        existence;
8        (3) the distribution percentage for any trust
9    converted to a total return trust by a trustee in
10    accordance with subsection (a) shall be 4%;
11        (4) the trustee shall pay to a beneficiary (in the case
12    of an underpayment) and shall recover from a beneficiary
13    (in the case of an overpayment) an amount equal to the
14    difference between the amount properly payable and the
15    amount actually paid, plus interest compounded annually at
16    a rate per annum equal to the distribution percentage in
17    the year or years while the underpayment or overpayment
18    exists; and
19        (5) a change in the method of determining a reasonable
20    current return by converting to a total return trust in
21    accordance with this Section and substituting the
22    distribution amount for net trust accounting income is a
23    proper change in the definition of trust income
24    notwithstanding any contrary provision of the Principal
25    and Income Act, and the distribution amount shall be deemed
26    a reasonable current return that fairly apportions the

 

 

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1    total return of a total return trust.
2    (e) Administration. The trustee, in the trustee's
3discretion, may determine any of the following matters in
4administering a total return trust as the trustee from time to
5time determines necessary or helpful for the proper functioning
6of the trust:
7        (1) the effective date of a conversion to a total
8    return trust;
9        (2) the manner of prorating the distribution amount for
10    a short year in which a beneficiary's interest commences or
11    ceases;
12        (3) whether distributions are made in cash or in kind;
13        (4) the manner of adjusting valuations and
14    calculations of the distribution amount to account for
15    other payments from or contributions to the trust;
16        (5) whether to value the trust's assets annually or
17    more frequently;
18        (6) what valuation dates and how many valuation dates
19    to use;
20        (7) valuation decisions about any asset for which there
21    is no readily available market value, including:
22            (A) how frequently to value such an asset;
23            (B) whether and how often to engage a professional
24        appraiser to value such an asset; and
25            (C) whether to exclude the value of such an asset
26        from the net fair market value of the trust's assets

 

 

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1        under subdivision (d)(2) for purposes of determining
2        the distribution amount. Any such asset so excluded is
3        referred to as an "excluded asset" in this subsection
4        (e), and the trustee shall distribute any net income
5        received from the excluded asset as provided for in the
6        governing instrument, subject to the following
7        principles:
8                (i) unless the trustee determines there are
9            compelling reasons to the contrary considering all
10            relevant factors including the best interests of
11            the beneficiaries, the trustee shall treat each
12            asset for which there is no readily available
13            market value as an excluded asset;
14                (ii) if tangible personal property or real
15            property is possessed or occupied by a
16            beneficiary, the trustee shall not limit or
17            restrict any right of the beneficiary to use the
18            property in accordance with the governing
19            instrument whether or not the trustee treats the
20            property as an excluded asset;
21                (iii) examples of assets for which there is a
22            readily available market value include: cash and
23            cash equivalents; stocks, bonds, and other
24            securities and instruments for which there is an
25            established market on a stock exchange, in an
26            over-the-counter market, or otherwise; and any

 

 

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1            other property that can reasonably be expected to
2            be sold within one week of the decision to sell
3            without extraordinary efforts by the seller;
4                (iv) examples of assets for which there is no
5            readily available market value include: stocks,
6            bonds, and other securities and instruments for
7            which there is no established market on a stock
8            exchange, in an over-the-counter market, or
9            otherwise; real property; tangible personal
10            property; and artwork and other collectibles; and
11        (8) any other administrative matters as the trustee
12    determines necessary or helpful for the proper functioning
13    of the total return trust.
14    (f) Allocations.
15        (1) Expenses, taxes, and other charges that would be
16    deducted from income if the trust were not a total return
17    trust shall not be deducted from the distribution amount.
18        (2) Unless otherwise provided by the governing
19    instrument, the trustee shall fund the distribution amount
20    each year from the following sources for that year in the
21    order listed: first from net income (as the term would be
22    determined if the trust were not a total return trust),
23    then from other ordinary income as determined for federal
24    income tax purposes, then from net realized short-term
25    capital gains as determined for federal income tax
26    purposes, then from net realized long-term capital gains as

 

 

