99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
SB3165

 

Introduced 2/19/2016, by Sen. John G. Mulroe

 

SYNOPSIS AS INTRODUCED:
 
See Index

    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 Uniform Prudent Investor Act; life insurance; affiliated investments; liability of trustees and rights of persons dealing with trustee; total return trusts; trust decanting; the Uniform Powers of Appointment Act; perpetuities; and application of the Code to existing trusts. Repeals a Section of the Probate Act of 1975 concerning testamentary powers of appointment. Repeals the Trusts and Trustees Act, the Trusts and Dissolutions of Marriage Act, the Statute Concerning Perpetuities, the Perpetuities Vesting Act, the Trust Accumulation Act, the Power of Appointment Exercise Act, and the Termination of Powers 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, 2017.


LRB099 20744 HEP 45399 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB3165LRB099 20744 HEP 45399 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
Article 1. General provisions and definitions.

 
5    Section 101. Short title. This Act may be cited as the
6Illinois Trust Code.
 
7    Section 102. Scope. Except as otherwise provided, this Code
8applies to express trusts, charitable or noncharitable, and
9trusts created pursuant to a statute, judgment, or decree that
10requires the trust to be administered in the manner of an
11express trust. The provisions of this Code do not apply to any:
12        (1) land trust;
13        (2) voting trust;
14        (3) security instrument such as a trust deed or
15    mortgage;
16        (4) liquidation trust;
17        (5) escrow;
18        (6) instrument under which a nominee, custodian for
19    property, or paying or receiving agent is appointed;
20        (7) trust created by a deposit arrangement in a banking
21    or savings institution, commonly known as a "Totten trust"
22    unless in the trust instrument any of the provisions of

 

 

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1    this Code are made applicable by specific reference; or
2        (8) Grain Indemnity Trust Account or any other trust
3    created under the Grain Code.
 
4    Section 103. Definitions. In this Code:
5    (1) "Action", with respect to an act of a trustee, includes
6a failure to act.
7    (2) "Ascertainable standard" means a standard relating to
8an individual's health, education, support, or maintenance
9within the meaning of Section 2041(b)(1)(A) or 2514(c)(1) of
10the Internal Revenue Code and any applicable regulations.
11    (3) "Beneficiary" means a person that:
12        (A) has a present or future beneficial interest in a
13    trust, vested or contingent, assuming nonexercise of
14    powers of appointment;
15        (B) in a capacity other than that of trustee, holds a
16    power of appointment over trust property; or
17        (C) is an identified charitable organization that will
18    or may receive distributions under the terms of the trust.
19    (4) "Charitable interest" means an interest in a trust
20that:
21        (A) is held by an identified charitable organization
22    and makes the organization a qualified beneficiary;
23        (B) benefits only charitable organizations and, if the
24    interest were held by an identified charitable
25    organization, would make the organization a qualified

 

 

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1    beneficiary; or
2        (C) is held solely for charitable purposes and, if the
3    interest were held by an identified charitable
4    organization, would make the organization a qualified
5    beneficiary.
6    (5) "Charitable organization" means:
7        (A) a person, other than an individual, organized and
8    operated exclusively for charitable purposes; or
9        (B) a government or governmental subdivision, agency,
10    or instrumentality, to the extent it holds funds
11    exclusively for a charitable purpose.
12    (6) "Charitable purpose" means the relief of poverty, the
13advancement of education or religion, the promotion of health,
14municipal or other governmental purpose, or another purpose the
15achievement of which is beneficial to the community.
16    (7) "Charitable trust" means a trust, or portion of a
17trust, created for a charitable purpose.
18    (8) "Community property" means all personal property,
19wherever situated, that was acquired as or became, and
20remained, community property under the laws of another
21jurisdiction, and all real property situated in another
22jurisdiction that is community property under the laws of that
23jurisdiction.
24    (9) "Current beneficiary" means a beneficiary that on the
25date the beneficiary's qualification is determined is a
26distributee or permissible distributee of trust income or

 

 

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1principal. The term "current beneficiary" includes the holder
2of a presently exercisable general power of appointment but
3does not include a person who is a beneficiary only because the
4person holds any other power of appointment.
5    (10) "Directing party" means any investment trust advisor,
6distribution trust advisor, or trust protector.
7    (11) "Donor", with reference to a power of appointment,
8means a person that creates a power of appointment.
9    (12) "Environmental law" means a federal, state, or local
10law, rule, regulation, or ordinance relating to protection of
11the environment.
12    (13) "General power of appointment" means a power of
13appointment exercisable in favor of a powerholder, the
14powerholder's estate, a creditor of the powerholder, or a
15creditor of the powerholder's estate.
16    (14) "Guardian of the estate" means a person appointed by a
17court to administer the estate of a minor or adult individual.
18    (15) "Guardian of the person" means a person appointed by a
19court to make decisions regarding the support, care, education,
20health, and welfare of a minor or adult individual.
21    (16) "Incapacitated" or "incapacity" means the inability
22of an individual to manage property or business affairs because
23the individual is a minor, adjudicated incompetent, has an
24impairment in the ability to receive and evaluate information
25or make or communicate decisions even with the use of
26technological assistance; or is at a location that is unknown

 

 

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1and not reasonably ascertainable. Without limiting the ways in
2which incapacity may be established, an individual is
3incapacitated if:
4        (i) a plenary guardian has been appointed for the
5    individual under subsection (c) of Section 11a-12 of the
6    Probate Act of 1975;
7        (ii) a limited guardian has been appointed for the
8    individual under subsection (b) of Section 11a-12 of the
9    Probate Act of 1975 and the court has found that the
10    individual lacks testamentary capacity; or
11        (iii) the individual was examined by a licensed
12    physician who determined that the individual was
13    incapacitated and the physician made a signed written
14    record of the physician's determination within 90 days
15    after the examination and no licensed physician
16    subsequently made a signed written record of the
17    physician's determination that the individual was not
18    incapacitated within 90 days after examining the
19    individual.
20    (17) "Internal Revenue Code" means the Internal Revenue
21Code of 1986 as amended from time to time and includes
22corresponding provisions of any subsequent federal tax law.
23    (18) "Interested persons" means: (A) the trustee; and (B)
24all beneficiaries, or their respective representatives
25determined after giving effect to the provisions of Article 3,
26whose consent or joinder would be required in order to achieve

 

 

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1a binding settlement were the settlement to be approved by the
2court. "Interested persons" includes a trust advisor,
3investment advisor, distribution advisor, trust protector, or
4other holder, or committee of holders, of fiduciary or
5nonfiduciary powers, if the person then holds powers material
6to a particular question or dispute to be resolved or affected
7by a nonjudicial settlement in accordance with Section 111 or
8by a judicial proceeding.
9    (19) "Interests of the beneficiaries" means the beneficial
10interests provided in the trust instrument.
11    (20) "Jurisdiction", with respect to a geographic area,
12includes a State or country.
13    (21) "Legal capacity" means that the person is not
14incapacitated.
15    (22) "Nongeneral power of appointment" means a power of
16appointment that is not a general power of appointment.
17    (23) "Person" means an individual, estate, business or
18nonprofit entity, public corporation, government or
19governmental subdivision, agency, or instrumentality, or other
20legal entity.
21    (24) "Power of appointment" means a power that enables a
22powerholder acting in a nonfiduciary capacity to designate a
23recipient of an ownership interest in or another power of
24appointment over the appointive property. The term "power of
25appointment" does not include a power of attorney.
26    (25) "Power of withdrawal" means a presently exercisable

 

 

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1general power of appointment other than a power:
2        (A) exercisable by the powerholder as trustee that is
3    limited by an ascertainable standard; or
4        (B) exercisable by another person only upon consent of
5    the trustee or a person holding an adverse interest.
6    (26) "Powerholder" means a person in which a donor creates
7a power of appointment.
8    (27) "Presently exercisable power of appointment" means a
9power of appointment exercisable by the powerholder at the
10relevant time. The term "presently exercisable power of
11appointment":
12        (A) includes a power of appointment exercisable only
13    after the occurrence of a specified event, the satisfaction
14    of an ascertainable standard, or the passage of a specified
15    time only after:
16            (i) the occurrence of the specified event;
17            (ii) the satisfaction of the ascertainable
18        standard; or
19            (iii) the passage of the specified time; and
20        (B) does not include a power exercisable only at the
21    powerholder's death.
22    (28) "Presumptive remainder beneficiary" means a
23beneficiary of a trust, as of the date of determination and
24assuming nonexercise of all powers of appointment, who either:
25(A) would be eligible to receive a distribution of income or
26principal if the trust terminated on that date; or (B) would be

 

 

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1eligible to receive a distribution of income or principal if
2the interests of all beneficiaries currently eligible to
3receive income or principal from the trust ended on that date
4without causing the trust to terminate.
5    (29) "Property" means anything that may be the subject of
6ownership, whether real or personal, legal or equitable, or any
7interest therein.
8    (30) "Qualified beneficiary" means a beneficiary who, on
9the date the beneficiary's qualification is determined and
10assuming nonexercise of powers of appointment:
11        (A) is a distributee or permissible distributee of
12    trust income or principal;
13        (B) would be a distributee or permissible distributee
14    of trust income or principal if the interests of the
15    distributees described in subparagraph (A) terminated on
16    that date without causing the trust to terminate; or
17        (C) would be a distributee or permissible distributee
18    of trust income or principal if the trust terminated on
19    that date.
20    (31) "Revocable", as applied to a trust, means revocable by
21the settlor without the consent of the trustee or a person
22holding an adverse interest. A revocable trust is deemed
23revocable during the settlor's lifetime.
24    (32) "Settlor", except as otherwise provided in Sections
25113 and 1225, means a person, including a testator, who
26creates, or contributes property to, a trust. If more than one

 

 

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1person creates or contributes property to a trust, each person
2is a settlor of the portion of the trust property attributable
3to that person's contribution except to the extent another
4person has the power to revoke or withdraw that portion.
5    (33) "Sign" means, with present intent to authenticate or
6adopt a record:
7        (A) to execute or adopt a tangible symbol; or
8        (B) to attach to or logically associate with the record
9    an electronic symbol, sound, or process.
10    (34) "Spendthrift provision" means a term of a trust that
11restrains both voluntary and involuntary transfer of a
12beneficiary's interest.
13    (35) "State" means a State of the United States, the
14District of Columbia, Puerto Rico, the United States Virgin
15Islands, or any territory or insular possession subject to the
16jurisdiction of the United States. The term "state" includes an
17Indian tribe or band recognized by federal law or formally
18acknowledged by a state.
19    (36) "Terms of the trust" means the manifestation of the
20settlor's intent regarding a trust's provisions as expressed in
21the trust instrument, as may be established by other evidence
22that would be admissible in a judicial proceeding, or as may be
23established by court order or nonjudicial settlement
24agreement.
25    (37) "Trust" means a trust created by will, deed,
26agreement, declaration, or other written instrument.

 

 

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1    (38) "Trust accounting" means one or more written
2communications from the trustee with respect to the accounting
3year that describe: (A) the trust property, liabilities,
4receipts, and disbursements, including the amount of the
5trustee's compensation; (B) the value of the trust assets on
6hand at the close of the accounting period, to the extent
7feasible; and (C) all other material facts related to the
8trustee's administration of the trust.
9    (39) "Trust instrument" means the written instrument
10stating the terms of a trust, including any amendment, any
11court order or nonjudicial settlement agreement establishing,
12construing, or modifying the terms of the trust in accordance
13with Section 111, Sections 410 through 416, or other applicable
14law, and any additional trust instrument under Article 12.
15    (40) "Trustee" includes an original, additional, and
16successor trustee, and a cotrustee.
17    (41) "Unascertainable beneficiary" means a beneficiary
18whose identity is uncertain or not reasonably ascertainable.
 
19    Section 104. Knowledge.
20    (a) Except as provided in subsection (b), a person has
21knowledge of a fact if the person:
22        (1) has actual knowledge of it;
23        (2) has received a notice or notification of it; or
24        (3) from all the facts and circumstances known to the
25    person at the time in question, has reason to know it.

 

 

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1    (b) An organization that conducts activities through
2employees has notice or knowledge of a fact involving a trust
3only from the time the information was received by an employee
4having responsibility to act for the trust, or would have been
5brought to the employee's attention if the organization had
6exercised reasonable diligence. An organization exercises
7reasonable diligence if it maintains reasonable routines for
8communicating significant information to the employee having
9responsibility to act for the trust and there is reasonable
10compliance with the routines. Reasonable diligence does not
11require an employee of the organization to communicate
12information unless the communication is part of the
13individual's regular duties or the individual knows a matter
14involving the trust would be materially affected by the
15information.
 
16    Section 105. Default and mandatory rules.
17    (a) The trust instrument may specify the rights, powers,
18duties, limitations, and immunities applicable to the trustee,
19beneficiary, and others and those provisions, if not otherwise
20contrary to law, shall control, except to the extent
21specifically provided otherwise in this Section. The
22provisions of this Code apply to the trust to the extent that
23they are not inconsistent with specific provisions of the trust
24instrument.
25    (b) Specific terms of the trust instrument prevail over any

 

 

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1provision of this Code except:
2        (1) the requirements for creating a trust;
3        (2) the duty of a trustee to act in good faith;
4        (3) the requirement that a trust have a purpose that is
5    lawful and not contrary to public policy;
6        (4) the rules governing designated representatives as
7    provided in Section 307;
8        (5) the 21-year limitation contained in subsection (a)
9    of Section 409;
10        (6) the power of the court to modify or terminate a
11    trust under Sections 411 through 417;
12        (7) the effect of a spendthrift provision and the
13    rights of certain creditors and assignees to reach a trust
14    as provided in Article 5;
15        (8) the requirement under subsection (e) of Section 602
16    that an agent under a power of attorney must have express
17    authorization in the agency to exercise a settlor's powers
18    with respect to a revocable trust;
19        (9) the power of the court under subsection (b) of
20    Section 708 to adjust a trustee's compensation specified in
21    the trust instrument that is unreasonably low or high;
22        (10) for trusts becoming irrevocable after the
23    effective date of this Code, the trustee's duty under
24    paragraph (b)(1) of Section 813.1 to provide information to
25    the qualified beneficiaries;
26        (11) for trusts becoming irrevocable after the

 

 

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1    effective date of this Code, the trustee's duty under
2    paragraph (b)(2) of Section 813.1 to provide accountings to
3    the current beneficiaries of the trust;
4        (12) for trusts becoming irrevocable after the
5    effective date of this Code, the trustee's duty under
6    paragraph (b)(4) of Section 813.1 to provide accountings to
7    beneficiaries receiving a distribution of the residue of
8    the trust upon a trust's termination;
9        (13) the effect of an exculpatory term under Section
10    1008;
11        (14) the rights under Sections 1010 through 1013 of a
12    person other than a trustee or beneficiary; and
13        (15) the power of the court to take such action and
14    exercise such jurisdiction as may be necessary in the
15    interests of equity.
 
16    Section 106. Common law of trusts; principles of equity.
17The common law of trusts and principles of equity supplement
18this Code, except to the extent modified by this Code or
19another statute of this State.
 
20    Section 107. Governing law.
21    (a) The meaning and effect of a trust instrument are
22determined by:
23        (1) the law of the jurisdiction designated in the trust
24    instrument; or

 

 

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1        (2) in the absence of a designation in the trust
2    instrument, the law of the jurisdiction having the most
3    significant relationship to the matter at issue.
4    (b) Except as otherwise expressly provided by the trust
5instrument or by court order, the laws of this State govern the
6administration of a trust while the trust is administered in
7this State.
 
8    Section 108. Principal place of administration.
9    (a) Without precluding other means for establishing a
10sufficient connection with the designated jurisdiction, the
11provisions of a trust instrument designating the principal
12place of administration are valid and controlling if:
13        (1) a trustee's principal place of business is located
14    in or a trustee is a resident of the designated
15    jurisdiction; or
16        (2) all or part of the administration occurs in the
17    designated jurisdiction.
18    (b) The trustee, as the trustee reasonably determines is
19appropriate, may transfer the trust's principal place of
20administration to another state or to a jurisdiction outside of
21the United States. Language in a trust instrument that the
22trust shall be governed by the laws of a particular state shall
23not be deemed to expressly prohibit a transfer of the principal
24place of administration.
25    (c) Notwithstanding any other provision of this Code, the

 

 

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1trustee has no duty to inform beneficiaries, or any other
2interested party, about the availability of this Section and
3further has no duty to review the trust instrument to determine
4whether any action should be taken under this Section unless
5requested to do so in writing by a beneficiary then entitled to
6receive reports and information related to the administration
7of the trust.
8    (d) In connection with a transfer of the trust's principal
9place of administration, the trustee may transfer some or all
10of the trust property to a successor trustee designated in the
11trust instrument or appointed pursuant to Section 704.
 
12    Section 109. Methods and waiver of notice.
13    (a) Notice to a person under this Code or the sending of a
14document to a person under this Code must be accomplished in a
15manner reasonably suitable under the circumstances and likely
16to result in receipt of the notice or document. Permissible
17methods of notice or for sending a document include first-class
18mail, personal delivery, delivery to the person's last known
19place of residence or place of business, or a properly directed
20electronic message.
21    (b) Notice otherwise required under this Code or a document
22otherwise required to be sent under this Code need not be
23provided to a person whose identity or location is unknown to
24and not reasonably ascertainable by the trustee.
25    (c) Notice under this Code or the sending of a document

 

 

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1under this Code may be waived by the person to be notified or
2sent the document.
3    (d) Notice of a judicial proceeding must be given as
4provided in the applicable rules of civil procedure.
5    (e) Subject to subsection (d), receipt by a beneficiary or
6other person of a trustee's notice, account, or other report is
7presumed if the trustee has reasonable procedures in place
8requiring the mailing or delivery of the notice, account, or
9report to the beneficiary or other person. This presumption
10applies to the mailing or delivery of a notice, account, or
11other report, including any communication required in writing,
12by electronic means or the provision of access to the
13information by electronic means so long as the beneficiary or
14other person has agreed to receive the information by
15electronic delivery or access.
 
16    Section 110. Others treated as qualified beneficiaries.
17    (a) A person appointed to enforce a trust created for the
18care of an animal or another noncharitable purpose as provided
19in Section 408 or 409 has the rights of a qualified beneficiary
20under this Code.
21    (b) The Attorney General's Charitable Trust Bureau has the
22rights of a qualified beneficiary with respect to a charitable
23trust having its principal place of administration in this
24State.
 

 

 

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1    Section 111. Nonjudicial settlement agreements.
2    (a) Interested persons, or their respective
3representatives determined after giving effect to the
4provisions of Article 3, may enter into a binding nonjudicial
5settlement agreement with respect to any matter involving a
6trust as provided in this Section.
7    (b) The following matters may be resolved by a nonjudicial
8settlement agreement:
9        (1) Validity, interpretation, or construction of the
10    terms of the trust instrument.
11        (2) Approval of a trustee's report or accounting.
12        (3) Exercise or nonexercise of any power by a trustee.
13        (4) The grant to a trustee of any necessary or
14    desirable administrative power if the grant does not
15    conflict with a clear material purpose of the trust.
16        (5) Questions relating to property or an interest in
17    property held by the trust if the resolution does not
18    conflict with a clear material purpose of the trust.
19        (6) Removal, appointment, or removal and appointment
20    of a trustee, trust advisor, investment advisor,
21    distribution advisor, trust protector, or other holder, or
22    committee of holders, of fiduciary or nonfiduciary powers,
23    including without limitation designation of a plan of
24    succession or procedure to determine successors to any such
25    office.
26        (7) Determination of a trustee's or other fiduciary's

 

 

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1    compensation.
2        (8) Transfer of a trust's principal place of
3    administration, including, without limitation, to change
4    the law governing administration of the trust.
5        (9) Liability or indemnification of a trustee for an
6    action relating to the trust.
7        (10) Resolution of bona fide disputes related to trust
8    administration, investment, distribution, or other
9    matters.
10        (11) Modification of the terms of the trust instrument
11    pertaining to the administration of the trust.
12        (12) Determining whether the aggregate interests of
13    each beneficiary in severed trusts are substantially
14    equivalent to the beneficiary's interests in the trusts
15    before severance.
16        (13) Termination of the trust, except that court
17    approval of the termination must be obtained in accordance
18    with subsection (d) of this Section, and the court must
19    find that continuance of the trust is not necessary to
20    achieve any clear material purpose of the trust. The court
21    shall consider spendthrift provisions as a factor in making
22    a decision under this subsection, but a spendthrift
23    provision is not necessarily a material purpose of a trust,
24    and the court is not precluded from modifying or
25    terminating a trust because the trust instrument contains
26    spendthrift provisions. Upon termination, the court shall

 

 

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1    order the distribution of the trust property as agreed by
2    the parties to the agreement, or if the parties cannot
3    agree, then as the court determines is equitable and
4    consistent with the purposes of the trust.
5    (c) If a trust contains a charitable interest, the parties
6to any proposed nonjudicial settlement agreement affecting the
7trust shall deliver to the Attorney General's Charitable Trust
8Bureau written notice of the proposed agreement at least 60
9days prior to its effective date. The Bureau is not required to
10take action, but if it objects in a writing delivered to one or
11more of the parties prior to the proposed effective date, the
12agreement shall not take effect unless the parties obtain court
13approval.
14    (d) Any beneficiary or other interested person may request
15the court to approve any part or all of a nonjudicial
16settlement agreement, including, without limitation, whether
17any representation is adequate and without material conflict of
18interest, if the petition for approval is filed within 60 days
19after the effective date of the agreement.
20    (e) An agreement entered into in accordance with this
21Section, or a judicial proceeding pursued in accordance with
22this Section, is final and binding on the trustee, on all
23beneficiaries of the trust, both current and future, and on all
24other interested persons as if ordered by a court with
25competent jurisdiction over the trust, the trust property, and
26all parties in interest.

 

 

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1    (f) In the trustee's sole discretion, the trustee may, but
2is not required to, obtain and rely upon an opinion of counsel
3on any matter relevant to this Section, including, without
4limitation:
5        (1) if required by this Section, that the agreement
6    proposed to be made in accordance with this Section does
7    not conflict with a clear material purpose of the trust;
8        (2) in the case of a trust termination, that
9    continuance of the trust is not necessary to achieve any
10    clear material purpose of the trust;
11        (3) that there is no material conflict of interest
12    between a representative and the person represented with
13    respect to the particular question or dispute; and
14        (4) that the representative and the person represented
15    have substantially similar interests with respect to the
16    particular question or dispute.
17    (g) This Section shall be construed as pertaining to the
18administration of a trust and shall be available to any trust
19that is administered in this State or that is governed by
20Illinois law with respect to the meaning and effect of its
21terms, except to the extent the trust instrument expressly
22prohibits the use of this Section by specific reference to this
23Section or a prior corresponding law. A provision in the trust
24instrument in the form: "Neither the provisions of Section 111
25of the Illinois Trust Code nor any corresponding provision of
26future law may be used in the administration of this trust", or

 

 

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1a similar provision demonstrating that intent, is sufficient to
2preclude the use of this Section.
 
3    Section 112. Rules of construction. The rules of
4construction that apply in this State to the interpretation of
5wills and the disposition of property by will also apply as
6appropriate to the interpretation of the trust instrument and
7the disposition of the trust property. This Code shall be
8liberally construed and the rule that statutes in derogation of
9the common law shall be strictly construed does not apply.
 
10    Section 113. Insurable interest of trustee.
11    (a) A trustee of a trust has an insurable interest in the
12life of an individual insured under a life insurance policy
13that is owned by the trustee of the trust acting in a fiduciary
14capacity or that designates the trust itself as the owner if,
15on the date the policy is issued:
16        (1) the insured is:
17            (A) a settlor or beneficiary of the trust; or
18            (B) an individual in whom a settlor of the trust
19        has, or would have had if living at the time the policy
20        was issued, an insurable interest; and
21        (2) the trustee determines the life insurance
22    proceeds:
23            (A) are for the benefit of one or more trust
24        beneficiaries that have an insurable interest in the

 

 

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1        life of the insured; or
2            (B) will carry out a purpose of the trust.
3    (b) If a trustee of a trust would have an insurable
4interest in the life of an individual insured as described in
5this Section, then the insurable interest includes the joint
6lives of such an individual and his or her spouse.
7    (c) Nothing in this Section limits or affects any provision
8of the Viatical Settlements Act of 2009.
 
9    Section 114. Gift to a deceased beneficiary under an inter
10vivos trust.
11    (a) If a gift of a present or future interest is to a
12descendant of the settlor who dies before or after the settlor,
13the descendants of the deceased beneficiary living when the
14gift is to take effect in possession or enjoyment take per
15stirpes the gift so bequeathed.
16    (b) If a gift of a present or future interest is to a class
17and any member of the class dies before or after the settlor,
18the members of the class living when the gift is to take effect
19in possession or enjoyment take the share or shares that the
20deceased member would have taken if he or she were then living,
21except that, if the deceased member of the class is a
22descendant of the settlor, the descendants of the deceased
23member then living shall take per stirpes the share or shares
24that the deceased member would have taken if he or she were
25then living.

 

 

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1    (c) Except as provided in subsections (a) and (b), if the
2gift is not to a descendant of the settlor or is not to a class
3as provided in subsections (a) and (b) and if the beneficiary
4dies either before or after the settlor and before the gift is
5to take effect in possession or enjoyment, then the gift shall
6lapse. If the gift lapses by reason of the death of the
7beneficiary before the gift is to take possession or enjoyment,
8then the gift so given shall be included in and pass as part of
9the residue of the trust under the trust. If the gift is or
10becomes part of the residue, the gift so bequeathed shall pass
11to and be taken by the beneficiaries remaining, if any, of the
12residue in proportions and upon trusts corresponding to their
13respective interests in the residue of the trust. The
14provisions of subsections (a) and (b) do not apply to a future
15interest that is or becomes indefeasibly vested at the
16settlor's death or at any time thereafter before it takes
17effect in possession or enjoyment. The provisions of this
18Section apply on and after January 1, 2005 for any gifts to a
19deceased beneficiary under an inter vivos trust if the deceased
20beneficiary dies after January 1, 2005 and before the gift is
21to take effect in possession or enjoyment.
 
22
Article 2. Judicial proceedings.

 
23    Section 201. Role of court in administration of trusts.
24    (a) The court may adjudicate any matter arising in the

 

 

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1administration of a trust to the extent its jurisdiction is
2invoked by an interested person or as provided by law.
3    (b) A trust is not subject to continuing judicial
4supervision unless ordered by the court.
5    (c) A judicial proceeding involving a trust may relate to
6any matter involving the trust's administration, including a
7request for instructions.
 
8    Section 202. Jurisdiction over trustee and beneficiary.
9    (a) By accepting the trusteeship of a trust having its
10principal place of administration in this State or by moving
11the principal place of administration to this State, the
12trustee is subject to the jurisdiction of the courts of this
13State regarding any matter involving the trust.
14    (b) With respect to their interests in the trust, the
15beneficiaries of a trust having its principal place of
16administration in this State are subject to the jurisdiction of
17the courts of this State regarding any matter involving the
18trust. By accepting a distribution from such a trust, the
19recipient personally submits to the jurisdiction of the courts
20of this State regarding any matter involving the trust.
21    (c) Service of process upon any person who is subject to
22the jurisdiction of the courts of this State, as provided in
23this Section, may be made by personally serving the summons
24upon the defendant outside this State, as provided in the Code
25of Civil Procedure, with the same force and effect as though

 

 

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1summons had been personally served within this State.
2    (d) This Section does not preclude other methods of
3obtaining jurisdiction over a trustee, beneficiary, or other
4person receiving property from the trust.
 
5    Section 203. (Reserved).
 
6    Section 204. Venue.
7    (a) Except as otherwise provided in subsection (b), venue
8for a judicial proceeding involving a trust is in the county of
9this State in which the trust's principal place of
10administration is or will be located and, if the trust is
11created by will and the estate is not yet closed, in the county
12in which the decedent's estate is being administered.
13    (b) If a trust has no trustee, venue for a judicial
14proceeding for the appointment of a trustee is proper in a
15county of this State in which a beneficiary resides, in a
16county in which any real or tangible trust property is located,
17and if the trust is created by will, in the county in which the
18decedent's estate was or is being administered.
 
19
Article 3. Representation.

 
20    Section 301. Representation: basic effect.
21    (a) Except as provided in Section 602 and subsection (c):
22        (1) Notice, information, accountings, or reports given

 

 

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1    to a person who may represent and bind another person under
2    this Article have the same effect as if given directly to
3    the person represented.
4        (2) Actions, including, but not limited to, the
5    execution of an agreement, taken by a person who may
6    represent and bind another person under this Article are
7    binding on the person represented to the same extent as if
8    the actions had been taken by the person represented.
9    (b) Except as otherwise provided in Section 602, a person
10under this Article who represents a settlor who is
11incapacitated may, on the settlor's behalf: (i) receive notice,
12information, accountings, or reports; (ii) give a binding
13consent; or (iii) enter a binding agreement.
14    (c) A settlor may not represent and bind a beneficiary
15under this Article with respect to a nonjudicial settlement
16agreement under Section 111, the termination or modification of
17a trust under subsection (a) of Section 411, or an exercise of
18the decanting power under Article 12.
19    (d) If pursuant to this Article a person may be represented
20by 2 or more representatives, then the representative who has
21legal capacity, in the following order of priority, shall
22represent and bind the person:
23        (1) a representative or guardian ad litem appointed by
24    a court under Section 305;
25        (2) the holder of a power of appointment under Section
26    302;

 

 

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1        (3) a designated representative under Section 307;
2        (4) a court-appointed guardian of the estate, or, if
3    none, a court-appointed guardian of the person under
4    subsection (b) of Section 303;
5        (5) an agent under a power of attorney for property
6    under subsection (c) of Section 303;
7        (6) a parent of a person under subsection (d) of
8    Section 303;
9        (7) another person having a substantially similar
10    interest with respect to the particular question or dispute
11    under subsection (a) of Section 304; and
12        (8) a representative under this Article for a person
13    who has a substantially similar interest to a person who
14    has a representative under subsection (b) of Section 304.
15    (e) A trustee is not liable for giving notice, information,
16accountings, or reports to a person who is represented by
17another person under this Article, and nothing in this Article
18prohibits the trustee from giving notice, information,
19accountings, or reports to the person represented.
 
20    Section 302. Representation by holders of certain powers.
21    (a) The holder of a testamentary or a presently exercisable
22power of appointment that is: (1) a general power of
23appointment; or (2) exercisable in favor of all persons other
24than the powerholder, the powerholder's estate, a creditor of
25the powerholder, or a creditor of the powerholder's estate, may

 

 

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1represent and bind all persons, including permissible
2appointees and takers in default, whose interests may be
3eliminated by the exercise or nonexercise of the power.
4    (b) To the extent there is no conflict of interest between
5a holder and the persons represented with respect to the
6particular question or dispute, the holder of a testamentary or
7presently exercisable power of appointment, other than a power
8described in subsection (a), may represent and bind all
9persons, including permissible appointees and takers in
10default, whose interests may be eliminated by the exercise or
11nonexercise of the power.
 
12    Section 303. Representation by others.
13    (a) If all qualified beneficiaries of a trust either have
14legal capacity or have representatives under this Article who
15have legal capacity, an action taken by all qualified
16beneficiaries, in each case either by the beneficiary or by the
17beneficiary's representative, shall represent and bind all
18other beneficiaries who have a successor, contingent, future,
19or other interest in the trust.
20    (b) If a person is represented by a court-appointed
21guardian of the estate or, if none, guardian of the person,
22then the guardian may represent and bind the person.
23    (c) If an individual is incapacitated, an agent under a
24power of attorney for property who has authority to act with
25respect to the particular question or dispute and who does not

 

 

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1have a material conflict of interest with respect to the
2particular question or dispute may represent and bind the
3principal. An agent is deemed to have authority under this
4subsection if the power of attorney grants the agent the power
5to settle claims and to exercise powers with respect to trusts
6and estates, even if the powers do not include powers to make a
7will, to revoke or amend a trust, or to require the trustee to
8pay income or principal.
9    (d) If a person is incapacitated, a parent of the person
10may represent and bind the person if there is no material
11conflict of interest between the represented person and either
12of the person's parents with respect to the particular question
13or dispute. If a disagreement arises between parents who
14otherwise qualify to represent a child in accordance with this
15subsection and who are seeking to represent the same child, the
16parent who is a lineal descendant of the settlor of the trust
17that is the subject of the representation is entitled to
18represent the child; or if none, the parent who is a
19beneficiary of the trust is entitled to represent the child.
 
20    Section 304. Representation by person having substantially
21identical interest.
22    (a) To the extent there is no material conflict of interest
23between the representative and the represented beneficiary
24with respect to the particular question or dispute, a
25beneficiary who is incapacitated, unborn, or unascertainable

 

 

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1may, for all purposes, be represented by and bound by another
2beneficiary having a substantially similar interest with
3respect to the particular question or dispute.
4    (b) A guardian, agent, or parent who is the representative
5for a beneficiary under subsection (b), (c), or (d) of Section
6303 may, for all purposes, represent and bind any other
7beneficiary who is incapacitated, unborn, or unascertainable
8and who has an interest, with respect to the particular
9question or dispute, that is substantially similar to the
10interest of the beneficiary represented by the representative,
11but only to the extent that there is no material conflict of
12interest between the beneficiary represented by the
13representative and the other beneficiary with respect to the
14particular question or dispute.
 
15    Section 305. Appointment of representative.
16    (a) If the court determines that representation of an
17incapacitated, unborn, or unascertainable beneficiary might
18otherwise be inadequate, the court may appoint a representative
19for any nonjudicial matter to receive any notice, information,
20accounting, or report on behalf of the beneficiary and to
21represent and bind the beneficiary, or may appoint a guardian
22ad litem in any judicial proceeding to represent the interests
23of, bind, and approve any order or agreement on behalf of the
24beneficiary.
25    (b) A representative may act on behalf of the individual

 

 

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1represented with respect to any matter arising under this Code,
2regardless of whether a judicial proceeding concerning the
3trust or estate is pending.
4    (c) If not precluded by a conflict of interest with respect
5to the particular question or dispute, a representative or
6guardian ad litem may be appointed to represent several persons
7or interests.
8    (d) In giving any consent or agreement, a representative or
9guardian ad litem may consider general family benefit accruing
10to the living members of the family of the person represented.
 
11    Section 306. Representation of charity. If a trust contains
12a charitable interest, the Attorney General's Charitable Trust
13Bureau may, in accordance with this Section, represent, bind,
14and act on behalf of the charitable interest with respect to
15any particular question or dispute, including without
16limitation representing the charitable interest in a
17nonjudicial settlement agreement under Section 111, in an
18agreement to convert a trust to a total return trust under
19Article 11, or in a distribution in further trust under Article
2012. A charitable organization that is specifically named as
21beneficiary of a trust or otherwise has a beneficial interest
22in a trust may act for itself. Notwithstanding any other
23provision, nothing in this Section shall be construed to limit
24or affect the Attorney General's authority to file an action or
25take other steps as he or she deems advisable at any time to

 

 

SB3165- 32 -LRB099 20744 HEP 45399 b

1enforce or protect the general public interest as to a trust
2that provides a beneficial interest or expectancy for one or
3more charitable organizations or charitable purposes whether
4or not a specific charitable organization is named in the
5trust. This Section shall be construed as declarative of
6existing law and not as a new enactment.
 
7    Section 307. Designated representative.
8    (a) If specifically nominated in the trust instrument, one
9or more individuals with legal capacity may be designated to
10represent and bind an individual who is a qualified
11beneficiary. The trust instrument may also authorize any person
12or persons, other than a trustee of the trust, to designate one
13or more individuals with legal capacity to represent and bind
14an individual who is a qualified beneficiary. Any person so
15nominated or designated is referred to in this Section as a
16"designated representative".
17    (b) Notwithstanding subsection (a):
18        (1) A designated representative may not represent and
19    bind a current beneficiary who is age 30 or older and is
20    not incapacitated.
21        (2) A designated representative may not represent and
22    bind a qualified beneficiary while the designated
23    representative is serving as a trustee.
24        (3) Subject to paragraphs (1) and (2) of this
25    subsection (b), a designated representative may not

 

 

SB3165- 33 -LRB099 20744 HEP 45399 b

1    represent and bind a qualified beneficiary if the
2    designated representative is also a qualified beneficiary
3    of the trust, unless:
4            (A) the designated representative was specifically
5        nominated in the trust instrument; or
6            (B) the designated representative is the qualified
7        beneficiary's spouse or a grandparent or descendant of
8        a grandparent of the qualified beneficiary or of the
9        qualified beneficiary's spouse.
10    (c) Each designated representative is a fiduciary of the
11trust subject to the standards applicable to a trustee of a
12trust under applicable law.
13    (d) In no event may a designated representative be relieved
14or exonerated from the duty to act, or withhold from acting, in
15good faith and as the designated representative reasonably
16believes is in the best interest of the represented qualified
17beneficiary.
 
18
Article 4. Creation, validity, modification, and termination
19
of trust.

 
20    Section 401. Methods of creating trust. A trust may be
21created by:
22        (1) transfer of property to another person as trustee
23    during the settlor's lifetime or by will or other
24    disposition taking effect upon the settlor's death;

 

 

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1        (2) declaration by the owner of property that the owner
2    holds identifiable property as trustee; or
3        (3) exercise of a power of appointment in favor of a
4    trustee.
 
5    Section 402. Requirements for creation.
6    (a) A trust is created only if:
7        (1) the settlor has capacity to create a trust;
8        (2) the settlor indicates an intention to create the
9    trust;
10        (3) the trust has a definite beneficiary or is:
11            (A) a charitable trust;
12            (B) a trust for the care of an animal, as provided
13        in Section 408; or
14            (C) a trust for a noncharitable purpose, as
15        provided in Section 409;
16        (4) the trustee has duties to perform; and
17        (5) the same person is not the sole trustee and sole
18    beneficiary.
19    (b) A beneficiary is definite if the beneficiary can be
20ascertained now or in the future, subject to any applicable
21rule against perpetuities.
22    (c) A power in a trustee to select a beneficiary from an
23indefinite class is valid. If the power is not exercised within
24a reasonable time, the power fails and the property subject to
25the power passes to the persons who would have taken the

 

 

SB3165- 35 -LRB099 20744 HEP 45399 b

1property had the power not been conferred.
 
2    Section 403. Trusts created in other jurisdictions. A trust
3not created by will is validly created if its creation complies
4with the law of the jurisdiction in which the trust instrument
5was executed, or the law of the jurisdiction in which, at the
6time of creation:
7        (1) the settlor was domiciled, had a place of abode, or
8    was a national;
9        (2) a trustee was domiciled or had a place of business;
10    or
11        (3) any trust property was located.
 
12    Section 404. Trust purposes. A trust may be created only to
13the extent its purposes are lawful and not contrary to public
14policy.
 
15    Section 405. Charitable purposes; enforcement.
16    (a) A charitable trust may be created for any charitable
17purpose.
18    (b) If the terms of a charitable trust do not indicate a
19particular charitable purpose or beneficiary and do not
20delegate to the trustee or others willing to exercise the
21authority to select one or more charitable purposes or
22beneficiaries, then the court may select one or more charitable
23purposes or beneficiaries. The selection must be consistent

 

 

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1with the settlor's intention to the extent it can be
2ascertained.
3    (c) The settlor of a charitable trust, among others, may
4maintain a proceeding to enforce the trust.
 
