SB1066sam001 96TH GENERAL ASSEMBLY

Sen. William R. Haine

Filed: 3/17/2009

09600SB1066sam001 LRB096 07137 AJO 23984 a

AMENDMENT TO SENATE BILL 1066

AMENDMENT NO. ______. Amend Senate Bill 1066 by replacing everything after the enacting clause with the following:

"Section 5. The Trusts and Trustees Act is amended by adding Section 5.4 as follows:

(760 ILCS 5/5.4 new)

Sec. 5.4. Spendthrift trusts.

(a) For trusts created on or after the effective date of this amendatory Act of the 96th General Assembly, a settlor who in writing irrevocably transfers property in any manner to a trust having at least one trustee as defined in subsection (b) of this Section may, subject to the limitations in subsection (c) of this Section, provide that the income or principal interest of the settlor as beneficiary may not be either voluntarily or involuntarily transferred before payment or delivery to the settlor as beneficiary by the trustee. This Section shall be considered to be a restriction on the transfer of the settlor's beneficial interest in the trust that is enforceable under applicable nonbankruptcy law within the meaning of Section 541(c)(2) of the Bankruptcy Code or any successor provision.

(b) If the settlor is a beneficiary of the trust, at least one trustee of a trust described in this Section must be a corporate fiduciary who:

(1) is authorized by the laws of this State to act as a trustee and whose activities are subject to supervision by the Director of the Division of Banking of this State, the Office of the Comptroller of the Currency, or the Office of Thrift Supervision, or any successor thereto; and

(2) maintains or arranges for custody in this State of some or all of the property that is the subject of the trust described in this Section, maintains records for the trust on an exclusive or nonexclusive basis, prepares or arranges for the preparation of fiduciary income tax returns for the trust, or otherwise materially participates in the administration of the trust.

(c)(1) Except as provided in this subsection, if a trust has a restriction as provided in subsection (a) of this Section, a creditor or other claimant of the settlor may not satisfy a claim, or liability on a claim, in either law or equity, out of the settlor's transfer or the settlor's beneficial interest in the trust. For purposes of this Section, a creditor includes one holding or seeking to enforce a judgment entered by a court or other body having adjudicative authority as well as one with a right to payment, whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.

(2) A trust described in this Section does not prevent a creditor or person described in this subsection (c) from satisfying a claim or liability out of the settlor's beneficial interest in or transfer into trust if:

(A) the claim is a judgment, order, decree, or other legally enforceable decision or ruling resulting from a judicial, arbitration, mediation, or administrative proceeding commenced prior to or within 3 years after the trust is created;

(B) the settlor's transfer into trust is made with actual intent to hinder, delay, or defraud that creditor or claimant;

(C) the trust provides that the settlor may revoke or terminate all or part of the trust;

(D) the claim is for a payment owed by the settlor under a child support judgment or order;

(E) the claim is by a spouse or former spouse of the settlor on account of an agreement or court order for the payment of support or maintenance or for a division or distribution of property;

(F) the claim is a tax or other amount owed by the settlor to any governmental entity;

(G) the claim is by a governmental entity for recovery of public assistance received by the settlor from the governmental entity;

(H) the transfer is made when the settlor is insolvent or the transfer renders the settlor insolvent;

(I) the claim is a judgment, award, order, sentence, fine, penalty, or other determination of liability of the settlor for conduct of the settlor constituting fraud, intentional infliction of harm, or a crime; or

(J) the settlor transferred assets into the trust that: (i) were listed in a written representation of the settlor's assets given to a claimant to induce the claimant to enter into a transaction or agreement with the settlor; or (ii) were transferred from the settlor's control in breach of any written agreement, covenant, or security interest between the settlor and the claimant.

(d) The statute of limitations for actions to satisfy a claim or liability out of the settlor's beneficial interest in or transfer into trust under this Section is the statute of limitations applicable to the underlying action.

(e) The satisfaction of a claim under this Section is limited to that part of the trust or transfer to which it applies.

(f) For purposes of this Section, a trust is not revoked or terminated by:

(1) a power to veto a distribution from the trust;

(2) a testamentary special power of appointment or similar power;

(3) the right to receive a distribution of income, principal, or both in the discretion of another, including a trustee other than the settlor;

(4) an interest in a charitable remainder unitrust or charitable remainder annuity trust as defined in Internal Revenue Code Section 664 or any successor provision;

(5) a right to receive principal subject to an ascertainable standard set forth in the trust; or

(6) the power to appoint a nonsubordinate adviser or trust protector who can remove and appoint trustees, who can direct, consent to, or disapprove distributions, or who is an investment adviser or has the power to appoint an investment adviser or investment director pursuant to the laws of this State.

(g) The courts of this State shall have exclusive jurisdiction over any action brought under this Section.".