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1    determined for federal income tax purposes, then from trust
2    principal comprised of assets for which there is a readily
3    available market value, and then from other trust
4    principal.
5    (g) Court orders. The court may order any of the following
6actions in a proceeding brought by a trustee or a beneficiary
7in accordance with subdivision (c)(1), (c)(2), or (c)(3):
8        (1) select a distribution percentage other than 4%;
9        (2) average the valuation of the trust's net assets
10    over a period other than 3 years;
11        (3) reconvert prospectively from or adjust the
12    distribution percentage of a total return trust;
13        (4) direct the distribution of net income (determined
14    as if the trust were not a total return trust) in excess of
15    the distribution amount as to any or all trust assets if
16    the distribution is necessary to preserve a tax benefit; or
17        (5) change or direct any administrative procedure as
18    the court determines necessary or helpful for the proper
19    functioning of the total return trust.
20    Nothing in this subsection (g) limits the equitable powers
21of the court to grant other relief.
22    (h) Restrictions. Conversion to a total return trust does
23not affect any provision in the governing instrument:
24        (1) directing or authorizing the trustee to distribute
25    principal;
26        (2) directing or authorizing the trustee to distribute

 

 

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1    a fixed annuity or a fixed fraction of the value of trust
2    assets;
3        (3) authorizing a beneficiary to withdraw a portion or
4    all of the principal; or
5        (4) in any manner that would diminish an amount
6    permanently set aside for charitable purposes under the
7    governing instrument unless both income and principal are
8    so set aside.
9    (i) Tax limitations. If a particular trustee is a
10beneficiary of the trust and conversion or failure to convert
11would enhance or diminish the beneficial interest of the
12trustee, or if possession or exercise of the conversion power
13by a particular trustee would alone cause any individual to be
14treated as owner of a part of the trust for income tax purposes
15or cause a part of the trust to be included in the gross estate
16of any individual for estate tax purposes, then that particular
17trustee may not participate as a trustee in the exercise of the
18conversion power; however:
19        (1) the trustee may petition the court under
20    subdivision (c)(1) to order conversion in accordance with
21    this Section; and
22        (2) if the trustee has one or more co-trustees to whom
23    this subsection (i) does not apply, the co-trustee or
24    co-trustees may convert the trust to a total return trust
25    in accordance with this Section.
26    (j) Releases. A trustee may irrevocably release the power

 

 

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1granted by this Section if the trustee reasonably believes the
2release is in the best interests of the trust and its
3beneficiaries. The release may be personal to the releasing
4trustee or may apply generally to some or all subsequent
5trustees, and the release may be for any specified period,
6including a period measured by the life of an individual.
7    (k) Remedies. A trustee who reasonably and in good faith
8takes or omits to take any action under this Section is not
9liable to any person interested in the trust. If a trustee
10reasonably and in good faith takes or omits to take any action
11under this Section and a person interested in the trust opposes
12the act or omission, the person's exclusive remedy is to obtain
13an order of the court directing the trustee to convert the
14trust to a total return trust, to reconvert from a total return
15trust, to change the distribution percentage, or to order any
16administrative procedures the court determines necessary or
17helpful for the proper functioning of the trust. An act or
18omission by a trustee under this Section is presumed taken or
19omitted reasonably and in good faith unless it is determined by
20the court to have been an abuse of discretion. Any claim by any
21person interested in the trust that an act or omission by a
22trustee under this Section was an abuse of discretion is barred
23if not asserted in a proceeding commenced by or on behalf of
24the person within 2 years after the trustee has sent to the
25person or the person's personal representative a notice or
26report in writing sufficiently disclosing facts fundamental to

 

 

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1the claim such that the person knew or reasonably should have
2known of the claim. The preceding sentence shall not apply to a
3person who was under a legal disability at the time the notice
4or report was sent and who then had no personal representative.
5For purposes of this subsection (k), a personal representative
6refers to a court appointed guardian or conservator of the
7estate of a person.
8    (l) Application. This Section is available to trusts in
9existence on the effective date of this amendatory Act of the
1092nd General Assembly or created after that date. This Section
11shall be construed as pertaining to the administration of a
12trust and shall be available to any trust that is administered
13in Illinois under Illinois law or that is governed by Illinois
14law with respect to the meaning and effect of its terms unless:
15        (1) the trust is a trust described in Internal Revenue
16    Code Section 642(c)(5), 664(d), 2702(a)(3), or 2702(b); or
17        (2) the governing instrument expressly prohibits use
18    of this Section by specific reference to this Section. A
19    provision in the governing instrument in the form: "Neither
20    the provisions of Section 5.3 of the Trusts and Trustees
21    Act nor any corresponding provision of future law may be
22    used in the administration of this trust" or a similar
23    provision demonstrating that intent is sufficient to
24    preclude the use of this Section.
25    (m) Application to express trusts.
26        (1) This subsection (m) does not apply to a charitable