5    Section 406. Creation of trust induced by fraud, duress, or
6undue influence. If the creation, amendment, or restatement of
7a trust is procured by fraud, duress, mistake, or undue
8influence, the trust or any part so procured is void. The
9remainder of the trust not procured by such means is valid if
10the remainder is not invalid for other reasons. If the
11revocation of a trust, or any part of the trust, is procured by
12fraud, duress, mistake, or undue influence, the revocation is
13void.
 
14    Section 407. Evidence of oral trust. Except as required by
15a statute other than this Code, a trust need not be evidenced
16by a trust instrument, but the creation of an oral trust and
17its terms may be established only by clear and convincing
18evidence.
 
19    Section 408. Trusts for domestic or pet animals.
20    (a) A trust for the care of one or more designated domestic
21or pet animals is valid. The trust terminates when no living
22animal is covered by the trust. A trust instrument shall be
23liberally construed to bring the transfer within this Section,

 

 

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1to presume against a merely precatory or honorary nature of its
2disposition, and to carry out the general intent of the
3transferor. Extrinsic evidence is admissible in determining
4the transferor's intent.
5    (b) A trust for the care of one or more designated domestic
6or pet animals is subject to the following provisions:
7        (1) Except as expressly provided otherwise in the
8    instrument creating the trust, no portion of the principal
9    or income of the trust may be converted to the use of the
10    trustee or to a use other than for the trust's purposes or
11    for the benefit of a covered animal.
12        (2) Upon termination, the trustee shall transfer the
13    unexpended trust property in the following order:
14            (A) as directed in the trust instrument;
15            (B) to the settlor, if then living;
16            (C) if there is no direction in the trust
17        instrument and if the trust was created in a
18        non-residuary clause in the transferor's will, then
19        under the residuary clause in the transferor's will;
20            (D) to the transferor's heirs under Section 2-1 of
21        the Probate Act of 1975.
22        (3) The intended use of the principal or income may be
23    enforced by an individual designated for that purpose in
24    the trust instrument or, if none, by an individual
25    appointed by a court having jurisdiction of the matter and
26    parties, upon petition to it by an individual.

 

 

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1        (4) Except as ordered by the court or required by the
2    trust instrument, no filing, report, registration,
3    periodic accounting, separate maintenance of funds,
4    appointment, or fee is required by reason of the existence
5    of the fiduciary relationship of the trustee.
6        (5) The court may reduce the amount of the property
7    transferred if it determines that the amount substantially
8    exceeds the amount required for the intended use. The
9    amount of the reduction, if any, passes as unexpended trust
10    property under paragraph (2).
11        (6) If a trustee is not designated or no designated
12    trustee is willing and able to serve, the court shall name
13    a trustee. The court may order the transfer of the property
14    to another trustee if the transfer is necessary to ensure
15    that the intended use is carried out, and if a successor
16    trustee is not designated in the trust instrument or if no
17    designated successor trustee agrees to serve and is able to
18    serve. The court may also make other orders and
19    determinations as are advisable to carry out the intent of
20    the transferor and the purpose of this Section.
21        (7) The trust is exempt from the operation of the
22    common law rule against perpetuities.
 
23    Section 409. Noncharitable trust without ascertainable
24beneficiary.
25    (a) Except as otherwise provided in Section 408 or by

 

 

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1another statute, a trust may be created for a noncharitable
2purpose without a definite or definitely ascertainable
3beneficiary or for a noncharitable but otherwise valid purpose
4to be selected by the trustee.
5    (b) The trust may not be enforced for more than 21 years.
6If the trust is still in existence after 21 years, the trust
7shall terminate. The unexpended trust property shall be
8distributed in the following order:
9        (1) as directed in the trust instrument;
10        (2) to the settlor, if then living;
11        (3) if the trust was created in a non-residuary clause
12    in the settlor's will, then pursuant to the residuary
13    clause in the settlor's will;
14        (4) to the transferor's heirs under Section 2-1 of the
15    Probate Act of 1975.
16    (c) A trust authorized by this Section may be enforced by a
17person appointed in the trust instrument or, if no person is so
18appointed, by a person appointed by the court.
19    (d) Property of a trust authorized by this Section may be
20applied only to its intended use, except to the extent the
21court determines that the value of the trust property exceeds
22the amount required for the intended use. Property not required
23for the intended use must be distributed as provided in
24subsection (b) of this Section.
 
25    Section 410. Modification or termination of trust;

 

 

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1proceedings for approval or disapproval.
2    (a) In addition to the methods of termination prescribed by
3Sections 411 through 414, a trust terminates to the extent the
4trust is revoked or expires pursuant to the trust instrument,
5no purpose of the trust remains to be achieved, or the purposes
6of the trust have become unlawful, contrary to public policy,
7or impossible to achieve.
8    (b) A proceeding to approve or disapprove a proposed
9modification or termination under Sections 411 through 416, or
10trust combination or division under Section 417, may be
11commenced by a trustee or beneficiary. The settlor of a
12charitable trust may maintain a proceeding to modify the trust
13under Section 413.
 
14    Section 411. Modification or termination of noncharitable
15irrevocable trust by consent.
16    (a) A noncharitable irrevocable trust may be terminated
17upon consent of all of the beneficiaries if the court concludes
18that continuance of the trust is not necessary to achieve any
19material purpose of the trust.
20    (b) A noncharitable irrevocable trust may be modified upon
21consent of all of the beneficiaries if the court concludes that
22modification is not inconsistent with any material purpose of
23the trust.
24    (c) The court shall consider spendthrift provisions as a
25factor in making a decision under this Section, but the court

 

 

SB3165- 41 -LRB099 20744 HEP 45399 b

1is not precluded from modifying or terminating a trust because
2the trust contains spendthrift provisions.
3    (d) Upon termination of a trust under subsection (a), the
4trustee shall distribute the trust property as agreed by the
5beneficiaries.
6    (e) If not all of the beneficiaries consent to a proposed
7modification or termination of the trust under subsection (a)
8or (b), the modification or termination may be approved by the
9court if the court is satisfied that:
10        (1) if all of the beneficiaries had consented, the
11    trust could have been modified or terminated under this
12    Section; and
13        (2) a beneficiary who does not consent is treated
14    equitably and consistent with the purposes of the trust.
 
15    Section 412. Modification or termination because of
16unanticipated circumstances or inability to administer trust
17effectively.
18    (a) The court may modify the administrative or dispositive
19terms of a trust or terminate the trust if, because of
20circumstances not anticipated by the settlor, modification or
21termination will further the purposes of the trust. To the
22extent practicable, the modification must be made in accordance
23with the settlor's probable intention.
24    (b) The court may modify the administrative terms of a
25trust if continuation of the trust on its existing terms would

 

 

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1be impracticable or wasteful or impair the trust's
2administration.
3    (c) Upon termination of a trust under this Section, the
4court shall order the distribution of the trust property as
5agreed by the beneficiaries, or if the beneficiaries cannot
6agree, then as the court determines is equitable and consistent
7with the purposes of the trust.
 
8    Section 413. Cy pres.
9    (a) Except as otherwise provided in subsection (b), if a
10particular charitable purpose becomes unlawful, impracticable,
11impossible to achieve, or wasteful:
12        (1) the trust does not fail, in whole or in part;
13        (2) the trust property does not revert to the settlor
14    or the settlor's successors in interest; and
15        (3) the court may apply cy pres to modify or terminate
16    the trust by directing that the trust property be applied
17    or distributed, in whole or in part, in a manner consistent
18    with the settlor's charitable purposes.
19    (b) A provision in the terms of a charitable trust that
20would result in distribution of the trust property to a
21noncharitable beneficiary prevails over the power of the court
22under subsection (a) to apply cy pres to modify or terminate
23the trust only if, when the provision takes effect:
24        (1) the trust property is to revert to the settlor and
25    the settlor is still living; or

 

 

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1        (2) fewer than 21 years have elapsed since the date of
2    the trust's creation.
 
3    Section 414. Modification or termination of uneconomic
4trust.
5    (a) After notice to the qualified beneficiaries, the
6trustee of a trust consisting of trust property having a total
7value less than $100,000 may terminate the trust if the trustee
8concludes that the costs of continuing the trust will
9substantially impair accomplishment of the purpose of the
10trust.
11    (b) The court may modify or terminate a trust or remove the
12trustee and appoint a different trustee if it determines that
13the value of the trust property is insufficient to justify the
14cost of administration.
15    (c) Upon termination of a trust under this Section, the
16trustee shall distribute the trust property to the current
17beneficiaries in the proportions to which they are entitled to
18mandatory current distributions, or if their interests are
19indefinite, to the current beneficiaries per stirpes if they
20have a common ancestor, or if not, then in equal shares. The
21trustee shall give notice to the current beneficiaries at least
2230 days prior to the effective date of the termination.
23    (d) This Section does not apply to an easement for
24conservation or preservation.
25    (e) If a particular trustee is a current beneficiary of the

 

 

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1trust or is legally obligated to a current beneficiary, then
2that particular trustee may not participate as a trustee in the
3exercise of this termination power; provided, however, that if
4the trust has one or more cotrustees who are not so
5disqualified from participating, the cotrustee or cotrustees
6may exercise this power.
7    (f) This Section does not apply to the extent that it would
8cause a trust otherwise qualifying for a federal or state tax
9benefit or other benefit not to qualify, nor does it apply to
10trusts for domestic or pet animals.
 
11    Section 415. Reformation to correct mistakes. The court may
12reform the terms of a trust, even if unambiguous, to conform
13the terms to the settlor's intention if it is proved by clear
14and convincing evidence what the settlor's intention was and
15that the terms of the trust instrument were affected by a
16mistake of fact or law, whether in expression or inducement.
 
17    Section 416. Modification to achieve settlor's tax
18objectives. To achieve the settlor's tax objectives, the court
19may modify the terms of a trust in a manner that is not
20contrary to the settlor's probable intention. The court may
21provide that the modification has retroactive effect.
 
22    Section 417. Combination and division of trusts.
23    (a) Subject to subsections (b), (c), and (d) of this

 

 

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1Section, after notice to the qualified beneficiaries, a trustee
2may:
3        (1) consolidate 2 or more trusts having substantially
4    similar terms into a single trust;
5        (2) sever any trust estate on a fractional basis into 2
6    or more separate trusts; and
7        (3) segregate by allocation to a separate account or
8    trust a specific amount or specific property.
9    (b) No consolidation, severance, or segregation may be made
10if the result impairs the rights of any beneficiary or
11adversely affects achievement of the material purposes of the
12subject trust or trusts.
13    (c) A severance or consolidation may be made for any reason
14including to reflect a partial disclaimer, to reflect
15differences in perpetuities periods, to reflect or result in
16differences in federal or state tax attributes, to satisfy any
17federal tax requirement or election, or to reduce potential
18generation-skipping transfer tax liability, and shall be made
19in a manner consistent with the rules governing disclaimers,
20federal tax attributes, requirements or elections, or any
21applicable federal or state tax rules or regulations.
22    (d) A separate account or trust created by severance or
23segregation:
24        (1) shall be treated as a separate trust for all
25    purposes on and after the effective date of the severance
26    or segregation; and

 

 

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1        (2) shall be held on terms and conditions that are
2    substantially equivalent to the terms of the trust from
3    which it was severed or segregated so that the aggregate
4    interests of each beneficiary in the several trusts are
5    substantially equivalent to the beneficiary's interests in
6    the trust before severance, except that any terms of the
7    trust before severance that would affect the perpetuities
8    period or qualification of the trust for any federal or
9    state tax deduction, exclusion, election, exemption, or
10    other special federal or state tax status must remain
11    identical in each of the separate trusts created.
12    (e) Income earned on a severed or segregated amount or
13property after severance or segregation occurs shall pass to
14the designated taker of the amount or property.
15    (f) In managing, investing, administering, and
16distributing the trust property of any separate account or
17trust and in making applicable federal or state tax elections,
18the trustee may consider the differences in federal or state
19tax attributes and all other factors the trustee believes
20pertinent and may make disproportionate distributions from the
21separate accounts or trusts.
 
22
Article 5. Creditor's claims; spendthrift and discretionary
23
trusts.

 
24    Section 501. Rights of beneficiary's creditor or assignee.

 

 

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1Except as provided in Section 504, to the extent a
2beneficiary's interest is not subject to a spendthrift
3provision, the court may authorize a creditor or assignee of
4the beneficiary to reach the beneficiary's interest by
5attachment of present or future distributions to or for the
6benefit of the beneficiary or other means. The court may limit
7the award to such relief as is appropriate under the
8circumstances.
 
9    Section 502. Spendthrift provision.
10    (a) A spendthrift provision is valid only if it prohibits
11both voluntary and involuntary transfer of a beneficiary's
12interest.
13    (b) A term of a trust providing that the interest of a
14beneficiary is held subject to a "spendthrift trust", or words
15of similar import, is sufficient to restrain both voluntary and
16involuntary transfer of the beneficiary's interest.
17    (c) A beneficiary may not transfer an interest in a trust
18in violation of a valid spendthrift provision and, except as
19otherwise provided in this Article, a creditor or assignee of
20the beneficiary may not reach the interest or a distribution by
21the trustee before its receipt by the beneficiary.
22    (d) A valid spendthrift provision does not prevent the
23appointment of interests through the exercise of a power of
24appointment.
 

 

 

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1    Section 503. Exceptions to spendthrift provision.
2    (a) In this Section, "child" includes any person for whom
3an order or judgment for child support has been entered in this
4or another state.
5    (b) A spendthrift provision is unenforceable against:
6        (1) a beneficiary's child, spouse, or former spouse who
7    has a judgment or court order against the beneficiary for
8    child support obligations owed by the beneficiary as
9    provided in the Income Withholding for Support Act, the
10    Non-Support Punishment Act, the Illinois Parentage Act of
11    2015, the Illinois Marriage and Dissolution of Marriage
12    Act, and similar provisions of other Acts that provide for
13    the support of a child;
14        (2) a judgment creditor who has provided services for
15    the protection of a beneficiary's interest in the trust;
16    and
17        (3) a claim of this State or the United States to the
18    extent a statute of this State or federal law so provides.
19    (c) Except as otherwise provided in this subsection and in
20Section 504, a claimant against which a spendthrift provision
21cannot be enforced may obtain from a court an order attaching
22present or future distributions to or for the benefit of the
23beneficiary. The court may limit the award to such relief as is
24appropriate under the circumstances. Notwithstanding this
25subsection, the remedies provided in this subsection apply to a
26claim for unpaid child support obligations by a beneficiary's

 

 

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1child, spouse, former spouse, judgment creditor, or claim
2described in subsection (b) only as a last resort upon an
3initial showing that traditional methods of enforcing the claim
4are insufficient.
 
5    Section 504. Discretionary distributions; effect of
6standard.
7    (a) As used in this Section, "discretionary distribution"
8means a distribution that is subject to the trustee's
9discretion regardless of whether the discretion is expressed in
10the form of a standard of distribution and regardless of
11whether the trustee has abused the discretion.
12    (b) Regardless of whether a trust contains a spendthrift
13provision, and regardless of whether the beneficiary is acting
14as trustee, if a trustee may make discretionary distributions
15to or for the benefit of a beneficiary, a creditor of the
16beneficiary, including a creditor described in subsection (b)
17of Section 503, may not:
18        (1) compel a distribution that is subject to the
19    trustee's discretion; or
20        (2) obtain from a court an order attaching present or
21    future distributions to or for the benefit of the
22    beneficiary, except as provided in Section 2-1403 of the
23    Code of Civil Procedure.
24    (c) If the trustee's discretion to make distributions for
25the trustee's own benefit is limited by an ascertainable

 

 

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1standard, a creditor may not reach or compel distribution of
2the beneficial interest except to the extent the interest would
3be subject to the creditor's claim were the beneficiary not
4acting as trustee.
5    (d) This Section does not limit the right of a beneficiary
6to maintain a judicial proceeding against a trustee for an
7abuse of discretion or failure to comply with a standard for
8distribution.
 
9    Section 505. Creditor's claim against settlor.
10    (a) Whether or not the terms of a trust contain a
11spendthrift provision, the following rules apply:
12        (1) During the lifetime of the settlor, the property of
13    a revocable trust is subject to claims of the settlor's
14    creditors to the extent the property would not otherwise be
15    exempt by law if owned directly by the settlor.
16        (2) With respect to an irrevocable trust, a creditor or
17    assignee of the settlor may reach the maximum amount that
18    can be distributed to or for the settlor's benefit. If a
19    trust has more than one settlor, the amount the creditor or
20    assignee of a particular settlor may reach may not exceed
21    the settlor's interest in the portion of the trust
22    attributable to that settlor's contribution.
23        (3) Notwithstanding the provisions of paragraph (2),
24    the assets of an irrevocable trust may not be subject to
25    the claims of an existing or subsequent creditor or

 

 

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1    assignee of the settlor, in whole or in part, solely
2    because of the existence of a discretionary power granted
3    to the trustee by the terms of the trust instrument, or any
4    other provision of law, to pay directly to the taxing
5    authorities or to reimburse the settlor for any tax on
6    trust income or principal that is payable by the settlor
7    under the law imposing the tax.
8        (4) Paragraph (2) does not apply to the assets of an
9    irrevocable trust established for the benefit of a person
10    with a disability that meets the requirements of 42 U.S.C.
11    1396p(d)(4) or similar federal law governing the transfer
12    to such a trust.
13        (5) After the death of a settlor, and subject to the
14    settlor's right to direct the source from which liabilities
15    will be paid, the property of a trust that was revocable at
16    the settlor's death is subject to claims of the settlor's
17    creditors, costs of administration of the settlor's
18    estate, the expenses of the settlor's funeral and disposal
19    of remains, and statutory allowances to a surviving spouse
20    and children to the extent the settlor's probate estate is
21    inadequate to satisfy those claims, costs, expenses, and
22    allowances. Distributees of the trust take property
23    distributed after payment of such claims; subject to the
24    following conditions:
25            (A) sums recovered by the personal representative
26        of the settlor's estate must be administered as part of

 

 

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1        the decedent's probate estate, and the liability
2        created by this subsection does not apply to any assets
3        to the extent that the assets are otherwise exempt
4        under the laws of this State or under federal law;
5            (B) with respect to claims, expenses, and taxes in
6        connection with the settlement of the settlor's
7        estate, any claim of a creditor that would be barred
8        against the personal representative of a settlor's
9        estate or the estate of the settlor is barred against
10        the trust property of a trust that was revocable at the
11        settlor's death, the trustee of the revocable trust,
12        and the beneficiaries of the trust; and
13            (C) Sections 18-10 and 18-13 of the Probate Act of
14        1975, detailing the classification and priority of
15        payment of claims, expenses, and taxes from the probate
16        estate of a decedent, or comparable provisions of the
17        law of the deceased settlor's domicile at death if not
18        Illinois, apply to a revocable trust to the extent the
19        assets of the settlor's probate estate are inadequate
20        and the personal representative or creditor or taxing
21        authority of the settlor's estate has perfected its
22        right to collect from the settlor's revocable trust.
23        (6) After the death of a settlor, a trustee of a trust
24    that was revocable at the settlor's death is released from
25    liability under this Section for any assets distributed to
26    the trust's beneficiaries in accordance with the governing

 

 

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1    trust instrument if:
2            (A) the trustee made the distribution 6 months or
3        later after the settlor's death; and
4            (B) the trustee did not receive a written notice
5        from the decedent's personal representative asserting
6        that the decedent's probate estate is or may be
7        insufficient to pay allowed claims or, if the trustee
8        received such a notice, the notice was withdrawn by the
9        personal representative or revoked by the court before
10        the distribution.
11    (b) For purposes of this Section:
12        (1) during the period the power may be exercised, the
13    holder of a power of withdrawal is treated in the same
14    manner as the settlor of a revocable trust to the extent of
15    the property subject to the power; and
16        (2) upon the lapse, release, or waiver of the power,
17    the holder is treated as the settlor of the trust only to
18    the extent the value of the property affected by the lapse,
19    release, or waiver exceeds the greater of the amount
20    specified in Section 2041(b)(2) or 2514(e) of the Internal
21    Revenue Code.
 
22    Section 506. Overdue distribution.
23    (a) In this Section, "mandatory distribution" means a
24distribution of income or principal that the trustee is
25required to make to a beneficiary under the trust instrument,

 

 

SB3165- 54 -LRB099 20744 HEP 45399 b

1including a distribution upon termination of the trust. The
2term does not include a distribution subject to the exercise of
3the trustee's discretion even if (1) the discretion is
4expressed in the form of a standard of distribution, or (2) the
5terms of the trust instrument authorizing a distribution couple
6language of discretion with language of direction.
7    (b) Whether or not a trust contains a spendthrift
8provision, a creditor or assignee of a beneficiary may reach a
9mandatory distribution of income or principal, including a
10distribution upon termination of the trust, if the trustee has
11not made the distribution to the beneficiary within a
12reasonable time after the designated distribution date.
 
13    Section 507. Personal obligations of trustee. Trust
14property is not subject to personal obligations of the trustee,
15even if the trustee becomes insolvent or bankrupt.
 
16    Section 508. Lapse of power to withdraw. A beneficiary of a
17trust may not be considered to be a settlor or to have made a
18transfer to the trust merely because of a lapse, release, or
19waiver of his or her power of withdrawal to the extent that the
20value of the affected property does not exceed the greatest of
21the amounts specified in Sections 2041(b)(2), 2514(e), and
222503(b) of the Internal Revenue Code.
 
23    Section 509. Trust for disabled beneficiary.

 

 

SB3165- 55 -LRB099 20744 HEP 45399 b

1    (a) In this Section, "discretionary trust" means a trust in
2which the trustee has discretionary power to determine
3distributions to be made under the trust.
4    (b) A discretionary trust for the benefit of an individual
5who is incapacitated other than by reason of being a minor or
6an individual whose location is uncertain, or who otherwise has
7a disability that substantially impairs the individual's
8ability to provide for his or her own care or custody and
9constitutes a substantial disability, is not be liable to pay
10or reimburse this State or any public agency for financial aid
11or services to the individual except to the extent the trust
12was created by the individual or trust property has been
13distributed directly to or is otherwise under the control of
14the individual, except that this exception does not apply to a
15trust created with the individual with a disability's own
16property or property within his or her control if the trust
17complies with Medicaid reimbursement requirements of federal
18law. Notwithstanding any other provisions, a trust created with
19the individual with a disability's own property or property
20within his or her control is liable, after the reimbursement of
21Medicaid expenditures, to this State for reimbursement of any
22other service charges outstanding at the death of the
23individual with a disability. Property, goods, and services
24purchased or owned by a trust for and used or consumed by a
25beneficiary with a disability shall not be considered trust
26property distributed to or under the control of the

 

 

SB3165- 56 -LRB099 20744 HEP 45399 b

1beneficiary.
 
2
Article 6. Revocable trusts.

 
3    Section 601. Capacity of settlor of revocable trust. The
4capacity required of the settlor to create, amend, revoke in
5whole or in part, or add property to a revocable trust is the
6same as that required to make a will.
 
7    Section 602. Revocation or amendment of revocable trust.
8    (a) The settlor may revoke a trust only if the trust
9instrument expressly provides that the trust is revocable or
10that the settlor has an unrestricted power of amendment. The
11settlor may amend a trust only if the trust expressly provides
12that the trust is revocable or amendable by the settlor.
13    (b) If a revocable trust has more than one settlor:
14        (1) to the extent the trust consists of community
15    property, the trust may be revoked by either spouse acting
16    alone but may be amended only by joint action of both
17    spouses;
18        (2) to the extent the trust consists of property other
19    than community property, each settlor may revoke or amend
20    the trust only with regard to the portion of the trust
21    property attributable to that settlor's contribution; and
22        (3) upon the revocation or amendment of the trust by
23    fewer than all of the settlors, the trustee shall promptly

 

 

SB3165- 57 -LRB099 20744 HEP 45399 b

1    notify the other settlors of the revocation or amendment.
2    (c) The settlor may revoke or amend a revocable trust
3instrument:
4        (1) by substantially complying with a method provided
5    in the trust instrument; or
6        (2) if the trust instrument does not provide a method
7    or the method provided in the terms is not expressly made
8    exclusive, by a later instrument in writing other than a
9    will, signed by the settlor and specifically referring to
10    the trust.
11    (d) Upon revocation of a revocable trust, the trustee shall
12deliver the trust property to the settlor or as the settlor
13directs.
14    (e) A settlor's powers with respect to revocation,
15amendment, or distribution of trust property may not be
16exercised by an agent under a power of attorney unless
17expressly authorized by the power and not prohibited by the
18trust instrument.
19    (f) A guardian of the estate of the settlor, if any, or a
20guardian of the person of the settlor may not exercise a
21settlor's powers with respect to revocation, amendment, or
22distribution of trust property unless ordered by the court
23supervising the guardianship.
24    (g) A trustee who does not know that a trust has been
25revoked or amended is not liable for distributions made and
26other actions taken or not taken on the assumption that the

 

 

SB3165- 58 -LRB099 20744 HEP 45399 b

1trust had not been amended or revoked.
 
2    Section 603. Settlor's powers; powers of withdrawal.
3    (a) While a trust is revocable, and the settlor personally
4has capacity to revoke the trust, rights of the beneficiaries
5are subject to the control of, and the duties of the trustee
6are owed exclusively to, the settlor.
7    (b) While a trust is revocable but the settlor does not
8personally have the capacity to revoke the trust, the duties of
9the trustee are owed only to the settlor and current
10beneficiaries. If the settlor is a beneficiary, the settlor's
11interests as a beneficiary take priority over the interests of
12all other beneficiaries.
13    (c) Except as provided in subsection (d), only the settlor,
14a representative of the settlor under Article 3 during the
15settlor's lifetime if the settlor is incapacitated, and the
16representative of the settlor's estate after the settlor's
17death have standing to contest, challenge, or bring any
18proceeding in any court regarding any action of the trustee of
19a revocable trust taken or not taken while the trust is
20revocable.
21    (d) An individual who is or was a current beneficiary
22during the settlor's lifetime, a representative of such an
23individual under Article 3 or the representative of such
24individual's estate after the individual's death, has standing
25to contest, challenge, or bring any proceeding in any court

 

 

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1regarding any action of the trustee of a revocable trust while
2the trust is revocable but the settlor does not personally have
3capacity to revoke the trust, but only to the extent the action
4of the trustee affects the interest of the individual as a
5current beneficiary of the trust during the lifetime of the
6settlor while the settlor does not personally have the capacity
7to revoke the trust.
8    (e) The holder of a non-lapsing power of withdrawal, during
9the period the power may be exercised, has the rights of a
10settlor of a revocable trust to the extent of the property
11subject to the power.
 
12    Section 604. Limitation on action contesting validity of
13revocable trust; distribution of trust property.
14    (a) A person may commence a judicial proceeding to contest
15the validity of a trust that was revocable at the settlor's
16death only within the earlier of:
17        (1) 2 years after the settlor's death; or
18        (2)(A) in the case of a trust to which a legacy is
19    provided by the settlor's will that is admitted to probate,
20    the time to contest the validity of the settlor's will as
21    provided in the Probate Act of 1975; or
22        (B) in the case of a trust other than a trust described
23    in subdivision (A), 6 months after the trustee sent the
24    person a copy of the trust instrument and a notice
25    informing the person of the trust's existence, of the

 

 

SB3165- 60 -LRB099 20744 HEP 45399 b

1    trustee's name and address, and of the 6 month period
2    allowed for commencing a proceeding.
3    (b) Nine months after the death of the settlor of a trust
4that was revocable at the settlor's death, the trustee may
5proceed to distribute the trust property in accordance with the
6trust instrument. The trustee is not subject to liability for
7doing so unless:
8        (1) the trustee knows of a pending judicial proceeding
9    contesting the validity of the trust; or
10        (2) a potential contestant has notified the trustee of
11    a possible judicial proceeding to contest the trust and a
12    judicial proceeding is commenced within 60 days after the
13    contestant sent the notification.
14    (c) A beneficiary of a trust that was revocable at the
15settlor's death that is determined to have been invalid is
16liable to return any distribution received and all income and
17appreciation associated with the distribution from the date of
18receipt until the date of return of the distribution.
 
19    Section 605. Revocation of provisions in revocable trust by
20divorce or annulment
21    (a) As used in this Section:
22        (1) "Judicial termination of marriage" includes, but
23    is not limited to, divorce, dissolution, annulment or
24    declaration of invalidity of marriage.
25        (2) "Provision pertaining to the settlor's former

 

 

SB3165- 61 -LRB099 20744 HEP 45399 b

1    spouse" includes, but is not limited to, every present or
2    future gift or interest or power of appointment given to
3    the settlor's former spouse or right of the settlor's
4    former spouse to serve in a fiduciary capacity.
5        (3) "Trust" means a trust created by a nontestamentary
6    instrument executed after January 1, 1982.
7        (4) Notwithstanding the definition of "revocable" in
8    Section 103, a provision is revocable by the settlor if the
9    settlor has the power at the time of the entry of the
10    judgment or judicial termination of marriage of the settlor
11    to revoke, modify, or amend the provision, either alone or
12    in conjunction with any other person or persons.
13    (b) Unless the trust instrument or the judgment of judicial
14termination of marriage expressly provides otherwise, judicial
15termination of marriage of the settlor of a trust revokes every
16provision that is revocable by the settlor pertaining to the
17settlor's former spouse in a trust instrument or amendment
18executed by the settlor before the entry of the judgment of
19judicial termination of marriage of the settlor and any such
20trust shall be administered and construed as if the settlor's
21former spouse had died upon entry of the judgment of judicial
22termination of marriage.
23    (c) A trustee who has no actual knowledge of a judgment of
24judicial termination of marriage of the settlor is not liable
25for any action taken or omitted in good faith on the assumption
26that the settlor is married. The preceding sentence is intended

 

 

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1to affect only the liability of the trustee and shall not
2affect the disposition of beneficial interests in any trust.
3    (d) Notwithstanding Section 102, the provisions of this
4Section may be made applicable by specific reference in the
5trust instrument to this Section in any (1) land trust; (2)
6voting trust; (3) security instrument such as a trust deed or
7mortgage; (4) liquidation trust; (5) escrow; (6) instrument
8under which a nominee, custodian for property or paying or
9receiving agent is appointed; or (7) trust created by a deposit
10arrangement in a bank or savings institution, commonly known as
11"Totten Trust".
12    (e) If provisions of a trust are revoked solely by this
13Section, they are revived by the settlor's remarriage to the
14former spouse.
 
15
Article 7. Office of trustee.

 
16    Section 701. Accepting or declining trusteeship.
17    (a) Except as otherwise provided in subsection (c), a
18person designated as trustee accepts the trusteeship:
19        (1) by substantially complying with a method of
20    acceptance provided in the trust instrument; or
21        (2) if the trust instrument does not provide a method
22    or the method provided in the trust instrument is not
23    expressly made exclusive, by accepting delivery of the
24    trust property, exercising powers or performing duties as

 

 

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1    trustee, or otherwise indicating acceptance of the
2    trusteeship.
3    (b) A person designated as trustee who has not yet accepted
4the trusteeship may decline the trusteeship. A designated
5trustee who does not accept the trusteeship within 120 days
6after receiving notice of the designation is deemed to have
7declined the trusteeship.
8    (c) A person designated as trustee, without accepting the
9trusteeship, may, but need not:
10        (1) act to preserve the trust property if, within 120
11    days after receiving notice of the designation, the person
12    sends a declination of the trusteeship to the settlor or,
13    if the settlor is deceased or incapacitated, to the
14    qualified beneficiaries; and
15        (2) inspect or investigate trust property to determine
16    potential liability under environmental or other law or for
17    any other purpose.
18    (d) A person acting under subsection (c) is not liable for
19actions taken in good faith.
 
20    Section 702. Trustee's bond. A trustee is not required to
21give bond to secure performance of the trustee's duties unless
22bond is required by the trust instrument and the court has not
23dispensed with the requirement.
 
24    Section 703. Cotrustees.

 

 

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1    (a) Cotrustees who are unable to reach a unanimous decision
2may act by majority decision after prior written notice to, or
3written waiver of notice by, each other cotrustee.
4    (b) If a vacancy occurs in a cotrusteeship, subsection (b)
5of Section 704 applies.
6    (c) A cotrustee must participate in the performance of a
7trustee's function unless the cotrustee is unavailable to
8perform the function because of absence, illness,
9disqualification under other law, or other temporary
10incapacity or the cotrustee has properly delegated the
11performance of the function to another trustee.
12    (d) If a cotrustee is unavailable to perform duties because
13of absence, illness, disqualification under other law, or other
14temporary incapacity, and prompt action is necessary to achieve
15the purposes of the trust or to avoid injury to the trust
16property, the remaining cotrustee or a majority of the
17remaining cotrustees may act for the trust.
18    (e) A trustee may delegate to a cotrustee for any period of
19time any or all of the trustee's rights, powers, and duties.
20Unless a delegation was irrevocable, a trustee may revoke a
21delegation previously made.
22    (f) Except as otherwise provided in subsection (g), a
23trustee who is not qualified to participate in an action or who
24does not join in an action of another trustee is not liable for
25the action.
26    (g) Each trustee who is not an excluded fiduciary under

 

 

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1Section 808 shall exercise reasonable care to:
2        (1) prevent a cotrustee from committing a serious
3    breach of trust; and
4        (2) compel a cotrustee to redress a serious breach of
5    trust.
6    (h) A dissenting trustee who joins in an action at the
7direction of the majority of the trustees and who notified any
8cotrustee of the dissent at or before the time of the action is
9not liable for the action unless the action is a serious breach
10of trust.
 
11    Section 704. Vacancy in trusteeship; appointment of
12successor.
13    (a) A vacancy in a trusteeship occurs if:
14        (1) a person designated as trustee declines the
15    trusteeship;
16        (2) a person designated as trustee cannot be identified
17    or does not exist;
18        (3) a trustee resigns;
19        (4) a trustee is disqualified or removed;
20        (5) a trustee dies;
21        (6) a guardian is appointed for an individual serving
22    as trustee; or
23        (7) an individual serving as trustee becomes
24    incapacitated.
25    (b) If one or more cotrustees remain in office, a vacancy

 

 

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1in a trusteeship need not be filled and the remaining
2cotrustees or trustee may act for the trust. A vacancy in a
3trusteeship must be filled if the trust has no remaining
4trustee, or if the existing vacancy impairs the administration
5of the trust as determined by the remaining trustees.
6    (c) A vacancy in a trusteeship of a trust that is required
7to be filled must be filled in the following order of priority:
8        (1) by a person designated in accordance with the trust
9    instrument to act as successor trustee;
10        (2) by a person appointed by a majority of the
11    beneficiaries who are distributees or permissible
12    distributees of trust income; or
13        (3) by a person appointed by the court.
14    (d) If a trust contains a charitable interest, then the
15appointment of a successor trustee provided under paragraph (2)
16of subsection (c) of this Section shall not take effect until
1730 days after written notice is delivered to the Attorney
18General's Charitable Trust Bureau. The Attorney General's
19Charitable Trust Bureau may waive this notice requirement.
 
20    Section 705. Resignation of trustee.
21    (a) A trustee may resign:
22        (1) upon notice to the settlor, if living, to the
23    beneficiaries who are distributees or permissible
24    distributees of trust income, and all cotrustees; or
25        (2) with the approval of the court.

 

 

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1    (b) In approving a resignation, the court may issue orders
2and impose conditions reasonably necessary for the protection
3of the trust property.
4    (c) Any liability of a resigning trustee or of any sureties
5on the trustee's bond for acts or omissions of the trustee is
6not discharged or affected by the trustee's resignation.
 
7    Section 706. Removal of trustee.
8    (a) A settlor, a cotrustee, or a qualified beneficiary may
9request the court to remove a trustee, or a trustee may be
10removed by the court on its own initiative.
11    (b) The court may remove a trustee if:
12        (1) the trustee has committed a serious breach of
13    trust;
14        (2) lack of cooperation among cotrustees substantially
15    impairs the administration of the trust;
16        (3) because of unfitness, unwillingness, or persistent
17    failure of the trustee to administer the trust effectively,
18    the court determines that removal of the trustee best
19    serves the purposes of the trust and the interests of the
20    beneficiaries; or
21        (4) there has been a substantial change of
22    circumstances or removal is requested by all of the
23    qualified beneficiaries, the court finds that removal of
24    the trustee best serves the interests of all of the
25    beneficiaries and is not inconsistent with any material

 

 

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1    purpose of the trust, and a suitable cotrustee or successor
2    trustee is available.
3    (c) Pending a final decision on a request to remove a
4trustee, or in lieu of or in addition to removing a trustee,
5the court may order such appropriate relief under subsection
6(b) of Section 1001 as may be necessary to protect the trust
7property or the interests of the beneficiaries.
 
8    Section 707. Delivery of property by former trustee.
9    (a) Unless a cotrustee remains in office or the court
10otherwise orders, and until the trust property is delivered to
11a successor trustee or other person entitled to it, a trustee
12who has resigned or been removed has the duties of a trustee
13and the powers necessary to protect the trust property.
14    (b) A trustee who has resigned or been removed shall
15proceed expeditiously to deliver the trust property within the
16trustee's possession to the cotrustee, successor trustee, or
17other person entitled to it.
 
18    Section 708. Compensation of trustee.
19    (a) If the trust instrument does not specify the trustee's
20compensation, a trustee is entitled to compensation that is
21reasonable under the circumstances.
22    (b) If the trust instrument specifies the trustee's
23compensation, the trustee is entitled to be compensated as
24specified, but the court may allow more or less compensation

 

 

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1if:
2        (1) the duties of the trustee are substantially
3    different from those contemplated when the trust was
4    created; or
5        (2) the compensation specified by the trust instrument
6    would be unreasonably low or high.
 
7    Section 709. Reimbursement of expenses.
8    (a) A trustee is entitled to be reimbursed out of the trust
9property, with interest as appropriate, for:
10        (1) expenses that were properly incurred in the
11    administration and protection of the trust; and
12        (2) to the extent necessary to prevent unjust
13    enrichment of the trust, expenses that were not properly
14    incurred in the administration of the trust.
15    (b) An advance by the trustee of money for the protection
16of the trust gives rise to a right to reimbursement with
17reasonable interest.
 
18
Article 8. Duties and powers of trustee.

 
19    Section 801. Duty to administer trust. Upon acceptance of a
20trusteeship, the trustee shall administer the trust in good
21faith, in accordance with its purposes and the terms of the
22trust instrument, and in accordance with this Code.
 

