HB4594 EngrossedLRB103 34868 LNS 64730 b

1    AN ACT concerning civil law.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Trust Code is amended by changing
5Sections 103, 110, 402, and 407 and by adding Section 409.5 as
6follows:
 
7    (760 ILCS 3/103)
8    Sec. 103. Definitions. In this Code:
9    (1) "Action", with respect to an act of a trustee,
10includes a failure to act.
11    (1.5) "Appointive property" means the property or property
12interest subject to a power of appointment.
13    (2) "Ascertainable standard" means a standard relating to
14an individual's health, education, support, or maintenance
15within the meaning of Section 2041(b)(1)(A) or 2514(c)(1) of
16the Internal Revenue Code and any applicable regulations.
17    (3) "Beneficiary" means a person that:
18        (A) has a present or future beneficial interest in a
19    trust, vested or contingent, assuming nonexercise of
20    powers of appointment, excluding the right of a settlor to
21    be reimbursed for tax obligations as provided in paragraph
22    (3) of subsection (a) of Section 505;
23        (B) in a capacity other than that of trustee, holds a

 

 

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1    power of appointment over trust property; or
2        (C) is an identified charitable organization that will
3    or may receive distributions under the terms of the trust.
4"Beneficiary" does not include a permissible appointee of
5power of appointment, other than the holder of a presently
6exercisable general power of appointment, until the power is
7exercised in favor of such appointee.
8    (4) "Charitable interest" means an interest in a trust
9that:
10        (A) is held by an identified charitable organization
11    and makes the organization a qualified beneficiary;
12        (B) benefits only charitable organizations and, if the
13    interest were held by an identified charitable
14    organization, would make the organization a qualified
15    beneficiary; or
16        (C) is held solely for charitable purposes and, if the
17    interest were held by an identified charitable
18    organization, would make the organization a qualified
19    beneficiary.
20    (5) "Charitable organization" means:
21        (A) a person, other than an individual, organized and
22    operated exclusively for charitable purposes; or
23        (B) a government or governmental subdivision, agency,
24    or instrumentality, to the extent it holds funds
25    exclusively for a charitable purpose.
26    (6) "Charitable purpose" means the relief of poverty, the

 

 

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1advancement of education or religion, the promotion of health,
2municipal or other governmental purpose, or another purpose
3the achievement of which is beneficial to the community.
4    (7) "Charitable trust" means a trust, or portion of a
5trust, created for a charitable purpose.
6    (8) "Community property" means all personal property,
7wherever situated, that was acquired as or became, and
8remained, community property under the laws of another
9jurisdiction, and all real property situated in another
10jurisdiction that is community property under the laws of that
11jurisdiction.
12    (9) "Current beneficiary" means a beneficiary that on the
13date the beneficiary's qualification is determined is a
14distributee or permissible distributee of trust income or
15principal. The term "current beneficiary" includes the holder
16of a presently exercisable general power of appointment but
17does not include a person who is a beneficiary only because the
18person holds any other power of appointment. In a revocable
19trust, "current beneficiary" does not include a person who may
20receive trust assets only through the exercise of a power to
21make a gift on behalf of the settlor.
22    (10) "Directing party" means any investment trust advisor,
23distribution trust advisor, or trust protector.
24    (11) "Donor", with reference to a power of appointment,
25means a person that creates a power of appointment.
26    (12) "Environmental law" means a federal, state, or local

 

 

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1law, rule, regulation, or ordinance relating to protection of
2the environment.
3    (13) "General power of appointment" means a power of
4appointment exercisable in favor of a powerholder, the
5powerholder's estate, a creditor of the powerholder, or a
6creditor of the powerholder's estate.
7    (14) "Guardian of the estate" means a person appointed by
8a court to administer the estate of a minor or adult
9individual.
10    (15) "Guardian of the person" means a person appointed by
11a court to make decisions regarding the support, care,
12education, health, and welfare of a minor or adult individual.
13    (16) "Incapacitated" or "incapacity" means the inability
14of an individual to manage property or business affairs
15because the individual is a minor, adjudicated incompetent,
16has an impairment in the ability to receive and evaluate
17information or make or communicate decisions even with the use
18of technological assistance; or is at a location that is
19unknown and not reasonably ascertainable. Without limiting the
20ways in which incapacity may be established, an individual is
21incapacitated if:
22        (i) a plenary guardian has been appointed for the
23    individual under subsection (c) of Section 11a-12 of the
24    Probate Act of 1975;
25        (ii) a limited guardian has been appointed for the
26    individual under subsection (b) of Section 11a-12 of the

 

 