 

 

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1    remainder unitrust as defined by Section 664(d), Internal
2    Revenue Code of 1986 (26 U.S.C. Section 664), as amended.
3        (2) In this subsection (m):
4            (A) "Unitrust" means a trust the terms of which
5        require distribution of a unitrust amount, without
6        regard to whether the trust has been converted to a
7        total return trust in accordance with this Section or
8        whether the trust is established by express terms of
9        the governing instrument.
10            (B) "Unitrust amount" means an amount equal to a
11        percentage of a trust's assets that may or must be
12        distributed to one or more beneficiaries annually in
13        accordance with the terms of the trust. The unitrust
14        amount may be determined by reference to the net fair
15        market value of the trust's assets as of a particular
16        date or as an average determined on a multiple year
17        basis.
18        (3) A unitrust changes the definition of income by
19    substituting the unitrust amount for net trust accounting
20    income as the method of determining current return and
21    shall be given effect notwithstanding any contrary
22    provision of the Principal and Income Act. By way of
23    example and not limitation, a unitrust amount determined by
24    a percentage of not less than 3% nor greater than 5% is
25    conclusively presumed a reasonable current return that
26    fairly apportions the total return of a unitrust.

 

 

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1        (4) The allocations provision of subdivision (2) of
2    subsection (f) of Section 5.3 applies to a unitrust except
3    to the extent its governing instrument expressly provides
4    otherwise.
5(Source: P.A. 96-479, eff. 1-1-10.)
 
6    (760 ILCS 5/16.1)
7    Sec. 16.1. Virtual representation.
8    (a) Representation by a beneficiary with a person having
9substantially similar identical interest, by the primary
10beneficiaries and by others ; contingent remainder
11beneficiaries.
12        (1) To the extent there is no material conflict of
13    interest between the representative and the person
14    represented beneficiary with respect to the particular
15    question or dispute, a beneficiary who is a minor, or a
16    disabled, or unborn beneficiary person, or a beneficiary
17    person whose identity or location is unknown and not
18    reasonably ascertainable (hereinafter referred to as an
19    "unascertainable beneficiary"), may for all purposes be
20    represented by and bound by another beneficiary individual
21    having a substantially similar identical interest with
22    respect to the particular question or dispute; provided,
23    however, that the represented beneficiary such person is
24    not otherwise represented by a court appointed guardian or
25    agent in accordance with subdivision (a)(4) or by a parent

 

 

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1    in accordance with subdivision (a)(5) as provided in the
2    next sentence. If a person is represented by a court
3    appointed guardian of the estate or, if none, by a court
4    appointed guardian of the person, the actions of such
5    guardian shall represent and bind that person for purposes
6    of this subsection (a)(1).
7        (2) If all primary beneficiaries of a trust either have
8    legal capacity are adults and not disabled, or have
9    representatives in accordance with this subsection (a)(1)
10    who have legal capacity are adults and not disabled, the
11    actions of such primary beneficiaries, in each case either
12    by the beneficiary or by the beneficiary's representative
13    or their respective representatives, shall represent and
14    bind all other beneficiaries persons who have a successor,
15    contingent, future, or other interest in the trust and who
16    would become primary beneficiaries only by reason of
17    surviving a primary beneficiary.
18        For purposes of this Section, "primary beneficiary"
19    means a beneficiary who is either: (i) currently eligible
20    to receive income or principal from the trust or (ii)
21    assuming nonexercise of all powers of appointment, will be
22    eligible to receive a distribution of principal from the
23    trust if the beneficiary survives to the final date of
24    distribution with respect to the beneficiary's share.
25        (3) For purposes of this Act:
26            (A) "Primary beneficiary" means a beneficiary of a

 

 