 

 

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1    Section 802. Duty of loyalty.
2    (a) Subject to the rights of persons dealing with or
3assisting the trustee as provided in Section 1012, a sale,
4encumbrance, or other transaction involving the investment or
5management of trust property entered into by the trustee for
6the trustee's own personal account or that is otherwise
7affected by a conflict between the trustee's fiduciary and
8personal interests is voidable by a beneficiary affected by the
9transaction unless:
10        (1) the transaction was authorized by the trust
11    instrument or applicable law;
12        (2) the transaction was approved by the court or by
13    nonjudicial settlement agreement in accordance with
14    Section 111;
15        (3) the beneficiary did not commence a judicial
16    proceeding within the time allowed by Section 1005;
17        (4) the beneficiary consented to the trustee's
18    conduct, ratified the transaction, or released the trustee
19    in compliance with Section 1009; or
20        (5) the transaction involves a contract entered into or
21    claim acquired by the trustee before the person became or
22    contemplated becoming trustee.
23    (b) A sale, encumbrance, or other transaction involving the
24investment or management of trust property is presumed to be
25affected by a conflict between personal and fiduciary interests
26if it is entered into by the trustee with:

 

 

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1        (1) the trustee's spouse;
2        (2) the trustee's descendants, siblings, parents, or
3    their spouses; or
4        (3) a corporation or other person or enterprise in
5    which the trustee, or a person that owns a significant
6    interest in the trustee, has an interest that might affect
7    the trustee's best judgment, except as otherwise
8    authorized by law.
9    (c) A transaction between a trustee and a beneficiary that
10does not concern trust property, that occurs during the
11existence of the trust and from which the trustee obtains an
12advantage, is voidable by the beneficiary unless the trustee
13establishes that the transaction was fair to the beneficiary.
14    (d) A transaction not concerning trust property in which
15the trustee engages in the trustee's individual capacity
16involves a conflict between personal and fiduciary interests if
17the transaction concerns an opportunity properly belonging to
18the trust.
19    (e) An investment by a trustee in securities of an
20investment company or investment trust to which the trustee, or
21its affiliate, provides services in a capacity other than as
22trustee is not presumed to be affected by a conflict between
23personal and fiduciary interests if the investment otherwise
24complies with the prudent investor rule. In addition to its
25compensation for acting as trustee, the trustee may be
26compensated by the investment company or investment trust for

 

 

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1providing those services out of fees charged to the trust so
2long as the total compensation paid by the trust as trustee's
3fees and mutual fund or other investment fees is reasonable.
4    (f) In voting shares of stock or in exercising powers of
5control over similar interests in other forms of enterprise,
6the trustee shall act in the best interests of the
7beneficiaries.
8    (g) This Section does not preclude the following
9transactions, if fair to the beneficiaries:
10        (1) an agreement between a trustee and a beneficiary
11    relating to the appointment or compensation of the trustee;
12        (2) payment of reasonable compensation to the trustee;
13        (3) a transaction between a trust and another trust,
14    decedent's estate, or guardianship of which the trustee is
15    a fiduciary or in which a beneficiary has an interest;
16        (4) the entry of an agreement for a bank or other
17    deposit account, safe deposit box, custodian, agency, or
18    depository arrangement for all or any part of the trust
19    property, including an agreement for services provided by a
20    bank operated by or affiliated with the trustee, and the
21    payment of reasonable compensation for those services,
22    including compensation to the bank operated by or
23    affiliated with the trustee, except that nothing in this
24    paragraph shall be construed as removing any depository
25    arrangements from the requirements of the prudent investor
26    rule; or

 

 

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1        (5) an advance by the trustee of money for the
2    protection of the trust.
3    (h) The court may appoint a special fiduciary to make a
4decision with respect to any proposed transaction that might
5violate this Section if entered into by the trustee.
 
6    Section 803. Impartiality.
7    (a) If a trust has 2 or more beneficiaries, the trustee
8shall act impartially in investing, managing, and distributing
9the trust property giving due regard to the beneficiaries
10respective interests. The trustee must treat the beneficiaries
11equitably in light of the purposes and terms of the trust,
12including any manifestation of an intention to favor one or
13more beneficiaries.
14    (b) In a judicial proceeding a trustee may, but need not,
15present the trustee's opinions and reasons:
16        (1) for supporting or opposing any part or all of the
17    court findings, orders, or instructions sought by any party
18    to the proceeding, including without limitation whether
19    any proposed action or inaction would enable the trustee to
20    better carry out the purposes of the trust; and
21        (2) about any other matters relevant to the proceeding.
22    (c) A trustee's actions in accordance with subsection (b)
23shall not be deemed improper or inconsistent with the trustee's
24duty of impartiality unless the court finds from all of the
25evidence that the trustee acted in bad faith.
 

 

 

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1    Section 804. Prudent administration. A trustee shall
2administer the trust as a prudent person would, by considering
3the purposes, terms, distribution requirements, and other
4circumstances of the trust. In satisfying this standard, the
5trustee shall exercise reasonable care, skill, and caution.
 
6    Section 805. Costs of administration. In administering a
7trust, the trustee may incur only costs that are reasonable in
8relation to the trust property and the purposes of the trust.
 
9    Section 806. (Reserved).
 
10    Section 807. Delegation by trustee.
11    (a) Except as provided in subsection (b), the trustee has a
12duty not to delegate to others the performance of any acts
13involving the exercise of judgment and discretion.
14    (b) A trustee may delegate duties and powers that a prudent
15trustee of comparable skills could properly delegate under the
16circumstances. The trustee shall exercise reasonable care,
17skill, and caution in:
18        (1) selecting an agent;
19        (2) establishing the scope and terms of the delegation,
20    consistent with the purposes of the trust and the trust
21    instrument; and
22        (3) periodically reviewing the agent's actions in

 

 

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1    order to monitor the agent's performance and compliance
2    with the terms of the delegation.
3    (c) In performing a delegated function, an agent owes a
4duty to the trust to exercise reasonable care to comply with
5the terms of the delegation.
6    (d) A trustee who complies with subsection (b) is not
7liable to the beneficiaries or to the trust for an action of
8the agent to whom the function was delegated.
9    (e) By accepting a delegation of powers or duties from the
10trustee of a trust that is subject to the law of this State, an
11agent submits to the jurisdiction of the courts of this State.
 
12    Section 808. Directed trusts.
13    (a) In this Section:
14        (1) "Distribution trust advisor" means any one or more
15    persons given authority by the trust instrument to direct,
16    consent to, veto, or otherwise exercise all or any portion
17    of the distribution powers and discretions of the trust,
18    including, but not limited to, authority to make
19    discretionary distribution of income or principal.
20        (2) "Excluded fiduciary" means any fiduciary that by
21    the trust instrument is directed to act in accordance with
22    the exercise of specified powers by a directing party, in
23    which case the specified powers are deemed granted not to
24    the fiduciary but to the directing party and the fiduciary
25    is deemed excluded from exercising the specified powers. If

 

 

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1    a trust instrument provides that a fiduciary as to one or
2    more specified matters is to act, omit action, or make
3    decisions only with the consent of a directing party, then
4    the fiduciary is an excluded fiduciary with respect to the
5    matters. Notwithstanding any provision of this Section, a
6    person does not fail to qualify as an excluded fiduciary
7    solely by reason of having effectuated, participated in, or
8    consented to a transaction, including, but not limited to,
9    any transaction described in Section 111 or 411 or Article
10    12 of this Code invoking the provisions of this Section
11    with respect to any new or existing trust.
12        (3) "Fiduciary" means any person expressly given one or
13    more fiduciary duties by the trust instrument, including,
14    but not limited to, a trustee.
15        (4) "Investment trust advisor" means any one or more
16    persons given authority by the trust instrument to direct,
17    consent to, veto, or otherwise exercise all or any portion
18    of the investment powers of the trust.
19        (5) "Power" means authority to take or withhold an
20    action or decision, including, but not limited to, an
21    expressly specified power, the implied power necessary to
22    exercise a specified power, and authority inherent in a
23    general grant of discretion.
24        (6) "Trust protector" means any one or more persons
25    given any one or more of the powers specified in subsection
26    (d), regardless of whether the power is designated with the

 

 

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1    title of trust protector by the trust instrument.
2    (b) An investment trust advisor may be designated in the
3trust instrument of a trust. The powers of an investment trust
4advisor may be exercised or not exercised in the sole and
5absolute discretion of the investment trust advisor, and are
6binding on all other persons, including, but not limited to,
7each beneficiary, fiduciary, excluded fiduciary, and any other
8party having an interest in the trust. The trust instrument may
9use the title "investment trust advisor" or any similar name or
10description demonstrating the intent to provide for the office
11and function of an investment trust advisor. Unless the terms
12of the trust instrument provide otherwise, the investment trust
13advisor has the authority to:
14        (1) direct the trustee with respect to the retention,
15    purchase, transfer, assignment, sale, or encumbrance of
16    trust property and the investment and reinvestment of
17    principal and income of the trust;
18        (2) direct the trustee with respect to all management,
19    control, and voting powers related directly or indirectly
20    to trust assets, including, but not limited to, voting
21    proxies for securities held in trust;
22        (3) select and determine reasonable compensation of
23    one or more advisors, managers, consultants, or
24    counselors, including the trustee, and to delegate to them
25    any of the powers of the investment trust advisor in
26    accordance with Section 807; and

 

 

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1        (4) determine the frequency and methodology for
2    valuing any asset for which there is no readily available
3    market value.
4    (c) A distribution trust advisor may be designated in the
5trust instrument of a trust. The powers of a distribution trust
6advisor may be exercised or not exercised in the sole and
7absolute discretion of the distribution trust advisor, and are
8binding on all other persons, including, but not limited to,
9each beneficiary, fiduciary, excluded fiduciary, and any other
10party having an interest in the trust. The trust instrument may
11use the title "distribution trust advisor" or any similar name
12or description demonstrating the intent to provide for the
13office and function of a distribution trust advisor. Unless the
14terms of the trust instrument provide otherwise, the
15distribution trust advisor has authority to direct the trustee
16with regard to all decisions relating directly or indirectly to
17discretionary distributions to or for one or more
18beneficiaries.
19    (d) A trust protector may be designated in the trust
20instrument of a trust. The powers of a trust protector may be
21exercised or not exercised in the sole and absolute discretion
22of the trust protector, and are binding on all other persons,
23including, but not limited to, each beneficiary, investment
24trust advisor, distribution trust advisor, fiduciary, excluded
25fiduciary, and any other party having an interest in the trust.
26The trust instrument may use the title "trust protector" or any

 

 

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1similar name or description demonstrating the intent to provide
2for the office and function of a trust protector. The powers
3granted to a trust protector by the trust instrument may
4include but are not limited to authority to do any one or more
5of the following:
6        (1) modify or amend the trust instrument to achieve
7    favorable tax status or respond to changes in the Internal
8    Revenue Code, federal laws, state law, or the rulings and
9    regulations under such laws;
10        (2) increase, decrease, or modify the interests of any
11    beneficiary or beneficiaries of the trust;
12        (3) modify the terms of any power of appointment
13    granted by the trust; provided, however, such modification
14    or amendment may not grant a beneficial interest to any
15    individual, class of individuals, or other parties not
16    specifically provided for under the trust instrument;
17        (4) remove, appoint, or remove and appoint, a trustee,
18    investment trust advisor, distribution trust advisor,
19    another directing party, investment committee member, or
20    distribution committee member, including designation of a
21    plan of succession for future holders of any such office;
22        (5) terminate the trust, including determination of
23    how the trustee shall distribute the trust property to be
24    consistent with the purposes of the trust;
25        (6) change the situs of the trust, the governing law of
26    the trust, or both;

 

 

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1        (7) appoint one or more successor trust protectors,
2    including designation of a plan of succession for future
3    trust protectors;
4        (8) interpret terms of the trust instrument at the
5    request of the trustee;
6        (9) advise the trustee on matters concerning a
7    beneficiary; or
8        (10) amend or modify the trust instrument to take
9    advantage of laws governing restraints on alienation,
10    distribution of trust property, or to improve the
11    administration of the trust.
12If a trust contains a charitable interest a trust protector
13must give notice to the Attorney General's Charitable Trust
14Bureau at least 60 days before taking any of the actions
15authorized under paragraph (2), (3), (4), (5), or (6) of this
16subsection. The Attorney General's Charitable Trust Bureau may
17waive this notice requirement.
18    (e) A directing party is a fiduciary of the trust subject
19to the same duties and standards applicable to a trustee of a
20trust as provided by applicable law unless the trust instrument
21provides otherwise, but the trust instrument may not, however,
22relieve or exonerate a directing party from the duty to act or
23withhold acting as the directing party in good faith reasonably
24believes is in the best interests of the trust.
25    (f) The excluded fiduciary shall act in accordance with the
26trust instrument and comply with the directing party's exercise

 

 

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1of the powers granted to the directing party by the trust
2instrument. Unless otherwise provided in the trust instrument,
3an excluded fiduciary has no duty to monitor, review, inquire,
4investigate, recommend, evaluate, or warn with respect to a
5directing party's exercise or failure to exercise any power
6granted to the directing party by the trust instrument,
7including, but not limited to, any power related to the
8acquisition, disposition, retention, management, or valuation
9of any asset or investment. Except as otherwise provided in
10this Section or the trust instrument, an excluded fiduciary is
11not liable, either individually or as a fiduciary, for any
12action, inaction, consent, or failure to consent by a directing
13party, including, but not limited to, any of the following:
14        (1) if a trust instrument provides that an excluded
15    fiduciary is to follow the direction of a directing party,
16    and such excluded fiduciary acts in accordance with such a
17    direction, then except in cases of willful misconduct on
18    the part of the excluded fiduciary in complying with the
19    direction of the directing party, the excluded fiduciary is
20    not liable for any loss resulting directly or indirectly
21    from following any such direction, including but not
22    limited to compliance regarding the valuation of assets for
23    which there is no readily available market value;
24        (2) if a trust instrument provides that an excluded
25    fiduciary is to act or omit to act only with the consent of
26    a directing party, then except in cases of willful

 

 

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1    misconduct on the part of the excluded fiduciary, the
2    excluded fiduciary is not liable for any loss resulting
3    directly or indirectly from any act taken or omitted as a
4    result of such directing party's failure to provide such
5    consent after having been asked to do so by the excluded
6    fiduciary; or
7        (3) if a trust instrument provides that, or for any
8    other reason, an excluded fiduciary is required to assume
9    the role or responsibilities of a directing party, or if
10    the excluded fiduciary appoints a directing party or
11    successor to a directing party other than in a nonjudicial
12    settlement agreement under Section 111 or in a second trust
13    under Article 12, then the excluded fiduciary shall also
14    assume the same fiduciary and other duties and standards
15    that applied to such directing party.
16    (g) By accepting an appointment to serve as a directing
17party of a trust that is subject to the laws of this State, the
18directing party submits to the jurisdiction of the courts of
19this State even if investment advisory agreements or other
20related agreements provide otherwise, and the directing party
21may be made a party to any action or proceeding if issues
22relate to a decision or action of the directing party.
23    (h) Each directing party shall keep the excluded fiduciary
24and any other directing party reasonably informed regarding the
25administration of the trust with respect to any specific duty
26or function being performed by the directing party to the

 

 

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1extent that the duty or function would normally be performed by
2the excluded fiduciary or to the extent that providing such
3information to the excluded fiduciary or other directing party
4is reasonably necessary for the excluded fiduciary or other
5directing party to perform its duties, and the directing party
6shall provide such information as reasonably requested by the
7excluded fiduciary or other directing party. Neither the
8performance nor the failure to perform of a directing party's
9duty to inform as provided in this subsection affects
10whatsoever the limitation on the liability of the excluded
11fiduciary as provided in this Section.
12    (i) Other required notices.
13        (1) A directing party shall:
14            (A) within 90 days after becoming a directing
15        party, notify each qualified beneficiary of the
16        acceptance and of the directing party's name, address,
17        and telephone number, except that the notice
18        requirement of this subdivision (A) does not apply with
19        respect to a succession of a business entity by merger
20        or consolidation with another business entity or by
21        transfer between holding company affiliates if there
22        is no change in the contact information for the
23        directing party, in which case the successor entity has
24        discretion to determine what timing and manner of
25        notice is appropriate;
26            (B) notify each qualified beneficiary in advance

 

 

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1        of any change in the rate of or the method of
2        determining the directing party's compensation; and
3            (C) notify each qualified beneficiary of the
4        directing party's resignation.
5        (2) In the event of the incapacity, death,
6    disqualification, or removal of any directing party, a
7    directing party who continues acting as directing party
8    following such an event shall notify each qualified
9    beneficiary of the incapacity, death, disqualification, or
10    removal of any other directing party within 90 days after
11    the event.
12    (j) An excluded fiduciary may, but is not required to,
13obtain and rely upon an opinion of counsel on any matter
14relevant to this Section.
15    (k) On and after January 1, 2013, this Section applies to:
16        (1) all existing and future trusts that appoint or
17    provide for a directing party, including, but not limited
18    to, a party granted power or authority effectively
19    comparable in substance to that of a directing party as
20    provided in this Section; or
21        (2) any existing or future trust that:
22            (A) is modified in accordance with applicable law
23        or the terms of the trust instrument to appoint or
24        provide for a directing party; or
25            (B) is modified to appoint or provide for a
26        directing party, including, but not limited to, a party

 

 

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1        granted power or authority effectively comparable in
2        substance to that of a directing party, in accordance
3        with: (i) a court order; (ii) a nonjudicial settlement
4        agreement made in accordance with Section 111; or (iii)
5        an exercise of decanting power under Article 12,
6        regardless of whether the order, agreement, or second
7        trust instrument specifies that this Section governs
8        the responsibilities, actions, and liabilities of a
9        person designated as a directing party or excluded
10        fiduciary.
 
11    Section 809. Control and protection of trust property. A
12trustee shall take reasonable steps to take control of and
13protect the trust property. If a corporation is acting as
14cotrustee with one or more individuals, the corporate trustee
15shall have custody of the trust estate unless all the trustees
16otherwise agree.
 
17    Section 810. Recordkeeping and identification of trust
18property.
19    (a) A trustee shall keep adequate records of the
20administration of the trust.
21    (b) A trustee shall keep trust property separate from the
22trustee's own property.
23    (c) Except as otherwise provided in subsection (d), a
24trustee not subject to federal or state banking regulation

 

 

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1shall cause the trust property to be designated so that the
2interest of the trust, to the extent feasible, appears in
3records maintained by a party other than a trustee or
4beneficiary to whom the trustee has delivered the property.
5    (d) If the trustee maintains records clearly indicating the
6respective interests, a trustee may invest as a whole the
7property of 2 or more separate trusts.
 
8    Section 811. Enforcement and defense of claims. A trustee
9shall take reasonable steps to enforce claims of the trust and
10to defend claims against the trust. It may be reasonable for a
11trustee not to enforce a claim, not to defend an action, to
12settle an action, or to suffer a default, depending upon the
13likelihood of recovery and the cost of suit and enforcement.
 
14    Section 812. Powers and duties of successor; liability for
15acts of predecessor; approval of accounts.
16    (a) A successor trustee shall have all the rights, powers,
17and duties that are granted to or imposed on the predecessor
18trustee.
19    (b) A successor trustee is under no duty to inquire into
20the acts or doings of a predecessor trustee, and is not liable
21for any act or failure to act of a predecessor trustee.
22    (c) With the approval of a majority in interest of the
23beneficiaries then entitled to receive or eligible to have the
24benefit of the income from the trust, a successor trustee may

 

 

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1accept the account rendered by, and the property received from,
2the predecessor trustee as a full and complete discharge of the
3predecessor trustee without incurring any liability.
 
4    Section 813.1. Duty to inform and account; trusts
5irrevocable and trustees accepting appointment after effective
6date of Code.
7    (a) The provisions of this Section are prospective only and
8do not apply to any trust that was irrevocable prior to the
9effective date of this Code, or to a trustee who accepts a
10trusteeship before the effective date of this Code. Subject to
11Section 105, this Section supplants any common law duty of a
12trustee to inform and account to trust beneficiaries. This
13Section does not apply to trusts that became irrevocable prior
14to the effective date of this Code.
15    (b) General principles.
16        (1) The trustee shall notify each qualified
17    beneficiary:
18            (A) of the trust's existence;
19            (B) of the beneficiary's right to request a
20        complete copy of the trust instrument; and
21            (C) whether the beneficiary has a right to receive
22        or request accountings.
23        The notice required by this paragraph (1) must be
24    given: (i) within 90 days of the trust becoming irrevocable
25    or if no trustee is then acting within 90 days of the

 

 

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1    trustee's acceptance of the trusteeship; (ii) within 90
2    days of the trustee acquiring knowledge that a qualified
3    beneficiary has a representative under Article 3 who did
4    not previously receive notice; (iii) within 90 days of the
5    trustee acquiring knowledge that a qualified beneficiary
6    who previously had a representative under Article 3 no
7    longer has a representative under Article 3; and (iv)
8    within 90 days of the trustee acquiring knowledge that
9    there is a new qualified beneficiary.
10        (2) A trustee shall send at least annually a trust
11    accounting to all current beneficiaries.
12        (3) A trustee shall send at least annually a trust
13    accounting to all presumptive remainder beneficiaries.
14        (4) Upon termination of a trust, a trustee shall send a
15    trust accounting to the beneficiaries entitled to receive a
16    distribution of the residue of the trust.
17        (5) Notwithstanding any other provision, a trustee in
18    its discretion may provide notice, information, trust
19    accountings, or reports to any beneficiary of the trust
20    regardless of whether the communication is otherwise
21    required to be provided.
22        (6) Upon the reasonable request of a qualified
23    beneficiary, the trustee shall promptly furnish to the
24    qualified beneficiary a complete copy of the trust
25    instrument.
26        (7) Notwithstanding any other provision, a trustee is

 

 

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1    deemed to have fully and completely discharged the
2    trustee's duties to inform and account to all
3    beneficiaries, under this Section, at common law, or
4    otherwise, if the trustee provides at least annually and on
5    termination of the trust a trust accounting required by
6    paragraph (2), (3), or (4) to each beneficiary entitled to
7    a trust accounting.
8        (8) For each asset or class of assets described in a
9    trust accounting for which there is no readily available
10    market value, the trustee, in the trustee's discretion, may
11    determine whether to estimate the value or use a nominal
12    carrying value for such an asset, how to estimate the value
13    of such an asset, and whether and how often to engage a
14    professional appraiser to value such an asset.
15    (c) Upon a vacancy in a trusteeship, unless a cotrustee
16remains in office, the trust accounting required by subsection
17(b) of this Section must be sent to the beneficiaries entitled
18to the accounting by the former trustee. A personal
19representative, guardian of the estate, or guardian of the
20person may send the trust accounting to the beneficiaries
21entitled to the accounting on behalf of a deceased or
22incapacitated trustee.
23    (d) Other required notices.
24        (1) A trustee shall:
25            (A) within 90 days after accepting a trusteeship,
26        notify each qualified beneficiary of the acceptance

 

 

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1        and of the trustee's name, address, and telephone
2        number, except that the notice requirement of this
3        subdivision (A) does not apply with respect to a
4        succession of a corporate trustee by merger or
5        consolidation with another corporate fiduciary or by
6        transfer between holding company affiliates if there
7        is no change in the contact information for the
8        trustee, in which case the successor trustee has
9        discretion to determine what timing and manner of
10        notice is appropriate;
11            (B) notify each qualified beneficiary in advance
12        of any change in the rate of or the method of
13        determining the trustee's compensation; and
14            (C) notify each qualified beneficiary of the
15        trustee's resignation.
16        (2) In the event of the incapacity, death,
17    disqualification, or removal of any trustee, a trustee who
18    continues acting as trustee following such an event shall
19    notify each qualified beneficiary of the incapacity,
20    death, disqualification, or removal of any other trustee
21    within 90 days after the event.
22        (3) A trustee shall notify each qualified beneficiary
23    of any change in the address, telephone number, or other
24    contact information for the trustee no later than 90 days
25    after the change goes into effect.
26    (e) Each request for information under this Section must be

 

 

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1with respect to a single trust that is sufficiently identified
2to enable the trustee to locate the trust's records. A trustee
3may charge a reasonable fee for providing information under
4this Section to:
5        (1) a nonqualified beneficiary;
6        (2) a qualified beneficiary for providing information
7    that was previously provided to the qualified beneficiary
8    or a representative under Article 3 for the qualified
9    beneficiary; or
10        (3) a representative under Article 3 for a qualified
11    beneficiary for information that was previously provided
12    to the qualified beneficiary or a representative under
13    Article 3 for the qualified beneficiary.
14    (f) If a trustee is bound by any confidentiality
15restrictions regarding a trust asset, then, prior to receiving
16the information, a beneficiary eligible under this Section to
17receive any information about that asset must agree to be bound
18by the same confidentiality restrictions. The trustee has no
19duty or obligation to disclose to any beneficiary any
20information that is otherwise prohibited to be disclosed by
21applicable law.
22    (g) A qualified beneficiary may waive the right to receive
23information otherwise required to be furnished under this
24Section, such as a trust accounting, by an instrument in
25writing delivered to the trustee. A qualified beneficiary may
26at any time, by an instrument in writing delivered to the

 

 

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1trustee, withdraw a waiver previously given with respect to
2future trust accountings.
3    (h) Receipt of information, notices, or a trust accounting
4by a beneficiary is presumed if the trustee has procedures in
5place requiring the mailing or delivery of information,
6notices, or trust accountings to the beneficiary. This
7presumption applies to the mailing or delivery of information,
8notices or trust accountings by electronic means or the
9provision of access to an account by electronic means for so
10long as the beneficiary has agreed to receive electronic
11delivery or access.
12    (i) A trustee may request approval of the trustee's current
13or final trust accounting in a judicial proceeding at the
14trustee's election, with all reasonable and necessary costs of
15the proceeding payable by the trust and allocated between
16income and principal in accordance with the Principal and
17Income Act.
18    (j) Notwithstanding any other provision, the provisions of
19this Section are not intended to and do not impose on any
20trustee a duty to inform any beneficiary in advance of
21transactions relating to the trust property.
 
22    Section 813.2. Duty to inform and account; trusts
23irrevocable and trustees accepting appointment prior to the
24effective date of Code.
25    (a) This Section applies to all trusts that were

 

 

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1irrevocable prior to the effective date of this Code and to a
2trustee who accepts a trusteeship before the effective date of
3this Code.
4    (b) Every trustee at least annually shall furnish to the
5beneficiaries then entitled to receive or receiving the income
6from the trust estate, or, if none, then to those beneficiaries
7eligible to have the benefit of the income from the trust
8estate, a current account showing the receipts, disbursements,
9and inventory of the trust estate.
10    (c) Every trustee shall on termination of the trust furnish
11to the beneficiaries then entitled to distribution of the trust
12estate a final account for the period from the date of the last
13current account to the date of distribution showing the
14inventory of the trust estate, the receipts, disbursements and
15distributions and shall make available to the beneficiaries
16copies of prior accounts not previously furnished.
17    (d) If a beneficiary is incapacitated, the account shall be
18provided to the representative of the estate of the
19beneficiary. If no representative for the estate of a
20beneficiary under legal disability has been appointed, the
21account shall be provided to a spouse, parent, adult child, or
22guardian of the person of the beneficiary.
23    (e) For each asset or class of assets described in a trust
24accounting for which there is no readily available market
25value, the trustee, in the trustee's discretion, may determine
26whether to estimate the value or use a nominal carrying value

 

 

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1for such an asset, how to estimate the value of such an asset,
2and whether and how often to engage a professional appraiser to
3value such an asset.
 
4    Section 814. Discretionary powers; tax savings.
5    (a) Notwithstanding the breadth of discretion granted to a
6trustee or other fiduciary in the trust instrument, including
7the use of such terms as "absolute", "sole", or "uncontrolled",
8such fiduciary shall exercise a discretionary power in good
9faith and in accordance with the terms and purposes of the
10trust instrument.
11    (b) Subject to subsection (e), and unless the trust
12instrument expressly indicates that a rule in this subsection
13does not apply:
14        (1) a person other than a settlor who is a beneficiary
15    and a trustee or other fiduciary of a trust that confers on
16    that fiduciary a power to make discretionary distributions
17    to or for that fiduciary's personal benefit may exercise
18    the power only in accordance with an ascertainable
19    standard; and
20        (2) a trustee or other fiduciary may not exercise a
21    power to make discretionary distributions to satisfy a
22    legal obligation of support that such fiduciary personally
23    owes another person.
24    (c) Subject to subsections (d) and (e), if a beneficiary of
25a trust, in an individual, trustee, or other capacity, removes

 

 

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1a fiduciary and appoints a successor fiduciary who would be
2related or subordinate to that beneficiary within the meaning
3of Section 672(c) of the Internal Revenue Code if the
4beneficiary were the grantor, that successor fiduciary's
5discretionary powers are limited as follows:
6        (1) the fiduciary's discretionary power to make
7    distributions to or for the benefit of that beneficiary is
8    limited to an ascertainable standard;
9        (2) the fiduciary's discretionary power may not be
10    exercised to satisfy any of that beneficiary's legal
11    obligations for support or other purposes; and
12        (3) the fiduciary's discretionary power may not be
13    exercised to grant to that beneficiary a general power of
14    appointment.
15    (d) Subsection (c) does not apply if:
16        (1) the appointment of the trustee or other fiduciary
17    by the beneficiary may be made only in conjunction with
18    another person having a substantial interest in the
19    property of the trust subject to the power that is adverse
20    to the interest of the beneficiary within the meaning of
21    Section 2041(b)(1)(C)(ii) of the Internal Revenue Code; or
22        (2) the appointment is in conformity with a procedure
23    governing appointments approved by the court before the
24    effective date of this Code.
25    (e) Subsections (b) and (c) do not apply to:
26        (1) a person other than a settlor who is a beneficiary

 

 

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1    and trustee or other fiduciary of a trust that confers on
2    such fiduciary a power exercisable only in conjunction with
3    another person having a substantial interest in the
4    property subject to the power that is adverse to the
5    interest of that fiduciary within the meaning of Section
6    2041(b)(1)(C)(ii) of the Internal Revenue Code;
7        (2) a power held by the settlor's spouse who is the
8    trustee or other fiduciary of a trust for which a marital
9    deduction, as defined in Section 2056(b)(5) or 2523(e) of
10    the Internal Revenue Code, was previously allowed;
11        (3) any trust during any period that the trust may be
12    revoked or amended by its settlor;
13        (4) a trust if contributions to the trust qualify for
14    the annual exclusion under Section 2503(c) of the Internal
15    Revenue Code; or
16        (5) any portion of a trust over which the trustee or
17    other fiduciary is expressly granted in the trust
18    instrument a presently exercisable or testamentary general
19    power of appointment.
20    (f) A power whose exercise is limited or prohibited by
21subsections (b) and (c) may be exercised by a majority of the
22remaining trustees or other fiduciaries whose exercise of the
23power is not so limited or prohibited. If the power of all
24trustees or other fiduciaries is so limited or prohibited, the
25court may appoint a special fiduciary with authority to
26exercise the power.
 

 

 

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1    Section 815. General powers of trustee.
2    (a) A trustee, without authorization by the court, may
3exercise:
4        (1) powers conferred by the trust instrument; or
5        (2) except as limited by the trust instrument:
6            (A) all powers over the trust property that an
7        unmarried owner with legal capacity has over
8        individually owned property;
9            (B) any other powers appropriate to achieve the
10        proper investment, management, and distribution of the
11        trust property; and
12            (C) any other powers conferred by this Code.
13    (b) The exercise of a power is subject to the fiduciary
14duties prescribed by this Code.
 
15    Section 816. Specific powers of trustee. Without limiting
16the authority conferred by Section 815, a trustee may:
17        (1) collect trust property and accept or reject
18    additions to the trust property from a settlor or any other
19    person;
20        (2) acquire or sell property, for cash or on credit, at
21    public or private sale;
22        (3) exchange, partition, or otherwise change the
23    character of trust property;
24        (4) deposit trust money in an account in a regulated

 

 

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1    financial-service institution;
2        (5) borrow money, with or without security, and
3    mortgage or pledge or otherwise encumber trust property for
4    a period within or extending beyond the duration of the
5    trust;
6        (6) with respect to an interest in a proprietorship,
7    partnership, limited liability company, business trust,
8    corporation, or other form of business or enterprise,
9    continue the business or other enterprise and take any
10    action that may be taken by shareholders, members, or
11    property owners, including merging, dissolving, pledging
12    other trust assets or guaranteeing a debt obligation of the
13    business or enterprise, or otherwise changing the form of
14    business organization or contributing additional capital;
15        (7) with respect to stocks or other securities,
16    exercise the rights of an absolute owner, including the
17    right to:
18            (A) vote, or give proxies to vote, with or without
19        power of substitution, or enter into or continue a
20        voting trust agreement;
21            (B) hold a security in the name of a nominee or in
22        other form without disclosure of the trust so that
23        title may pass by delivery;
24            (C) pay calls, assessments, and other sums
25        chargeable or accruing against the securities, and
26        sell or exercise stock subscription or conversion

 

 

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1        rights;
2            (D) deposit the securities with a depositary or
3        other regulated financial-service institution; and
4            (E) participate in mergers, consolidations,
5        foreclosures, reorganizations or liquidations.
6        (8) with respect to an interest in real property,
7    construct, or make ordinary or extraordinary repairs to,
8    alterations to, or improvements in, buildings or other
9    structures, demolish improvements, raze existing or erect
10    new party walls or buildings, subdivide or develop land,
11    dedicate any interest in real estate, dedicate land to
12    public use or grant public or private easements, enter into
13    contracts relating to real estate, and make or vacate plats
14    and adjust boundaries;
15        (9) enter into a lease for any purpose as lessor or
16    lessee, including a lease or other arrangement for
17    exploration and removal of natural resources, with or
18    without the option to purchase or renew, for a period
19    within or extending beyond the duration of the trust;
20        (10) grant an option involving a sale, lease, or other
21    disposition of trust property or acquire an option for the
22    acquisition of property, including an option exercisable
23    beyond the duration of the trust, and exercise an option so
24    acquired;
25        (11) insure the property of the trust against damage or
26    loss and insure the trustee, the trustee's agents, and

 

 

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1    beneficiaries against liability arising from the
2    administration of the trust;
3        (12) abandon or decline to administer property of no
4    value or of insufficient value to justify its collection or
5    continued administration;
6        (13) with respect to possible liability for violation
7    of environmental law:
8            (A) inspect or investigate property the trustee
9        holds or has been asked to hold, or property owned or
10        operated by an organization in which the trustee holds
11        or has been asked to hold an interest, for the purpose
12        of determining the application of environmental law
13        with respect to the property;
14            (B) take action to prevent, abate, or otherwise
15        remedy any actual or potential violation of any
16        environmental law affecting property held directly or
17        indirectly by the trustee, whether taken before or
18        after the assertion of a claim or the initiation of
19        governmental enforcement;
20            (C) decline to accept property into trust or
21        disclaim any power with respect to property that is or
22        may be burdened with liability for violation of
23        environmental law;
24            (D) compromise claims against the trust that may be
25        asserted for an alleged violation of environmental
26        law; and

 

 

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1            (E) pay the expense of any inspection, review,
2        abatement, or remedial action to comply with
3        environmental law;
4        (14) pay, contest, prosecute, or abandon any claim,
5    settle a claim or charges in favor of or against the trust,
6    and release, in whole or in part, a claim belonging to the
7    trust;
8        (15) pay taxes, assessments, compensation of the
9    trustee and of employees and agents of the trust, and other
10    expenses incurred in the administration of the trust;
11        (16) exercise elections with respect to federal,
12    state, and local taxes;
13        (17) select a mode of payment under any employee
14    benefit or retirement plan, annuity, or life insurance
15    payable to the trustee, exercise rights related to the
16    employee benefit or retirement plan, annuity, or life
17    insurance payable to the trustee, including exercise the
18    right to indemnification for expenses and against
19    liabilities, and take appropriate action to collect the
20    proceeds;
21        (18) make loans out of trust property, including loans
22    to a beneficiary on terms and conditions the trustee
23    considers to be fair and reasonable under the
24    circumstances, and the trustee has a lien on future
25    distributions for repayment of those loans;
26        (19) pledge trust property to guarantee loans made by

 

 

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1    others to the beneficiary;
2        (20) appoint a trustee to act in another jurisdiction
3    to act as sole or cotrustee with respect to any part or all
4    of trust property located in the other jurisdiction, confer
5    upon the appointed trustee any or all of the rights,
6    powers, and duties of the appointing trustee, require that
7    the appointed trustee furnish security, and remove any
8    trustee so appointed;
9        (21) distribute income and principal in one or more of
10    the following ways, without being required to see to the
11    application of any distribution, as the trustee believes to
12    be for the best interests of any beneficiary who at the
13    time of distribution is incapacitated or in the opinion of
14    the trustee is unable to manage property or business
15    affairs because of incapacity:
16            (A) directly to the beneficiary;
17            (B) to the guardian of the estate, or if none, the
18        guardian of the person of the beneficiary;
19            (C) to a custodian for the beneficiary under any
20        state's Uniform Transfers to Minors Act, Uniform Gifts
21        to Minors Act or Uniform Custodial Trust Act, and, for
22        that purpose, to create a custodianship or custodial
23        trust;
24            (D) to an adult relative of the beneficiary to be
25        expended on the beneficiary's behalf;
26            (E) by expending the money or using the property

 

 

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1        directly for the benefit of the beneficiary;
2            (F) to a trust, created prior to the time the
3        distribution becomes payable, for the sole benefit of
4        the beneficiary and those dependent upon the
5        beneficiary during his or her lifetime, to be
6        administered as a part of the trust, except that any
7        amount distributed to the trust under this
8        subparagraph (F) shall be separately accounted for by
9        the trustee of the trust and shall be indefeasibly
10        vested in the beneficiary so that if the beneficiary
11        dies prior to complete distribution of the amounts, the
12        amounts and the accretions, earnings, and income, if
13        any, shall be paid to the beneficiary's estate, except
14        that this subparagraph (F) does not apply to the extent
15        that it would cause a trust otherwise qualifying for
16        the federal estate tax marital deduction not to
17        qualify; and
18            (G) by managing it as a separate fund on the
19        beneficiary's behalf, subject to the beneficiary's
20        continuing right to withdraw the distribution;
21        (22) on distribution of trust property or the division
22    or termination of a trust, make distributions in divided or
23    undivided interests, allocate particular assets in
24    proportionate or disproportionate shares, value the trust
25    property for those purposes, and adjust for resulting
26    differences in valuation;

 

 

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1        (23) resolve a dispute concerning the interpretation
2    of the trust or its administration by judicial proceeding,
3    nonjudicial settlement agreement under Section 111,
4    mediation, arbitration, or other procedure for alternative
5    dispute resolution;
6        (24) prosecute or defend an action, claim, or judicial
7    proceeding in any jurisdiction to protect trust property
8    and the trustee in the performance of the trustee's duties;
9        (25) execute contracts, notes, conveyances, and other
10    instruments that are useful to achieve or facilitate the
11    exercise of the trustee's powers, regardless of whether the
12    instruments contain covenants and warranties binding upon
13    and creating a charge against the trust estate or excluding
14    personal liability;
15        (26) on termination of the trust, exercise the powers
16    appropriate to wind up the administration of the trust and
17    distribute the trust property to the persons entitled to
18    it;
19        (27) enter into agreements for bank or other deposit
20    accounts, safe deposit boxes, or custodian, agency, or
21    depositary arrangements for all or any part of the trust
22    estate, including, to the extent fair to the beneficiaries,
23    agreements for services provided by a bank operated by or
24    affiliated with the trustee, and to pay reasonable
25    compensation for those services, including, to the extent
26    fair to the beneficiaries, compensation to the bank

 

 

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1    operated by or affiliated with the trustee, except that
2    nothing in this Section shall be construed as removing any
3    depositary arrangements from the requirements of the
4    prudent investor rule;
5        (28) engage attorneys, auditors, financial advisers,
6    and other agents and pay reasonable compensation to such
7    persons;
8        (29) invest in or hold undivided interests in property;
9        (30) if fair to the beneficiaries, deal with the
10    executor, trustee, or other representative of any other
11    trust or estate in which a beneficiary of the trust has an
12    interest, notwithstanding the fact that the trustee is an
13    executor, trustee, or other representative of the other
14    trust or estate;
15        (31) make equitable division or distribution in cash or
16    in kind, or both, and for that purpose may value any
17    property divided or distributed in kind;
18        (32) rely upon an affidavit, certificate, letter, or
19    other evidence reasonably believed to be genuine and on the
20    basis of any such evidence to make any payment or
21    distribution in good faith without liability;
22        (33) except as otherwise directed by the court, have
23    all of the rights, powers, and duties given to or imposed
24    upon the trustee by law and the provisions of the trust
25    instrument during the period between the termination of the
26    trust and the distribution of the trust assets and during

 

 

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1    any period in which any litigation is pending that may void
2    or invalidate the trust in whole or in part or affect the
3    rights, powers, duties, or discretions of the trustee;
4        (34) plant and harvest crops; breed, raise, purchase,
5    and sell livestock; lease land, equipment, or livestock for
6    cash or on shares, purchase and sell, exchange or otherwise
7    acquire or dispose of farm equipment and farm produce of
8    all kinds; make improvements, construct, repair, or
9    demolish and remove any buildings, structures, or fences,
10    engage agents, managers, and employees and delegate powers
11    to them; engage in drainage and conservation programs;
12    terrace, clear, ditch, and drain lands and install
13    irrigation systems; replace improvements and equipment;
14    fertilize and improve the soil; engage in the growing,
15    improvement, and sale of trees and other forest crops;
16    participate or decline to participate in governmental
17    agricultural or land programs; and perform such acts as the
18    trustee deems appropriate using such methods as are
19    commonly employed by other farm owners in the community in
20    which the farm property is located;
21        (35) drill, mine, and otherwise operate for the
22    development of oil, gas, and other minerals; enter into
23    contracts relating to the installation and operation of
24    absorption and repressuring plants; enter into unitization
25    or pooling agreements for any purpose including primary,
26    secondary, or tertiary recovery; place and maintain pipe

 

 

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1    lines; execute oil, gas, and mineral leases, division and
2    transfer orders, grants, deeds, releases and assignments,
3    and other instruments; participate in a cooperative coal
4    marketing association or similar entity; and perform such
5    other acts as the trustee deems appropriate using such
6    methods as are commonly employed by owners of similar
7    interests in the community in which the interests are
8    located;
9        (36) continue an unincorporated business and
10    participate in its management by having the trustee or one
11    or more agents of the trustee act as a manager with
12    appropriate compensation from the business and incorporate
13    the business;
14        (37) continue a business in the partnership form and
15    participate in its management by having the trustee or one
16    or more agents of the trustee act as a partner, limited
17    partner, or employee with appropriate compensation from
18    the business; enter into new partnership agreements and
19    incorporate the business; and, with respect to activities
20    under this paragraph (37), the trustee or the agent or
21    agents of the trustee shall not be personally liable to
22    third persons with respect to actions not sounding in tort
23    unless the trustee or agent fails to identify the trust
24    estate and disclose that the trustee or agent is acting in
25    a representative capacity, except that nothing in this
26    paragraph impairs in any way the liability of the trust

 

 

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1    estate with respect to activities under this paragraph (37)
2    to the extent of the assets of the trust estate.
 
