(760 ILCS 3/1207)
Sec. 1207. Notice. (a) In this Section, a notice period begins on the day notice is given under subsection (c) and ends 59 days after the day notice is given. (b) Except as otherwise provided in this Article, an authorized fiduciary may exercise the decanting power without the consent of any person and without court approval.
(c) Except as otherwise provided in subsection (f), an authorized fiduciary shall give notice in a record of the intended exercise of the decanting power not later than 60 days before the exercise to:
(1) each settlor of the first trust, if living or |
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(2) each qualified beneficiary of the first trust;
(3) each holder of a presently exercisable power of
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| appointment over any part or all of the first trust;
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(4) each person that currently has the right to
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| remove or replace the authorized fiduciary;
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(5) each other fiduciary of the first trust;
(6) each fiduciary of the second trust; and
(7) the Attorney General's Charitable Trust Bureau,
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| if the first trust contains a charitable interest.
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(d) An authorized fiduciary is not required to give notice under subsection (c) to a qualified beneficiary who is a minor and has no representative. The authorized fiduciary is not required to give notice under subsection (c) to a person that is not known to the fiduciary or is known to the fiduciary but cannot be located by the fiduciary after reasonable diligence.
(e) A notice under subsection (c) must:
(1) specify the manner in which the authorized
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| fiduciary intends to exercise the decanting power;
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(2) specify the proposed effective date for exercise
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(3) include a copy of the first-trust instrument;
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(4) include a copy of all second-trust instruments.
(f) The decanting power may be exercised before expiration of the notice period under subsection (a) if all persons entitled to receive notice waive the period in a signed record.
(g) The receipt of notice, waiver of the notice period, or expiration of the notice period does not affect the right of a person to file an application under Section 1209 with the court asserting that:
(1) an attempted exercise of the decanting power is
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| ineffective because it did not comply with this Article or was an abuse of discretion or breach of fiduciary duty; or
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(2) Section 1222 applies to the exercise of the
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(h) An exercise of the decanting power is not ineffective because of the failure to give notice to one or more persons under subsection (c) if the authorized fiduciary acted with reasonable care to comply with subsection (c).
(i) If the first trust contains a charitable interest and the Attorney General objects to the proposed exercise of the decanting power in writing delivered to the authorized fiduciary before the end of the notice period, the authorized fiduciary may proceed with the proposed exercise of the decanting power only with either court approval or the later written consent of the Attorney General.
(Source: P.A. 101-48, eff. 1-1-20 .)
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(760 ILCS 3/1209)
Sec. 1209. Court involvement. (a) On application of an authorized fiduciary, a person entitled to notice under Section 1207(c), a beneficiary, or, with respect to a charitable interest, the Attorney General or any other person that has standing to enforce the charitable interest, the court may:
(1) provide instructions to the authorized fiduciary |
| regarding whether a proposed exercise of the decanting power is permitted under this Article and consistent with the fiduciary duties of the authorized fiduciary;
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(2) appoint a special fiduciary and authorize the
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| special fiduciary to determine whether the decanting power should be exercised under this Article and to exercise the decanting power;
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(3) approve an exercise of the decanting power;
(4) determine that a proposed or attempted exercise
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| of the decanting power is ineffective because:
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(A) after applying Section 1222, the proposed or
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| attempted exercise does not or did not comply with this Article; or
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(B) the proposed or attempted exercise would be
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| or was an abuse of the fiduciary's discretion or a breach of fiduciary duty;
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(5) determine the extent to which Section 1222
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| applies to a prior exercise of the decanting power;
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(6) provide instructions to the trustee regarding
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| the application of Section 1222 to a prior exercise of the decanting power; or
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(7) order other appropriate relief to carry out the
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| purposes of this Article.
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(b) On application of an authorized fiduciary, the court may approve:
(1) an increase in the fiduciary's compensation
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(2) a modification under Section 1218 of a provision
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| granting a person the right to remove or replace the fiduciary.
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(Source: P.A. 101-48, eff. 1-1-20 .)
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(760 ILCS 3/1211) Sec. 1211. Decanting power under expanded distributive discretion. (a) In this Section:
(1) "Noncontingent" right means a right that is not |
| subject to the exercise of discretion or the occurrence of a specified event that is not certain to occur. The term does not include a right held by a beneficiary if any person has discretion to distribute property subject to the right of any person other than the beneficiary or the beneficiary's estate.
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(2) "Successor beneficiary" means a beneficiary that
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| on the date the beneficiary's qualification is determined is not a qualified beneficiary. The term does not include a person that is a beneficiary only because the person holds a nongeneral power of appointment.