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1        trust who as of the date of determination is either:
2        (i) currently eligible to receive income or principal
3        from the trust or (ii) is a presumptive remainder
4        beneficiary. If all presumptive remainder
5        beneficiaries either are adults and not disabled, or
6        have representatives in accordance with subsection
7        (a)(1) who are adults and not disabled, the actions of
8        such presumptive remainder beneficiaries, or their
9        respective representatives, shall represent and bind
10        all other beneficiaries who have a successor,
11        contingent, or other future interest in the trust. For
12        purposes of this Section, "presumptive remainder
13        beneficiaries" means,
14            (B) "Presumptive remainder beneficiary" means a
15        beneficiary of a trust, as of the date of determination
16        and assuming nonexercise of all powers of appointment,
17        all beneficiaries who either (i) (A) would be eligible
18        to receive a distribution of income or principal if the
19        trust terminated on that date, or (ii) (B) would be
20        eligible to receive a distribution of income or
21        principal if the interests of all beneficiaries
22        currently eligible to receive income or principal from
23        the trust ended on that date without causing the trust
24        to terminate.
25            (C) "Disabled person" as of any date means either a
26        disabled person within the meaning of Section 11a-2 of

 

 

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1        the Probate Act of 1975 or means a person who, within
2        the 365 days immediately preceding that date, (i) was
3        examined by a licensed physician who determined that
4        such person lacked the capacity to make prudent
5        financial decisions, and (ii) such physician made a
6        written record of the physician's determination and
7        signed the written record within 90 days after the
8        examination.
9            (D) A person has legal capacity unless the person
10        is a minor or a disabled person.
11        (4) If a trust beneficiary is represented by a court
12    appointed guardian of the estate or, if none, guardian of
13    the person, such guardian shall represent and bind the
14    beneficiary. If a trust beneficiary is a disabled person,
15    an agent under a power of attorney for property who has
16    authority to act with respect to the particular question or
17    dispute and who does not have a material conflict of
18    interest with respect to the particular question or dispute
19    may represent and bind the principal. An agent is deemed to
20    have such authority if the power of attorney grants the
21    agent the power to settle claims and to exercise powers
22    with respect to trusts and estates even if such powers do
23    not include powers to make a will, to revoke or amend a
24    trust, or to require the trustee to pay income or
25    principal. Absent a court order pursuant to the Illinois
26    Power of Attorney Act directing a guardian to exercise

 

 

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1    powers of the principal under an agency that survives
2    disability, an agent under a power of attorney for property
3    who in accordance with this subdivision has authority to
4    represent and bind a disabled principal takes precedence
5    over a court appointed guardian unless the court specifies
6    otherwise. This subdivision applies to all agencies,
7    whenever and whereever executed. The consent of a person
8    who may represent and bind another person in accordance
9    with this Section is binding on the person represented, and
10    notice to a person who may represent and bind another
11    person in accordance with this Section has the same effect
12    as if notice were given directly to the other person.
13        (5) If a trust beneficiary is a minor or a disabled or
14    unborn person and is not represented by a guardian or agent
15    in accordance with subdivision (a)(4), then a parent of the
16    beneficiary may represent and bind the beneficiary,
17    provided that there is no material conflict of interest
18    between the represented person and either of such person's
19    parents with respect to the particular question or dispute.
20    If a disagreement arises between parents who otherwise
21    qualify to represent a child in accordance with this
22    subsection (a) and who are seeking to represent the same
23    child, the parent who is a lineal descendant of the settlor
24    of the trust that is the subject of the representation is
25    entitled to represent the child; or if none, the parent who
26    is a beneficiary of such trust is entitled to represent the

 

 

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1    child.
2        (6) A guardian, agent or parent who is the
3    representative for a beneficiary under subdivision (a)(4)
4    or (a)(5) may, for all purposes, represent and bind any
5    other beneficiary who is a minor or a disabled, unborn, or
6    unascertainable beneficiary who has an interest, with
7    respect to the particular question or dispute, that is
8    substantially similar to the interest of the beneficiary
9    represented by such representative, but only to the extent
10    that there is no material conflict of interest between the
11    beneficiary represented by the representative and the
12    other beneficiary with respect to the particular question
13    or dispute; provided, however, that the other beneficiary
14    is not otherwise represented by a guardian or agent in
15    accordance with subdivision (a)(4) or by a parent in
16    accordance with subdivision (a)(5).
17        (7) The action or consent of a representative who may
18    represent and bind a beneficiary in accordance with this
19    Section is binding on the beneficiary represented, and
20    notice or service of process to such representative has the
21    same effect as if such notice or service of process were
22    given directly to the beneficiary represented.
23        (8) Nothing in this Section limits the discretionary
24    power of a court in a judicial proceeding to appoint a
25    guardian ad litem for any minor, disabled, unborn, or
26    unascertainable beneficiary with respect to a particular