3    Section 817. Distribution upon termination. Before
4distributing property to a beneficiary upon the termination of
5a trust in whole or in part, including the exercise by a
6beneficiary of a right to withdraw trust principal, the trustee
7has the right to require from the beneficiary a written
8approval of the trustee's accountings provided to the
9beneficiary and, at the trustee's election, a refunding
10agreement from the beneficiary for liabilities that would
11otherwise be payable from trust property to the extent of the
12beneficiary's share of the distribution. An accounting
13approved under this Section is binding on the beneficiary
14providing the approval and on the beneficiary's successors,
15heirs, representatives, and assigns. A trustee may elect to
16withhold a distribution or require a reasonable reserve for the
17payment of debts, expenses, and taxes payable from the trust
18pending the receipt of a written approval of the trustee's
19accountings provided to the beneficiary and refunding
20agreement from a beneficiary or a judicial settlement of
21accounts.
 
22    Section 818. Notice of proposed action.
23    (a) A trustee or directing party may give a notice of
24proposed action under this Section regarding any matter

 

 

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1governed by this Code over which the trustee or directing party
2is granted power or discretion under the trust instrument or
3any provision of this Code if there is no other notice or
4consent procedure prescribed for the matter in another Section
5of this Code.
6    (b) A trustee or directing party shall provide any notice
7of proposed action to all qualified beneficiaries of a trust,
8except that a trustee or directing party is not required to
9give a notice of proposed action to any person who consents, at
10any time before or after the proposed action is taken, in
11writing to the proposed action.
12    (c) A notice of proposed action shall state that the notice
13is given as set forth in this Section and shall state all of
14the following:
15        (1) The name and mailing address of the trustee or
16    directing party.
17        (2) The name and telephone number of a person who may
18    be contacted for additional information.
19        (3) A description of the proposed action and an
20    explanation of the reasons for the action.
21        (4) The time period in which objections to the proposed
22    action may be made, which shall not expire until at least
23    60 days after the trustee or directing party provides the
24    notice of proposed action.
25        (5) A statement that if no objection is received during
26    the time period in which objections to the proposed action

 

 

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1    may be made, the trustee or directing party is not liable
2    to any current or future beneficiary with respect to the
3    proposed action.
4        (6) The date on or after which the proposed action may
5    be taken or is effective.
6        (7) If the notice is sent to a representative of a
7    beneficiary under Article 3, the beneficiary or
8    beneficiaries represented by the representative.
9    (d) A qualified beneficiary may object to a proposed action
10by delivering a written objection to the trustee or directing
11party at the address stated in the notice of proposed action
12within the period specified in the notice of proposed action.
13    (e) A trustee or directing party is not liable to any
14beneficiary for an action regarding a matter governed by this
15Section if:
16        (1) the action to which the notice of proposed action
17    pertained does not constitute a per se breach of trust;
18        (2) the trustee or directing party does not receive a
19    written objection to the proposed action from the
20    beneficiary within the applicable period; and
21        (3) the other requirements of this Section are
22    satisfied.
23    (f) If the trustee or directing party receives a written
24objection within the applicable period, either the trustee or
25directing party or a beneficiary may petition the court to have
26the proposed action taken as proposed, taken with

 

 

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1modifications, or denied. In the proceeding, a beneficiary
2objecting to the proposed action has the burden of proving that
3the trustee's proposed action should not be taken. A
4beneficiary who has not objected is not estopped from opposing
5the proposed action in the proceeding. If the trustee or
6directing party decides not to implement the proposed action,
7the trustee or directing party shall provide written notice to
8each qualified beneficiary of the decision not to take the
9action. The decision of the trustee or directing party not to
10implement the proposed action does not itself give rise to
11liability to any beneficiary. Within 60 days after receiving
12notice from the trustee or directing party that it will not to
13implement the proposed action, a beneficiary may petition the
14court to have the action taken and has the burden of proving
15that it should be taken.
16    (g) Notwithstanding any other provision of this Section,
17the trustee or directing party may not use a notice of proposed
18action to address any of the following actions:
19        (1) Allowance of the trustee's or directing party's
20    compensation.
21        (2) Allowance of compensation of the attorney for the
22    trustee or directing party.
23        (3) Settlement of a trustee's or directing party's
24    accounts.
25        (4) Preliminary and final distributions from a trust
26    and discharge of any trustee or directing party.

 

 

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1        (5) Sale of property of the trust to the trustee or
2    directing party or to the attorney for the trustee or
3    directing party.
4        (6) Exchange of property of the trust for property of
5    the trustee or directing party or for property of the
6    attorney for the trustee or directing party.
7        (7) Grant of an option to purchase property of the
8    trust to the trustee or directing party or to the attorney
9    for the trustee or directing party.
10        (8) Allowance, payment, or compromise of a claim of the
11    trustee or directing party, or the attorney for the trustee
12    or directing party, against the trust.
13        (9) Compromise or settlement of a claim, action, or
14    proceeding by the trust against the trustee or directing
15    party or against the attorney for the trustee or directing
16    party.
17        (10) Extension, renewal, or modification of the terms
18    of a debt or other obligation of the trustee or directing
19    party, or the attorney for the trustee or directing party,
20    owing to or in favor of the trust.
21    (h) Notwithstanding any other provision of this Code,
22delivery of notice of a proposed action to a representative
23under Article 3 on behalf of a beneficiary is effective for
24purposes of this Section only if the representative previously
25acknowledged or acknowledges in writing prior to the end of the
26period for objections to the proposed action that the

 

 

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1representative is representing the beneficiary.
2    (i) Notwithstanding any other provision, the provisions of
3this Section are not intended to and do not impose on any
4trustee or directing party a duty to inform any beneficiary in
5advance of transactions relating to the trust property.
 
6    Section 819. Nominee registration. The trustee may cause
7stocks, bonds, and other real or personal property belonging to
8the trust to be registered and held in the name of a nominee
9without mention of the trust in any instrument or record
10constituting or evidencing title thereto. The trustee is liable
11for the acts of the nominee with respect to any investment so
12registered. The records of the trustee shall show at all times
13the ownership of the investment by the trustee, and the stocks,
14bonds, and other similar investments shall be in the possession
15and control of the trustee and be kept separate and apart from
16assets that are the individual property of the trustee.
 
17    Section 820. Proceeds of eminent domain or partition. If a
18trustee is appointed by a court of this State to receive money
19under eminent domain or partition proceedings and to invest it
20for the benefit of the person who would be entitled to the real
21estate or its income if it had not been taken or sold, on
22petition of any interested person describing the real estate to
23be purchased, the price to be paid, the probable income to be
24derived and the state of the title, the court may authorize the

 

 

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1trustee to invest all or any part of the money in other real
2estate in this State. Title to the real estate so purchased
3shall be taken in the name of the trustee. If the interest of
4the beneficiary in the real estate taken or sold was a legal
5interest, the court shall direct the trustee to convey to the
6beneficiary a legal estate upon the same conditions and
7limitations of title, but the conveyance by the trustee shall
8preserve any right of entry for condition broken, possibility
9of reverter created by the instrument of title or any reversion
10or other vested interest that arose by operation of law at the
11time the instrument took effect. The court shall not direct the
12conveyance by the trustee unless there is a person or class of
13persons in being who would have a vested interest in the real
14estate taken or sold under the instrument of title to the real
15estate and who would be entitled to possession of the real
16estate if it had not been taken or sold.
 
17    Section 821. Lands or estates subject to future interest or
18power of appointment; waste; appointment of trustee. If lands
19or any estate therein are subject to any legal or equitable
20future interest of any kind or to any power of appointment,
21whether a trust is involved or not, and it is made to appear
22that such lands or estate are liable to waste or depreciation
23in value, or that the sale thereof and the safe and proper
24investment of the proceeds will inure to the benefit and
25advantage of the persons entitled thereto, or that it is

 

 

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1otherwise necessary for the conservation, preservation or
2protection of the property or estate or of any present or
3future interest therein that such lands or estate be sold,
4mortgaged, leased, converted, exchanged, improved, managed or
5otherwise dealt with, the court may, pending the happening of
6the contingency, if any, and the vesting in possession of such
7future interest, declare a trust, and appoint a trustee or
8trustees for such lands or estate and vest in a trustee or
9trustees title to the property, and authorize and direct the
10sale of such property, either at a public sale or at private
11sale, and upon such terms and conditions as the court may
12direct, and in such case may authorize the trustee or trustees
13to make such sale and to receive, hold and invest the proceeds
14thereof under the direction of the court for the benefit of the
15persons entitled or who may become entitled thereto according
16to their respective rights and interests, authorize and direct
17that all or any portion of the property, or the proceeds
18thereof, so subject to such future interests or powers of
19appointment, be leased, mortgaged, converted, exchanged,
20improved, managed, invested, reinvested, or otherwise dealt
21with, as the rights and interests of the parties and the
22equities of the case may require, and to that end may confer
23all necessary powers on the trustee or trustees. All orders of
24every court entered pursuant to this Section subsequent to June
2530, 1982 and prior to September 16, 1985 vesting title to
26property in a trustee are hereby validated and such title is

 

 

SB3165- 116 -LRB099 20744 HEP 45399 b

1vested in such trustee effective the day the court entered such
2order.
 
3
Article 9. Illinois Uniform Prudent Investor Act; life
4
insurance; affiliated investments.

 
5    Section 900. Article title. This Article may be referred to
6as the Illinois Uniform Prudent Investor Act.
 
7    Section 901. Prudent investor rule.
8    (a) Except as otherwise provided in subsection (b), a
9trustee administering a trust has a duty to invest and manage
10the trust assets to comply with the prudent investor rule set
11forth in this Article.
12    (b) The prudent investor rule, a default rule, may be
13expanded, restricted, eliminated, or otherwise altered by
14express provisions of the trust instrument. A trustee is not
15liable to a beneficiary for the trustee's reasonable and good
16faith reliance on those express provisions.
 
17    Section 902. Standard of care; portfolio strategy; risk and
18return objectives.
19    (a) A trustee has a duty to invest and manage trust assets
20as a prudent investor would, considering the purposes, terms,
21distribution requirements, and other circumstances of the
22trust. This standard requires the exercise of reasonable care,

 

 

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1skill, and caution and applies not in isolation, but in the
2context of the trust portfolio as a whole and as a part of an
3overall investment strategy that incorporates risk and return
4objectives reasonably suitable to the trust.
5    (b) A trustee has a duty to pursue an investment strategy
6that considers both the reasonable production of income and
7safety of capital, consistent with the trustee's duty of
8impartiality and the purposes of the trust. Whether investments
9are underproductive or overproductive of income shall be judged
10by the portfolio as a whole and not as to any particular asset.
11    (c) The circumstances that a trustee may consider in making
12investment decisions include, without limitation:
13        (1) the general economic conditions;
14        (2) the possible effect of inflation or deflation;
15        (3) the expected tax consequences of investment
16    decisions or strategies;
17        (4) the role each investment or course of action plays
18    within the overall portfolio;
19        (5) the expected total return including both income
20    yield and appreciation of capital;
21        (6) the duty to incur only reasonable and appropriate
22    costs;
23        (7) environmental and social considerations;
24        (8) governance policies of the entities in which the
25    trustee may invest;
26        (9) needs for liquidity, regularity of income, and

 

 

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1    preservation or appreciation of capital; and
2        (10) an asset's special relationship or value, if any,
3    to the purpose of the trust or to one or more of the
4    beneficiaries.
5    (d) In addition to the circumstances listed in subsection
6(c), a trustee may, but need not, consider related trusts and
7the assets of beneficiaries known to the trustee when making
8investment decisions.
 
9    Section 903. Diversification. A trustee has a duty to
10diversify the investments of the trust unless, under the
11circumstances, the trustee reasonably believes it is in the
12interests of the beneficiaries and furthers the purposes of the
13trust not to diversify.
 
14    Section 904. Duties at inception of trusteeship. A trustee
15has a duty, within a reasonable time after the acceptance of a
16trusteeship, to review trust assets and to make and implement
17decisions concerning the retention and disposition of original
18pre-existing investments, in order to conform to the provisions
19of this Article. A trustee's decision to retain or dispose of
20an asset may properly be influenced by the asset's special
21relationship or value to the purposes of the trust or to some
22or all of the beneficiaries, consistent with the trustee's duty
23of impartiality.
 

 

 

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1    Section 905. Court action. Nothing in this Article
2abrogates or restricts the power of an appropriate court in
3proper cases to: (i) direct or permit the trustee to deviate
4from the terms of the trust instrument; or (ii) to direct or
5permit the trustee to take, or to restrain the trustee from
6taking, any action regarding the making or retention of
7investments.
 
8    Section 906. (Reserved).
 
9    Section 907. (Reserved).
 
10    Section 908. Reviewing compliance. No specific investment
11course of action is, taken alone, prudent or imprudent. The
12trustee may invest in every kind of property and type of
13investment, subject to this Article. A trustee's investment
14decisions and actions are to be judged in terms of the
15trustee's reasonable business judgment regarding the
16anticipated effect on the trust portfolio as a whole under the
17facts and circumstances prevailing at the time of the decision
18or action. This Article is a test of conduct and not of
19resulting performance.
 
20    Section 909. Delegation of investment and management
21functions. Notwithstanding any other provision of this Code,
22prior to delegating any investment functions to an agent in

 

 

SB3165- 120 -LRB099 20744 HEP 45399 b

1accordance with the provisions of subsection (b) of Section
2807, a trustee shall conduct an inquiry into the experience,
3performance history, professional licensing or registration,
4if any, and financial stability of the investment agent.
 
5    Section 910. Language invoking standard of Article. The
6following terms or comparable language in the investment powers
7and related provisions of a trust instrument, unless otherwise
8limited or modified by that instrument, shall be construed as
9authorizing any investment or strategy permitted under this
10Article: "investments permissible by law for investment of
11trust funds", "legal investments", "authorized investments",
12"using the judgment and care under the circumstances then
13prevailing that persons of prudence, discretion, and
14intelligence exercise in the management of their own affairs,
15not in regard to speculation but in regard to the permanent
16disposition of their funds, considering the probable income as
17well as the probable safety of their capital", "prudent man
18rule", "prudent trustee rule", "prudent person rule", and
19"prudent investor rule".
 
20    Section 911. (See Section 900 for short title.)
 
21    Section 912. Application to existing trusts. The Sections
22of this Article that proceed this Section apply to all existing
23and future trusts, but only as to actions or inactions

 

 

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1occurring on or after January 1, 1992.
 
2    Section 913. Life insurance.
3    (a) Notwithstanding any other provision, the duties of a
4trustee with respect to acquiring or retaining as a trust asset
5a contract of insurance upon the life of the settlor, upon the
6lives of the settlor and the settlor's spouse, or upon the life
7of any person for which the trustee has an insurable interest
8in accordance with Section 113, do not include any of the
9following duties:
10        (1) to determine whether any contract of life insurance
11    in the trust, or to be acquired by the trust, is or remains
12    a proper investment, including, without limitation, with
13    respect to:
14            (A) the type of insurance contract;
15            (B) the quality of the insurance contract;
16            (C) the quality of the insurance company; or
17            (D) the investments held within the insurance
18        contract.
19        (2) to diversify the investment among different
20    policies or insurers, among available asset classes, or
21    within an insurance contract;
22        (3) to inquire about or investigate into the health or
23    financial condition of an insured;
24        (4) to prevent the lapse of a life insurance contract
25    if the trust does not receive contributions or hold other

 

 

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1    readily marketable assets to pay the life insurance
2    contract premiums; or
3        (5) to exercise any policy options, rights, or
4    privileges available under any contract of life insurance
5    in the trust, including any right to borrow the cash value
6    or reserve of the policy, acquire a paid-up policy, or
7    convert to a different policy.
8    (b) The trustee is not liable to the beneficiaries of the
9trust, the beneficiaries of the contract of insurance, or to
10any other party for loss arising from the absence of these
11duties regarding insurance contracts under this Section.
12    (c) This Section applies to an irrevocable trust created
13after the effective date of this Code or to a revocable trust
14that becomes irrevocable after the effective date of this Code.
15The trustee of a trust described under this Section established
16prior to the effective date of this Code shall notify the
17settlor in writing that, unless the settlor provides written
18notice to the contrary to the trustee within 90 days of the
19trustee's notice, the provisions of this Section apply to the
20trust. This Section does not apply if, within 90 days of the
21trustee's notice, the settlor notifies the trustee in writing
22that this Section does not apply. If the settlor is deceased,
23then the trustee shall give notice to all of the legally
24competent current beneficiaries, and this Section applies to
25the trust unless the majority of the beneficiaries notify the
26trustee to the contrary in writing within 90 days of the

 

 

SB3165- 123 -LRB099 20744 HEP 45399 b

1trustee's notice.
 
2    Section 914. Investments in affiliated investments;
3transactions with affiliates.
4    (a) As used in this Section:
5        (1) "Affiliate" means any corporation or other entity
6    that directly or indirectly is controlled by a financial
7    institution acting in a fiduciary capacity, or is related
8    to the financial institution by shareholding or other means
9    of common ownership and control.
10        (2) "Affiliated investment" means an investment for
11    which the fiduciary or an affiliate of the fiduciary acts
12    as adviser, administrator, distributor, placement agent,
13    underwriter, broker, or in any other capacity for which the
14    fiduciary or an affiliate of the fiduciary receives or has
15    received compensation from the investment.
16        (3) "Fiduciary capacity" includes an agent with
17    investment discretion to determine what securities or
18    other assets to purchase or sell on behalf of a fiduciary
19    account.
20    (b) A financial institution acting in any fiduciary
21capacity may purchase any affiliated investment, including,
22but not limited to, insurance, equity derivatives, or
23securities underwritten or otherwise distributed by the
24financial institution or by an affiliate, through or directly
25from the financial institution or an affiliate or from a

 

 

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1syndicate or selling group that includes the financial
2institution or an affiliate, if the purchase is otherwise
3prudent under the applicable fiduciary investment standard.
4    (c) The compensation paid to a financial institution acting
5in any fiduciary capacity or an affiliate of the financial
6institution for any affiliated investment under this Section
7must be reasonable and may not be prohibited by the instrument
8governing the fiduciary relationship. The compensation for the
9affiliated investment may be in addition to the compensation
10that the financial institution is otherwise entitled to receive
11from the fiduciary account.
12    (d) A financial institution shall disclose, at least
13annually:
14        (1) any purchase of an affiliated investment
15    authorized by this Section, including all compensation
16    paid or to be paid by the fiduciary account or to be
17    received by an affiliate arising from the affiliated
18    investment;
19        (2) the capacities in which the financial institution
20    or an affiliate acts for the issuer of the securities or
21    the provider of the products or services; and
22        (3) that the financial institution or an affiliate may
23    have an interest in the affiliated investment.
24    (e) The disclosure shall be given, in writing or
25electronically by any document prepared for an affiliated
26investment under federal or state securities laws or in a

 

 

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1written summary that includes all compensation received or to
2be received by the financial institution or any affiliate and
3an explanation of the manner in which the compensation is
4calculated (either as a percentage of the assets invested or by
5some other formula or method), to each principal in an agency
6relationship and to all persons entitled to receive account
7statements of any other fiduciary account.
8    (f) This Section applies to the purchase of securities made
9at the time of the initial offering of the securities or at any
10time thereafter.
11    (g) A financial institution that has complied with the
12terms of this Section has full authority to administer an
13affiliated investment, including the authority to vote proxies
14on the affiliated investment.
 
15
Article 10. Liability of trustees and rights of persons dealing
16
with trustee.

 
17    Section 1001. Remedies for breach of trust.
18    (a) A violation by a trustee of a duty the trustee owes to
19a beneficiary is a breach of trust.
20    (b) To remedy a breach of trust that has occurred or may
21occur, the court may:
22        (1) compel the trustee to perform the trustee's duties;
23        (2) enjoin the trustee from committing a breach of
24    trust;

 

 

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1        (3) compel the trustee to redress a breach of trust by
2    paying money, restoring property, or other means;
3        (4) order a trustee to account;
4        (5) appoint a special fiduciary to take possession of
5    the trust property and administer the trust;
6        (6) suspend the trustee;
7        (7) remove the trustee as provided in Section 706;
8        (8) reduce or deny compensation to the trustee; or
9        (9) subject to Section 1012, void an act of the
10    trustee, impose a lien or a constructive trust on trust
11    property, or trace trust property wrongfully disposed of
12    and recover the property or its proceeds.
13    (c) Nothing in this Section limits the equitable powers of
14the court to order other appropriate relief.
 
15    Section 1002. Damages for breach of trust.
16    (a) A trustee who commits a breach of trust is liable to
17the beneficiaries affected for the greater of:
18        (1) the amount required to restore the value of the
19    trust property and trust distributions to what they would
20    have been had the breach not occurred; or
21        (2) the value of any benefit received by the trustee by
22    reason of the breach.
23    (b) Except as otherwise provided in this subsection, if
24more than one trustee is liable to the beneficiaries for a
25breach of trust, a trustee is entitled to contribution from the

 

 

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1other trustee or trustees liable for the breach. A trustee is
2not entitled to contribution if the trustee was substantially
3more at fault than another trustee or if the trustee committed
4the breach of trust in bad faith or with reckless indifference
5to the purposes of the trust or the interests of the
6beneficiaries. A trustee who received a benefit from the breach
7of trust is not entitled to contribution from another trustee
8to the extent of the benefit received.
 
9    Section 1003. No damages in absence of breach. Absent a
10breach of trust, a trustee is not liable to a beneficiary for a
11loss or depreciation in the value of trust property or for any
12benefit received by the trustee by reason of the administration
13of the trust.
 
14    Section 1004. Attorney's fees and costs. In a judicial
15proceeding involving the administration of a trust, the court,
16as equity may require, may award costs and expenses, including
17reasonable attorney's fees, to any party, to be paid by another
18party or from the trust that is the subject of the controversy.
 
19    Section 1005. Limitation on action against trustee.
20    (a) A beneficiary may not commence a proceeding against a
21trustee for breach of trust for any matter disclosed in writing
22by a trust accounting, or otherwise as provided in Sections
23813.1, 813.2, and Section 1102, after the date on which the

 

 

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1disclosure becomes binding upon the beneficiary as provided
2below:
3        (1) With respect to a trust that becomes irrevocable
4    after the effective date of this Code and to trustees
5    accepting appointment after the effective date of this
6    Code, a matter disclosed in writing by a trust accounting
7    or otherwise pursuant to Section 813.1 and Section 1102 is
8    binding on each person who receives the information and
9    each person represented as provided in Article 3 by a
10    person who receives the information, and all of the
11    person's respective successors, representatives, heirs,
12    and assigns, unless an action against the trustee is
13    instituted within 2 years after the date the information is
14    furnished. A trust accounting or other communication
15    adequately discloses the existence of a potential claim for
16    breach of trust if it provides sufficient information so
17    that the person entitled to receive the information knows
18    of the potential claim or should have inquired into its
19    existence.
20        (2) With respect to a trust that became irrevocable
21    prior to the effective date of this Code or a trustee that
22    accepted appointment prior to the effective date of this
23    Code, a current account is binding on each beneficiary
24    receiving the account and on the beneficiary's heirs and
25    assigns unless an action against the trustee is instituted
26    by the beneficiary or the beneficiary's heirs and assigns

 

 

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1    within 3 years after the date the current account is
2    furnished, and a final accounting is binding on each
3    beneficiary receiving the final accounting and all persons
4    claiming by or through the beneficiary, unless an action
5    against the trustee is instituted by the beneficiary or
6    person claiming by or through him or her within 3 years
7    after the date the final account is furnished. If the
8    account is provided to the representative of the estate of
9    the beneficiary or to a spouse, parent, adult child, or
10    guardian of the person of the beneficiary, the account is
11    binding on the beneficiary unless an action is instituted
12    against the trustee by the representative of the estate of
13    the beneficiary or by the spouse, parent, adult child, or
14    guardian of the person to whom the account is furnished
15    within 3 years after the date it is furnished.
16        (3) Notwithstanding paragraphs (1) and (2) of this
17    subsection (a), with respect to trust estates that
18    terminated and were distributed 10 years or less prior to
19    January 1, 1988, the final account furnished to the
20    beneficiaries entitled to distribution of the trust estate
21    is binding on the beneficiaries receiving the final
22    account, and all persons claiming by or through them,
23    unless an action against the trustee is instituted by the
24    beneficiary or person claiming by or through him or her
25    within 5 years after January 1, 1988 or within 10 years
26    after the date the final account was furnished, whichever

 

 

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1    is longer.
2        (4) Notwithstanding paragraphs (1), (2) and (3) of this
3    subsection (a), with respect to trust estates that
4    terminated and were distributed more than 10 years before
5    January 1, 1988, the final account furnished to the
6    beneficiaries entitled to distribution of the trust estate
7    is binding on the beneficiaries receiving the final
8    account, and all persons claiming by or through them,
9    unless an action against the trustee is instituted by the
10    beneficiary or person claiming by or through him or her
11    within 2 years after January 1, 1988.
12    (b) Unless barred earlier under subsection (a), a judicial
13proceeding by a beneficiary against a trustee for breach of
14trust must be commenced within 5 years after the first to occur
15of:
16        (1) the removal, resignation, or death of the trustee;
17        (2) the termination of the beneficiary's interest in
18    the trust; or
19        (3) the termination of the trust.
20    (c) Notwithstanding any other provision of this Section, a
21beneficiary may bring any action against the trustee for
22fraudulent concealment within the time limit set forth in
23Section 13-215 of the Code of Civil Procedure.
 
24    Section 1006. Reliance on trust instrument. A trustee who
25acts in reasonable reliance on the express language of the

 

 

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1trust instrument is not liable to a beneficiary for a breach of
2trust to the extent the breach resulted from the reliance.
 
3    Section 1007. Event affecting administration or
4distribution. If the happening of an event, including, but not
5limited to, marriage, divorce, performance of educational
6requirements, or death, affects the administration or
7distribution of a trust, a trustee who has exercised reasonable
8care to ascertain the happening of the event is not liable for
9a loss resulting from the trustee's lack of knowledge.
 
10    Section 1008. Exculpation of trustee.
11    (a) A term of a trust relieving a trustee of liability for
12breach of trust is unenforceable to the extent that it:
13        (1) relieves the trustee of liability for breach of
14    trust committed in bad faith or with reckless indifference
15    to the purposes of the trust or the interests of the
16    beneficiaries; or
17        (2) was inserted as the result of an abuse by the
18    trustee of a fiduciary or confidential relationship to the
19    settlor.
20    (b) An exculpatory term drafted or caused to be drafted by
21the trustee is invalid as an abuse of a fiduciary or
22confidential relationship unless the trustee proves that the
23exculpatory term is fair under the circumstances and that its
24existence and contents were adequately communicated to the

 

 

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1settlor. These conditions are satisfied if the settlor was
2represented by independent counsel.
 
3    Section 1009. Beneficiary's consent, release, or
4ratification.
5    (a) A trustee is not liable to a beneficiary, or to anyone
6claiming by or through the beneficiary, for breach of trust if
7the beneficiary consented to the conduct constituting the
8breach, released the trustee from liability for the breach, or
9ratified the transaction constituting the breach, unless:
10        (1) the consent, release, or ratification of the
11    beneficiary was induced by improper conduct of the trustee;
12    or
13        (2) at the time of the consent, release, or
14    ratification, the beneficiary did not know of the
15    beneficiary's rights or of the material facts relating to
16    the breach.
17    (b) If the beneficiary's consent, release, or ratification
18involves a self-dealing transaction, the consent, release, or
19ratification is binding only if the transaction was fair and
20reasonable. The condition that a self-dealing transaction must
21be fair and reasonable is satisfied if the beneficiary was
22represented by independent counsel. No consideration is
23required for the consent, release, or ratification to be valid.
 
24    Section 1010. Limitation on personal liability of trustee.

 

 

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1    (a) Except as otherwise provided in the contract, a trustee
2is not personally liable on a contract properly entered into in
3the trustee's fiduciary capacity in the course of administering
4the trust if the trustee in the contract disclosed the
5fiduciary capacity.
6    (b) A trustee is personally liable for torts committed in
7the course of administering a trust, or for obligations arising
8from ownership or control of trust property, including
9liability for violation of environmental law, only if the
10trustee is personally at fault.
11    (c) A claim based on a contract entered into by a trustee
12in the trustee's fiduciary capacity, on an obligation arising
13from ownership or control of trust property, or on a tort
14committed in the course of administering a trust, may be
15asserted in a judicial proceeding against the trustee in the
16trustee's fiduciary capacity, whether or not the trustee is
17personally liable for the claim.
 
18    Section 1011. Interest as general partner.
19    (a) Except as otherwise provided in subsection (c) or
20unless personal liability is imposed in the contract, a trustee
21who holds an interest as a general partner in a general or
22limited partnership is not personally liable on a contract
23entered into by the partnership after the trust's acquisition
24of the interest if the fiduciary capacity was disclosed in the
25contract or in a statement previously filed pursuant to the

 

 

SB3165- 134 -LRB099 20744 HEP 45399 b

1Uniform Partnership Act (1997) or Uniform Limited Partnership
2Act (2001) or any other similar state law.
3    (b) Except as otherwise provided in subsection (c), a
4trustee who holds an interest as a general partner is not
5personally liable for torts committed by the partnership or for
6obligations arising from ownership or control of the interest
7unless the trustee is personally at fault.
8    (c) The immunity provided by this Section does not apply if
9an interest in the partnership is held by the trustee in a
10capacity other than that of trustee or is held by the trustee's
11spouse or one or more of the trustee's descendants, siblings,
12or parents, or the spouse of any of them.
13    (d) If the trustee of a revocable trust holds an interest
14as a general partner, the settlor is personally liable for
15contracts and other obligations of the partnership as if the
16settlor were a general partner.
 
17    Section 1012. Protection of person dealing with trustee.
18    (a) A person other than a beneficiary or a beneficiary's
19representative under Article 3 acting in a representative
20capacity who in good faith assists a trustee, or who in good
21faith and for value deals with a trustee, without knowledge
22that the trustee is exceeding or improperly exercising the
23trustee's powers is protected from liability as if the trustee
24properly exercised the power.
25    (b) A person other than a beneficiary or a beneficiary's

 

 

SB3165- 135 -LRB099 20744 HEP 45399 b

1representative under Article 3 acting in a representative
2capacity who in good faith deals with a trustee is not required
3to inquire into the extent of the trustee's powers or the
4propriety of their exercise.
5    (c) A person, including a beneficiary, who in good faith
6delivers assets to a trustee need not ensure their proper
7application.
8    (d) A person other than a beneficiary who in good faith
9assists a former trustee, or who in good faith and for value
10deals with a former trustee, without knowledge that the
11trusteeship has terminated is protected from liability as if
12the former trustee were still a trustee.
13    (e) Comparable protective provisions of other laws
14relating to commercial transactions or transfer of securities
15by fiduciaries prevail over the protection provided by this
16Section.
 
17    Section 1013. Certification of trust.
18    (a) Instead of furnishing a copy of the trust instrument to
19a person other than a beneficiary, the trustee may furnish to
20the person a certification of trust containing the following
21information:
22        (1) that the trust exists and the date the trust
23    instrument was executed;
24        (2) the identity of the settlor;
25        (3) the identity and address of the currently acting

 

 

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1    trustee;
2        (4) the powers of the trustee;
3        (5) the revocability or irrevocability of the trust,
4    whether the trust is amendable or unamendable, and the
5    identity of any person holding a power to revoke the trust;
6        (6) the authority of cotrustees to sign or otherwise
7    authenticate and whether all or less than all are required
8    in order to exercise powers of the trustee;
9        (7) the trust's taxpayer identification number; and
10        (8) the manner of taking title to trust property.
11    (b) A certification of trust must be signed or otherwise
12authenticated by one or more of the trustees. A third party may
13require that the certification of trust be acknowledged.
14    (c) A certification of trust must state that the trust has
15not been revoked, modified, or amended in any manner that would
16cause the representations contained in the certification of
17trust to be incorrect.
18    (d) A certification of trust need not contain the
19dispositive terms of a trust.
20    (e) A recipient of a certification of trust may require the
21trustee to furnish copies of those excerpts from the original
22trust instrument and later amendments that designate the
23trustee and confer upon the trustee the power to act in the
24pending transaction.
25    (f) A person who acts in reliance upon a certification of
26trust without actual knowledge that the representations

 

 

SB3165- 137 -LRB099 20744 HEP 45399 b

1contained therein are incorrect is not liable to any person for
2so acting and may assume without inquiry the existence of the
3facts contained in the certification. Knowledge of the trust
4instrument may not be inferred solely from the fact that a copy
5of all or part of the trust instrument is held by the person
6relying upon the certification.
7    (g) A person who in good faith enters into a transaction in
8reliance upon a certification of trust may enforce the
9transaction against the trust property as if the
10representations contained in the certification were correct.
11    (h) A person making a demand for the trust instrument in
12addition to a certification of trust or excerpts is liable for
13damages if the court determines that the person did not act in
14good faith in demanding the trust instrument. A person required
15to examine a complete copy of the trust instrument for purposes
16of complying with applicable federal, state, or local law, a
17person acting in a fiduciary capacity with respect to a trust,
18and the Attorney General's Charitable Trust Bureau are deemed
19to be acting in good faith when demanding a copy of the trust
20instrument. This Section does not modify or limit any
21obligation a trustee may have to furnish a copy of a trust
22instrument to the Attorney General under the Charitable Trust
23Act or the Solicitation for Charity Act.
24    (i) This Section does not limit the right of a person to
25obtain a copy of the trust instrument in a judicial proceeding
26concerning the trust.

 

 

SB3165- 138 -LRB099 20744 HEP 45399 b

1    (j) A certification of trust may be substantially as
2follows, but nothing in this subsection invalidates or bars the
3use of a certification of trust in any other or different form:
4
CERTIFICATION OF TRUST
5Name of trust:...............................................
6Date trust instrument was executed:..........................
7Tax Identification Number of trust (SSN or EIN):.............
8Name(s) of settlor(s) of trust:..............................
9Name(s) of currently acting trustee(s):......................
10Address(es) of currently acting trustee(s):..................
11.... This trust states that .... of .... cotrustee(s) are
12required to exercise the powers of the trustee.
13.... The cotrustees authorized to sign or otherwise
14authenticate on behalf of the trust are:.....................
15.... There are no cotrustees authorized to sign or otherwise
16authenticate on behalf of the trust.
17Name(s) of successor trustee(s):.............................
18The trustee(s) has (have) the power to (state, synopsize, or
19describe relevant powers):.
20Title to the trust property shall be taken as follows (for
21example, "John Doe and Jane Doe, cotrustees of the Doe Family
22Living Trust, dated January 4, 1999"):.......................
23.... This is an irrevocable trust.
24.... This is a revocable trust. Name(s) of person(s) holding
25power to revoke the trust:...................................
26.... This is an unamendable trust.

 

 

SB3165- 139 -LRB099 20744 HEP 45399 b

1.... This trust is amendable. Name(s) of person(s) holding
2power to amend the trust:....................................
 
3I (we) certify that the above-named trust is in full force and
4has not been revoked, modified, or amended in any manner that
5would cause the representations in this Certification of Trust
6to be incorrect.
 
7IN WITNESS THEREOF, each of the undersigned, being a trustee of
8the above-named trust with the authority to execute this
9Certification of Trust, does hereby execute it this ..... day
10of .........., .......
 
11Trustee Signature: .............
12Printed Name: ..................
 
13Trustee Signature: .............
14Printed Name: ..................
 
15[OPTIONAL:
16State of .................)
17County of ................)
 
18This instrument was signed and acknowledged before me on
19.........., ...... (date) by (name/s of person/s):.........
 

 

 

SB3165- 140 -LRB099 20744 HEP 45399 b

1(Signature of Notary Public):
2............................
3(SEAL)]
 
4    Section 1014. Reliance on Secretary of Financial and
5Professional Regulation. No trustee or other person is liable
6under this Code for any act done or omitted in good faith in
7conformity with any rule, interpretation, or opinion issued by
8the Secretary of Financial and Professional Regulation,
9notwithstanding that after the act or omission has occurred,
10the rule, opinion, or interpretation upon which reliance is
11placed is amended, rescinded, or determined by judicial or
12other authority to be invalid for any reason.
 