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1    Probate Act of 1975 and the court has found that the
2    individual lacks testamentary capacity; or
3        (iii) the individual was examined by a licensed
4    physician who determined that the individual was
5    incapacitated and the physician made a signed written
6    record of the physician's determination within 90 days
7    after the examination and no licensed physician
8    subsequently made a signed written record of the
9    physician's determination that the individual was not
10    incapacitated within 90 days after examining the
11    individual.
12    (17) "Internal Revenue Code" means the Internal Revenue
13Code of 1986 as amended from time to time and includes
14corresponding provisions of any subsequent federal tax law.
15    (18) "Interested persons" means: (A) the trustee; and (B)
16all beneficiaries, or their respective representatives
17determined after giving effect to the provisions of Article 3,
18whose consent or joinder would be required in order to achieve
19a binding settlement were the settlement to be approved by the
20court. "Interested persons" includes a trust advisor,
21investment advisor, distribution advisor, trust protector, or
22other holder, or committee of holders, of fiduciary or
23nonfiduciary powers, if the person then holds powers material
24to a particular question or dispute to be resolved or affected
25by a nonjudicial settlement in accordance with Section 111 or
26by a judicial proceeding. "Interested persons" includes the

 

 

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1members of a trust purpose committee and trust enforcers of a
2virtuous trust created under Section 409.5.
3    (19) "Interests of the beneficiaries" means the beneficial
4interests provided in the trust instrument.
5    (20) "Jurisdiction", with respect to a geographic area,
6includes a State or country.
7    (21) "Legal capacity" means that the person is not
8incapacitated.
9    (22) "Nongeneral power of appointment" means a power of
10appointment that is not a general power of appointment.
11    (22.5) "Permissible appointee" means a person in whose
12favor a powerholder may exercise a power of appointment.
13    (23) "Person" means an individual, estate, trust, business
14or nonprofit entity, public corporation, government or
15governmental subdivision, agency, or instrumentality, or other
16legal entity.
17    (24) "Power of appointment" means a power that enables a
18powerholder acting in a nonfiduciary capacity to designate a
19recipient of an ownership interest in or another power of
20appointment over the appointive property. The term "power of
21appointment" does not include a power of attorney.
22    (25) "Power of withdrawal" means a presently exercisable
23general power of appointment other than a power:
24        (A) exercisable by the powerholder as trustee that is
25    limited by an ascertainable standard; or
26        (B) exercisable by another person only upon consent of

 

 

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1    the trustee or a person holding an adverse interest.
2    (26) "Powerholder" means a person in which a donor creates
3a power of appointment.
4    (27) "Presently exercisable power of appointment" means a
5power of appointment exercisable by the powerholder at the
6relevant time. The term "presently exercisable power of
7appointment":
8        (A) includes a power of appointment exercisable only
9    after the occurrence of a specified event, the
10    satisfaction of an ascertainable standard, or the passage
11    of a specified time only after:
12            (i) the occurrence of the specified event;
13            (ii) the satisfaction of the ascertainable
14        standard; or
15            (iii) the passage of the specified time; and
16        (B) does not include a power exercisable only at the
17    powerholder's death.
18    (28) "Presumptive remainder beneficiary" means a
19beneficiary of a trust, as of the date of determination and
20assuming nonexercise of all powers of appointment, who either:
21(A) would be a distributee or permissible distributee of trust
22income or principal if the trust terminated on that date; or
23(B) would be a distributee or permissible distributee of trust
24income or principal if the interests of all distributees
25currently eligible to receive income or principal from the
26trust terminated on that date without causing the trust to

 

 

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1terminate.
2    (29) "Property" means anything that may be the subject of
3ownership, whether real or personal, legal or equitable, or
4any interest therein.
5    (30) "Qualified beneficiary" means each current
6beneficiary and presumptive remainder beneficiary.
7    (31) "Revocable", as applied to a trust, means revocable
8by the settlor without the consent of the trustee or a person
9holding an adverse interest. A revocable trust is deemed
10revocable during the settlor's lifetime.
11    (32) "Settlor", except as otherwise provided in Sections
12113 and 1225, means a person, including a testator, who
13creates, or contributes property to, a trust. If more than one
14person creates or contributes property to a trust, each person
15is a settlor of the portion of the trust property attributable
16to that person's contribution except to the extent another
17person has the power to revoke or withdraw that portion.
18    (33) "Sign" means, with present intent to authenticate or
19adopt a record:
20        (A) to execute or adopt a tangible symbol; or
21        (B) to attach to or logically associate with the
22    record an electronic symbol, sound, or process.
23    (34) "Spendthrift provision" means a term of a trust that
24restrains both voluntary and involuntary transfer of a
25beneficiary's interest.
26    (35) "State" means a State of the United States, the

 

 