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(3) "Vested interest" means:
(A) a right to a mandatory distribution that is
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| a noncontingent right as of the date of the exercise of the decanting power;
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(B) a current and noncontingent right, annually
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| or more frequently, to a mandatory distribution of income, a specified dollar amount, or a percentage of value of some or all of the trust property;
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(C) a current and noncontingent right, annually
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| or more frequently, to withdraw income, a specified dollar amount, or a percentage of value of some or all of the trust property;
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(D) a presently exercisable general power of
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(E) a right to receive an ascertainable part of
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| the trust property on the trust's termination that is not subject to the exercise of discretion or to the occurrence of a specified event that is not certain to occur.
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(b) Subject to subsection (c) and Section 1214, an authorized fiduciary that has expanded distributive discretion to distribute the principal of a first trust to one or more current beneficiaries may exercise the decanting power over the principal of the first trust.
(c) Subject to Section 1213, in an exercise of the decanting power under this Section, a second trust may not:
(1) include as a current beneficiary a person that
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| is not a current beneficiary of the first trust, except as otherwise provided in subsection (d) or in the terms of the first trust;
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(2) include as a presumptive remainder beneficiary
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| or successor beneficiary a person that is not a current beneficiary, presumptive remainder beneficiary, or successor beneficiary of the first trust, except as otherwise provided in subsection (d); or
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(3) reduce or eliminate a vested interest.
(d) Subject to subsection (c)(3) and Section 1214, in an exercise of the decanting power under this Section, a second trust may be a trust created or administered under the law of any jurisdiction and may:
(1) retain a power of appointment granted in the
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(2) omit a power of appointment granted in the first
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| trust, other than a presently exercisable general power of appointment;
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(3) create or modify a power of appointment if the
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| powerholder is a current beneficiary of the first trust and the authorized fiduciary has expanded distributive discretion to distribute principal to the beneficiary; and
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(4) create or modify a power of appointment if the
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| powerholder is a presumptive remainder beneficiary or successor beneficiary of the first trust, but the exercise of the power may take effect only after the powerholder becomes, or would have become if then living, a current beneficiary.
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(e) A power of appointment described in subsection (d)(1) through (4) of subsection (d) may be general or nongeneral. The class of permissible appointees in favor of which the power may be exercised may be broader than or different from the beneficiaries of the first trust.
(f) If an authorized fiduciary has expanded distributive discretion to distribute part but not all of the principal of a first trust, the fiduciary may exercise the decanting power under this Section over that part of the principal over which the authorized fiduciary has expanded distributive discretion.
(Source: P.A. 101-48, eff. 1-1-20; 102-279, eff. 1-1-22 .)
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(760 ILCS 3/1213)
Sec. 1213. Trust for beneficiary with disability. (a) In this Section:
(1) "Beneficiary with a disability" means a |
| beneficiary of the first trust who the special-needs fiduciary believes may qualify for governmental benefits based on disability, whether or not the beneficiary currently receives those benefits or is an individual who has been adjudicated incompetent.
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(2) "Best interests" of a beneficiary with a
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| disability include, without limitation, consideration of the financial impact to the family of the beneficiary who has a disability.
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(3) "Governmental benefits" means financial aid or
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| services from a state, federal, or other public agency.
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(4) "Special-needs fiduciary" means, with respect to
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| a trust that has a beneficiary with a disability:
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(A) a trustee or other fiduciary, other than a
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| settlor, that has discretion to distribute part or all of the principal of a first trust to one or more current beneficiaries;
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(B) if no trustee or fiduciary has discretion
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| under subparagraph (A), a trustee or other fiduciary, other than a settlor, that has discretion to distribute part or all of the income of the first trust to one or more current beneficiaries; or
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(C) if no trustee or fiduciary has discretion
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| under subparagraphs (A) and (B), a trustee or other fiduciary, other than a settlor, that is required to distribute part or all of the income or principal of the first trust to one or more current beneficiaries.
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(5) "Special-needs trust" means a trust the trustee
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| believes would not be considered a resource for purposes of determining whether the beneficiary with a disability is eligible for governmental benefits.
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(b) A special-needs fiduciary may exercise the decanting power under Section 1211 over the principal of a first trust as if the fiduciary had authority to distribute principal to a beneficiary with a disability subject to expanded distributive discretion if:
(1) a second trust is a special-needs trust that
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| benefits the beneficiary with a disability; and
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(2) the special-needs fiduciary determines that
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| exercise of the decanting power will further the purposes of the first trust or the best interests of the beneficiary with a disability.