13
Article 11. Total return trusts.

 
14    Section 1101. Total return trust defined; trustee duty to
15inform.
16    (a) In this Article, "total return trust" means a trust
17converted in accordance with this Article that the trustee
18shall manage and invest seeking a total return without regard
19to whether the return is from income or appreciation of
20principal.
21    (b) Notwithstanding any other provision of this Article, a
22trustee has no duty to inform beneficiaries about the
23availability of this Article and has no duty to review the

 

 

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1trust to determine whether any action should be taken under
2this Article unless requested to do so in writing by a
3qualified beneficiary.
 
4    Section 1102. Conversion by trustee. A trustee may convert
5a trust to a total return trust as described in this Article if
6all of the following apply:
7        (1) The trust describes the amount that may or must be
8    distributed to a beneficiary by referring to the trust's
9    income, and the trustee determines that conversion to a
10    total return trust will enable the trustee to better carry
11    out the purposes of the trust and the conversion is in the
12    best interests of the beneficiaries;
13        (2) the trustee sends a written notice of the trustee's
14    decision to convert the trust to a total return trust,
15    specifying a prospective effective date for the conversion
16    and including a copy of this Article, to all of the
17    qualified beneficiaries; and
18        (3) no qualified beneficiary objects to the conversion
19    to a total return trust in a writing delivered to the
20    trustee within 60 days after the notice is sent.
 
21    Section 1103. Conversion by agreement. Conversion to a
22total return trust may be made by agreement between a trustee
23and all qualified beneficiaries. The agreement may include any
24actions a court could properly order under Section 1108 of this

 

 

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1Article; however, any distribution percentage determined by
2the agreement may not be less than 3% nor greater than 5%.
 
3    Section 1104. Conversion or reconversion by court.
4    (a) The trustee may for any reason elect to petition the
5court to order conversion to a total return trust, including
6without limitation the reason that conversion under Section
71102 is unavailable because a beneficiary timely objects to the
8conversion to a total return trust.
9    (b) A beneficiary may request the trustee to convert to a
10total return trust or adjust the distribution percentage. If
11the trustee declines or fails to act within 6 months after
12receiving a written request to do so, the beneficiary may
13petition the court to order the conversion or adjustment.
14    (c) The trustee may petition the court prospectively to
15reconvert from a total return trust or adjust the distribution
16percentage if the trustee determines that the reconversion or
17adjustment will enable the trustee to better carry out the
18purposes of the trust. A beneficiary may request the trustee to
19petition the court prospectively to reconvert from a total
20return trust or adjust the distribution percentage. If the
21trustee declines or fails to act within 6 months after
22receiving a written request to do so, the beneficiary may
23petition the court to order the reconversion or adjustment.
24    (d) In a judicial proceeding under this Section, the
25trustee may, but need not, present the trustee's opinions and

 

 

SB3165- 143 -LRB099 20744 HEP 45399 b

1reasons (1) for supporting or opposing conversion to (or
2reconversion from or adjustment of the distribution percentage
3of) a total return trust, including whether the trustee
4believes conversion (or reconversion or adjustment of the
5distribution percentage) would enable the trustee to better
6carry out the purposes of the trust, and (2) about any other
7matters relevant to the proposed conversion (or reconversion or
8adjustment of the distribution percentage). A trustee's
9actions in accordance with this Section shall not be deemed
10improper or inconsistent with the trustee's duty of
11impartiality unless the court finds from all the evidence that
12the trustee acted in bad faith.
13    (e) The court shall order conversion to (or reconversion
14prospectively from or adjustment of the distribution
15percentage of) a total return trust if the court determines
16that the conversion (or reconversion or adjustment of the
17distribution percentage) will enable the trustee to better
18carry out the purposes of the trust and the conversion (or
19reconversion or adjustment of the distribution percentage) is
20in the best interests of the beneficiaries.
21    (f) The court may order any of the following actions in a
22proceeding brought by a trustee or a beneficiary under this
23Section:
24        (1) select a distribution percentage other than 4%;
25        (2) average the valuation of the trust's net assets
26    over a period other than 3 years;

 

 

SB3165- 144 -LRB099 20744 HEP 45399 b

1        (3) reconvert prospectively from or adjust the
2    distribution percentage of a total return trust;
3        (4) direct the distribution of net income (determined
4    as if the trust were not a total return trust) in excess of
5    the distribution amount as to any or all trust assets if
6    the distribution is necessary to preserve a tax benefit; or
7        (5) change or direct any administrative procedure as
8    the court determines necessary or helpful for the proper
9    functioning of the total return trust.
10    (g) Nothing in this Section limits the equitable powers of
11the court to grant other relief.
 
12    Section 1105. Post conversion. While a trust is a total
13return trust, all of the following apply to the trust:
14        (1) the trustee shall make income distributions in
15    accordance with the trust instrument subject to the
16    provisions of this Article;
17        (2) the term "income" in the trust instrument means an
18    annual amount (the "distribution amount") equal to a
19    percentage (the "distribution percentage") of the net fair
20    market value of the trust's assets, whether the assets are
21    considered income or principal under the Principal and
22    Income Act, averaged over the lesser of:
23            (A) the 3 preceding years; or
24            (B) the period during which the trust has been in
25        existence;

 

 

SB3165- 145 -LRB099 20744 HEP 45399 b

1        (3) the distribution percentage for any trust
2    converted to a total return trust by a trustee in
3    accordance with Section 1102 shall be 4%;
4        (4) the trustee shall pay to a beneficiary (in the case
5    of an underpayment) and shall recover from a beneficiary
6    (in the case of an overpayment) an amount equal to the
7    difference between the amount properly payable and the
8    amount actually paid, plus interest compounded annually at
9    a rate per annum equal to the distribution percentage in
10    the year or years while the underpayment or overpayment
11    exists; and
12        (5) a change in the method of determining a reasonable
13    current return by converting to a total return trust in
14    accordance with this Article and substituting the
15    distribution amount for net trust accounting income is a
16    proper change in the definition of trust income
17    notwithstanding any contrary provision of the Principal
18    and Income Act, and the distribution amount shall be deemed
19    a reasonable current return that fairly apportions the
20    total return of a total return trust.
 
21    Section 1106. Administration.
22    (a) As used in this Section, "excluded asset" means an
23asset for which there is no readily available market value and
24that the trustee determines in accordance with subsection (d)
25shall be excluded from the net fair market value of the trust's

 

 

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1assets for purposes of determining the distribution amount
2under paragraph (2) of Section 1105.
3    (b) The trustee, in the trustee's discretion, may determine
4any of the following matters in administering a total return
5trust as the trustee from time to time determines necessary or
6helpful for the proper functioning of 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; and
23            (B) whether and how often to engage a professional
24        appraiser to value such an asset;
25        (8) which trust assets are excluded assets; and
26        (9) any other administrative matters as the trustee

 

 

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1    determines necessary or helpful for the proper functioning
2    of the total return trust.
3    (c) The trustee shall distribute any net income received
4from excluded assets as provided in the trust instrument.
5    (d) Unless the trustee determines there are compelling
6reasons to the contrary considering all relevant factors
7including the best interests of the beneficiaries, the trustee
8shall treat each asset for which there is no readily available
9market value as an excluded asset. Examples of assets for which
10there is a readily available market value include: cash and
11cash equivalents; stocks, bonds, and other securities and
12instruments for which there is an established market on a stock
13exchange, in an over-the-counter market, or otherwise; and any
14other property that can reasonably be expected to be sold
15within one week of the decision to sell without extraordinary
16efforts by the seller. Examples of assets for which there is no
17readily available market value include: stocks, bonds, and
18other securities and instruments for which there is no
19established market on a stock exchange, in an over-the-counter
20market, or otherwise; real property; tangible personal
21property; and artwork and other collectibles.
22    (e) If tangible personal property or real property is
23possessed or occupied by a beneficiary, the trustee shall not
24limit or restrict any right of the beneficiary to use the
25property in accordance with the trust instrument regardless of
26whether the trustee treats the property as an excluded asset.
 

 

 

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1    Section 1107. Allocations.
2    (a) Expenses, taxes, and other charges that would be
3deducted from income if the trust were not a total return trust
4shall not be deducted from the distribution amount.
5    (b) Unless otherwise provided by the trust instrument, the
6trustee shall fund the distribution amount each year from the
7following sources for that year in the order listed:
8        (1) first from net income (as the term would be
9    determined if the trust were not a total return trust);
10        (2) then from other ordinary income as determined for
11    federal income tax purposes;
12        (3) then from net realized short-term capital gains as
13    determined for federal income tax purposes;
14        (4) then from net realized long-term capital gains as
15    determined for federal income tax purposes;
16        (5) then from trust principal comprised of assets for
17    which there is a readily available market value; and
18        (6) then from other trust principal.
 
19    Section 1108. Restrictions. Conversion to a total return
20trust does not affect any provision in the trust instrument:
21        (1) directing or authorizing the trustee to distribute
22    principal;
23        (2) directing or authorizing the trustee to distribute
24    a fixed annuity or a fixed fraction of the value of trust

 

 

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1    assets;
2        (3) authorizing a beneficiary to withdraw a portion or
3    all of the principal; or
4        (4) in any manner that would diminish an amount
5    permanently set aside for charitable purposes under the
6    trust instrument unless both income and principal are so
7    set aside.
 
8    Section 1109. Tax limitations.
9    (a) If a particular trustee is a beneficiary of the trust
10and conversion or failure to convert would enhance or diminish
11the beneficial interest of the trustee, or if possession or
12exercise of the conversion power by a particular trustee would
13alone cause any individual to be treated as owner of a part of
14the trust for income tax purposes or cause a part of the trust
15to be included in the gross estate of any individual for estate
16tax purposes, then the particular trustee may not participate
17as a trustee in the exercise of the conversion power except
18that the particular trustee may petition the court under
19subsection (a) of Section 1104 to order conversion in
20accordance with this Article.
21    (b) If the particular trustee has one or more cotrustees to
22whom subsection (a) does not apply, the cotrustee or cotrustees
23may convert the trust to a total return trust in accordance
24with this Article.
 

 

 

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1    Section 1110. Releases. A trustee may irrevocably release
2the power granted by this Article if the trustee reasonably
3believes the release is in the best interests of the trust and
4its beneficiaries. The release may be personal to the releasing
5trustee or may apply generally to some or all subsequent
6trustees, and the release may be for any specified period,
7including a period measured by the life of an individual.
 
8    Section 1111. Remedies. A trustee who reasonably and in
9good faith takes any action under this Article is not liable to
10any interested person. If a trustee reasonably and in good
11faith takes any action under this Article and an interested
12person opposes the action, the person's exclusive remedy is to
13obtain an order of the court directing the trustee to convert
14the trust to a total return trust, to reconvert from a total
15return trust, to change the distribution percentage, or to
16order any administrative procedures the court determines
17necessary or helpful for the proper functioning of the trust.
18An action by a trustee under this Article is presumed taken or
19omitted reasonably and in good faith unless it is determined by
20the court to have been an abuse of discretion.
 
21    Section 1112. Application. This Article is available to
22trusts in existence on or after August 22, 2002. This Article
23shall be construed as pertaining to the administration of a
24trust and shall be available to any trust that is administered

 

 

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1in Illinois or that is governed by Illinois law with respect to
2the meaning and effect of its terms unless one of the following
3apply:
4        (1) The trust is a trust described in Section
5    642(c)(5), 664(d), 2702(a)(3), or 2702(b) of the Internal
6    Revenue Code.
7        (2) The trust instrument expressly prohibits use of
8    this Article by specific reference to this Article or a
9    prior corresponding law. A provision in the trust
10    instrument in the form: "Neither the provisions of Article
11    11 of the Illinois Trust Code nor any corresponding
12    provision of future law may be used in the administration
13    of this trust" or a similar provision demonstrating that
14    intent is sufficient to preclude the use of this Article.
 
15    Section 1113. Application to express trusts.
16    (a) In this Section:
17        (1) "Unitrust" means a trust the terms of which require
18    distribution of a unitrust amount, without regard to
19    whether the trust has been converted to a total return
20    trust in accordance with this Article or whether the trust
21    is established by express terms of the trust instrument.
22        (2) "Unitrust amount" means an amount equal to a
23    percentage of a trust's assets that may or must be
24    distributed to one or more beneficiaries annually in
25    accordance with the terms of the trust. The unitrust amount

 

 

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1    may be determined by reference to the net fair market value
2    of the trust's assets as of a particular date or as an
3    average determined on a multiple year basis.
4    (b) A unitrust changes the definition of income by
5substituting the unitrust amount for net trust accounting
6income as the method of determining current return and shall be
7given effect notwithstanding any contrary provision of the
8Principal and Income Act. By way of example and not limitation,
9a unitrust amount determined by a percentage of not less than
103% nor greater than 5% is conclusively presumed a reasonable
11current return that fairly apportions the total return of a
12unitrust.
13    (c) Subsection (b) of Section 1107 applies to a unitrust
14except to the extent its trust instrument expressly provides
15otherwise.
16    (d) This Section does not apply to a charitable remainder
17unitrust as defined by Section 664(d) of the Internal Revenue
18Code.
 
19
Article 12. Trust decanting.

 
20    Section 1201. Article title. This Article may be referred
21to as the Trust Decanting Law.
 
22    Section 1202. Definitions. In this Article:
23    (1) "Appointive property" means the property or property

 

 

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1interest subject to a power of appointment.
2    (2) "Authorized fiduciary" means:
3        (A) a trustee or other fiduciary, other than a settlor,
4    that has discretion to distribute or direct a trustee to
5    distribute part or all of the principal of the first trust
6    to one or more current beneficiaries;
7        (B) a special fiduciary appointed under Section 1209;
8    or
9        (C) a special-needs fiduciary under Section 1213.
10    (3) "Court" means the court in this State having
11jurisdiction in matters relating to trusts.
12    (4) "Decanting power" or "the decanting power" means the
13power of an authorized fiduciary under this Article to
14distribute property of a first trust to one or more second
15trusts or to modify the terms of the first trust.
16    (5) "Expanded distributive discretion" means a
17discretionary power of distribution that is not limited to an
18ascertainable standard or a reasonably definite standard.
19    (6) "First trust" means a trust over which an authorized
20fiduciary may exercise the decanting power.
21    (7) "First-trust instrument" means the trust instrument
22for a first trust.
23    (8) "Reasonably definite standard" means a clearly
24measurable standard under which a holder of a power of
25distribution is legally accountable within the meaning of
26Section 674(b)(5)(A) of the Internal Revenue Code, as amended,

 

 

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1and any applicable regulations.
2    (9) "Record" means information that is inscribed on a
3tangible medium or that is stored in an electronic or other
4medium and is retrievable in perceivable form.
5    (10) "Second trust" means:
6        (A) a first trust after modification under this
7    Article; or
8        (B) a trust to which a distribution of property from a
9    first trust is or may be made under this Article.
10    (11) "Second-trust instrument" means the trust instrument
11for a second trust.
 
12    Section 1203. Scope.
13    (a) Except as otherwise provided in subsections (b) and
14(c), this Article applies to an express trust that is
15irrevocable or revocable by the settlor only with the consent
16of the trustee or a person holding an adverse interest.
17    (b) This Article does not apply to a trust held solely for
18charitable purposes.
19    (c) Subject to Section 1215, a trust instrument may
20restrict or prohibit exercise of the decanting power.
21    (d) This Article does not limit the power of a trustee,
22powerholder, or other person to distribute or appoint property
23in further trust or to modify a trust under the trust
24instrument, law of this State other than this Article, common
25law, a court order, or a nonjudicial settlement agreement.

 

 

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1    (e) This Article does not affect the ability of a settlor
2to provide in a trust instrument for the distribution or
3appointment in further trust of the trust property or for
4modification of the trust instrument.
 
5    Section 1204. Fiduciary duty.
6    (a) In exercising the decanting power, an authorized
7fiduciary shall act in accordance with its fiduciary duties,
8including the duty to act in accordance with the purposes of
9the first trust.
10    (b) This Article does not create or imply a duty to
11exercise the decanting power or to inform beneficiaries about
12the applicability of this Article.
13    (c) Except as otherwise provided in a first-trust
14instrument, for purposes of this Article and Section 801 of
15this Code, the terms of the first trust are deemed to include
16the decanting power.
 
17    Section 1205. Application; governing law. This Article
18applies to a trust created before, on, or after the effective
19date of this Code that:
20        (1) has its principal place of administration in this
21    State, including a trust whose principal place of
22    administration has been changed to this State; or
23        (2) provides by its trust instrument that it is
24    governed by the law of this State or is governed by the law

 

 

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1    of this State for the purpose of:
2            (A) administration, including administration of a
3        trust whose governing law for purposes of
4        administration has been changed to the law of this
5        State;
6            (B) construction of terms of the trust; or
7            (C) determining the meaning or effect of terms of
8        the trust.
 
9    Section 1206. Reasonable reliance. A trustee or other
10person that reasonably relies on the validity of a distribution
11of part or all of the property of a trust to another trust, or a
12modification of a trust, under this Article, law of this State
13other than this Article or the law of another jurisdiction is
14not liable to any person for any action or failure to act as a
15result of the reliance.
 
16    Section 1207. Notice.
17    (a) In this Section, a notice period begins on the day
18notice is given under subsection (c) and ends 59 days after the
19day notice is given.
20    (b) Except as otherwise provided in this Article, an
21authorized fiduciary may exercise the decanting power without
22the consent of any person and without court approval.
23    (c) Except as otherwise provided in subsection (f), an
24authorized fiduciary shall give notice in a record of the

 

 

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1intended exercise of the decanting power not later than 60 days
2before the exercise to:
3        (1) each settlor of the first trust, if living or then
4    in existence;
5        (2) each qualified beneficiary of the first trust;
6        (3) each holder of a presently exercisable power of
7    appointment over any part or all of the first trust;
8        (4) each person that currently has the right to remove
9    or replace the authorized fiduciary;
10        (5) each other fiduciary of the first trust;
11        (6) each fiduciary of the second trust; and
12        (7) the Attorney General's Charitable Trust Bureau, if
13    the first trust contains a charitable interest.
14    (d) An authorized fiduciary is not required to give notice
15under subsection (c) to a qualified beneficiary who is a minor
16and has no representative. The authorized fiduciary is not
17required to give notice under subsection (c) to a person that
18is not known to the fiduciary or is known to the fiduciary but
19cannot be located by the fiduciary after reasonable diligence.
20    (e) A notice under subsection (c) must:
21        (1) specify the manner in which the authorized
22    fiduciary intends to exercise the decanting power;
23        (2) specify the proposed effective date for exercise of
24    the power;
25        (3) include a copy of the first-trust instrument; and
26        (4) include a copy of all second-trust instruments.

 

 

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1    (f) The decanting power may be exercised before expiration
2of the notice period under subsection (a) if all persons
3entitled to receive notice waive the period in a signed record.
4    (g) The receipt of notice, waiver of the notice period, or
5expiration of the notice period does not affect the right of a
6person to file an application under Section 1209 with the court
7asserting that:
8        (1) an attempted exercise of the decanting power is
9    ineffective because it did not comply with this Article or
10    was an abuse of discretion or breach of fiduciary duty; or
11        (2) Section 1222 applies to the exercise of the
12    decanting power.
13    (h) An exercise of the decanting power is not ineffective
14because of the failure to give notice to one or more persons
15under subsection (c) if the authorized fiduciary acted with
16reasonable care to comply with subsection (c).
 
17    Section 1208. (Reserved).
 
18    Section 1209. Court involvement.
19    (a) On application of an authorized fiduciary, a person
20entitled to notice under Section 1207(c), a beneficiary, or
21with respect to a charitable interest the Attorney General's
22Charitable Trust Bureau or any other person that has standing
23to enforce the charitable interest, the court may:
24        (1) provide instructions to the authorized fiduciary

 

 

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1    regarding whether a proposed exercise of the decanting
2    power is permitted under this Article and consistent with
3    the fiduciary duties of the authorized fiduciary;
4        (2) appoint a special fiduciary and authorize the
5    special fiduciary to determine whether the decanting power
6    should be exercised under this Article and to exercise the
7    decanting power;
8        (3) approve an exercise of the decanting power;
9        (4) determine that a proposed or attempted exercise of
10    the decanting power is ineffective because:
11            (A) after applying Section 1222, the proposed or
12        attempted exercise does not or did not comply with this
13        Article; or
14            (B) the proposed or attempted exercise would be or
15        was an abuse of the fiduciary's discretion or a breach
16        of fiduciary duty;
17        (5) determine the extent to which Section 1222 applies
18    to a prior exercise of the decanting power;
19        (6) provide instructions to the trustee regarding the
20    application of Section 1222 to a prior exercise of the
21    decanting power; or
22        (7) order other appropriate relief to carry out the
23    purposes of this Article.
24    (b) On application of an authorized fiduciary, the court
25may approve:
26        (1) an increase in the fiduciary's compensation under

 

 

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1    Section 1216; or
2        (2) a modification under Section 1218 of a provision
3    granting a person the right to remove or replace the
4    fiduciary.
 
5    Section 1210. Formalities. An exercise of the decanting
6power must be made in a record signed by an authorized
7fiduciary. The signed record must, directly or by reference to
8the notice required by Section 1207, identify the first trust
9and the second trust or trusts and state the property of the
10first trust being distributed to each second trust and the
11property, if any, that remains in the first trust.
 
12    Section 1211. Decanting power under expanded distributive
13discretion.
14    (a) In this Section:
15        (1) "Noncontingent" right means a right that is not
16    subject to the exercise of discretion or the occurrence of
17    a specified event that is not certain to occur. The term
18    does not include a right held by a beneficiary if any
19    person has discretion to distribute property subject to the
20    right of any person other than the beneficiary or the
21    beneficiary's estate.
22        (2) "Presumptive remainder beneficiary" means a
23    qualified beneficiary other than a current beneficiary.
24        (3) "Successor beneficiary" means a beneficiary that

 

 

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1    on the date the beneficiary's qualification is determined
2    is not a qualified beneficiary. The term does not include a
3    person that is a beneficiary only because the person holds
4    a nongeneral power of appointment.
5        (4) "Vested interest" means:
6            (A) a right to a mandatory distribution that is a
7        noncontingent right as of the date of the exercise of
8        the decanting power;
9            (B) a current and noncontingent right, annually or
10        more frequently, to a mandatory distribution of
11        income, a specified dollar amount, or a percentage of
12        value of some or all of the trust property;
13            (C) a current and noncontingent right, annually or
14        more frequently, to withdraw income, a specified
15        dollar amount, or a percentage of value of some or all
16        of the trust property;
17            (D) a presently exercisable general power of
18        appointment; or
19            (E) a right to receive an ascertainable part of the
20        trust property on the trust's termination that is not
21        subject to the exercise of discretion or to the
22        occurrence of a specified event that is not certain to
23        occur.
24    (b) Subject to subsection (c) and Section 1214, an
25authorized fiduciary that has expanded distributive discretion
26to distribute the principal of a first trust to one or more

 

 

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1current beneficiaries may exercise the decanting power over the
2principal of the first trust.
3    (c) Subject to Section 1213, in an exercise of the
4decanting power under this Section, a second trust may not:
5        (1) include as a current beneficiary a person that is
6    not a current beneficiary of the first trust, except as
7    otherwise provided in subsection (d);
8        (2) include as a presumptive remainder beneficiary or
9    successor beneficiary a person that is not a current
10    beneficiary, presumptive remainder beneficiary, or
11    successor beneficiary of the first trust, except as
12    otherwise provided in subsection (d); or
13        (3) reduce or eliminate a vested interest.
14    (d) Subject to subsection (c)(3) and Section 1214, in an
15exercise of the decanting power under this Section, a second
16trust may be a trust created or administered under the law of
17any jurisdiction and may:
18        (1) retain a power of appointment granted in the first
19    trust;
20        (2) omit a power of appointment granted in the first
21    trust, other than a presently exercisable general power of
22    appointment;
23        (3) create or modify a power of appointment if the
24    powerholder is a current beneficiary of the first trust and
25    the authorized fiduciary has expanded distributive
26    discretion to distribute principal to the beneficiary; and

 

 

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1        (4) create or modify a power of appointment if the
2    powerholder is a presumptive remainder beneficiary or
3    successor beneficiary of the first trust, but the exercise
4    of the power may take effect only after the powerholder
5    becomes, or would have become if then living, a current
6    beneficiary.
7    (e) A power of appointment described in subsection (d)(1)
8through (4) of subsection (d) may be general or nongeneral. The
9class of permissible appointees in favor of which the power may
10be exercised may be broader than or different from the
11beneficiaries of the first trust.
12    (f) If an authorized fiduciary has expanded distributive
13discretion to distribute part but not all of the principal of a
14first trust, the fiduciary may exercise the decanting power
15under this Section over that part of the principal over which
16the authorized fiduciary has expanded distributive discretion.
 
17    Section 1212. Decanting power under limited distributive
18discretion.
19    (a) In this Section, "limited distributive discretion"
20means a discretionary power of distribution that is limited to
21an ascertainable standard or a reasonably definite standard.
22    (b) An authorized fiduciary that has limited distributive
23discretion over the principal of the first trust for the
24benefit of one or more current beneficiaries may exercise the
25decanting power over the principal of the first trust.

 

 

SB3165- 164 -LRB099 20744 HEP 45399 b

1    (c) Under this Section and subject to Section 1214, a
2second trust may be created or administered under the law of
3any jurisdiction. Under this Section, the second trusts, in the
4aggregate, must grant each beneficiary of the first trust
5beneficial interests that are substantially similar to the
6beneficial interests of the beneficiary in the first trust.
7    (d) A power to make a distribution under a second trust for
8the benefit of a beneficiary who is an individual is
9substantially similar to a power under the first trust to make
10a distribution directly to the beneficiary. A distribution is
11for the benefit of a beneficiary if:
12        (1) the distribution is applied for the benefit of the
13    beneficiary;
14        (2) the beneficiary is incapacitated or in the opinion
15    of the trustee is unable to manage property or business
16    affairs, and the distribution is made as permitted under
17    this Code; or
18        (3) the distribution is made as permitted under the
19    terms of the first-trust instrument and the second-trust
20    instrument for the benefit of the beneficiary.
21    (e) If an authorized fiduciary has limited distributive
22discretion over part but not all of the principal of a first
23trust, the fiduciary may exercise the decanting power under
24this Section over that part of the principal over which the
25authorized fiduciary has limited distributive discretion.
 

 

 

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1    Section 1213. Trust for beneficiary with disability.
2    (a) In this Section:
3        (1) "Beneficiary with a disability" means a
4    beneficiary of the first trust who the special-needs
5    fiduciary believes may qualify for governmental benefits
6    based on disability, whether or not the beneficiary
7    currently receives those benefits or is an individual who
8    has been adjudicated incompetent.
9        (2) "Best interests" of a beneficiary with a disability
10    include, without limitation, consideration of the
11    financial impact to the family of the beneficiary who has a
12    disability.
13        (3) "Governmental benefits" means financial aid or
14    services from a state, federal, or other public agency.
15        (4) "Special-needs fiduciary" means, with respect to a
16    trust that has a beneficiary with a disability:
17            (A) a trustee or other fiduciary, other than a
18        settlor, that has discretion to distribute part or all
19        of the principal of a first trust to one or more
20        current beneficiaries;
21            (B) if no trustee or fiduciary has discretion under
22        subparagraph (A), a trustee or other fiduciary, other
23        than a settlor, that has discretion to distribute part
24        or all of the income of the first trust to one or more
25        current beneficiaries; or
26            (C) if no trustee or fiduciary has discretion under

 

 

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1        subparagraphs (A) and (B), a trustee or other
2        fiduciary, other than a settlor, that is required to
3        distribute part or all of the income or principal of
4        the first trust to one or more current beneficiaries.
5        (5) "Special-needs trust" means a trust the trustee
6    believes would not be considered a resource for purposes of
7    determining whether the beneficiary with a disability is
8    eligible for governmental benefits.
9    (b) A special-needs fiduciary may exercise the decanting
10power under Section 1211 over the principal of a first trust as
11if the fiduciary had authority to distribute principal to a
12beneficiary with a disability subject to expanded distributive
13discretion if:
14        (1) a second trust is a special-needs trust that
15    benefits the beneficiary with a disability; and
16        (2) the special-needs fiduciary determines that
17    exercise of the decanting power will further the purposes
18    of the first trust or the best interests of the beneficiary
19    with a disability.
20    (c) In an exercise of the decanting power under this
21Section, the following rules apply:
22        (1) If the first trust was created by the beneficiary
23    with a disability, or to the extent the first trust was
24    funded by the beneficiary with a disability, then
25    notwithstanding paragraph (2) of subsection (c) of Section
26    1211, the interest in the second trust of a beneficiary

 

 

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1    with a disability may:
2            (A) be a pooled trust as defined by Medicaid law
3        for the benefit of the beneficiary with a disability
4        under 42 U.S.C. 1396p(d)(4)(C), as amended; or
5            (B) contain payback provisions complying with
6        reimbursement requirements of Medicaid law under 42
7        U.S.C. 1396p(d)(4)(A), as amended.
8        (2) Paragraph (3) of subsection (c) of Section 1211
9    does not apply to the interests of the beneficiary with a
10    disability.
11        (3) Except as affected by any change to the interests
12    of the beneficiary with a disability, the second trusts, in
13    the aggregate, must grant each other beneficiary of the
14    first trust beneficial interests in the second trusts that
15    are substantially similar to the beneficiary's beneficial
16    interests in the first trust.
 
17    Section 1214. Protection of charitable interests.
18    (a) In this Section:
19        (1) "Determinable charitable interest" means a
20    charitable interest that is a right to a mandatory
21    distribution currently, periodically, on the occurrence of
22    a specified event, or after the passage of a specified time
23    and that is unconditional or that will in all events be
24    held for charitable purposes.
25        (2) "Unconditional" means not subject to the

 

 

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1    occurrence of a specified event that is not certain to
2    occur, other than a requirement in a trust instrument that
3    a charitable organization be in existence or qualify under
4    a particular provision of the Internal Revenue Code on the
5    date of the distribution if the charitable organization
6    meets the requirement on the date of determination.
7    (b) If a first trust contains a determinable charitable
8interest, the Attorney General's Charitable Trust Bureau has
9the rights of a qualified beneficiary and may represent and
10bind the charitable interest.
11    (c) If a first trust contains a charitable interest, the
12second trusts in the aggregate may not:
13        (1) diminish the charitable interest;
14        (2) diminish the interest of an identified charitable
15    organization that holds the charitable interest;
16        (3) alter any charitable purpose stated in the
17    first-trust instrument; or
18        (4) alter any condition or restriction related to the
19    charitable interest.
20    (d) If there are 2 or more second trusts, the second trusts
21shall be treated as one trust for purposes of determining
22whether the exercise of the decanting power diminishes the
23charitable interest or diminishes the interest of an identified
24charitable organization for purposes of subsection (c).
25    (e) If a first trust contains a determinable charitable
26interest, the second trusts that include charitable interests

 

 

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1pursuant to subsection (c) must be administered under the law
2of this State unless:
3        (1) the Attorney General's Charitable Trust Bureau,
4    after receiving notice under Section 1207, fails to object
5    in a signed record delivered to the authorized fiduciary
6    within the notice period;
7        (2) the Attorney General's Charitable Trust Bureau
8    consents in a signed record to the second trusts being
9    administered under the law of another jurisdiction; or
10        (3) the court approves the exercise of the decanting
11    power.
12    (f) This Article does not limit the powers and duties of
13the Attorney General's Charitable Trust Bureau under Illinois
14law.
 
15    Section 1215. Trust limitation on decanting.
16    (a) An authorized fiduciary may not exercise the decanting
17power to the extent the first-trust instrument expressly
18prohibits exercise of:
19        (1) the decanting power; or
20        (2) a power granted by state law to the fiduciary to
21    distribute part or all of the principal of the trust to
22    another trust or to modify the trust.
23    (b) Exercise of the decanting power is subject to any
24restriction in the first-trust instrument that expressly
25applies to exercise of:

 

 

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1        (1) the decanting power; or
2        (2) a power granted by state law to a fiduciary to
3    distribute part or all of the principal of the trust to
4    another trust or to modify the trust.
5    (c) A general prohibition of the amendment or revocation of
6a first trust, a spendthrift clause, or a clause restraining
7the voluntary or involuntary transfer of a beneficiary's
8interest does not preclude exercise of the decanting power.
9    (d) Subject to subsections (a) and (b), an authorized
10fiduciary may exercise the decanting power under this Article
11even if the first-trust instrument permits the authorized
12fiduciary or another person to modify the first-trust
13instrument or to distribute part or all of the principal of the
14first trust to another trust.
15    (e) If a first-trust instrument contains an express
16prohibition described in subsection (a) or an express
17restriction described in subsection (b), that provision must be
18included in the second-trust instrument.
 
19    Section 1216. Change in compensation.
20    (a) If a first-trust instrument specifies an authorized
21fiduciary's compensation, the fiduciary may not exercise the
22decanting power to increase the fiduciary's compensation
23beyond the specified compensation unless:
24        (1) all qualified beneficiaries of the second trust
25    consent to the increase in a signed record; or

 

 

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1        (2) the increase is approved by the court.
2    (b) If a first-trust instrument does not specify an
3authorized fiduciary's compensation, the fiduciary may not
4exercise the decanting power to increase the fiduciary's
5compensation above the compensation permitted by Section 708
6unless:
7        (1) all qualified beneficiaries of the second trust
8    consent to the increase in a signed record; or
9        (2) the increase is approved by the court.
10    (c) A change in an authorized fiduciary's compensation that
11is incidental to other changes made by the exercise of the
12decanting power is not an increase in the fiduciary's
13compensation for purposes of subsections (a) and (b).
 
14    Section 1217. Relief from liability and indemnification.
15    (a) Except as otherwise provided in this Section, a
16second-trust instrument may not relieve an authorized
17fiduciary from liability for breach of trust to a greater
18extent than the first-trust instrument.
19    (b) A second-trust instrument may provide for
20indemnification of an authorized fiduciary of the first trust
21or another person acting in a fiduciary capacity under the
22first trust for any liability or claim that would have been
23payable from the first trust if the decanting power had not
24been exercised.
25    (c) A second-trust instrument may not reduce fiduciary

 

 

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1liability in the aggregate.
2    (d) Subject to subsection (c), a second-trust instrument
3may divide and reallocate fiduciary powers among fiduciaries,
4including one or more trustees, distribution advisors,
5investment advisors, trust protectors, or other persons, and
6relieve a fiduciary from liability for an act or failure to act
7of another fiduciary as permitted by law of this State other
8than this Article.
 
9    Section 1218. Removal or replacement of authorized
10fiduciary. An authorized fiduciary may not exercise the
11decanting power to modify a provision in the first-trust
12instrument granting another person power to remove or replace
13the fiduciary unless:
14        (1) the person holding the power consents to the
15    modification in a signed record and the modification
16    applies only to the person;
17        (2) the person holding the power and the qualified
18    beneficiaries of the second trust consent to the
19    modification in a signed record and the modification grants
20    a substantially similar power to another person; or
21        (3) the court approves the modification and the
22    modification grants a substantially similar power to
23    another person.
 
24    Section 1219. Tax-related limitations.

 

 

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1    (a) In this Section:
2        (1) "Grantor trust" means a trust as to which a settlor
3    of a first trust is considered the owner under Sections 671
4    through 677 of the Internal Revenue Code or Section 679 of
5    the Internal Revenue Code.
6        (2) "Nongrantor trust" means a trust that is not a
7    grantor trust.
8        (3) "Qualified benefits property" means property
9    subject to the minimum distribution requirements of
10    Section 401(a)(9) of the Internal Revenue Code, and any
11    applicable regulations, or to any similar requirements
12    that refer to Section 401(a)(9) of the Internal Revenue
13    Code or the regulations.
14    (b) An exercise of the decanting power is subject to the
15following limitations:
16        (1) If a first trust contains property that qualified,
17    or would have qualified but for provisions of this Article
18    other than this Section, for a marital deduction for
19    purposes of the gift or estate tax under the Internal
20    Revenue Code or a state gift, estate, or inheritance tax,
21    the second-trust instrument must not include or omit any
22    term that, if included in or omitted from the trust
23    instrument for the trust to which the property was
24    transferred, would have prevented the transfer from
25    qualifying for the deduction, or would have reduced the
26    amount of the deduction, under the same provisions of the

 

 

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1    Internal Revenue Code or state law under which the transfer
2    qualified.
3        (2) If the first trust contains property that
4    qualified, or would have qualified but for provisions of
5    this Article other than this Section, for a charitable
6    deduction for purposes of the income, gift, or estate tax
7    under the Internal Revenue Code or a state income, gift,
8    estate, or inheritance tax, the second-trust instrument
9    must not include or omit any term that, if included in or
10    omitted from the trust instrument for the trust to which
11    the property was transferred, would have prevented the
12    transfer from qualifying for the deduction, or would have
13    reduced the amount of the deduction, under the same
14    provisions of the Internal Revenue Code or state law under
15    which the transfer qualified.
16        (3) If the first trust contains property that
17    qualified, or would have qualified but for provisions of
18    this Article other than this Section, for the exclusion
19    from the gift tax described in Section 2503(b) of the
20    Internal Revenue Code, the second-trust instrument must
21    not include or omit a term that, if included in or omitted
22    from the trust instrument for the trust to which the
23    property was transferred, would have prevented the
24    transfer from qualifying under the same provision of
25    Section 2503 of the Internal Revenue Code. If the first
26    trust contains property that qualified, or would have

 

 

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1    qualified but for provisions of this Article other than
2    this Section, for the exclusion from the gift tax described
3    in Section 2503(b) of the Internal Revenue Code, by
4    application of Section 2503(c) of the Internal Revenue
5    Code, the second-trust instrument must not include or omit
6    a term that, if included or omitted from the trust
7    instrument for the trust to which the property was
8    transferred, would have prevented the transfer from
9    qualifying under Section 2503(c) of the Internal Revenue
10    Code.
11        (4) If the property of the first trust includes shares
12    of stock in an S corporation, as defined in Section 1361 of
13    the Internal Revenue Code and the first trust is, or but
14    for provisions of this Article other than this Section
15    would be, a permitted shareholder under any provision of
16    Section 1361 of the Internal Revenue Code, an authorized
17    fiduciary may exercise the power with respect to part or
18    all of the S-corporation stock only if any second trust
19    receiving the stock is a permitted shareholder under
20    Section 1361(c)(2) of the Internal Revenue Code. If the
21    property of the first trust includes shares of stock in an
22    S corporation and the first trust is, or but for provisions
23    of this Article other than this Section, would be, a
24    qualified subchapter-S trust within the meaning of Section
25    1361(d) of the Internal Revenue Code, the second-trust
26    instrument must not include or omit a term that prevents

 

 

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1    the second trust from qualifying as a qualified
2    subchapter-S trust.
3        (5) If the first trust contains property that
4    qualified, or would have qualified but for provisions of
5    this Article other than this Section, for a zero inclusion
6    ratio for purposes of the generation-skipping transfer tax
7    under Section 2642(c) of the Internal Revenue Code the
8    second-trust instrument must not include or omit a term
9    that, if included in or omitted from the first-trust
10    instrument, would have prevented the transfer to the first
11    trust from qualifying for a zero inclusion ratio under
12    Section 2642(a) of the Internal Revenue Code.
13        (6) If the first trust is directly or indirectly the
14    beneficiary of qualified benefits property, the
15    second-trust instrument may not include or omit any term
16    that, if included in or omitted from the first-trust
17    instrument, would have increased the minimum distributions
18    required with respect to the qualified benefits property
19    under Section 401(a)(9) of the Internal Revenue Code and
20    any applicable regulations, or any similar requirements
21    that refer to Section 401(a)(9) of the Internal Revenue
22    Code or the regulations. If an attempted exercise of the
23    decanting power violates the preceding sentence, the
24    trustee is deemed to have held the qualified benefits
25    property and any reinvested distributions of the property
26    as a separate share from the date of the exercise of the

 

 

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1    power and Section 1222 applies to the separate share.
2        (7) If the first trust qualifies as a grantor trust
3    because of the application of Section 672(f)(2)(A) of the
4    Internal Revenue Code the second trust may not include or
5    omit a term that, if included in or omitted from the
6    first-trust instrument, would have prevented the first
7    trust from qualifying under Section 672(f)(2)(A) of the
8    Internal Revenue Code.
9        (8) In this paragraph (8), "tax benefit" means a
10    federal or state tax deduction, exemption, exclusion, or
11    other benefit not otherwise listed in this Section, except
12    for a benefit arising from being a grantor trust. Subject
13    to paragraph (9) of this subsection (b), a second-trust
14    instrument may not include or omit a term that, if included
15    in or omitted from the first-trust instrument, would have
16    prevented qualification for a tax benefit if:
17            (A) the first-trust instrument expressly indicates
18        an intent to qualify for the benefit or the first-trust
19        instrument clearly is designed to enable the first
20        trust to qualify for the benefit; and
21            (B) the transfer of property held by the first
22        trust or the first trust qualified, or but for
23        provisions of this Article other than this Section,
24        would have qualified for the tax benefit.
25        (9) Subject to paragraph (4) of this subsection (b):
26            (A) except as otherwise provided in paragraph (7)

 

 

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1        of this subsection (b), the second trust may be a
2        nongrantor trust, even if the first trust is a grantor
3        trust; and
4            (B) except as otherwise provided in paragraph (10)
5        of this subsection (b), the second trust may be a
6        grantor trust, even if the first trust is a nongrantor
7        trust.
8        (10) An authorized fiduciary may not exercise the
9    decanting power if a settlor objects in a signed record
10    delivered to the fiduciary within the notice period and:
11            (A) the first trust and second trusts are both
12        grantor trusts, in whole or in part, the first trust
13        grants the settlor or another person the power to cause
14        the second trust to cease to be a grantor trust, and
15        the second trust does not grant an equivalent power to
16        the settlor or other person; or
17            (B) the first trust is a nongrantor trust and the
18        second trust is a grantor trust, in whole or in part,
19        with respect to the settlor, unless:
20                (i) the settlor has the power at all times to
21            cause the second trust to cease to be a grantor
22            trust; or
23                (ii) the first-trust instrument contains a
24            provision granting the settlor or another person a
25            power that would cause the first trust to cease to
26            be a grantor trust and the second-trust instrument

 

 

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1            contains the same provision.
 