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1District of Columbia, Puerto Rico, the United States Virgin
2Islands, or any territory or insular possession subject to the
3jurisdiction of the United States. The term "state" includes
4an Indian tribe or band recognized by federal law or formally
5acknowledged by a state.
6    (36) "Terms of the trust" means:
7        (A) except as otherwise provided in paragraph (B), the
8    manifestation of the settlor's intent regarding a trust's
9    provisions as:
10            (i) expressed in the trust instrument; or
11            (ii) established by other evidence that would be
12        admissible in a judicial proceeding; or
13        (B) the trust's provisions as established, determined,
14    or modified by:
15            (i) a trustee or other person in accordance with
16        applicable law;
17            (ii) a court order; or
18            (iii) a nonjudicial settlement agreement under
19        Section 111.
20    (37) "Trust" means (A) a trust created by will, deed,
21agreement, declaration, or other written instrument, or (B) an
22oral trust under Section 407.
23    (38) "Trust accounting" means one or more written
24communications from the trustee with respect to the accounting
25year that describe: (A) the trust property, liabilities,
26receipts, and disbursements, including the amount of the

 

 

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1trustee's compensation; (B) the value of the trust assets on
2hand at the close of the accounting period, to the extent
3feasible; and (C) all other material facts related to the
4trustee's administration of the trust.
5    (39) "Trust instrument" means the written instrument
6stating the terms of a trust, including any amendment, any
7court order or nonjudicial settlement agreement establishing,
8construing, or modifying the terms of the trust in accordance
9with Section 111, Sections 410 through 416, or other
10applicable law, and any additional trust instrument under
11Article 12.
12    (40) "Trustee" includes an original, additional, and
13successor trustee, and a co-trustee.
14    (41) "Unascertainable beneficiary" means a beneficiary
15whose identity is uncertain or not reasonably ascertainable.
16(Source: P.A. 101-48, eff. 1-1-20; 102-279, eff. 1-1-22.)
 
17    (760 ILCS 3/110)
18    Sec. 110. Others treated as qualified beneficiaries.
19    (a) A person appointed to enforce a trust created for the
20care of an animal or another noncharitable purpose as provided
21in Section 408 or 409 has the rights of a qualified beneficiary
22under this Code.
23    (b) The Attorney General has the rights of a qualified
24beneficiary with respect to a charitable trust having its
25principal place of administration in this State.

 

 

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1    (c) A trust enforcer of a virtuous trust as provided in
2Section 409.5 has the rights of a qualified beneficiary under
3this Code.
4(Source: P.A. 101-48, eff. 1-1-20.)
 
5    (760 ILCS 3/402)
6    Sec. 402. Requirements for creation.
7    (a) A trust is created only if:
8        (1) the settlor or other person creating the trust has
9    capacity to create a trust;
10        (2) the settlor or other person creating the trust
11    indicates an intention to create the trust;
12        (3) the trust has a definite beneficiary or is:
13            (A) a charitable trust;
14            (B) a trust for the care of an animal, as provided
15        in Section 408; or
16            (C) a trust for a noncharitable purpose, as
17        provided in Section 409; or
18            (D) a virtuous trust, as provided in Section
19        409.5;
20        (4) the trustee has duties to perform; and
21        (5) the same person is not the sole trustee and sole
22    beneficiary.
23    (b) A beneficiary is definite if the beneficiary can be
24ascertained now or in the future, subject to any applicable
25rule against perpetuities.

 

 

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1    (c) A power in a trustee to select a beneficiary from an
2indefinite class is valid. If the power is not exercised
3within a reasonable time, the power fails and the property
4subject to the power passes to the persons who would have taken
5the property had the power not been conferred.
6(Source: P.A. 101-48, eff. 1-1-20; 102-279, eff. 1-1-22.)
 
7    (760 ILCS 3/407)
8    Sec. 407. Evidence of oral trust. Except as required by a
9statute other than this Code or by Section 409.5, a trust need
10not be evidenced by a trust instrument, but the creation of an
11oral trust and its terms may be established only by clear and
12convincing evidence.
13(Source: P.A. 101-48, eff. 1-1-20.)
 
14    (760 ILCS 3/409.5 new)
15    Sec. 409.5. Virtuous trust.
16    (a) A trust may be created for a business or other
17noncharitable purpose without a definite or definitely
18ascertainable beneficiary. The business purpose may seek
19economic and noneconomic benefits.
20    (b) A trust authorized by this Section shall be created by
21a written instrument. The trust instrument may designate one
22or more categories of stakeholders for whose benefit the trust
23is created, which may include, but shall not be limited to,
24employees, suppliers, and customers of the corporation or its

 

 