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(c) In an exercise of the decanting power under this Section, the following rules apply:
(1) If the first trust was created by the
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| beneficiary with a disability, or to the extent the first trust was funded by the beneficiary with a disability, then notwithstanding paragraph (2) of subsection (c) of Section 1211, the interest in the second trust of a beneficiary with a disability may:
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(A) be a pooled trust as defined by Medicaid law
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| for the benefit of the beneficiary with a disability under 42 U.S.C. 1396p(d)(4)(C), as amended; or
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(B) contain payback provisions complying with
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| reimbursement requirements of Medicaid law under 42 U.S.C. 1396p(d)(4)(A), as amended.
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(2) Paragraph (3) of subsection (c) of Section 1211
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| does not apply to the interests of the beneficiary with a disability.
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(3) Except as affected by any change to the
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| interests of the beneficiary with a disability, the second trusts, in the aggregate, must grant each other beneficiary of the first trust beneficial interests in the second trusts that are substantially similar to the beneficiary's beneficial interests in the first trust.
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(Source: P.A. 101-48, eff. 1-1-20 .)
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(760 ILCS 3/1214)
Sec. 1214. Protection of charitable interests. (a) In this Section:
(1) "Determinable charitable interest" means a |
| charitable interest that is a right to a mandatory distribution currently, periodically, on the occurrence of a specified event, or after the passage of a specified time and that is unconditional or that will in all events be held for charitable purposes.
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(2) "Unconditional" means not subject to the
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| occurrence of a specified event that is not certain to occur, other than a requirement in a trust instrument that a charitable organization be in existence or qualify under a particular provision of the Internal Revenue Code on the date of the distribution if the charitable organization meets the requirement on the date of determination.
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(b) If a first trust contains a determinable charitable interest, the Attorney General has the rights of a qualified beneficiary and may represent and bind the charitable interest.
(c) If a first trust contains a charitable interest, the second trusts in the aggregate may not:
(1) diminish the charitable interest;
(2) diminish the interest of an identified
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| charitable organization that holds the charitable interest;
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(3) alter any charitable purpose stated in the
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| first-trust instrument; or
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(4) alter any condition or restriction related to
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(d) If there are 2 or more second trusts, the second trusts shall be treated as one trust for purposes of determining whether the exercise of the decanting power diminishes the charitable interest or diminishes the interest of an identified charitable organization for purposes of subsection (c).
(e) If a first trust contains a determinable charitable interest, the second trusts that include charitable interests pursuant to subsection (c) must be administered under the law of this State unless:
(1) the Attorney General, after receiving notice
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| under Section 1207, fails to object in a signed record delivered to the authorized fiduciary within the notice period;
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(2) the Attorney General consents in a signed record
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| to the second trusts being administered under the law of another jurisdiction; or
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(3) the court approves the exercise of the decanting
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(f) This Article does not limit the powers and duties of the Attorney General under Illinois law.
(Source: P.A. 101-48, eff. 1-1-20 .)
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(760 ILCS 3/1219)
Sec. 1219. Tax-related limitations. (a) In this Section:
(1) "Grantor trust" means a trust as to which a |
| settlor of a first trust is considered the owner under Sections 671 through 677 of the Internal Revenue Code or Section 679 of the Internal Revenue Code.
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(2) "Nongrantor trust" means a trust that is not a
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(3) "Qualified benefits property" means property
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| subject to the minimum distribution requirements of Section 401(a)(9) of the Internal Revenue Code, and any applicable regulations, or to any similar requirements that refer to Section 401(a)(9) of the Internal Revenue Code or the regulations.
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(b) An exercise of the decanting power is subject to the following limitations:
(1) If a first trust contains property that
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| qualified, or would have qualified but for provisions of this Article other than this Section, for a marital deduction for purposes of the gift or estate tax under the Internal Revenue Code or a state gift, estate, or inheritance tax, the second-trust instrument must not include or omit any term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying for the deduction, or would have reduced the amount of the deduction, under the same provisions of the Internal Revenue Code or state law under which the transfer qualified.
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(2) If the first trust contains property that
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| qualified, or would have qualified but for provisions of this Article other than this Section, for a charitable deduction for purposes of the income, gift, or estate tax under the Internal Revenue Code or a state income, gift, estate, or inheritance tax, the second-trust instrument must not include or omit any term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying for the deduction, or would have reduced the amount of the deduction, under the same provisions of the Internal Revenue Code or state law under which the transfer qualified.