2    Section 1220. Duration of second trust.
3    (a) Subject to subsection (b), a second trust may have a
4duration that is the same as or different from the duration of
5the first trust.
6    (b) To the extent that property of a second trust is
7attributable to property of the first trust, the second trust
8is subject to any rules governing maximum perpetuity,
9accumulation, or suspension of the power of alienation
10applicable to property of the first trust.
 
11    Section 1221. Need to distribute not required. An
12authorized fiduciary may exercise the decanting power whether
13or not under the first trust's discretionary distribution
14standard the fiduciary would have made or could have been
15compelled to make a discretionary distribution of principal at
16the time of the exercise.
 
17    Section 1222. Savings provision.
18    (a) If exercise of the decanting power would be effective
19under this Article except that the second-trust instrument in
20part does not comply with this Article, the exercise of the
21power is effective and the following rules apply to the
22principal of the first trust subject to the exercise of the
23power:

 

 

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1        (1) A provision in the second-trust instrument that is
2    not permitted under this Article is void to the extent
3    necessary to comply with this Article.
4        (2) A provision required by this Article to be in the
5    second-trust instrument that is not contained in the
6    instrument is deemed to be included in the instrument to
7    the extent necessary to comply with this Article.
8    (b) If a trustee or other fiduciary of a second trust
9discovers that subsection (a) applies to a prior exercise of
10the decanting power, the fiduciary shall take such appropriate
11corrective action as is consistent with the fiduciary's duties.
 
12    Section 1223. Trust for care of animal.
13    (a) In this Section:
14        (1) "Animal trust" means a trust or an interest in a
15    trust created to provide for the care of one or more
16    designated domestic or pet animals.
17        (2) "Protector" means a person described in paragraph
18    (3) of subsection (b) of Section 408.
19    (b) The decanting power may be exercised over an animal
20trust that has a protector to the extent the trust could be
21decanted under this Article as if each animal that benefits
22from the trust were an individual, if the protector consents in
23a signed record to the exercise of the decanting power.
24    (c) A protector for an animal has the rights under this
25Article of a qualified beneficiary.

 

 

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1    (d) Notwithstanding any other provision of this Article, if
2a first trust is an animal trust, in an exercise of the
3decanting power, the second trust must provide that trust
4property may be applied only to its intended purpose for the
5period the first trust benefitted the animal.
 
6    Section 1224. (Reserved).
 
7    Section 1225. Settlor.
8    (a) For purposes of the laws of this State other than this
9Article and subject to subsection (b), a settlor of a first
10trust is deemed to be the settlor of the second trust with
11respect to the portion of the principal of the first trust
12subject to the exercise of the decanting power.
13    (b) In determining settlor intent with respect to a second
14trust, the intent of a settlor of the first trust, the intent
15of a settlor of the second trust, and the intent of the
16authorized fiduciary may be considered.
 
17    Section 1226. Later-discovered property.
18    (a) Except as otherwise provided in subsection (c), if
19exercise of the decanting power was intended to distribute all
20the principal of the first trust to one or more second trusts,
21later-discovered property otherwise belonging to the first
22trust and property paid to or acquired by the first trust after
23the exercise of the power is part of the trust estate of the

 

 

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1second trust.
2    (b) Except as otherwise provided in subsection (c), if
3exercise of the decanting power was intended to distribute less
4than all the principal of the first trust to one or more second
5trusts, later-discovered property belonging to the first trust
6or property paid to or acquired by the first trust after
7exercise of the decanting power remains part of the trust
8estate of the first trust.
9    (c) An authorized fiduciary may provide in an exercise of
10the decanting power or by the terms of a second trust for
11disposition of later-discovered property belonging to the
12first trust or property paid to or acquired by the first trust
13after exercise of the decanting power.
 
14    Section 1227. Obligations. A debt, liability, or other
15obligation enforceable against property of a first trust is
16enforceable to the same extent against that property when held
17by the second trust after exercise of the decanting power.
 
18
Article 13. Uniform Powers of Appointment Act.

 
19    Section 1301. Article title. This Article may be referred
20to as the Uniform Powers of Appointment Act.
 
21    Section 1302. Definitions. In this Article:
22    (1) "Appointee" means a person to which a powerholder makes

 

 

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1an appointment of appointive property.
2    (2) "Appointive property" means the property or property
3interest subject to a power of appointment.
4    (3) "Blanket-exercise clause" means a clause in an
5instrument that exercises a power of appointment and is not a
6specific-exercise clause. The term includes a clause that:
7        (A) expressly uses the words "any power" in exercising
8    any power of appointment the powerholder has;
9        (B) expressly uses the words "any property" in
10    appointing any property over which the powerholder has a
11    power of appointment; or
12        (C) disposes of all property subject to disposition by
13    the powerholder.
14    (4) "Exclusionary power of appointment" means a power of
15appointment exercisable in favor of any one or more of the
16permissible appointees to the exclusion of the other
17permissible appointees.
18    (5) "Gift-in-default clause" means a clause identifying a
19taker in default of appointment.
20    (6) "Impermissible appointee" means a person that is not a
21permissible appointee.
22    (7) "Instrument" means a writing.
23    (8) "Permissible appointee" means a person in whose favor a
24powerholder may exercise a power of appointment.
25    (9) "Powerholder" means a person in which a donor creates a
26power of appointment.

 

 

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1    (10) "Specific-exercise clause" means a clause in an
2instrument that specifically refers to and exercises a
3particular power of appointment.
4    (11) "Taker in default of appointment" means a person that
5takes part or all of the appointive property to the extent the
6powerholder does not effectively exercise the power of
7appointment.
 
8    Section 1303. Governing law. Unless the terms of the
9instrument creating a power of appointment manifest a contrary
10intent:
11    (1) the creation, revocation, or amendment of the power is
12governed by the law of the donor's domicile at the relevant
13time; and
14    (2) the exercise, release, or disclaimer of the power, or
15the revocation or amendment of the exercise, release, or
16disclaimer of the power, is governed by the law of the
17powerholder's domicile at the relevant time.
 
18    Section 1304. Common law and principles of equity. The
19common law and principles of equity supplement this Article,
20except to the extent modified by this Article or law of this
21State other than this Article.
 
22    Section 1305. Creation of power of appointment.
23    (a) A power of appointment is created only if:

 

 

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1        (1) the instrument creating the power:
2            (A) is valid under applicable law; and
3            (B) except as otherwise provided in subsection
4        (b), transfers the appointive property; and
5        (2) the terms of the instrument creating the power
6    manifest the donor's intent to create, in a powerholder, a
7    power of appointment over the appointive property
8    exercisable in favor of a permissible appointee.
9    (b) Subdivision (a)(1)(B) of this Section does not apply to
10the creation of a power of appointment by the exercise of a
11power of appointment.
12    (c) A power of appointment may not be created in a deceased
13individual.
14    (d) Subject to an applicable rule against perpetuities, a
15power of appointment may be created in an unborn or
16unascertained powerholder.
 
17    Section 1306. Nontransferability. A powerholder may not
18transfer a power of appointment. If the powerholder dies
19without exercising or releasing the power, the power lapses.
 
20    Section 1307. Presumption of unlimited authority. Subject
21to Section 1309, and unless the terms of the instrument
22creating a power of appointment manifest a contrary intent, the
23power is:
24        (1) presently exercisable;

 

 

SB3165- 186 -LRB099 20744 HEP 45399 b

1        (2) exclusionary; and
2        (3) except as otherwise provided in Section 1308,
3    general.
 
4    Section 1308. Exception to presumption of unlimited
5authority. Unless the terms of the instrument creating a power
6of appointment manifest a contrary intent, the power is
7nongeneral if:
8        (1) the power is exercisable only at the powerholder's
9    death; and
10        (2) the permissible appointees of the power are a
11    defined and limited class that does not include the
12    powerholder's estate, the powerholder's creditors, or the
13    creditors of the powerholder's estate.
 
14    Section 1309. Rules of classification.
15    (a) In this Section, "adverse party" means a person with a
16substantial beneficial interest in property that would be
17affected adversely by a powerholder's exercise or nonexercise
18of a power of appointment in favor of the powerholder, the
19powerholder's estate, a creditor of the powerholder, or a
20creditor of the powerholder's estate.
21    (b) If a powerholder may exercise a power of appointment
22only with the consent or joinder of an adverse party, the power
23is nongeneral.
24    (c) If the permissible appointees of a power of appointment

 

 

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1are not defined and limited, the power is exclusionary.
 
2    Section 1310. Power to revoke or amend. A donor may revoke
3or amend a power of appointment only to the extent that:
4        (1) the instrument creating the power is revocable by
5    the donor; or
6        (2) the donor reserves a power of revocation or
7    amendment in the instrument creating the power of
8    appointment.
 
9    Section 1311. Requisites for exercise of power of
10appointment. A power of appointment is exercised only:
11        (1) if the instrument exercising the power is valid
12    under applicable law;
13        (2) if the terms of the instrument exercising the
14    power:
15            (A) manifest the powerholder's intent to exercise
16        the power; and
17            (B) subject to Section 1314, satisfy the
18        requirements of exercise, if any, imposed by the donor;
19        and
20        (3) to the extent the appointment is a permissible
21    exercise of the power.
 
22    Section 1312. Intent to exercise: determining intent from
23residuary clause.

 

 

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1    (a) In this Section:
2        (1) "Residuary clause" does not include a residuary
3    clause containing a blanket-exercise clause or a
4    specific-exercise clause.
5        (2) "Will" includes a codicil and a testamentary
6    instrument that revises another will.
7    (b) A residuary clause in a powerholder's will, or a
8comparable clause in the powerholder's revocable trust,
9manifests the powerholder's intent to exercise a power of
10appointment only if:
11        (1) the terms of the instrument containing the
12    residuary clause do not manifest a contrary intent;
13        (2) the power is a general power exercisable in favor
14    of the powerholder's estate;
15        (3) there is no gift-in-default clause or it is
16    ineffective; and
17        (4) the powerholder did not release the power.
 
18    Section 1313. Intent to exercise: after-acquired power.
19Unless the terms of the instrument exercising a power of
20appointment manifest a contrary intent:
21        (1) except as otherwise provided in paragraph (2), a
22    blanket-exercise clause extends to a power acquired by the
23    powerholder after executing the instrument containing the
24    clause; and
25        (2) if the powerholder is also the donor of the power,

 

 

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1    the clause does not extend to the power unless there is no
2    gift-in-default clause or it is ineffective.
 
3    Section 1314. Substantial compliance with donor-imposed
4formal requirement. A powerholder's substantial compliance
5with a formal requirement of an appointment imposed by the
6donor, including a requirement that the instrument exercising
7the power of appointment make reference or specific reference
8to the power, is sufficient if:
9        (1) the powerholder knows of and intends to exercise
10    the power; and
11        (2) the powerholder's manner of attempted exercise of
12    the power does not impair a material purpose of the donor
13    in imposing the requirement.
 
14    Section 1315. Permissible appointment.
15    (a) A powerholder of a general power of appointment that
16permits appointment to the powerholder or the powerholder's
17estate may make any appointment, including an appointment in
18trust or creating a new power of appointment, that the
19powerholder could make in disposing of the powerholder's own
20property.
21    (b) A powerholder of a general power of appointment that
22permits appointment only to the creditors of the powerholder or
23of the powerholder's estate is restricted to appointing to
24those creditors.

 

 

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1    (c) Unless the terms of the instrument creating a power of
2appointment manifest a contrary intent, the powerholder of a
3nongeneral power may:
4        (1) make an appointment in any form, with any
5    conditions and limitations, including an appointment in
6    trust to any trustee, in favor of a permissible appointee;
7        (2) create a general or nongeneral power in a
8    permissible appointee that may be exercisable in favor of
9    persons other than permissible appointees of the original
10    nongeneral power; or
11        (3) create a nongeneral power in any person to appoint
12    to one or more of the permissible appointees of the
13    original nongeneral power.
 
14    Section 1316. Appointment to deceased appointee. Subject
15to Section 4-11 of the Probate Act of 1975, an appointment to a
16deceased appointee is ineffective.
 
17    Section 1317. Impermissible appointment.
18    (a) Except as otherwise provided in Section 1316, an
19exercise of a power of appointment in favor of an impermissible
20appointee is ineffective.
21    (b) An exercise of a power of appointment in favor of a
22permissible appointee is ineffective to the extent the
23appointment is a fraud on the power.
 

 

 

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1    Section 1318. Selective allocation doctrine. If a
2powerholder exercises a power of appointment in a disposition
3that also disposes of property the powerholder owns, the owned
4property and the appointive property must be allocated in the
5permissible manner that best carries out the powerholder's
6intent.
 
7    Section 1319. Capture doctrine: disposition of
8ineffectively appointed property under general power. To the
9extent a powerholder of a general power of appointment, other
10than a power to revoke, amend, or withdraw property from a
11trust, makes an ineffective appointment:
12        (1) the gift-in-default clause controls the
13    disposition of the ineffectively appointed property; or
14        (2) if there is no gift-in-default clause or to the
15    extent the clause is ineffective, the ineffectively
16    appointed property:
17            (A) passes to:
18                (i) the powerholder if the powerholder is a
19            permissible appointee and living; or
20                (ii) if the powerholder is an impermissible
21            appointee or not living, the powerholder's estate
22            if the estate is a permissible appointee; or
23            (B) if there is no taker under subparagraph (A),
24        passes under a reversionary interest to the donor or
25        the donor's transferee or successor in interest.
 

 

 

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1    Section 1320. Disposition of unappointed property under
2released or unexercised general power. To the extent a
3powerholder releases or fails to exercise a general power of
4appointment other than a power to revoke, amend, or withdraw
5property from a trust:
6        (1) the gift-in-default clause controls the
7    disposition of the unappointed property; or
8        (2) if there is no gift-in-default clause or to the
9    extent the clause is ineffective:
10            (A) except as otherwise provided in subparagraph
11        (B), the unappointed property passes to:
12                (i) the powerholder if the powerholder is a
13            permissible appointee and living; or
14                (ii) if the powerholder is an impermissible
15            appointee or not living, the powerholder's estate
16            if the estate is a permissible appointee; or
17            (B) to the extent the powerholder released the
18        power, or if there is no taker under subparagraph (A),
19        the unappointed property passes under a reversionary
20        interest to the donor or the donor's transferee or
21        successor in interest.
 
22    Section 1321. Disposition of unappointed property under
23released or unexercised nongeneral power. To the extent a
24powerholder releases, ineffectively exercises, or fails to

 

 

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1exercise a nongeneral power of appointment:
2    (1) the gift-in-default clause controls the disposition of
3the unappointed property; or
4    (2) if there is no gift-in-default clause or to the extent
5the clause is ineffective, the unappointed property:
6        (A) passes to the permissible appointees if:
7            (i) the permissible appointees are defined and
8        limited; and
9            (ii) the terms of the instrument creating the power
10        do not manifest a contrary intent; or
11        (B) if there is no taker under subparagraph (A), passes
12    under a reversionary interest to the donor or the donor's
13    transferee or successor in interest.
 
14    Section 1322. Disposition of unappointed property if
15partial appointment to taker in default. Unless the terms of
16the instrument creating or exercising a power of appointment
17manifest a contrary intent, if the powerholder makes a valid
18partial appointment to a taker in default of appointment, the
19taker in default of appointment may share fully in unappointed
20property.
 
21    Section 1323. Appointment to taker in default. If a
22powerholder of a general power makes an appointment to a taker
23in default of appointment and the appointee would have taken
24the property under a gift-in-default clause had the property

 

 

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1not been appointed, the power of appointment is deemed not to
2have been exercised, and the appointee takes under the
3gift-in-default clause.
 
4    Section 1324. Powerholder's authority to revoke or amend
5exercise. A powerholder may revoke or amend an exercise of a
6power of appointment only to the extent that:
7        (1) the powerholder reserves a power of revocation or
8    amendment in the instrument exercising the power of
9    appointment and, if the power is nongeneral, the terms of
10    the instrument creating the power of appointment do not
11    prohibit the reservation; or
12        (2) the terms of the instrument creating the power of
13    appointment provide that the exercise is revocable or
14    amendable.
 
15    Section 1325. Disposition of trust property subject to
16power. In disposing of trust property subject to a power of
17appointment exercisable by an instrument other than a will, a
18trustee acting in good faith shall have no liability to any
19appointee or taker in default of appointment for relying upon
20an instrument believed to be genuine purporting to exercise a
21power of appointment or for assuming that there is no
22instrument exercising the power of appointment in the absence
23of actual knowledge thereof within 3 months of the last date on
24which the power of appointment may be exercised.
 

 

 

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1    Section 1326. Disclaimer. As provided by Section 2-7 of the
2Probate Act of 1975:
3        (1) A powerholder may disclaim all or part of a power
4    of appointment.
5        (2) A permissible appointee, appointee, or taker in
6    default of appointment may disclaim all or part of an
7    interest in appointive property.
 
8    Section 1327. Authority to release. A powerholder may
9release a power of appointment, in whole or in part, except to
10the extent the terms of the instrument creating the power
11prevent the release.
 
12    Section 1328. Method of release. A powerholder of a
13releasable power of appointment may release the power in whole
14or in part:
15        (1) by substantial compliance with a method provided in
16    the terms of the instrument creating the power; or
17        (2) if the terms of the instrument creating the power
18    do not provide a method or the method provided in the terms
19    of the instrument is not expressly made exclusive, by an
20    instrument manifesting the powerholder's intent by clear
21    and convincing evidence.
 
22    Section 1329. Revocation or amendment of release. A

 

 

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1powerholder may revoke or amend a release of a power of
2appointment only to the extent that:
3        (1) the instrument of release is revocable by the
4    powerholder; or
5        (2) the powerholder reserves a power of revocation or
6    amendment in the instrument of release.
 
7    Section 1330. Power to contract: presently exercisable
8power of appointment. A powerholder of a presently exercisable
9power of appointment may contract:
10        (1) not to exercise the power; or
11        (2) to exercise the power if the contract when made
12    does not confer a benefit on an impermissible appointee.
 
13    Section 1331. Power to contract: power of appointment not
14presently exercisable. A powerholder of a power of appointment
15that is not presently exercisable may contract to exercise or
16not to exercise the power only if the powerholder:
17        (1) is also the donor of the power; and
18        (2) has reserved the power in a revocable trust.
 
19    Section 1332. Remedy for breach of contract to appoint or
20not to appoint. The remedy for a powerholder's breach of a
21contract to appoint or not to appoint is limited to damages
22payable out of the appointive property or, if appropriate,
23specific performance of the contract.
 

 

 

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1    Section 1333. Creditor claim: general power created by
2powerholder.
3    (a) In this Section, "power of appointment created by the
4powerholder" includes a power of appointment created in a
5transfer by another person to the extent the powerholder
6contributed value to the transfer.
7    (b) Appointive property subject to a general power of
8appointment created by the powerholder is subject to a claim of
9a creditor of the powerholder or of the powerholder's estate to
10the extent provided in the Uniform Fraudulent Transfer Act.
11    (c) Subject to subsection (b), appointive property subject
12to a general power of appointment created by the powerholder is
13not subject to a claim of a creditor of the powerholder or the
14powerholder's estate to the extent the powerholder irrevocably
15appointed the property in favor of a person other than the
16powerholder or the powerholder's estate.
17    (d) Subject to subsections (b) and (c), and notwithstanding
18the presence of a spendthrift provision or whether the claim
19arose before or after the creation of the power of appointment,
20appointive property subject to a general power of appointment
21created by the powerholder is subject to a claim of a creditor
22of:
23        (1) the powerholder, to the same extent as if the
24    powerholder owned the appointive property, if the power is
25    presently exercisable; and

 

 

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1        (2) the powerholder's estate, to the extent the estate
2    is insufficient to satisfy the claim and subject to the
3    right of a decedent to direct the source from which
4    liabilities are paid, if the power is exercisable at the
5    powerholder's death.
 
6    Section 1334. Creditor claim: general power not created by
7powerholder.
8    (a) Except as otherwise provided in subsection (b),
9appointive property subject to a general power of appointment
10created by a person other than the powerholder is subject to a
11claim of a creditor of:
12        (1) the powerholder, to the extent the powerholder's
13    property is insufficient, if the power is presently
14    exercisable; and
15        (2) the powerholder's estate if the power is exercised
16    at the powerholder's death, to the extent the estate is
17    insufficient, subject to the right of the deceased
18    powerholder to direct the source from which liabilities are
19    paid.
20    (b) Subject to subsection (c) of Section 1336, a power of
21appointment created by a person other than the powerholder that
22is subject to an ascertainable standard relating to an
23individual's health, education, support, or maintenance within
24the meaning of Section 2041(b)(1)(A) of the Internal Revenue
25Code or Section 2514(c)(1) of the Internal Revenue Code, as

 

 

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1amended, is treated for purposes of this Article as a
2nongeneral power.
 
3    Section 1335. Power to withdraw.
4    (a) For purposes of Sections 1333 through 1336, and except
5as otherwise provided in subsection (b), a power to withdraw
6property from a trust is treated, during the time the power may
7be exercised, as a presently exercisable general power of
8appointment to the extent of the property subject to the power
9to withdraw.
10    (b) A power to withdraw property from a trust ceases to be
11treated as a presently exercisable general power of appointment
12upon its lapse, release or waiver.
 
13    Section 1336. Creditor claim: nongeneral power.
14    (a) Except as otherwise provided in subsections (b) and
15(c), appointive property subject to a nongeneral power of
16appointment is exempt from a claim of a creditor of the
17powerholder or the powerholder's estate.
18    (b) Appointive property subject to a nongeneral power of
19appointment is subject to a claim of a creditor of the
20powerholder or the powerholder's estate to the extent that the
21powerholder owned the property and, reserving the nongeneral
22power, transferred the property in violation of the Uniform
23Fraudulent Transfer Act.
24    (c) If the initial gift in default of appointment is to the

 

 

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1powerholder or the powerholder's estate, a nongeneral power of
2appointment is treated for purposes of this Section as a
3general power.
 
4    Section 1337. Uniformity of application and construction.
5In applying and construing this Article, consideration must be
6given to the need to promote uniformity of the law with respect
7to its subject matter among states that enact it.
 
8    Section 1338. Application to existing relationships.
9    (a) Except as otherwise provided in this Article, on and
10after the effective date of this Code:
11        (1) this Article applies to a power of appointment
12    created before, on, or after its effective date;
13        (2) this Article applies to a judicial proceeding
14    concerning a power of appointment commenced on or after its
15    effective date;
16        (3) this Article applies to a judicial proceeding
17    concerning a power of appointment commenced before its
18    effective date unless the court finds that application of a
19    particular provision of this Article would substantially
20    interfere with the effective conduct of the judicial
21    proceeding or prejudice a right of a party, in which case
22    the particular provision of this Article does not apply and
23    the superseded law applies;
24        (4) a rule of construction or presumption provided in

 

 

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1    this Article applies to an instrument executed before the
2    effective date of the Article unless there is a clear
3    indication of a contrary intent in the terms of the
4    instrument; and
5        (5) an act done before the effective date of this Code
6    is not affected by this Article.
7    (b) If a right is acquired, extinguished, or barred on the
8expiration of a prescribed period that commenced under law of
9this State other than this Article before the effective date of
10this Code, the law continues to apply to the right.
11    (c) No trustee is liable to any person in whose favor a
12power of appointment may have been exercised for any
13distribution of property made to persons entitled to take in
14default of the effective exercise of the power of appointment
15to the extent that the distribution shall have been completed
16prior to the effective date of this Code.
 
17
Article 14. Perpetuities.

 
18    Section 1401. Article title. Except for Section 1407, this
19Article may be referred to as the Act Concerning Perpetuities.
 
20    Section 1402. Purpose. This Article modifies the common law
21rule of property known as the rule against perpetuities, that,
22except as modified by statutes in force at the effective date
23of this Article and by this Article, shall remain in full force

 

 

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1and effect.
 
2    Section 1403. Definitions and terms. As used in this
3Article unless the context otherwise requires:
4    (a) Any reference in this Article to income to be "paid" or
5to income "payments" or to "receiving" income includes income
6payable or distributable to or applicable for the benefit of a
7beneficiary.
8    (b) "Instrument" means any writing pursuant to which any
9legal or equitable interest in property or in the income
10therefrom is affected, disposed of or created.
11    (c) "Qualified perpetual trust" means any trust created by
12any written instrument executed on or after January 1, 1998,
13including an amendment to an instrument in existence prior to
14that date and the exercise of a power of appointment granted by
15an instrument executed or amended on or after that date:
16        (1) to which, by the specific terms governing the
17    trust, the rule against perpetuities does not apply; and
18        (2) the power of the trustee (or other person to whom
19    the power is properly granted or delegated) to sell
20    property of which is not limited by the trust instrument or
21    any provision of law for any period of time beyond the
22    period of the rule against perpetuities.
 
23    Section 1404. Application of rule against perpetuities.
24    (a) The rule against perpetuities does not apply:

 

 

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1        (1) to any disposition of property or interest therein
2    that, at the effective date of this Code, does not violate,
3    or is exempted by statute from the operation of, the common
4    law rule against perpetuities;
5        (2) to powers of a trustee to sell, lease or mortgage
6    property or to powers that relate to the administration or
7    management of trust assets, including, without limitation,
8    discretionary powers of a trustee to determine what
9    receipts constitute principal and what receipts constitute
10    income and powers to appoint a successor trustee;
11        (3) to mandatory powers of a trustee to distribute
12    income, or to discretionary powers of a trustee to
13    distribute principal prior to termination of a trust, to a
14    beneficiary having an interest in the principal that is
15    irrevocably vested in quality and quantity;
16        (4) to discretionary powers of a trustee to allocate
17    income and principal among beneficiaries, but no exercise
18    of any such power after the expiration of the period of the
19    rule against perpetuities is valid;
20        (5) to leases to commence in the future or upon the
21    happening of a future event, but no such lease is valid
22    unless the term of the lease actually commences in
23    possession within 40 years from the date of execution of
24    the lease;
25        (6) to commitments (A) by a lessor to enter into a
26    lease with a subtenant or with the holder of a leasehold

 

 

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1    mortgage or (B) by a lessee or sublessee to enter into a
2    lease with the holder of a mortgage;
3        (7) to options in gross or to preemptive rights in the
4    nature of a right of first refusal, but no option in gross
5    shall be valid for more than 40 years from the date of its
6    creation; or
7        (8) to qualified perpetual trusts as defined in Section
8    1403.
9    (b) The period of the rule against perpetuities shall not
10commence to run in connection with any disposition of property
11or interest therein, and no instrument shall be regarded as
12becoming effective for purposes of the rule against
13perpetuities, and no interest or power shall be deemed to be
14created for purposes of the rule against perpetuities as long
15as, by the terms of the instrument, the maker of the instrument
16has the power to revoke the instrument or to transfer or direct
17to be transferred to himself the entire legal and equitable
18ownership of the property or interest therein.
19    (c) In determining whether an interest violates the rule
20against perpetuities:
21        (1) it is presumed:
22            (A) that the interest was intended to be valid;
23            (B) in the case of an interest conditioned upon the
24        probate of a will, the appointment of an executor,
25        administrator or trustee, the completion of the
26        administration of an estate, the payment of debts, the

 

 

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1        sale or distribution of property, the determination of
2        federal or state tax liabilities or the happening of
3        any administrative contingency, that the contingency
4        must occur, if at all, within the period of the rule
5        against perpetuities; and
6            (C) if the instrument creates an interest in the
7        "widow", "widower", or "spouse" of another person,
8        that the maker of the instrument intended to refer to a
9        person who was living at the date that the period of
10        the rule against perpetuities commences to run;
11        (2) if any interest, but for this subsection, would be
12    invalid because it is made to depend upon any person
13    attaining or failing to attain an age in excess of 21
14    years, the age specified shall be reduced to 21 years as to
15    every person to whom the age contingency applies;
16        (3) notwithstanding the provisions of paragraphs (1)
17    and (2) of this subsection (c), if the validity of any
18    interest depends upon the possibility of the birth or
19    adoption of a child, the following apply:
20            (A) no person shall be deemed capable of having a
21        child until he has attained the age of 13 years;
22            (B) any person who has attained the age of 65 years
23        shall be deemed incapable of having a child;
24            (C) evidence is admissible as to the incapacity of
25        having a child by a living person who has not attained
26        the age of 65 years; and

 

 

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1            (D) the possibility of having a child or more
2        remote descendant by adoption shall be disregarded.
3    (d) Paragraphs (2), (3), and (6) of subsection (a) and
4subsection (b) of this Section are declaratory of existing law.
 
5    Section 1405. Trusts.
6    (a) Subject to the provisions of subsections (e) and (f) of
7this Section, a trust containing any limitation that, but for
8this subsection, would violate the rule against perpetuities as
9modified by Section 1404 shall terminate at the expiration of a
10period of:
11        (1) 21 years after the death of the last to die of all
12    of the beneficiaries of the instrument who were living at
13    the date when the period of the rule against perpetuities
14    commenced to run; or
15        (2) 21 years after that date if no beneficiary of the
16    instrument was then living, unless events occur that cause
17    an earlier termination in accordance with the terms of the
18    instrument and then the principal shall be distributed as
19    provided by the instrument.
20    (b) Subject to the provisions of subsections (c), (d) and
21(e) of this Section, when a trust terminates because of the
22application of subsection (a) of this Section, the trustee
23shall distribute the principal to those persons who would be
24the heirs at law of the maker of the instrument if he or she
25died at the expiration of the period specified in subsection

 

 

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1(a) of this Section and in the proportions then specified by
2statute, unless the trust was created by the exercise of a
3power of appointment and then the principal shall be
4distributed to the person who would have received it if the
5power had not been exercised.
6    (c) Before any distribution of principal is made pursuant
7to subsection (b) of this Section, the trustee shall
8distribute, out of principal, to each living beneficiary who,
9but for termination of the trust because of the application of
10subsection (a) of this Section, would have been entitled to be
11paid income after the expiration of the period specified in
12subsection (a) of this Section, an amount equal to the present
13value (determined as provided in subsection (d) of this Section
14of the income that the beneficiary would have been entitled to
15be paid after the expiration of that period.
16    (d) In determining the present value of income for purposes
17of any distribution to a beneficiary pursuant to subsection (c)
18of this Section:
19        (1) when income payments would have been subject in
20    whole or in part to any discretionary power, it shall be
21    assumed:
22            (A) that the income that would have been paid to an
23        individual income beneficiary would have been the
24        maximum amount of income that could have been paid to
25        him or her in the exercise of the power;
26            (B) if the income would or might have been payable

 

 

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1        to more than one beneficiary, that (except as
2        hereinafter provided) each beneficiary would have
3        received an equal share of the income, unless the
4        instrument specifies less than an equal share as the
5        maximum amount or proportion of income that would have
6        been paid to any beneficiary in the exercise of the
7        power, in which event the maximum specified shall
8        control; and
9            (C) if the income would or might have been payable
10        to the descendants of the maker of the instrument or of
11        another person, that, unless the instrument provides
12        otherwise, the descendants would have received the
13        income per stirpes;
14        (2)(A) present value shall be computed on an actuarial
15    basis and there shall be assumed a return of 5%, at simple
16    interest, on the value of the principal from which the
17    beneficiary would have been entitled to receive income; and
18        (B) if the interest in income was to be for the life of
19    the beneficiary or for the life of another, the computation
20    shall be made on the expectancy set forth in the most
21    recently published American Experience Tables of Mortality
22    and no other evidence of duration or expectancy shall be
23    considered;
24        (3) if the trustee cannot determine the present value
25    of any income interest in accordance with the provisions of
26    the instrument and the foregoing rules concerning income

 

 

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1    payments, the present value of the interest shall be deemed
2    to be zero.
3    (e) This Section applies only when a trust would violate
4the rule against perpetuities as modified by Section 1404 and
5does not apply to any trust that would have been valid apart
6from this Article.
7    (f) This Section does not apply when a trust violates the
8rule against perpetuities because the trust estate may not vest
9in the trustee within the period of the rule.
 
10    Section 1406. Applicability. Sections 1401 through 1405
11apply only to instruments, including instruments that exercise
12a power of appointment, that become effective after September
1322, 1969.
 
14    Section 1407. Vesting of any limitation of property.
15    (a) This Section may be referred to as the Perpetuities
16Vesting Law.
17    (b) The vesting of any limitation of property, whether
18created in the exercise of a power of appointment or in any
19other manner, shall not be regarded as deferred for purposes of
20the rule against perpetuities merely because the limitation is
21made to the estate of a person or to a personal representative,
22or to a trustee under a will, or to take effect on the probate
23of a will.
24    (c) This Section applies only to limitations created after

 

 

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1July 1, 1952.
 
2
Article 15. Miscellaneous provisions.

 
3    Section 1501. Uniformity of application and construction.
4In applying and construing this Code, consideration must be
5given to the need to promote uniformity of the law with respect
6to its subject matter among states that enact comparable
7provisions of the Uniform Trust Code.
 
8    Section 1502. Severability. If any provision of this Code
9or its application to any person or circumstances is held
10invalid, the invalidity does not affect other provisions or
11applications of this Code which can be given effect without the
12invalid provision or application, and to this end the
13provisions of this Code are severable.
 
14    Section 1503. (Reserved).
 
15    Section 1504. (See Section 9999 for effective date.)
 
16    (755 ILCS 5/4-2 rep.)
17    Section 1505. The Probate Act of 1975 is amended by
18repealing Section 4-2.
 
19    (760 ILCS 5/Act rep.)

 

 

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1    Section 1505.1. The Trusts and Trustees Act is repealed.
 
2    (760 ILCS 35/Act rep.)
3    Section 1505.2. The Trusts and Dissolutions of Marriage Act
4is repealed.
 
5    (765 ILCS 305/Act rep.)
6    Section 1505.3. The Statute Concerning Perpetuities is
7repealed.
 
8    (765 ILCS 310/Act rep.)
9    Section 1505.4. The Perpetuities Vesting Act is repealed.
 
10    (765 ILCS 315/Act rep.)
11    Section 1505.5. The Trust Accumulation Act is repealed.
 
12    (765 ILCS 320/Act rep.)
13    Section 1505.6. The Power of Appointment Exercise Act is
14repealed.
 
15    (765 ILCS 325/Act rep.)
16    Section 1505.7. The Termination of Powers Act is repealed.
 
17    Section 1506. Application to existing relationships.
18Except as otherwise provided in this Code, on the effective
19date of this Code:

 

 

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1        (1) This Code applies to all trusts created before, on,
2    or after its effective date.
3        (2) This Code applies to all judicial proceedings
4    concerning trusts commenced on or after its effective date.
5    As used in this Section, "judicial proceedings" includes
6    any proceeding before a court or administrative tribunal of
7    this State and any arbitration or mediation proceedings.
8        (3) this Code applies to all nonjudicial matters
9    concerning trusts commenced before, on, or after its
10    effective date. As used in this Section, "nonjudicial
11    matters" includes, but is not limited to, nonjudicial
12    settlement agreements entered into under Section 111 and
13    the grant of any consent, release, ratification, or
14    indemnification.
15        (4) This Code applies to judicial proceedings
16    concerning trusts commenced before its effective date
17    unless the court finds that application of a particular
18    provision of this Code would substantially interfere with
19    the effective conduct of the judicial proceedings or
20    prejudice the rights of the parties, in which case the
21    particular provision of this Code does not apply and the
22    superseded law applies.
23        (5) Any rule of construction or presumption provided in
24    this Code applies to trust instruments executed before the
25    effective date of this Code unless there is a clear
26    indication of a contrary intent in the trust instrument.

 

 

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1        (6) An act done before the effective date of this Code
2    is not affected by this Code.
3        (7) If a right is acquired, extinguished, or barred
4    upon the expiration of a prescribed period that has
5    commenced to run under any other statute before the
6    effective date of this Code, that statute continues to
7    apply to the right even if it has been repealed or
8    superseded.
9        (8) This Code shall be construed as pertaining to
10    administration of a trust and applies to any trust that is
11    administered in Illinois under Illinois law or that is
12    governed by Illinois law with respect to the meaning and
13    effect of its terms, except to the extent the trust
14    instrument expressly prohibits use of this Code by specific
15    reference to this Code.
 