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1subsidiaries or communities in which offices or other
2establishments of the corporation or its subsidiaries are
3located.
4    (c) A trust authorized by this Section may hold an
5ownership interest of any corporation, partnership, limited
6partnership, cooperative, limited liability company, limited
7liability partnership, or joint venture.
8    (d) A trustee of a trust created under this Section shall
9not be deemed to violate the trustee's duties under Article 9
10by virtue of the trustee investing and managing the trust's
11assets pursuant to the terms and the purposes of the trust,
12which may include retaining an ownership interest in a
13specific corporation, partnership, limited partnership,
14cooperative, limited liability company, limited liability
15partnership, or joint venture.
16    (e) A trust authorized by this Section shall be exempt
17from the common law rule against perpetuities.
18    (f) A trust authorized by this Section may be enforced by
19one or more trust enforcers appointed in the trust instrument,
20and the trust instrument may provide a process for appointing
21successor trust enforcers. If at any time no person is acting
22as trust enforcer, the court shall appoint one or more trust
23enforcers. Each trust enforcer shall enforce the purpose and
24the terms of the trust and shall exercise authority as a
25fiduciary. If more than one person is acting as a trust
26enforcer, action may be taken by a majority of the persons

 

 

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1acting as trust enforcers. A trust enforcer is not a
2beneficiary of a trust created pursuant to this Section, but a
3trust enforcer has the rights of a qualified beneficiary.
4    (g) A trust authorized by this Section must have a trust
5purpose committee with at least 3 persons as members. Each
6member of the trust purpose committee shall exercise authority
7as a fiduciary. The trust instrument may appoint the initial
8members of the trust purpose committee and may provide a
9process for appointing successor members. A vacancy on the
10trust purpose committee must be filled if the trust purpose
11committee has fewer than 3 members.
12    (h) A vacancy on the trust purpose committee that is
13required to be filled must be filled in the following order of
14priority:
15        (1) by a person designated in the trust instrument or
16    selected through a process provided in the trust
17    instrument;
18        (2) by a person appointed by unanimous agreement of
19    the trust enforcers; or
20        (3) by a person appointed by the court.
21    (i) Unless the trust instrument provides otherwise and
22except as provided in paragraph (4) of subsection (j) or
23subsection (o), the trust purpose committee may take action by
24a majority vote of its members.
25    (j) Unless the trust instrument provides otherwise, the
26trust purpose committee has the power, in carrying out the

 

 

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1purposes of the trust and after notice to the trust enforcers,
2to:
3        (1) remove a trustee, with or without cause;
4        (2) appoint one or more successor trustees or
5    co-trustees;
6        (3) remove a trust enforcer, with or without cause;
7        (4) remove a member of the trust purpose committee, by
8    unanimous vote of all other members of the trust purpose
9    committee; and
10        (5) direct distributions from the trust.
11    (k) Property of a trust authorized by this Section may be
12applied only to its intended use. No court shall have
13authority to determine that the value of the trust property
14exceeds the amount required for the intended use.
15    (l) Unless the trust instrument provides otherwise, a
16member of the trust purpose committee or a trust enforcer may
17resign:
18        (1) after at least 30 days' notice to the trustee, all
19    other trust enforcers, and all other members of the trust
20    purpose committee; or
21        (2) at any time with the approval of the court.
22    (m) The trust purpose committee must send a report to the
23trustee and to the trust enforcers at least annually showing
24receipts and disbursements and listing the trust property and
25liabilities. The trust purpose committee shall keep the
26trustee and the trust enforcers reasonably informed about the

 

 

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1administration of the trust and of the material facts
2necessary for the trustee to comply with the trustee's duties
3under Section 813.1 and for the trust enforcers to protect the
4purposes of the trust.
5    (n) A trustee of a trust authorized by this Section shall
6act in accordance with a direction from the trust purpose
7committee unless the action is manifestly contrary to the
8terms of the trust or the trustee knows that the action would
9constitute a serious breach of a fiduciary duty that the trust
10purpose committee, the trust enforcer, or the trustee owes to
11the trust. A trustee is liable only for willful misconduct and
12is not liable for reliance on documents provided by the trust
13purpose committee or the trust enforcer.
14    (o) Unless the terms of the trust provide otherwise, the
15trust purpose committee and the trust enforcers, acting
16together, may modify or terminate a trust authorized by this
17Section by unanimous agreement of the members of the trust
18purpose committee and unanimous agreement of the trust
19enforcers.
20    (p) Upon termination of a trust authorized by this
21Section, the trustee shall distribute all remaining trust
22property as the terms of the trust provide, or if the terms of
23the trust do not provide for complete distribution of the
24property, as a court determines to be consistent with the
25purposes for which the trust was created.
26    (q) A person serving as a trustee may not serve as a trust

 

 

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1enforcer or as a member of the trust purpose committee, and a
2person serving as a trust enforcer may not serve as a member of
3the trust purpose committee.
4    (r) This Section does not apply to trusts created pursuant
5to Section 7.65 of the Business Corporation Act of 1983.
6    (s) A trust created under this Section may be referred to
7as a "virtuous trust".
8    (t) Section 808 shall not apply to a virtuous trust.