 

 

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1    question or dispute, but such appointment need not be
2    considered and is not necessary if such beneficiary is
3    otherwise represented in accordance with this Section.
4    (b) Total return trusts. This Section shall apply to enable
5conversion to a total return trust by agreement in accordance
6with subsection 5.3(b) of the total return trust provisions of
7Section 5.3 of this Act, by whether such agreement is made
8between the trustee and (A) all primary beneficiaries of the
9trust, in each case either by the beneficiary or by the
10beneficiary's representative in accordance with this Section ,
11either individually or by their respective representatives in
12accordance with subsection (a)(1), or (B) all beneficiaries
13currently eligible to receive income or principal from the
14trust and all beneficiaries who are presumptive remaindermen of
15the trust, in each case either individually or by their
16respective representatives in accordance with subsection
17(a)(1).
18    (c) Representation of charity. A charity that is
19specifically named as beneficiary of a trust or that otherwise
20has an express beneficial interest in a trust shall act for
21itself. If a trust provides a beneficial interest or expectancy
22for one or more charities or charitable purposes that are not
23specifically named or otherwise represented (the "charitable
24interest"), the Illinois Attorney General may, in accordance
25with this Section, represent, bind, and act on behalf of the
26charitable interest with respect to any particular question or

 

 

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1dispute, including without limitation representing the
2charitable interest in a nonjudicial settlement agreement or in
3an agreement to convert a trust to a total return trust in
4accordance with subsection 5.3(b) of the total return trust
5provisions of Section 5.3 of this Act. This subsection (c)
6shall be construed as being declarative of existing law and not
7as a new enactment. Notwithstanding any other provision,
8nothing in this Section shall be construed to limit or affect
9the Illinois Attorney General's authority to file an action or
10take other steps as he or she deems advisable at any time to
11enforce or protect the general public interest as to a trust
12that provides a beneficial interest or expectancy for one or
13more charities or charitable purposes whether or not a specific
14charity is named in the trust.
15    (d) Nonjudicial settlement agreements.
16        (1) For purposes of this Section, "interested persons"
17    means the trustee and all beneficiaries, or their
18    respective representatives determined after giving effect
19    to the preceding provisions of this Section, other persons
20    and parties in interest whose consent or joinder would be
21    required in order to achieve a binding settlement were the
22    settlement to be approved by the court. "Interested
23    persons" also includes a trust advisor, investment
24    advisor, distribution advisor, trust protector or other
25    holder, or committee of holders, of fiduciary or
26    nonfiduciary powers, if such person then holds powers

 

 

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1    material to a particular question or dispute to be resolved
2    or affected by a nonjudicial settlement agreement in
3    accordance with this Section or by the court.
4        (2) Interested Except as otherwise provided in
5    subsection (d)(3), interested persons, or their respective
6    representatives determined after giving effect to the
7    preceding provisions of this Section, may enter into a
8    binding nonjudicial settlement agreement with respect to
9    any matter involving a trust as provided in this Section.
10        (3) (Blank). A nonjudicial settlement agreement is
11    valid only to the extent its terms and conditions could be
12    properly approved under applicable law by a court of
13    competent jurisdiction.
14        (4) The following matters Matters that may be resolved
15    by a nonjudicial settlement agreement include but are not
16    limited to:
17            (A) Validity, interpretation, or construction of
18        the terms of the trust. ;
19            (B) Approval approval of a trustee's report or
20        accounting. ;
21            (C) Exercise exercise or nonexercise of any power
22        by a trustee. ;
23            (D) The the grant to a trustee of any necessary or
24        desirable administrative power if such grant does not
25        conflict with a clear material purpose of the trust. ;
26            (E) Questions questions relating to property or an

 

 