16
Article 16. Amendatory provisions.

 
17    Section 1601. The Public Use Trust Act is amended by
18changing Section 2 as follows:
 
19    (30 ILCS 160/2)  (from Ch. 127, par. 4002)
20    Sec. 2. (a) The Department of Agriculture, the Department
21of Natural Resources, and the Historic Preservation Agency have
22the power to enter into a trust agreement with a person or
23group of persons under which the State agency may receive or

 

 

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1collect money or other property from the person or group of
2persons and may expend such money or property solely for a
3public purpose within the powers and duties of that State
4agency and stated in the trust agreement. The State agency
5shall be the trustee under any such trust agreement.
6    (b) Money or property received under a trust agreement
7shall not be deposited in the State treasury and is not subject
8to appropriation by the General Assembly, but shall be held and
9invested by the trustee separate and apart from the State
10treasury. The trustee shall invest money or property received
11under a trust agreement as provided for trustees under the
12Illinois Trust Code Trusts and Trustees Act or as otherwise
13provided in the trust agreement.
14    (c) The trustee shall maintain detailed records of all
15receipts and disbursements in the same manner as required for
16trustees under the Illinois Trust Code Trusts and Trustees Act.
17The trustee shall provide an annual accounting of all receipts,
18disbursements, and inventory to all donors to the trust and the
19Auditor General. The annual accounting shall be made available
20to any member of the public upon request.
21(Source: P.A. 89-445, eff. 2-7-96.)
 
22    Section 1602. The Township Code is amended by changing
23Section 135-20 as follows:
 
24    (60 ILCS 1/135-20)

 

 

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1    Sec. 135-20. Powers of board of managers. The board of
2managers shall control and manage the cemeteries jointly
3acquired by the townships or road districts. The board of
4managers may receive in trust from the proprietors or owners of
5any lot in the cemeteries, or any person, corporation,
6association, or society interested in the maintenance of those
7cemeteries, any gift or legacy of money or real, personal, or
8mixed property that is donated or bequeathed to the board of
9managers for the use and maintenance of the lot or cemeteries.
10The board of managers may convert the property into money, may
11invest the money in securities in which trust funds may be
12invested under the Illinois Trust Code Trusts and Trustees Act,
13and may apply the income perpetually for the care of the lot or
14the care and maintenance of the cemeteries as specified in the
15gift or legacy or as provided by the board of managers if the
16gift or legacy does not specify the manner in which the income
17is to be expended.
18(Source: P.A. 83-1362; 88-62.)
 
19    Section 1603. The Corporate Fiduciary Act is amended by
20changing Sections 1-6, 6-10, and 9-5 as follows:
 
21    (205 ILCS 620/1-6)  (from Ch. 17, par. 1551-6)
22    Sec. 1-6. General Corporate Powers. A corporate fiduciary
23shall have the powers:
24        (a) if it is a State bank, those powers granted under

 

 

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1    Sections 3 and 5 of the Illinois Banking Act; and
2        (b) if it is a State savings and loan association,
3    those powers granted under Sections 1-6 through 1-8 of the
4    Illinois Savings and Loan Act of 1985; and
5        (c) if it is a State savings bank, those powers granted
6    under the Savings Bank Act; and
7        (d) if it is a corporation organized under the Business
8    Corporation Act of 1983, as now or hereafter amended, or a
9    limited liability company organized under the Limited
10    Liability Company Act, those powers granted in Article 8
11    Sections 4.01 through 4.24 of the Illinois Trust Code
12    Trusts and Trustees Act, as now or hereafter amended, to
13    the extent the exercise of such powers by the corporate
14    fiduciary are not contrary to the instrument containing the
15    appointment of the corporate fiduciary, the court order
16    appointing the corporate fiduciary or any other statute
17    specifically limiting the power of the corporate fiduciary
18    under the circumstances; and
19        (e) subject to Article XLIV of the Illinois Insurance
20    Code, to act as the agent for any fire, life, or other
21    insurance company authorized by the State of Illinois, by
22    soliciting and selling insurance and collecting premiums
23    on policies issued by such company; and may receive for
24    services so rendered such fees or commissions as may be
25    agreed upon between the said corporate fiduciary and the
26    insurance company for which it may act as agent; provided,

 

 

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1    however, that no such corporate fiduciary shall in any case
2    assume or guarantee the payment of any premium on insurance
3    policies issued through its agency by its principal; and
4    provided further, that the corporate fiduciary shall not
5    guarantee the truth of any statement made by an assured in
6    filing his application for insurance.
7    The Commissioner may specify powers of corporate
8fiduciaries generally or of a particular corporate fiduciary
9and by rule or order limit or restrict such powers of corporate
10fiduciaries or a particular corporate fiduciary if he finds the
11exercise of such power by corporate fiduciaries generally or of
12the corporate fiduciary in particular may tend to be an unsafe
13or unsound practice, or if such power is otherwise not in the
14interest of beneficiaries of any fiduciary appointment.
15(Source: P.A. 90-41, eff. 10-1-97; 90-424, eff. 1-1-98; 90-655,
16eff. 7-30-98; 91-97, eff. 7-9-99.)
 
17    (205 ILCS 620/6-10)  (from Ch. 17, par. 1556-10)
18    Sec. 6-10. The receiver for a corporate fiduciary, under
19the direction of the Commissioner, shall have the power and
20authority and is charged with the duties and responsibilities
21as follows:
22    (1) To take possession of, and for the purpose of the
23receivership, the title to the books, records and assets of
24every description of the corporate fiduciary.
25    (2) To proceed to collect all debts, dues and claims

 

 

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1belonging to the corporate fiduciary.
2    (3) To file with the Commissioner a copy of each report
3which he makes to the court, together with such other reports
4and records as the Commissioner may require.
5    (4) The receiver shall have authority to sue and defend in
6the receiver's own name and with respect to the affairs,
7assets, claims, debts and chooses in action of the corporate
8fiduciary.
9    (5) The receiver shall have authority, and it shall be the
10receiver's duty, to surrender to the customers of such
11corporate fiduciary, when requested in writing directed to the
12receiver by such customers, the assets, private papers and
13valuables left with the corporate fiduciary for safekeeping,
14under a custodial or agency agreement, upon satisfactory proof
15of ownership.
16    (6) As soon as can reasonably be done, the receiver shall
17resign on behalf of the corporate fiduciary, all trusteeships,
18guardianships, and all appointments as executor and
19administrator, or as custodian under the Illinois Uniform
20Transfers to Minors Act, as now or hereafter amended, or as
21fiduciary under custodial or agency agreements or under the
22terms of any other written agreement or court order whereunder
23the corporate fiduciary is holding property in a fiduciary
24capacity for the benefit of another person, making in each
25case, from the records and documents available to the receiver,
26a proper accounting, in the manner and scope as determined by

 

 

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1the Commissioner to be practical and advisable under the
2circumstances, on behalf of the corporate fiduciary. The
3receiver, prior to resigning, shall cause a successor trustee
4or fiduciary to be appointed pursuant to the terms set forth in
5the governing instrument or pursuant to the provisions of the
6Illinois Trust Code Trusts and Trustees Act, as now or
7hereafter amended, if applicable, then the receiver shall make
8application to the court having jurisdiction over the
9liquidation or winding up of the corporate fiduciary, for the
10appointment of a successor. The receiver, if a corporate
11fiduciary, shall not be disqualified from acting as successor
12trustee or fiduciary if appointed under the terms of the
13governing instrument, by court order or by the customer of the
14corporate fiduciary whose affairs are being liquidated or wound
15up and, in such case, no guardian ad litem need be appointed to
16review the accounting of the receiver unless the beneficiaries
17or customers of the corporate fiduciary so request in writing.
18    (7) The receiver shall have authority to redeem or take
19down collateral hypothecated by the corporate fiduciary to
20secure its notes and other evidence of indebtedness whenever
21the Commissioner deems it to be in the best interest of the
22creditors of the corporate fiduciary and directs the receiver
23so to do.
24    (8) Whenever the receiver shall find it necessary in the
25receiver's opinion to use and employ money of the corporate
26fiduciary, in order to protect fully and benefit the corporate

 

 

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1fiduciary, by the purchase or redemption of any property, real
2or personal, in which the corporate fiduciary may have any
3rights by reason of any bond, mortgage, assignment, or other
4claim thereto, the receiver may certify the facts together with
5the receiver's opinions as to the value of the property
6involved, and the value of the equity the corporate fiduciary
7may have in the property to the Commissioner, together with a
8request for the right and authority to use and employ so much
9of the money of the corporate fiduciary as may be necessary to
10purchase the property, or to redeem the same from a sale if
11there was a sale, and if such request is granted, the receiver
12may use so much of the money of the corporate fiduciary as the
13Commissioner may have authorized to purchase said property at
14such sale.
15    (9) The receiver shall deposit daily all monies collected
16by the receiver in any State or national bank selected by the
17Commissioner, who may require (and the bank so selected may
18furnish) of such depository satisfactory securities or
19satisfactory surety bond for the safekeeping and prompt payment
20of the money so deposited. The deposits shall be made in the
21name of the Commissioner in trust for the receiver and be
22subject to withdrawal upon the receiver's order or upon the
23order of such persons as the Commissioner may designate. Such
24monies may be deposited without interest, unless otherwise
25agreed. However, if any interest was paid by such depository,
26it shall accrue to the benefit of the particular trust or

 

 

SB3165- 221 -LRB099 20744 HEP 45399 b

1fiduciary account to which the deposit belongs. Except as
2otherwise directed by the Commissioner, notwithstanding any
3other provision of this paragraph, the receiver's investment
4and other powers shall be those under the governing instrument
5or under the Illinois Trust Code Trusts and Trustees Act, as
6now or hereafter amended, and shall include the power to pay
7out income and principal in accordance with the terms of the
8governing instrument.
9    (10) The receiver shall do such things and take such steps
10from time to time under the direction and approval of the
11Commissioner as may reasonably appear to be necessary to
12conserve the corporate fiduciary's assets and secure the best
13interests of the creditors of the corporate fiduciary.
14    (11) The receiver shall record any judgment of dissolution
15entered in a dissolution proceeding and thereupon turn over to
16the Commissioner a certified copy thereof, together with all
17books of accounts and ledgers of such corporate fiduciary for
18preservation, as distinguished from the books of accounts and
19ledgers of the corporate fiduciary relating to the assets of
20the beneficiaries of such fiduciary relations, all of which
21books of accounts and ledgers shall be turned over by the
22receiver to the successor trustee or fiduciary.
23    (12) The receiver may cause all assets of the beneficiaries
24of such fiduciary relations to be registered in the name of the
25receiver or in the name of the receiver's nominee.
26    (13) The receiver shall have a reasonable period of time in

 

 

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1which to review all of the trust accounts, executorships,
2administrationships, guardianships, or other fiduciary
3relationships, in order to ascertain that the investments by
4the corporate fiduciary of the assets of such trust accounts,
5executorships, administrationships, guardianships or other
6fiduciary relationships comply with the terms of the governing
7instrument, the prudent person rule governing the investment of
8such funds, or any other law regulating the investment of such
9funds.
10    (14) For its services in administering the trusts and other
11fiduciary accounts of the corporate fiduciary during the period
12of winding up the affairs of the corporate fiduciary, the
13receiver shall be entitled to be reimbursed for all costs and
14expenses incurred by the receiver and shall also be entitled to
15receive out of the assets of the individual fiduciary accounts
16being administered by the receiver during the period of winding
17up the affairs of the corporate fiduciary and prior to the
18appointment of a successor trustee or fiduciary, the usual and
19customary fees charged by the receiver in the administration of
20its own fiduciary accounts or reasonable fees approved by the
21Commissioner.
22    (15) The receiver, during its administration of the trusts
23and other fiduciary accounts of the corporate fiduciary during
24the winding up of the affairs of the corporate fiduciary, shall
25have all of the powers which are vested in trustees under the
26terms and provisions of the Illinois Trust Code Trusts and

 

 

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1Trustees Act, as now or hereafter amended.
2    (16) Upon the appointment of a successor trustee or
3fiduciary, the receiver shall deliver to such successor trustee
4or fiduciary all of the assets belonging to the individual
5trust or fiduciary account as to which the successor trustee or
6fiduciary succeeds, and the receiver shall thereupon be
7relieved of any further duties or obligations with respect
8thereto.
9(Source: P.A. 90-655, eff. 7-30-98.)
 
10    (205 ILCS 620/9-5)  (from Ch. 17, par. 1559-5)
11    Sec. 9-5. Applicability of other Acts by reference.
12Corporate fiduciaries subject to the provisions of this Act
13shall continue to be subject to the provisions of other Acts
14which govern actions of trustees including, but not limited to:
15    (a) "An Act to provide for the appointment of successor
16trustees in land trust agreements", approved August 13, 1965,
17as amended.
18    (b) "An Act to require disclosure, under certification of
19perjury, of all beneficial interests in real property held in a
20land trust, in certain cases", approved September 21, 1973, as
21amended.
22    (c) "An Act in relation to land trusts and the power and
23authority of trustees of land trusts to deal with trust
24property", approved August 6, 1982, as amended.
25    (d) "An Act concerning the powers of corporations

 

 

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1authorized to accept and execute trusts, to register and hold
2securities of fiduciary accounts in bulk and to deposit same
3with a depository", approved September 1, 1972, as amended.
4    (e) the "Common Trust Fund Act", approved July 29, 1943, as
5amended.
6    (f) the Illinois Trust Code "Trusts and Trustees Act",
7approved September 10, 1973, as amended.
8    (g) "An Act concerning liability for participation in
9breaches of fiduciary obligations", approved July 7, 1931, as
10amended.
11(Source: P.A. 85-858.)
 
12    Section 1604. The Community-Integrated Living Arrangements
13Licensure and Certification Act is amended by changing Section
143 as follows:
 
15    (210 ILCS 135/3)  (from Ch. 91 1/2, par. 1703)
16    Sec. 3. As used in this Act, unless the context requires
17otherwise:
18    (a) "Applicant" means a person, group of persons,
19association, partnership or corporation that applies for a
20license as a community mental health or developmental services
21agency under this Act.
22    (b) "Community mental health or developmental services
23agency" or "agency" means a public or private agency,
24association, partnership, corporation or organization which,

 

 

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1pursuant to this Act, certifies community-integrated living
2arrangements for persons with mental illness or persons with a
3developmental disability.
4    (c) "Department" means the Department of Human Services (as
5successor to the Department of Mental Health and Developmental
6Disabilities).
7    (d) "Community-integrated living arrangement" means a
8living arrangement certified by a community mental health or
9developmental services agency under this Act where 8 or fewer
10recipients with mental illness or recipients with a
11developmental disability who reside under the supervision of
12the agency. Examples of community integrated living
13arrangements include but are not limited to the following:
14        (1) "Adult foster care", a living arrangement for
15    recipients in residences of families unrelated to them, for
16    the purpose of providing family care for the recipients on
17    a full-time basis;
18        (2) "Assisted residential care", an independent living
19    arrangement where recipients are intermittently supervised
20    by off-site staff;
21        (3) "Crisis residential care", a non-medical living
22    arrangement where recipients in need of non-medical,
23    crisis services are supervised by on-site staff 24 hours a
24    day;
25        (4) "Home individual programs", living arrangements
26    for 2 unrelated adults outside the family home;

 

 

SB3165- 226 -LRB099 20744 HEP 45399 b

1        (5) "Supported residential care", a living arrangement
2    where recipients are supervised by on-site staff and such
3    supervision is provided less than 24 hours a day;
4        (6) "Community residential alternatives", as defined
5    in the Community Residential Alternatives Licensing Act;
6    and
7        (7) "Special needs trust-supported residential care",
8    a living arrangement where recipients are supervised by
9    on-site staff and that supervision is provided 24 hours per
10    day or less, as dictated by the needs of the recipients,
11    and determined by service providers. As used in this item
12    (7), "special needs trust" means a trust for the benefit of
13    a beneficiary with a disability as described in Section
14    1213 15.1 of the Illinois Trust Code Trusts and Trustees
15    Act.
16    (e) "Recipient" means a person who has received, is
17receiving, or is in need of treatment or habilitation as those
18terms are defined in the Mental Health and Developmental
19Disabilities Code.
20    (f) "Unrelated" means that persons residing together in
21programs or placements certified by a community mental health
22or developmental services agency under this Act do not have any
23of the following relationships by blood, marriage or adoption:
24parent, son, daughter, brother, sister, grandparent, uncle,
25aunt, nephew, niece, great grandparent, great uncle, great
26aunt, stepbrother, stepsister, stepson, stepdaughter,

 

 

SB3165- 227 -LRB099 20744 HEP 45399 b

1stepparent or first cousin.
2(Source: P.A. 99-143, eff. 7-27-15.)
 
3    Section 1605. The Title Insurance Act is amended by
4changing Section 21.1 as follows:
 
5    (215 ILCS 155/21.1)
6    Sec. 21.1. Receiver and involuntary liquidation.
7    (a) The Secretary's proceedings under this Section shall be
8the exclusive remedy and the only proceedings commenced in any
9court for the dissolution of, the winding up of the affairs of,
10or the appointment of a receiver for a title insurance company.
11    (b) If the Secretary, with respect to a title insurance
12company, finds that (i) its capital is impaired or it is
13otherwise in an unsound condition, (ii) its business is being
14conducted in an unlawful, fraudulent, or unsafe manner, (iii)
15it is unable to continue operations, or (iv) its examination
16has been obstructed or impeded, the Secretary may give notice
17to the board of directors of the title insurance company of his
18or her finding or findings. If the Secretary's findings are not
19corrected to his or her satisfaction within 60 days after the
20company receives the notice, the Secretary shall take
21possession and control of the title insurance company, its
22assets, and assets held by it for any person for the purpose of
23examination, reorganization, or liquidation through
24receivership.

 

 

SB3165- 228 -LRB099 20744 HEP 45399 b

1    If, in addition to making a finding as provided in this
2subsection (b), the Secretary is of the opinion and finds that
3an emergency that may result in serious losses to any person
4exists, the Secretary may, in his or her discretion, without
5having given the notice provided for in this subsection, and
6whether or not proceedings under subsection (a) of this Section
7have been instituted or are then pending, take possession and
8control of the title insurance company and its assets for the
9purpose of examination, reorganization, or liquidation through
10receivership.
11    (c) The Secretary may take possession and control of a
12title insurance company, its assets, and assets held by it for
13any person by posting upon the premises of each office located
14in the State of Illinois at which it transacts its business as
15a title insurance company a notice reciting that the Secretary
16is assuming possession pursuant to this Act and the time when
17the possession shall be deemed to commence.
18    (d) Promptly after taking possession and control of a title
19insurance company the Secretary, represented by the Attorney
20General, shall file a copy of the notice posted upon the
21premises in the Circuit Court of either Cook County or Sangamon
22County, which cause shall be entered as a court action upon the
23dockets of the court under the name and style of "In the matter
24of the possession and control by the Secretary of the
25Department of Financial and Professional Regulation of (insert
26the name of the title insurance company)". If the Secretary

 

 

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1determines (which determination may be made at the time of, or
2at any time subsequent to, taking possession and control of a
3title insurance company) that no practical possibility exists
4to reorganize the title insurance company after reasonable
5efforts have been made, the Secretary, represented by the
6Attorney General, shall also file a complaint, if it has not
7already been done, for the appointment of a receiver or other
8proceeding as is appropriate under the circumstances. The court
9where the cause is docketed shall be vested with the exclusive
10jurisdiction to hear and determine all issues and matters
11pertaining to or connected with the Secretary's possession and
12control of the title insurance company as provided in this Act,
13and any further issues and matters pertaining to or connected
14with the Secretary's possession and control as may be submitted
15to the court for its adjudication.
16    The Secretary, upon taking possession and control of a
17title insurance company, may, and if not previously done shall,
18immediately upon filing a complaint for dissolution make an
19examination of the affairs of the title insurance company or
20appoint a suitable person to make the examination as the
21Secretary's agent. The examination shall be conducted in
22accordance with and pursuant to the authority granted under
23Section 12 of this Act. The person conducting the examination
24shall have and may exercise on behalf of the Secretary all of
25the powers and authority granted to the Secretary under Section
2612. A copy of the report shall be filed in any dissolution

 

 

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1proceeding filed by the Secretary. The reasonable fees and
2necessary expenses of the examining person, as approved by the
3Secretary or as recommended by the Secretary and approved by
4the court if a dissolution proceeding has been filed, shall be
5borne by the subject title insurance company and shall have the
6same priority for payment as the reasonable and necessary
7expenses of the Secretary in conducting an examination. The
8person appointed to make the examination shall make a proper
9accounting, in the manner and scope as determined by the
10Secretary to be practical and advisable under the
11circumstances, on behalf of the title insurance company and no
12guardian ad litem need be appointed to review the accounting.
13    (e) The Secretary, upon taking possession and control of a
14title insurance company and its assets, shall be vested with
15the full powers of management and control including, but not
16limited to, the following:
17        (1) the power to continue or to discontinue the
18    business;
19        (2) the power to stop or to limit the payment of its
20    obligations;
21        (3) the power to collect and to use its assets and to
22    give valid receipts and acquittances therefor;
23        (4) the power to transfer title and liquidate any bond
24    or deposit made under Section 4 of this Act;
25        (5) the power to employ and to pay any necessary
26    assistants;

 

 

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1        (6) the power to execute any instrument in the name of
2    the title insurance company;
3        (7) the power to commence, defend, and conduct in the
4    title insurance company's name any action or proceeding in
5    which it may be a party;
6        (8) the power, upon the order of the court, to sell and
7    convey the title insurance company's assets, in whole or in
8    part, and to sell or compound bad or doubtful debts upon
9    such terms and conditions as may be fixed in that order;
10        (9) the power, upon the order of the court, to make and
11    to carry out agreements with other title insurance
12    companies, financial institutions, or with the United
13    States or any agency of the United States for the payment
14    or assumption of the title insurance company's
15    liabilities, in whole or in part, and to transfer assets
16    and to make guaranties, in whole or in part, in connection
17    therewith;
18        (10) the power, upon the order of the court, to borrow
19    money in the name of the title insurance company and to
20    pledge its assets as security for the loan;
21        (11) the power to terminate his or her possession and
22    control by restoring the title insurance company to its
23    board of directors;
24        (12) the power to appoint a receiver which may be the
25    Secretary of the Department of Financial and Professional
26    Regulation, another title insurance company, or another

 

 

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1    suitable person and to order liquidation of the title
2    insurance company as provided in this Act; and
3        (13) the power, upon the order of the court and without
4    the appointment of a receiver, to determine that the title
5    insurance company has been closed for the purpose of
6    liquidation without adequate provision being made for
7    payment of its obligations, and thereupon the title
8    insurance company shall be deemed to have been closed on
9    account of inability to meet its obligations to its
10    insureds or escrow depositors.
11    (f) Upon taking possession, the Secretary shall make an
12examination of the condition of the title insurance company, an
13inventory of the assets and, unless the time shall be extended
14by order of the court or unless the Secretary shall have
15otherwise settled the affairs of the title insurance company
16pursuant to the provisions of this Act, within 90 days after
17the time of taking possession and control of the title
18insurance company, the Secretary shall either terminate his or
19her possession and control by restoring the title insurance
20company to its board of directors or appoint a receiver, which
21may be the Secretary of the Department of Financial and
22Professional Regulation, another title insurance company, or
23another suitable person and order the liquidation of the title
24insurance company as provided in this Act. All necessary and
25reasonable expenses of the Secretary's possession and control
26shall be a priority claim and shall be borne by the title

 

 

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1insurance company and may be paid by the Secretary from the
2title insurance company's own assets as distinguished from
3assets held for any other person.
4    (g) If the Secretary takes possession and control of a
5title insurance company and its assets, any period of
6limitation fixed by a statute or agreement that would otherwise
7expire on a claim or right of action of the title insurance
8company, on its own behalf or on behalf of its insureds or
9escrow depositors, or upon which an appeal must be taken or a
10pleading or other document filed by the title insurance company
11in any pending action or proceeding, shall be tolled until 6
12months after the commencement of the possession, and no
13judgment, lien, levy, attachment, or other similar legal
14process may be enforced upon or satisfied, in whole or in part,
15from any asset of the title insurance company or from any asset
16of an insured or escrow depositor while it is in the possession
17of the Secretary.
18    (h) If the Secretary appoints a receiver to take possession
19and control of the assets of insureds or escrow depositors for
20the purpose of holding those assets as fiduciary for the
21benefit of the insureds or escrow depositors pending the
22winding up of the affairs of the title insurance company being
23liquidated and the appointment of a successor escrowee for
24those assets, any period of limitation fixed by statute, rule
25of court, or agreement that would otherwise expire on a claim
26or right of action in favor of or against the insureds or

 

 

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1escrow depositors of those assets or upon which an appeal must
2be taken or a pleading or other document filed by a title
3insurance company on behalf of an insured or escrow depositor
4in any pending action or proceeding shall be tolled for a
5period of 6 months after the appointment of a receiver, and no
6judgment, lien, levy, attachment, or other similar legal
7process shall be enforced upon or satisfied, in whole or in
8part, from any asset of the insured or escrow depositor while
9it is in the possession of the receiver.
10    (i) If the Secretary determines at any time that no
11reasonable possibility exists for the title insurance company
12to be operated by its board of directors in accordance with the
13provisions of this Act after reasonable efforts have been made
14and that it should be liquidated through receivership, he or
15she shall appoint a receiver. The Secretary may require of the
16receiver such bond and security as the Secretary deems proper.
17The Secretary, represented by the Attorney General, shall file
18a complaint for the dissolution or winding up of the affairs of
19the title insurance company in a court of the county in which
20the principal office of the title insurance company is located
21and shall cause notice to be given in a newspaper of general
22circulation once each week for 4 consecutive weeks so that
23persons who may have claims against the title insurance company
24may present them to the receiver and make legal proof thereof
25and notifying those persons and all to whom it may concern of
26the filing of a complaint for the dissolution or winding up of

 

 

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1the affairs of the title insurance company and stating the name
2and location of the court. All persons who may have claims
3against the assets of the title insurance company, as
4distinguished from the assets of insureds and escrow depositors
5held by the title insurance company, and the receiver to whom
6those persons have presented their claims may present the
7claims to the clerk of the court, and the allowance or
8disallowance of the claims by the court in connection with the
9proceedings shall be deemed an adjudication in a court of
10competent jurisdiction. Within a reasonable time after
11completion of publication, the receiver shall file with the
12court a correct list of all creditors of the title insurance
13company as shown by its books, who have not presented their
14claims and the amount of their respective claims after allowing
15adjusted credit, deductions, and set-offs as shown by the books
16of the title insurance company. The claims so filed shall be
17deemed proven unless objections are filed thereto by a party or
18parties interested therein within the time fixed by the court.
19    (j) The receiver for a title insurance company has the
20power and authority and is charged with the duties and
21responsibilities as follows:
22        (1) To take possession of and, for the purpose of the
23    receivership, title to the books, records, and assets of
24    every description of the title insurance company.
25        (2) To proceed to collect all debts, dues, and claims
26    belonging to the title insurance company.

 

 

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1        (3) To sell and compound all bad and doubtful debts on
2    such terms as the court shall direct.
3        (4) To sell the real and personal property of the title
4    insurance company, as distinguished from the real and
5    personal property of the insureds or escrow depositors, on
6    such terms as the court shall direct.
7        (5) To file with the Secretary a copy of each report
8    that he or she makes to the court, together with such other
9    reports and records as the Secretary may require.
10        (6) To sue and defend in his or her own name and with
11    respect to the affairs, assets, claims, debts, and choses
12    in action of the title insurance company.
13        (7) To surrender to the insureds and escrow depositors
14    of the title insurance company, when requested in writing
15    directed to the receiver by them, the escrowed funds (on a
16    pro rata basis), and escrowed documents in the receiver's
17    possession upon satisfactory proof of ownership and
18    determination by the receiver of available escrow funds.
19        (8) To redeem or take down collateral hypothecated by
20    the title insurance company to secure its notes and other
21    evidence of indebtedness whenever the court deems it to be
22    in the best interest of the creditors of the title
23    insurance company and directs the receiver so to do.
24    (k) Whenever the receiver finds it necessary in his or her
25opinion to use and employ money of the title insurance company
26in order to protect fully and benefit the title insurance

 

 

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1company by the purchase or redemption of property, real or
2personal, in which the title insurance company may have any
3rights by reason of any bond, mortgage, assignment, or other
4claim thereto, the receiver may certify the facts together with
5the receiver's opinions as to the value of the property
6involved and the value of the equity the title insurance
7company may have in the property to the court, together with a
8request for the right and authority to use and employ so much
9of the money of the title insurance company as may be necessary
10to purchase the property, or to redeem the property from a sale
11if there was a sale, and if the request is granted, the
12receiver may use so much of the money of the title insurance
13company as the court may have authorized to purchase the
14property at the sale.
15    The receiver shall deposit daily all moneys collected by
16him or her in any State or national bank approved by the court.
17The deposits shall be made in the name of the Secretary, in
18trust for the receiver, and be subject to withdrawal upon the
19receiver's order or upon the order of those persons the
20Secretary may designate. The moneys may be deposited without
21interest, unless otherwise agreed. The receiver shall do the
22things and take the steps from time to time under the direction
23and approval of the court that may reasonably appear to be
24necessary to conserve the title insurance company's assets and
25secure the best interests of the creditors, insureds, and
26escrow depositors of the title insurance company. The receiver

 

 

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1shall record any judgment of dissolution entered in a
2dissolution proceeding and thereupon turn over to the Secretary
3a certified copy of the judgment.
4    The receiver may cause all assets of the insureds and
5escrow depositors of the title insurance company to be
6registered in the name of the receiver or in the name of the
7receiver's nominee.
8    For its services in administering the escrows held by the
9title insurance company during the period of winding up the
10affairs of the title insurance company, the receiver is
11entitled to be reimbursed for all costs and expenses incurred
12by the receiver and shall also be entitled to receive out of
13the assets of the individual escrows being administered by the
14receiver during the period of winding up the affairs of the
15title insurance company and prior to the appointment of a
16successor escrowee the usual and customary fees charged by an
17escrowee for escrows or reasonable fees approved by the court.
18    The receiver, during its administration of the escrows of
19the title insurance company during the winding up of the
20affairs of the title insurance company, shall have all of the
21powers that are vested in trustees under the terms and
22provisions of the Illinois Trust Code Trusts and Trustees Act.
23    Upon the appointment of a successor escrowee, the receiver
24shall deliver to the successor escrowee all of the assets
25belonging to each individual escrow to which the successor
26escrowee succeeds, and the receiver shall thereupon be relieved

 

 

SB3165- 239 -LRB099 20744 HEP 45399 b

1of any further duties or obligations with respect thereto.
2    (l) The receiver shall, upon approval by the court, pay all
3claims against the assets of the title insurance company
4allowed by the court pursuant to subsection (i) of this
5Section, as well as claims against the assets of insureds and
6escrow depositors of the title insurance company in accordance
7with the following priority:
8        (1) All necessary and reasonable expenses of the
9    Secretary's possession and control and of its receivership
10    shall be paid from the assets of the title insurance
11    company.
12        (2) All usual and customary fees charged for services
13    in administering escrows shall be paid from the assets of
14    the individual escrows being administered. If the assets of
15    the individual escrows being administered are
16    insufficient, the fees shall be paid from the assets of the
17    title insurance company.
18        (3) Secured claims, including claims for taxes and
19    debts due the federal or any state or local government,
20    that are secured by liens perfected prior to the date of
21    filing of the complaint for dissolution, shall be paid from
22    the assets of the title insurance company.
23        (4) Claims by policyholders, beneficiaries, insureds,
24    and escrow depositors of the title insurance company shall
25    be paid from the assets of the insureds and escrow
26    depositors. If there are insufficient assets of the

 

 

SB3165- 240 -LRB099 20744 HEP 45399 b

1    insureds and escrow depositors, claims shall be paid from
2    the assets of the title insurance company.
3        (5) Any other claims due the federal government shall
4    be paid from the assets of the title insurance company.
5        (6) Claims for wages or salaries, excluding vacation,
6    severance, and sick leave pay earned by employees for
7    services rendered within 90 days prior to the date of
8    filing of the complaint for dissolution, shall be paid from
9    the assets of the title insurance company.
10        (7) All other claims of general creditors not falling
11    within any priority under this subsection (l) including
12    claims for taxes and debts due any state or local
13    government which are not secured claims and claims for
14    attorney's fees incurred by the title insurance company in
15    contesting the dissolution shall be paid from the assets of
16    the title insurance company.
17        (8) Proprietary claims asserted by an owner, member, or
18    stockholder of the title insurance company in receivership
19    shall be paid from the assets of the title insurance
20    company.
21    The receiver shall pay all claims of equal priority
22according to the schedule set out in this subsection, and shall
23not pay claims of lower priority until all higher priority
24claims are satisfied. If insufficient assets are available to
25meet all claims of equal priority, those assets shall be
26distributed pro rata among those claims. All unclaimed assets

 

 

SB3165- 241 -LRB099 20744 HEP 45399 b

1of the title insurance company shall be deposited with the
2receiver to be paid out by him or her when such claims are
3submitted and allowed by the court.
4    (m) At the termination of the receiver's administration,
5the receiver shall petition the court for the entry of a
6judgment of dissolution. After a hearing upon the notice as the
7court may prescribe, the court may enter a judgment of
8dissolution whereupon the title insurance company's corporate
9existence shall be terminated and the receivership concluded.
10    (n) The receiver shall serve at the pleasure of the
11Secretary and upon the death, inability to act, resignation, or
12removal by the Secretary of a receiver, the Secretary may
13appoint a successor, and upon the appointment, all rights and
14duties of the predecessor shall at once devolve upon the
15appointee.
16    (o) Whenever the Secretary shall have taken possession and
17control of a title insurance company or a title insurance agent
18and its assets for the purpose of examination, reorganization
19or liquidation through receivership, or whenever the Secretary
20shall have appointed a receiver for a title insurance company
21or title insurance agent and filed a complaint for the
22dissolution or winding up of its affairs, and the title
23insurance company or title insurance agent denies the grounds
24for such actions, it may at any time within 10 days apply to
25the Circuit Court of Cook or Sangamon County to enjoin further
26proceedings in the premises; and the Court shall cite the

 

 

SB3165- 242 -LRB099 20744 HEP 45399 b

1Secretary to show cause why further proceedings should not be
2enjoined, and if the Court shall find that grounds do not
3exist, the Court shall make an order enjoining the Secretary or
4any receiver acting under his direction from all further
5proceedings on account of the alleged grounds.
6(Source: P.A. 94-893, eff. 6-20-06.)
 
7    Section 1606. The Illinois Funeral or Burial Funds Act is
8amended by changing Sections 4a and 5 as follows:
 
9    (225 ILCS 45/4a)
10    Sec. 4a. Investment of funds.
11    (a) A trustee has a duty to invest and manage the trust
12assets pursuant to the Illinois Uniform Prudent Investor Act
13Rule under Article 9 of the Illinois Trust Code Trusts and
14Trustees Act.
15    (b) The trust shall be a single-purpose trust fund. In the
16event of the seller's bankruptcy, insolvency or assignment for
17the benefit of creditors, or an adverse judgment, the trust
18funds shall not be available to any creditor as assets of the
19seller or to pay any expenses of any bankruptcy or similar
20proceeding, but shall be distributed to the purchasers or
21managed for their benefit by the trustee holding the funds.
22Except in an action by the Comptroller to revoke a license
23issued pursuant to this Act and for creation of a receivership
24as provided in this Act, the trust shall not be subject to

 

 

SB3165- 243 -LRB099 20744 HEP 45399 b

1judgment, execution, garnishment, attachment, or other seizure
2by process in bankruptcy or otherwise, nor to sale, pledge,
3mortgage, or other alienation, and shall not be assignable
4except as approved by the Comptroller. The changes made by
5Public Act 91-7 are intended to clarify existing law regarding
6the inability of licensees to pledge the trust.
7    (c) Because it is not known at the time of deposit or at
8the time that income is earned on the trust account to whom the
9principal and the accumulated earnings will be distributed for
10the purpose of determining the Illinois income tax due on these
11trust funds, the principal and any accrued earnings or losses
12related to each individual account shall be held in suspense
13until the final determination is made as to whom the account
14shall be paid. The beneficiary's estate shall not be
15responsible for any funeral and burial purchases listed in a
16pre-need contract if the pre-need contract is entered into on a
17guaranteed price basis.
18    If a pre-need contract is not a guaranteed price contract,
19then to the extent the proceeds of a non-guaranteed price
20pre-need contract cover the funeral and burial expenses for the
21beneficiary, no claim may be made against the estate of the
22beneficiary. A claim may be made against the beneficiary's
23estate if the charges for the funeral services and merchandise
24at the time of use exceed the amount of the amount in trust
25plus the percentage of the sale proceeds initially retained by
26the seller or the face value of the life insurance policy or

 

 

SB3165- 244 -LRB099 20744 HEP 45399 b

1tax-deferred annuity.
2(Source: P.A. 96-879, eff. 2-2-10.)
 
3    (225 ILCS 45/5)  (from Ch. 111 1/2, par. 73.105)
4    Sec. 5. This Act shall not be construed to prohibit the
5trustee and trustee's depositary from being reimbursed and
6receiving from such funds their reasonable compensation and
7expenses in the custody and administration of such funds
8pursuant to the Illinois Trust Code Trusts and Trustees Act.
9(Source: P.A. 96-879, eff. 2-2-10.)
 
10    Section 1607. The Mental Health and Developmental
11Disabilities Code is amended by changing Sections 3-605, 5-105,
12and 3-819 as follows:
 
13    (405 ILCS 5/3-605)  (from Ch. 91 1/2, par. 3-605)
14    Sec. 3-605. (a) In counties with a population of 3,000,000
15or more, upon receipt of a petition and certificate prepared
16pursuant to this Article, the county sheriff of the county in
17which a respondent is found shall take a respondent into
18custody and transport him to a mental health facility, or may
19make arrangements with another public or private entity
20including a licensed ambulance service to transport the
21respondent to the mental health facility. In the event it is
22determined by such facility that the respondent is in need of
23commitment or treatment at another mental health facility, the

 

 

SB3165- 245 -LRB099 20744 HEP 45399 b

1county sheriff shall transport the respondent to the
2appropriate mental health facility, or the county sheriff may
3make arrangements with another public or private entity
4including a licensed ambulance service to transport the
5respondent to the mental health facility.
6    (b) The county sheriff may delegate his duties under
7subsection (a) to another law enforcement body within that
8county if that law enforcement body agrees.
9    (b-5) In counties with a population under 3,000,000, upon
10receipt of a petition and certificate prepared pursuant to this
11Article, the Department shall make arrangements to
12appropriately transport the respondent to a mental health
13facility. In the event it is determined by the facility that
14the respondent is in need of commitment or treatment at another
15mental health facility, the Department shall make arrangements
16to appropriately transport the respondent to another mental
17health facility. The making of such arrangements and agreements
18with public or private entities is independent of the
19Department's role as a provider of mental health services and
20does not indicate that the respondent is admitted to any
21Department facility. In making such arrangements and
22agreements with other public or private entities, the
23Department shall include provisions to ensure (i) the provision
24of trained personnel and the use of an appropriate vehicle for
25the safe transport of the respondent and (ii) that the
26respondent's insurance carrier as well as other programs, both

 

 

SB3165- 246 -LRB099 20744 HEP 45399 b

1public and private, that provide payment for such
2transportation services are fully utilized to the maximum
3extent possible.
4    The Department may not make arrangements with an existing
5hospital or grant-in-aid or fee-for-service community provider
6for transportation services under this Section unless the
7hospital or provider has voluntarily submitted a proposal for
8its transportation services. This requirement does not
9eliminate or reduce any responsibility on the part of a
10hospital or community provider to ensure transportation that
11may arise independently through other State or federal law or
12regulation.
13    (c) The transporting authority acting in good faith and
14without negligence in connection with the transportation of
15respondents shall incur no liability, civil or criminal, by
16reason of such transportation.
17    (d) The respondent and the estate of that respondent are
18liable for the payment of transportation costs for transporting
19the respondent to a mental health facility. If the respondent
20is a beneficiary of a trust described in Section 1213 15.1 of
21the Illinois Trust Code Trusts and Trustees Act, the trust
22shall not be considered a part of the respondent's estate and
23shall not be subject to payment for transportation costs for
24transporting the respondent to a mental health facility under
25this Section except to the extent permitted under Section 1213
2615.1 of the Illinois Trust Code Trusts and Trustees Act. If the

 

 

SB3165- 247 -LRB099 20744 HEP 45399 b

1respondent is unable to pay or if the estate of the respondent
2is insufficient, the responsible relatives are severally
3liable for the payment of those sums or for the balance due in
4case less than the amount owing has been paid. If the
5respondent is covered by insurance, the insurance carrier shall
6be liable for payment to the extent authorized by the
7respondent's insurance policy.
8(Source: P.A. 93-770, eff. 1-1-05.)
 