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(3) If the first trust contains property that
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| qualified, or would have qualified but for provisions of this Article other than this Section, for the exclusion from the gift tax described in Section 2503(b) of the Internal Revenue Code, the second-trust instrument must not include or omit a term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying under the same provision of Section 2503 of the Internal Revenue Code. If the first trust contains property that qualified, or would have qualified but for provisions of this Article other than this Section, for the exclusion from the gift tax described in Section 2503(b) of the Internal Revenue Code, by application of Section 2503(c) of the Internal Revenue Code, the second-trust instrument must not include or omit a term that, if included or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying under Section 2503(c) of the Internal Revenue Code.
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(4) If the property of the first trust includes
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| shares of stock in an S corporation, as defined in Section 1361 of the Internal Revenue Code and the first trust is, or but for provisions of this Article other than this Section would be, a permitted shareholder under any provision of Section 1361 of the Internal Revenue Code, an authorized fiduciary may exercise the power with respect to part or all of the S corporation stock only if any second trust receiving the stock is a permitted shareholder under Section 1361(c)(2) of the Internal Revenue Code. If the property of the first trust includes shares of stock in an S corporation and the first trust is, or but for provisions of this Article other than this Section, would be, a qualified subchapter S trust within the meaning of Section 1361(d) of the Internal Revenue Code, the second-trust instrument must not include or omit a term that prevents the second trust from qualifying as a qualified subchapter S trust.
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(5) If the first trust contains property that
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| qualified, or would have qualified but for provisions of this Article other than this Section, for a zero inclusion ratio for purposes of the generation-skipping transfer tax under Section 2642(c) of the Internal Revenue Code the second-trust instrument must not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented the transfer to the first trust from qualifying for a zero inclusion ratio under Section 2642(a) of the Internal Revenue Code.
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(6) If the first trust is directly or indirectly the
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| beneficiary of qualified benefits property, the second-trust instrument may not include or omit any term that, if included in or omitted from the first-trust instrument, would have increased the minimum distributions required with respect to the qualified benefits property under Section 401(a)(9) of the Internal Revenue Code and any applicable regulations, or any similar requirements that refer to Section 401(a)(9) of the Internal Revenue Code or the regulations. If an attempted exercise of the decanting power violates the preceding sentence, the trustee is deemed to have held the qualified benefits property and any reinvested distributions of the property as a separate share from the date of the exercise of the power and Section 1222 applies to the separate share.
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(7) If the first trust qualifies as a grantor trust
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| because of the application of Section 672(f)(2)(A) of the Internal Revenue Code the second trust may not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented the first trust from qualifying under Section 672(f)(2)(A) of the Internal Revenue Code.
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(8) In this paragraph (8), "tax benefit" means a
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| federal or state tax deduction, exemption, exclusion, or other benefit not otherwise listed in this Section, except for a benefit arising from being a grantor trust. Subject to paragraph (9) of this subsection (b), a second-trust instrument may not include or omit a term that, if included in or omitted from the first-trust instrument, would have prevented qualification for a tax benefit if:
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(A) the first-trust instrument expressly
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| indicates an intent to qualify for the benefit or the first-trust instrument clearly is designed to enable the first trust to qualify for the benefit; and
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(B) the transfer of property held by the first
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| trust or the first trust qualified, or but for provisions of this Article other than this Section, would have qualified for the tax benefit.
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(9) Subject to paragraph (4) of this subsection (b):
(A) except as otherwise provided in paragraph
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| (7) of this subsection (b), the second trust may be a nongrantor trust, even if the first trust is a grantor trust; and
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(B) except as otherwise provided in paragraph
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| (10) of this subsection (b), the second trust may be a grantor trust, even if the first trust is a nongrantor trust.
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(10) An authorized fiduciary may not exercise the
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| decanting power if a settlor objects in a signed record delivered to the fiduciary within the notice period and:
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(A) the first trust and second trusts are both
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| grantor trusts, in whole or in part, the first trust grants the settlor or another person the power to cause the second trust to cease to be a grantor trust, and the second trust does not grant an equivalent power to the settlor or other person; or
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(B) the first trust is a nongrantor trust and
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| the second trust is a grantor trust, in whole or in part, with respect to the settlor, unless:
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(i) the settlor has the power at all times
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| to cause the second trust to cease to be a grantor trust; or
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(ii) the first-trust instrument contains a
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| provision granting the settlor or another person a power that would cause the first trust to cease to be a grantor trust and the second-trust instrument contains the same provision.
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(Source: P.A. 101-48, eff. 1-1-20; 102-558, eff. 8-20-21.)
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