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1        interest in property held by the trust if such
2        resolution does not conflict with a clear material
3        purpose of the trust. ;
4            (F) Remove, appoint, or remove and appoint, a
5        trustee, trust advisor, investment advisor,
6        distribution advisor, trust protector or other holder,
7        or committee of holders, of fiduciary or nonfiduciary
8        powers, including without limitation designation of a
9        plan of succession or procedure to determine
10        successors to any such office. resignation or
11        appointment of a trustee;
12            (G) Determination determination of a trustee's
13        compensation. ;
14            (H) Transfer transfer of a trust's principal place
15        of administration, including without limitation to
16        change the law governing administration of the trust. ;
17            (I) Liability liability or indemnification of a
18        trustee for an action relating to the trust. ;
19            (J) Resolution of bona fide resolution of disputes
20        or issues related to administration, investment,
21        distribution or other matters. ;
22            (K) Modification modification of terms of the
23        trust pertaining to administration of the trust. ; and
24            (L) Termination termination of the trust, provided
25        that court approval of such termination must be
26        obtained in accordance with subdivision subsection

 

 

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1        (d)(5) of this Section, and the court must conclude
2        continuance of the trust is not necessary to achieve
3        any clear material purpose of the trust. ; upon The
4        court may consider spendthrift provisions as a factor
5        in making a decision under this subdivision but a
6        spendthrift provision is not necessarily a clear
7        material purpose of a trust, and the court is not
8        precluded from modifying or terminating a trust
9        because the trust instrument contains a spendthrift
10        provisions. Upon such termination the court may order
11        the trust property distributed as agreed by the parties
12        to the agreement or otherwise as the court determines
13        equitable consistent with the purposes of the trust.
14            (M) Any other matter involving a trust to the
15        extent the terms and conditions of the nonjudicial
16        settlement agreement could be properly approved under
17        applicable law by a court of competent jurisdiction.
18        (5) Any beneficiary or other interested person may
19    request the court to approve any part or all of a
20    nonjudicial settlement agreement, including whether any
21    representation is adequate and without conflict of
22    interest, provided that the petition for such approval must
23    be filed before or within 60 days after the effective date
24    of the agreement.
25        (6) An agreement entered into in accordance with this
26    Section shall be final and binding on the trustee, on and

 

 

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1    all beneficiaries of the trust, both current and future,
2    and on all other interested persons as if ordered by a
3    court with competent jurisdiction over the trust, the trust
4    property, and all parties in interest.
5        (7) In the trustee's sole discretion, the trustee may,
6    but is not required to, obtain and rely upon an opinion of
7    counsel on any matter relevant to this Section, including
8    without limitation: (i) where required by this Section,
9    that the any agreement proposed to be made in accordance
10    with this Section does not conflict with a clear material
11    purpose of the trust or could be properly approved by the
12    court under applicable law, (ii) in the case of a trust
13    termination, that continuance of the trust is not necessary
14    to achieve any clear material purpose of the trust, (iii)
15    or that there is no material conflict of interest between a
16    representative and the person represented with respect to
17    the particular question or dispute, or (iv) that the
18    representative and the person represented have
19    substantially similar interests with respect to the or
20    among those being represented with respect to a particular
21    question or dispute.
22    (e) Application. This On and after its effective date, this
23Section applies to all trusts in existence on the effective
24date of this amendatory Act of the 97th General Assembly or
25created after that date existing and future trusts, and is
26applicable to judicial proceedings and nonjudicial matters

 

 

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1involving such trusts. For purposes of this Section, (i)
2judicial proceedings include any proceeding before a court or
3administrative tribunal of this State, and any arbitration or
4mediation proceedings; (ii) nonjudicial matters include, but
5are not limited to, nonjudicial settlement , or agreements
6entered into in accordance with this Section, and the grant of
7any consent, release, ratification, or indemnification on or
8after the effective date. This Section shall be construed as
9pertaining to the administration of a trust and shall be
10available to any trust that is administered in Illinois or that
11is governed by Illinois law with respect to the meaning and
12effect of its terms, except to the extent the governing
13instrument expressly prohibits use of this Section by specific
14reference to this Section. A provision in the governing
15instrument in the form: "Neither the provisions of Section 16.1
16of the Illinois Trusts and Trustees Act nor any corresponding
17provision of future law may be used in the administration of
18this trust" or a similar provision demonstrating that intent is
19sufficient to preclude the use of this Section.
20(Source: P.A. 96-479, eff. 1-1-10.)