9    (405 ILCS 5/3-819)  (from Ch. 91 1/2, par. 3-819)
10    Sec. 3-819. (a) In counties with a population of 3,000,000
11or more, when a recipient is hospitalized upon court order, the
12order may authorize a relative or friend of the recipient to
13transport the recipient to the facility if such person is able
14to do so safely and humanely. When the Department indicates
15that it has transportation to the facility available, the order
16may authorize the Department to transport the recipient there.
17The court may order the sheriff of the county in which such
18proceedings are held to transport the recipient to the
19facility. When a recipient is hospitalized upon court order,
20and the recipient has been transported to a mental health
21facility, other than a state-operated mental health facility,
22and it is determined by the facility that the recipient is in
23need of commitment or treatment at another mental health
24facility, the court shall determine whether a relative or
25friend of the recipient or the Department is authorized to

 

 

SB3165- 248 -LRB099 20744 HEP 45399 b

1transport the recipient between facilities, or whether the
2county sheriff is responsible for transporting the recipient
3between facilities. The sheriff may make arrangements with
4another public or private entity including a licensed ambulance
5service to transport the recipient to the facility. The
6transporting entity acting in good faith and without negligence
7in connection with the transportation of recipients shall incur
8no liability, civil or criminal, by reason of such
9transportation.
10    (a-5) In counties with a population under 3,000,000, when a
11recipient is hospitalized upon court order, the order may
12authorize a relative or friend of the recipient to transport
13the recipient to the facility if the person is able to do so
14safely and humanely. The court may order the Department to
15transport the recipient to the facility. When a recipient is
16hospitalized upon court order, and the recipient has been
17transported to a mental health facility other than a
18State-operated mental health facility, and it is determined by
19the facility that the recipient is in need of commitment or
20treatment at another mental health facility, the court shall
21determine whether a relative or friend of the recipient is
22authorized to transport the recipient between facilities, or
23whether the Department is responsible for transporting the
24recipient between facilities. If the court determines that the
25Department is responsible for the transportation, the
26Department shall make arrangements either directly or through

 

 

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1agreements with another public or private entity, including a
2licensed ambulance service, to appropriately transport the
3recipient to the facility. The making of such arrangements and
4agreements with public or private entities is independent of
5the Department's role as a provider of mental health services
6and does not indicate that the recipient is admitted to any
7Department facility. In making such arrangements and
8agreements with other public or private entities, the
9Department shall include provisions to ensure (i) the provision
10of trained personnel and the use of an appropriate vehicle for
11the safe transport of the recipient and (ii) that the
12recipient's insurance carrier as well as other programs, both
13public and private, that provide payment for such
14transportation services are fully utilized to the maximum
15extent possible.
16    The Department may not make arrangements with an existing
17hospital or grant-in-aid or fee-for-service community provider
18for transportation services under this Section unless the
19hospital or provider has voluntarily submitted a proposal for
20its transportation services. This requirement does not
21eliminate or reduce any responsibility on the part of a
22hospital or community provider to ensure transportation that
23may arise independently through other State or federal law or
24regulation.
25    A transporting entity acting in good faith and without
26negligence in connection with the transportation of a recipient

 

 

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1incurs no liability, civil or criminal, by reason of that
2transportation.
3    (b) The transporting entity may bill the recipient, the
4estate of the recipient, legally responsible relatives, or
5insurance carrier for the cost of providing transportation of
6the recipient to a mental health facility. The recipient and
7the estate of the recipient are liable for the payment of
8transportation costs for transporting the recipient to a mental
9health facility. If the recipient is a beneficiary of a trust
10described in Section 1213 15.1 of the Illinois Trust Code
11Trusts and Trustees Act, the trust shall not be considered a
12part of the recipient's estate and shall not be subject to
13payment for transportation costs for transporting the
14recipient to a mental health facility under this section,
15except to the extent permitted under Section 1213 15.1 of the
16Illinois Trust Code Trusts and Trustees Act. If the recipient
17is unable to pay or if the estate of the recipient is
18insufficient, the responsible relatives are severally liable
19for the payment of those sums or for the balance due in case
20less than the amount owing has been paid. If the recipient is
21covered by insurance, the insurance carrier shall be liable for
22payment to the extent authorized by the recipient's insurance
23policy.
24    (c) Upon the delivery of a recipient to a facility, in
25accordance with the procedure set forth in this Article, the
26facility director of the facility shall sign a receipt

 

 

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1acknowledging custody of the recipient and for any personal
2property belonging to him, which receipt shall be filed with
3the clerk of the court entering the hospitalization order.
4(Source: P.A. 93-770, eff. 1-1-05.)
 
5    (405 ILCS 5/5-105)  (from Ch. 91 1/2, par. 5-105)
6    Sec. 5-105. Each recipient of services provided directly or
7funded by the Department and the estate of that recipient is
8liable for the payment of sums representing charges for
9services to the recipient at a rate to be determined by the
10Department in accordance with this Act. If a recipient is a
11beneficiary of a trust described in Section 1213 15.1 of the
12Illinois Trust Code Trusts and Trustees Act, the trust shall
13not be considered a part of the recipient's estate and shall
14not be subject to payment for services to the recipient under
15this Section except to the extent permitted under Section 1213
1615.1 of the Illinois Trust Code Trusts and Trustees Act. If the
17recipient is unable to pay or if the estate of the recipient is
18insufficient, the responsible relatives are severally liable
19for the payment of those sums or for the balance due in case
20less than the amount prescribed under this Act has been paid.
21If the recipient is under the age of 18, the recipient and
22responsible relative shall be liable for medical costs on a
23case-by-case basis for services for the diagnosis and treatment
24of conditions other than that child's disabling condition. The
25liability shall be the lesser of the cost of medical care or

 

 

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1the amount of responsible relative liability established by the
2Department under Section 5-116. Any person 18 through 21 years
3of age who is receiving services under the Education for All
4Handicapped Children Act of 1975 (Public Law 94-142) or that
5person's responsible relative shall only be liable for medical
6costs on a case-by-case basis for services for the diagnosis
7and treatment of conditions other than the person's disabling
8condition. The liability shall be the lesser of the cost of
9medical care or the amount of responsible relative liability
10established by the Department under Section 5-116. In the case
11of any person who has received residential services from the
12Department, whether directly from the Department or through a
13public or private agency or entity funded by the Department,
14the liability shall be the same regardless of the source of
15services. The maximum services charges for each recipient
16assessed against responsible relatives collectively may not
17exceed financial liability determined from income in
18accordance with Section 5-116. Where the recipient is placed in
19a nursing home or other facility outside the Department, the
20Department may pay the actual cost of services in that facility
21and may collect reimbursement for the entire amount paid from
22the recipient or an amount not to exceed those amounts
23determined under Section 5-116 from responsible relatives
24according to their proportionate ability to contribute to those
25charges. The liability of each responsible relative for payment
26of services charges ceases when payments on the basis of

 

 

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1financial ability have been made for a total of 12 years for
2any recipient, and any portion of that 12 year period during
3which a responsible relative has been determined by the
4Department to be financially unable to pay any services charges
5must be included in fixing the total period of liability. No
6child is liable under this Act for services to a parent. No
7spouse is liable under this Act for the services to the other
8spouse who wilfully failed to contribute to the spouse's
9support for a period of 5 years immediately preceding his or
10her admission. Any spouse claiming exemption because of wilful
11failure to support during any such 5 year period must furnish
12the Department with clear and convincing evidence
13substantiating the claim. No parent is liable under this Act
14for the services charges incurred by a child after the child
15reaches the age of majority. Nothing in this Section shall
16preclude the Department from applying federal benefits that are
17specifically provided for the care and treatment of a person
18with a disability toward the cost of care provided by a State
19facility or private agency.
20(Source: P.A. 99-143, eff. 7-27-15.)
 
21    Section 1608. The Illinois Marriage and Dissolution of
22Marriage Act is amended by changing Section 513.5 as follows:
 
23    (750 ILCS 5/513.5)
24    Sec. 513.5. Support for a non-minor child with a

 

 

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1disability.
2    (a) The court may award sums of money out of the property
3and income of either or both parties or the estate of a
4deceased parent, as equity may require, for the support of a
5child of the parties who has attained majority when the child
6is mentally or physically disabled and not otherwise
7emancipated. The sums awarded may be paid to one of the
8parents, to a trust created by the parties for the benefit of
9the non-minor child with a disability, or irrevocably to a
10special needs trust, established by the parties and for the
11sole benefit of the non-minor child with a disability, pursuant
12to subdivisions (d)(4)(A) or (d)(4)(C) of 42 U.S.C. 1396p,
13Section 1213 15.1 of the Illinois Trust Code Trusts and
14Trustees Act, and applicable provisions of the Social Security
15Administration Program Operating Manual System. An application
16for support for a non-minor disabled child may be made before
17or after the child has attained majority. Unless an application
18for educational expenses is made for a mentally or physically
19disabled child under Section 513, the disability that is the
20basis for the application for support must have arisen while
21the child was eligible for support under Section 505 or 513 of
22this Act.
23    (b) In making awards under this Section, or pursuant to a
24petition or motion to decrease, modify, or terminate any such
25award, the court shall consider all relevant factors that
26appear reasonable and necessary, including:

 

 

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1        (1) the present and future financial resources of both
2    parties to meet their needs, including, but not limited to,
3    savings for retirement;
4        (2) the standard of living the child would have enjoyed
5    had the marriage not been dissolved. The court may consider
6    factors that are just and equitable;
7        (3) the financial resources of the child; and
8        (4) any financial or other resource provided to or for
9    the child including, but not limited to, any Supplemental
10    Security Income, any home-based support provided pursuant
11    to the Home-Based Support Services Law for Mentally
12    Disabled Adults, and any other State, federal, or local
13    benefit available to the non-minor disabled child.
14    (c) As used in this Section:
15    A "disabled" individual means an individual who has a
16physical or mental impairment that substantially limits a major
17life activity, has a record of such an impairment, or is
18regarded as having such an impairment.
19    "Disability" means a mental or physical impairment that
20substantially limits a major life activity.
21(Source: P.A. 99-90, eff. 1-1-16.)
 
22    Section 1609. The Probate Act of 1975 is amended by
23changing Section 28-8 as follows:
 
24    (755 ILCS 5/28-8)  (from Ch. 110 1/2, par. 28-8)

 

 

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1    Sec. 28-8. Administrative powers. An independent
2representative acting reasonably for the best interests of the
3estate has the powers granted in the will and the following
4powers, all exercisable without court order, except to the
5extent that the following powers are inconsistent with the
6will:
7    (a) To lease, sell at public or private sale, for cash or
8on credit, mortgage or pledge the personal estate of the
9decedent and to distribute in kind any personal estate the sale
10of which is not necessary;
11    (b) To borrow money with or without security;
12    (c) To mortgage or pledge agricultural commodities as
13provided in Section 19-3;
14    (d) To continue the decedent's unincorporated business
15without personal liability except for malfeasance or
16misfeasance for losses incurred; and obligations incurred or
17contracts entered into by the independent representative with
18respect to the business are entitled to priority of payment out
19of the assets of the business but, without approval of the
20court first obtained, do not involve the estate beyond those
21assets;
22    (e) To settle, compound or compromise any claim or interest
23of the decedent in any property or exchange any such claim or
24interest for other claims or property; and to settle compound
25or compromise and pay all claims against the estate as provided
26in Sections 18-11 and 18-13, but claims of the independent

 

 

SB3165- 257 -LRB099 20744 HEP 45399 b

1representative or his attorney shall be subject to Section
218-8;
3    (f) To perform any contract of the decedent;
4    (g) To employ agents, accountants and counsel, including
5legal and investment counsel; to delegate to them the
6performance of any act of administration, whether or not
7discretionary; and to pay them reasonable compensation;
8    (h) To hold stocks, bonds and other personal property in
9the name of a nominee as provided in Section 19-12;
10    (i) To take possession, administer and grant possession of
11the decedent's real estate, which term in this subsection
12includes oil, gas, coal and other mineral interests therein; to
13pay taxes on decedent's real estate whether or not in
14possession of the representative; to lease the decedent's real
15estate upon such terms and for such length of time as he deems
16advisable; to sell at public or private sale, for cash or on
17credit, or mortgage any real estate or interest therein to
18which the decedent had claim or title, but real estate
19specifically bequeathed shall not be leased, sold or mortgaged
20without the written consent of the legatee; and to confirm the
21title of any heir or legatee to real estate by recording and
22delivering to the heir or legatee an instrument releasing the
23estate's interest; and
24    (j) To retain property properly acquired, without regard to
25its suitability for original purchase; and to invest money of
26the estate (1) in any one or more of the investments described

 

 

SB3165- 258 -LRB099 20744 HEP 45399 b

1in Section 21-1 or (2) if the independent representative
2determines that the estate is solvent and all interested
3persons other than creditors approve, in any investments
4authorized for trustees under the prudent investor man rule
5stated in Article 9 Section 5 of the Illinois Trust Code
6"Trusts and Trustees Act", as now or hereafter amended.
7(Source: P.A. 81-213.)
 
8    Section 1610. The Illinois Power of Attorney Act is amended
9by changing Section 3-4 as follows:
 
10    (755 ILCS 45/3-4)  (from Ch. 110 1/2, par. 803-4)
11    Sec. 3-4. Explanation of powers granted in the statutory
12short form power of attorney for property. This Section defines
13each category of powers listed in the statutory short form
14power of attorney for property and the effect of granting
15powers to an agent, and is incorporated by reference into the
16statutory short form. Incorporation by reference does not
17require physical attachment of a copy of this Section 3-4 to
18the statutory short form power of attorney for property. When
19the title of any of the following categories is retained (not
20struck out) in a statutory property power form, the effect will
21be to grant the agent all of the principal's rights, powers and
22discretions with respect to the types of property and
23transactions covered by the retained category, subject to any
24limitations on the granted powers that appear on the face of

 

 

SB3165- 259 -LRB099 20744 HEP 45399 b

1the form. The agent will have authority to exercise each
2granted power for and in the name of the principal with respect
3to all of the principal's interests in every type of property
4or transaction covered by the granted power at the time of
5exercise, whether the principal's interests are direct or
6indirect, whole or fractional, legal, equitable or
7contractual, as a joint tenant or tenant in common or held in
8any other form; but the agent will not have power under any of
9the statutory categories (a) through (o) to make gifts of the
10principal's property, to exercise powers to appoint to others
11or to change any beneficiary whom the principal has designated
12to take the principal's interests at death under any will,
13trust, joint tenancy, beneficiary form or contractual
14arrangement. The agent will be under no duty to exercise
15granted powers or to assume control of or responsibility for
16the principal's property or affairs; but when granted powers
17are exercised, the agent will be required to act in good faith
18for the benefit of the principal using due care, competence,
19and diligence in accordance with the terms of the statutory
20property power and will be liable for negligent exercise. The
21agent may act in person or through others reasonably employed
22by the agent for that purpose and will have authority to sign
23and deliver all instruments, negotiate and enter into all
24agreements and do all other acts reasonably necessary to
25implement the exercise of the powers granted to the agent.
26    (a) Real estate transactions. The agent is authorized to:

 

 

SB3165- 260 -LRB099 20744 HEP 45399 b

1buy, sell, exchange, rent and lease real estate (which term
2includes, without limitation, real estate subject to a land
3trust and all beneficial interests in and powers of direction
4under any land trust); collect all rent, sale proceeds and
5earnings from real estate; convey, assign and accept title to
6real estate; grant easements, create conditions and release
7rights of homestead with respect to real estate; create land
8trusts and exercise all powers under land trusts; hold,
9possess, maintain, repair, improve, subdivide, manage, operate
10and insure real estate; pay, contest, protest and compromise
11real estate taxes and assessments; and, in general, exercise
12all powers with respect to real estate which the principal
13could if present and under no disability.
14    (b) Financial institution transactions. The agent is
15authorized to: open, close, continue and control all accounts
16and deposits in any type of financial institution (which term
17includes, without limitation, banks, trust companies, savings
18and building and loan associations, credit unions and brokerage
19firms); deposit in and withdraw from and write checks on any
20financial institution account or deposit; and, in general,
21exercise all powers with respect to financial institution
22transactions which the principal could if present and under no
23disability. This authorization shall also apply to any Totten
24Trust, Payable on Death Account, or comparable trust account
25arrangement where the terms of such trust are contained
26entirely on the financial institution's signature card,

 

 

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1insofar as an agent shall be permitted to withdraw income or
2principal from such account, unless this authorization is
3expressly limited or withheld under paragraph 2 of the form
4prescribed under Section 3-3. This authorization shall not
5apply to accounts titled in the name of any trust subject to
6the provisions of the Illinois Trust Code Trusts and Trustees
7Act, for which specific reference to the trust and a specific
8grant of authority to the agent to withdraw income or principal
9from such trust is required pursuant to Section 2-9 of the
10Illinois Power of Attorney Act and subsection (n) of this
11Section.
12    (c) Stock and bond transactions. The agent is authorized
13to: buy and sell all types of securities (which term includes,
14without limitation, stocks, bonds, mutual funds and all other
15types of investment securities and financial instruments);
16collect, hold and safekeep all dividends, interest, earnings,
17proceeds of sale, distributions, shares, certificates and
18other evidences of ownership paid or distributed with respect
19to securities; exercise all voting rights with respect to
20securities in person or by proxy, enter into voting trusts and
21consent to limitations on the right to vote; and, in general,
22exercise all powers with respect to securities which the
23principal could if present and under no disability.
24    (d) Tangible personal property transactions. The agent is
25authorized to: buy and sell, lease, exchange, collect, possess
26and take title to all tangible personal property; move, store,

 

 

SB3165- 262 -LRB099 20744 HEP 45399 b

1ship, restore, maintain, repair, improve, manage, preserve,
2insure and safekeep tangible personal property; and, in
3general, exercise all powers with respect to tangible personal
4property which the principal could if present and under no
5disability.
6    (e) Safe deposit box transactions. The agent is authorized
7to: open, continue and have access to all safe deposit boxes;
8sign, renew, release or terminate any safe deposit contract;
9drill or surrender any safe deposit box; and, in general,
10exercise all powers with respect to safe deposit matters which
11the principal could if present and under no disability.
12    (f) Insurance and annuity transactions. The agent is
13authorized to: procure, acquire, continue, renew, terminate or
14otherwise deal with any type of insurance or annuity contract
15(which terms include, without limitation, life, accident,
16health, disability, automobile casualty, property or liability
17insurance); pay premiums or assessments on or surrender and
18collect all distributions, proceeds or benefits payable under
19any insurance or annuity contract; and, in general, exercise
20all powers with respect to insurance and annuity contracts
21which the principal could if present and under no disability.
22    (g) Retirement plan transactions. The agent is authorized
23to: contribute to, withdraw from and deposit funds in any type
24of retirement plan (which term includes, without limitation,
25any tax qualified or nonqualified pension, profit sharing,
26stock bonus, employee savings and other retirement plan,

 

 

SB3165- 263 -LRB099 20744 HEP 45399 b

1individual retirement account, deferred compensation plan and
2any other type of employee benefit plan); select and change
3payment options for the principal under any retirement plan;
4make rollover contributions from any retirement plan to other
5retirement plans or individual retirement accounts; exercise
6all investment powers available under any type of self-directed
7retirement plan; and, in general, exercise all powers with
8respect to retirement plans and retirement plan account
9balances which the principal could if present and under no
10disability.
11    (h) Social Security, unemployment and military service
12benefits. The agent is authorized to: prepare, sign and file
13any claim or application for Social Security, unemployment or
14military service benefits; sue for, settle or abandon any
15claims to any benefit or assistance under any federal, state,
16local or foreign statute or regulation; control, deposit to any
17account, collect, receipt for, and take title to and hold all
18benefits under any Social Security, unemployment, military
19service or other state, federal, local or foreign statute or
20regulation; and, in general, exercise all powers with respect
21to Social Security, unemployment, military service and
22governmental benefits which the principal could if present and
23under no disability.
24    (i) Tax matters. The agent is authorized to: sign, verify
25and file all the principal's federal, state and local income,
26gift, estate, property and other tax returns, including joint

 

 

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1returns and declarations of estimated tax; pay all taxes;
2claim, sue for and receive all tax refunds; examine and copy
3all the principal's tax returns and records; represent the
4principal before any federal, state or local revenue agency or
5taxing body and sign and deliver all tax powers of attorney on
6behalf of the principal that may be necessary for such
7purposes; waive rights and sign all documents on behalf of the
8principal as required to settle, pay and determine all tax
9liabilities; and, in general, exercise all powers with respect
10to tax matters which the principal could if present and under
11no disability.
12    (j) Claims and litigation. The agent is authorized to:
13institute, prosecute, defend, abandon, compromise, arbitrate,
14settle and dispose of any claim in favor of or against the
15principal or any property interests of the principal; collect
16and receipt for any claim or settlement proceeds and waive or
17release all rights of the principal; employ attorneys and
18others and enter into contingency agreements and other
19contracts as necessary in connection with litigation; and, in
20general, exercise all powers with respect to claims and
21litigation which the principal could if present and under no
22disability. The statutory short form power of attorney for
23property does not authorize the agent to appear in court or any
24tribunal as an attorney-at-law for the principal or otherwise
25to engage in the practice of law without being a licensed
26attorney who is authorized to practice law in Illinois under

 

 

SB3165- 265 -LRB099 20744 HEP 45399 b

1applicable Illinois Supreme Court Rules.
2    (k) Commodity and option transactions. The agent is
3authorized to: buy, sell, exchange, assign, convey, settle and
4exercise commodities futures contracts and call and put options
5on stocks and stock indices traded on a regulated options
6exchange and collect and receipt for all proceeds of any such
7transactions; establish or continue option accounts for the
8principal with any securities or futures broker; and, in
9general, exercise all powers with respect to commodities and
10options which the principal could if present and under no
11disability.
12    (l) Business operations. The agent is authorized to:
13organize or continue and conduct any business (which term
14includes, without limitation, any farming, manufacturing,
15service, mining, retailing or other type of business operation)
16in any form, whether as a proprietorship, joint venture,
17partnership, corporation, trust or other legal entity;
18operate, buy, sell, expand, contract, terminate or liquidate
19any business; direct, control, supervise, manage or
20participate in the operation of any business and engage,
21compensate and discharge business managers, employees, agents,
22attorneys, accountants and consultants; and, in general,
23exercise all powers with respect to business interests and
24operations which the principal could if present and under no
25disability.
26    (m) Borrowing transactions. The agent is authorized to:

 

 

SB3165- 266 -LRB099 20744 HEP 45399 b

1borrow money; mortgage or pledge any real estate or tangible or
2intangible personal property as security for such purposes;
3sign, renew, extend, pay and satisfy any notes or other forms
4of obligation; and, in general, exercise all powers with
5respect to secured and unsecured borrowing which the principal
6could if present and under no disability.
7    (n) Estate transactions. The agent is authorized to:
8accept, receipt for, exercise, release, reject, renounce,
9assign, disclaim, demand, sue for, claim and recover any
10legacy, bequest, devise, gift or other property interest or
11payment due or payable to or for the principal; assert any
12interest in and exercise any power over any trust, estate or
13property subject to fiduciary control; establish a revocable
14trust solely for the benefit of the principal that terminates
15at the death of the principal and is then distributable to the
16legal representative of the estate of the principal; and, in
17general, exercise all powers with respect to estates and trusts
18which the principal could if present and under no disability;
19provided, however, that the agent may not make or change a will
20and may not revoke or amend a trust revocable or amendable by
21the principal or require the trustee of any trust for the
22benefit of the principal to pay income or principal to the
23agent unless specific authority to that end is given, and
24specific reference to the trust is made, in the statutory
25property power form.
26    (o) All other property transactions. The agent is

 

 

SB3165- 267 -LRB099 20744 HEP 45399 b

1authorized to: exercise all possible authority of the principal
2with respect to all possible types of property and interests in
3property, except to the extent limited in subsections (a)
4through (n) of this Section 3-4 and to the extent that the
5principal otherwise limits the generality of this category (o)
6by striking out one or more of categories (a) through (n) or by
7specifying other limitations in the statutory property power
8form.
9(Source: P.A. 96-1195, eff. 7-1-11.)
 
10    Section 1611. The Common Trust Fund Act is amended by
11changing Section 3 as follows:
 
12    (760 ILCS 45/3)  (from Ch. 17, par. 2103)
13    Sec. 3. Establishment of common trust fund. Any bank or
14trust company may, at and during such time as it is qualified
15to act as a fiduciary in this State, establish, maintain, and
16administer one or more common trust funds for the purpose of
17furnishing investments to itself as a fiduciary, or to itself
18and another or others as co-fiduciaries. An investment in a
19common trust fund does not constitute an investment in the
20various securities composing the common trust fund, but is an
21investment in the fund as an entity. A bank or trust company,
22in its capacity as a fiduciary or co-fiduciary, whether that
23fiduciary capacity arose before or is created after this Act
24takes effect, may invest funds that it holds for investment in

 

 

SB3165- 268 -LRB099 20744 HEP 45399 b

1that capacity in interests in one or more common trust funds,
2subject to the following limitations:
3        (1) In the case of a fiduciary other than an
4    administrator, the investment may be made in a common trust
5    fund if such an investment is not expressly prohibited by
6    the instrument, judgment, or order creating the fiduciary
7    relationship, or by an amendment thereof, and if, under the
8    instrument, judgment, or order creating the fiduciary
9    relationship, or an amendment thereof, the funds so held
10    for investment might properly be invested in an investment
11    with the overall investment characteristics of the common
12    trust fund, considered as an entity, and if, in the case of
13    co-fiduciaries, the bank or trust company procures the
14    consent of its co-fiduciary or co-fiduciaries to the
15    investment in those interests. If the instrument creating
16    the fiduciary relationship gives to the bank or trust
17    company the exclusive right to select investments, the
18    consent of the co-fiduciary shall not be required. Any
19    person acting as co-fiduciary with any such bank or trust
20    company is hereby authorized to consent to the investment
21    in those interests.
22        (2) In the case of an administrator, the investment may
23    be made upon approval by the court.
24        (3) A bank or trust company in establishing,
25    maintaining and administering one or more common trust
26    funds for the purpose of furnishing investments to itself

 

 

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1    as fiduciary shall have a duty to invest and manage such
2    common trust fund assets as follows:
3            (A) The bank or trust company has a duty to invest
4        and manage common trust fund assets as a prudent
5        investor would considering the purposes, terms,
6        distribution requirements, and other circumstances of
7        the common trust fund. This standard requires the
8        exercise of reasonable care, skill, and caution and is
9        to be applied to investments not in isolation, but in
10        the context of the common trust fund portfolio as a
11        whole and as a part of an overall investment strategy
12        that should incorporate risk and return objectives
13        reasonably suitable to the common trust fund.
14            (B) No specific investment or course of action is,
15        taken alone, prudent or imprudent. The bank or trust
16        company may invest in every kind of property and type
17        of investment, subject to this Section. The bank or
18        trust company's investment decisions and actions are
19        to be judged in terms of the bank or trust company's
20        reasonable business judgment regarding the anticipated
21        effect on the common trust fund portfolio as a whole
22        under the facts and circumstances prevailing at the
23        time of the decision or action. The standard set forth
24        in this paragraph (3) is a test of conduct and not of
25        resulting performance.
26            (C) The circumstances that the bank or trust

 

 

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1        company may consider in making investment decisions
2        include, without limitation, the general economic
3        conditions, the possible effect of inflation, the role
4        each investment or course of action plays within the
5        overall portfolio, and the expected total return.
6            (D) The bank or trust company may invest and
7        reinvest common trust fund assets in interests in any
8        open-end or closed-end management type investment
9        company or investment trust (hereafter referred to as a
10        "mutual fund") registered under the Investment Company
11        Act of 1940 or may retain, sell, or exchange those
12        interests, provided that the portfolio of the mutual
13        fund, as an entity, is appropriate under the provisions
14        of this Act. The bank or trust company is not
15        prohibited from investing, reinvesting, retaining, or
16        exchanging as common fund assets any interests in any
17        mutual fund for which the bank or trust company or an
18        affiliate acts as advisor or manager solely on the
19        basis that the bank or trust company (or its affiliate)
20        provides services to the mutual fund and receives
21        reasonable remuneration for those services. A bank or
22        trust company or its affiliate is not required to
23        reduce or waive its compensation for services provided
24        in connection with the administration, investment, and
25        management of the common trust fund or a participant in
26        the common trust fund because the bank or trust company

 

 

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1        invests, reinvests, or retains common trust fund
2        assets in a mutual fund, if the total compensation paid
3        by a participant to the bank or trust company and its
4        affiliates, directly or indirectly, including any
5        common trust fund fees, mutual fund fees, advisory
6        fees, and management fees, is reasonable. However, a
7        bank or trust company may receive fees equal to the
8        amount of those fees that would be paid to any other
9        party under Securities and Exchange Commission Rule
10        12b-1.
11        (4) A bank or trust company may not delegate the
12    investment functions of a common trust fund established or
13    operating under Section 584 of the Internal Revenue Code
14    pursuant to Section 807 5.1 of the Illinois Trust Code
15    Trusts and Trustees Act except as authorized by the Bureau
16    of the Comptroller of the Currency of the U. S. Department
17    of the Treasury. A bank or trust company may hire one or
18    more agents to give the trustee advice with respect to
19    investments of a common trust fund and pay reasonable and
20    appropriate compensation to the agent provided that the
21    final investment decisions and the exclusive management of
22    the common trust fund remain with the bank or trust
23    company.
24        (5) On or after the effective date of this amendatory
25    Act of 1991, this Section applies to all existing and
26    future common trust funds, but only as to actions or

 

 

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1    inactions occurring after that effective date.
2(Source: P.A. 89-344, eff. 8-17-95.)
 
3    Section 1612. The Religious Corporation Act is amended by
4changing Section 46j as follows:
 
5    (805 ILCS 110/46j)  (from Ch. 32, par. 185)
6    Sec. 46j. Any church, congregation, society or
7corporation, heretofore or hereafter formed for religious
8purposes or for the purpose of religious worship under any of
9the provisions of this Act or under any law of this State
10incorporating or for the incorporation of religious
11corporations or societies, may receive land by gift, legacy or
12purchase and make, erect, and build thereon such houses,
13buildings, or other improvements as may be necessary for the
14convenience, comfort and welfare of such church, congregation,
15society or corporation, and may lay out and maintain thereon a
16cemetery or cemeteries, or a burying ground or grounds and may
17maintain and build thereon schools, orphan asylums, or such
18other improvements or buildings as may be necessary for the
19educational, eleemosynary, cemetery and religious purposes of
20such congregation, church, society or corporation; but no such
21property shall be used except in the manner expressed in the
22gift, grant or legacy. However, this limitation on the
23disposition of real property does not apply to the extent that
24a restriction imposed by a donor on the use of an institutional

 

 

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1fund may be released by the governing board of an institution
2under the Uniform Prudent Management of Institutional Funds
3Act. Or if no use or trust is so expressed, no such property
4shall be used except for the benefit of the congregation,
5corporation, church or society, for which it was intended, or
6for such religious, educational or eleemosynary purpose as may
7be approved by such congregation, church, society or
8corporation or the ecclesiastical body having jurisdiction or
9patronage of or charge over such congregation, corporation,
10church or society.
11    Any corporation, heretofore or hereafter formed for
12religious purposes under any of the provisions of this Act or
13under any other law of this State incorporating or for the
14incorporation of religious corporations or societies, which
15now or hereafter owns, operates, maintains or controls a
16cemetery or cemeteries, or a burial ground or grounds, is
17hereby authorized and empowered to accept by gift, grant,
18contribution, payment, or legacy, or pursuant to contract, any
19sum of money, funds, securities or property of any kind, or the
20income or avails thereof, and to hold the same in trust in
21perpetuity for the care of such cemetery or cemeteries, burial
22ground or grounds, or for the care of any lot, grave or crypt
23therein; or for the special care of any lot, grave or crypt or
24of any family mausoleum or memorial, marker, or monument in
25such cemetery or cemeteries, burial ground or grounds. No gift,
26grant, legacy, payment or other contribution shall be invalid

 

 

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1by reason of any indefiniteness or uncertainty as to the
2beneficiary designated in the instrument creating the gift,
3grant, legacy, payment or other contribution. If any gift,
4grant, legacy, payment or other contribution consists of
5non-income producing property, such corporation is authorized
6and empowered to sell such property and to invest the funds
7obtained in accordance with the provisions of the Uniform
8Prudent Management of Institutional Funds Act, or the
9provisions of the next succeeding paragraph.
10    The trust funds authorized by this Section shall be held
11intact and, unless otherwise restricted by the terms of the
12gift, grant, legacy, contribution, payment, contract or other
13payment shall be invested, from time to time reinvested, and
14kept invested by such corporation in such investments as are
15authorized by the Uniform Prudent Management of Institutional
16Funds Act, and according to such standards as are prescribed,
17for trustees under that Act and the Illinois Trust Code "Trusts
18and Trustees Act", approved September 10, 1973, as amended, and
19the net income only from such investments shall be allocated
20and used for the purposes set forth in the paragraph
21immediately preceding; but the trust funds authorized by this
22Section may be commingled and may also be commingled with any
23other trust funds received by such corporation for the care of
24the cemetery or cemeteries, or burial ground or grounds, or for
25the care or special care of any lot, grave, crypt, private
26mausoleum, memorial, marker, or monument whether received by

 

 

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1gift, grant, legacy, contribution, payment, contract or other
2conveyance heretofore or hereafter made to such corporation.
3    The trust funds authorized by this Section, and the income
4therefrom, shall be exempt from taxation and exempt from the
5operation of the laws against perpetuities and accumulations.
6(Source: P.A. 96-29, eff. 6-30-09.)
 
7    Section 1613. The Illinois Pre-Need Cemetery Sales Act is
8amended by changing Section 16 as follows:
 
9    (815 ILCS 390/16)  (from Ch. 21, par. 216)
10    Sec. 16. Trust funds; disbursements.
11    (a) A trustee shall make no disbursements from the trust
12fund except as provided in this Act.
13    (b) A trustee has a duty to invest and manage the trust
14assets pursuant to the Illinois Uniform Prudent Investor Act
15Rule under Article 9 of the Illinois Trust Code Trusts and
16Trustees Act. Whenever the seller changes trustees pursuant to
17this Act, the trustee must provide written notice of the change
18in trustees to the Comptroller no less than 28 days prior to
19the effective date of such a change in trustee. The trustee has
20an ongoing duty to provide the Comptroller with a current and
21true copy of the trust agreement under which the trust funds
22are held pursuant to this Act.
23    (c) The trustee may rely upon certifications and affidavits
24made to it under the provisions of this Act, and shall not be

 

 

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1liable to any person for such reliance.
2    (d) A trustee shall be allowed to withdraw from the trust
3funds maintained pursuant to this Act a reasonable fee pursuant
4to the Illinois Trust Code Trusts and Trustees Act.
5    (e) The trust shall be a single-purpose trust fund. In the
6event of the seller's bankruptcy, insolvency or assignment for
7the benefit of creditors, or an adverse judgment, the trust
8funds shall not be available to any creditor as assets of the
9seller or to pay any expenses of any bankruptcy or similar
10proceeding, but shall be distributed to the purchasers or
11managed for their benefit by the trustee holding the funds.
12Except in an action by the Comptroller to revoke a license
13issued pursuant to this Act and for creation of a receivership
14as provided in this Act, the trust shall not be subject to
15judgment, execution, garnishment, attachment, or other seizure
16by process in bankruptcy or otherwise, nor to sale, pledge,
17mortgage, or other alienation, and shall not be assignable
18except as approved by the Comptroller. The changes made by this
19amendatory Act of the 91st General Assembly are intended to
20clarify existing law regarding the inability of licensees to
21pledge the trust.
22    (f) Because it is not known at the time of deposit or at
23the time that income is earned on the trust account to whom the
24principal and the accumulated earnings will be distributed, for
25purposes of determining the Illinois Income Tax due on these
26trust funds, the principal and any accrued earnings or losses

 

 

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1relating to each individual account shall be held in suspense
2until the final determination is made as to whom the account
3shall be paid.
4    (g) A trustee shall at least annually furnish to each
5purchaser a statement identifying: (1) the receipts,
6disbursements, and inventory of the trust, including an
7explanation of any fees or expenses charged by the trustee
8under paragraph (d) of this Section or otherwise, (2) an
9explanation of the purchaser's right to a refund, if any, under
10this Act, and (3) the primary regulator of the trust as a
11corporate fiduciary under state or federal law.
12(Source: P.A. 96-879, eff. 2-2-10.)
 
13
Article 99. Effective date.

 
14    Section 9999. Effective date. This Act takes effect January
151, 2017.
 
16    Section 999. Effective date. This Act takes effect January
171, 2017.

 

 

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1 INDEX
2 Statutes amended in order of appearance
3    New Act
4    755 ILCS 5/4-2 rep.
5    760 ILCS 5/Act rep.
6    760 ILCS 35/Act rep.
7    765 ILCS 305/Act rep.
8    765 ILCS 310/Act rep.
9    765 ILCS 315/Act rep.
10    765 ILCS 320/Act rep.
11    765 ILCS 325/Act rep.
12    30 ILCS 160/2from Ch. 127, par. 4002
13    60 ILCS 1/135-20
14    205 ILCS 620/1-6from Ch. 17, par. 1551-6
15    205 ILCS 620/6-10from Ch. 17, par. 1556-10
16    205 ILCS 620/9-5from Ch. 17, par. 1559-5
17    210 ILCS 135/3from Ch. 91 1/2, par. 1703
18    215 ILCS 155/21.1
19    225 ILCS 45/4a
20    225 ILCS 45/5from Ch. 111 1/2, par. 73.105
21    405 ILCS 5/3-605from Ch. 91 1/2, par. 3-605
22    405 ILCS 5/3-819from Ch. 91 1/2, par. 3-819
23    405 ILCS 5/5-105from Ch. 91 1/2, par. 5-105
24    750 ILCS 5/513.5
25    755 ILCS 5/28-8from Ch. 110 1/2, par. 28-8

 

 

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1    755 ILCS 45/3-4from Ch. 110 1/2, par. 803-4
2    760 ILCS 45/3from Ch. 17, par. 2103
3    805 ILCS 110/46jfrom Ch. 32, par. 185
4    815 ILCS 390/16from Ch. 21, par. 216