SB2002 EngrossedLRB098 06513 JDS 36556 b

1    AN ACT concerning government.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Trusts and Trustees Act is amended by
5changing Section 16.3 as follows:
 
6    (760 ILCS 5/16.3)
7    Sec. 16.3. Directed trusts.
8    (a) Definitions. In this Section:
9        (1) "Directing party" means any investment trust
10    advisor, distribution trust advisor, or trust protector as
11    provided in this Section.
12        (2) "Distribution trust advisor" means any one or more
13    persons given authority by the governing instrument to
14    direct, consent to, veto, or otherwise exercise all or any
15    portion of the distribution powers and discretions of the
16    trust, including but not limited to authority to make
17    discretionary distribution of income or principal.
18        (3) "Excluded fiduciary" means any fiduciary that by
19    the governing instrument is directed to act in accordance
20    with the exercise of specified powers by a directing party,
21    in which case such specified powers shall be deemed granted
22    not to the fiduciary but to the directing party and such
23    fiduciary shall be deemed excluded from exercising such

 

 

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1    specified powers. If a governing instrument provides that a
2    fiduciary as to one or more specified matters is to act,
3    omit action, or make decisions only with the consent of a
4    directing party, then such fiduciary is an excluded
5    fiduciary with respect to such matters. Notwithstanding
6    any provision of this Section to the contrary, a person
7    does not fail to qualify as an excluded fiduciary solely by
8    reason of having effectuated, participated in, or
9    consented to a transaction, including but not limited to
10    any transaction described in Section 16.1 or Section 16.4
11    of this Act, invoking the provisions of this Section with
12    respect to any new or existing trust.
13        (4) "Fiduciary" means any person expressly given one or
14    more fiduciary duties by the governing instrument,
15    including but not limited to a trustee.
16        (5) "Governing instrument" refers to the instrument
17    stating the terms of a trust, including but not limited to
18    any court order or nonjudicial settlement agreement
19    establishing, construing, or modifying the terms of the
20    trust in accordance with Section 16.1, 16.4, or 16.6 or
21    other applicable law.
22        (6) "Investment trust advisor" means any one or more
23    persons given authority by the governing instrument to
24    direct, consent to, veto, or otherwise exercise all or any
25    portion of the investment powers of the trust.
26        (7) "Power" means authority to take or withhold an

 

 

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1    action or decision, including but not limited to an
2    expressly specified power, the implied power necessary to
3    exercise a specified power, and authority inherent in a
4    general grant of discretion.
5        (8) "Trust protector" means any one or more persons
6    given any one or more of the powers specified in subsection
7    (d), whether or not designated with the title of trust
8    protector by the governing instrument.
9    (b) Powers of investment trust advisor. An investment trust
10advisor may be designated in the governing instrument of a
11trust. The powers of an investment trust advisor may be
12exercised or not exercised in the sole and absolute discretion
13of the investment trust advisor, and are binding on all other
14persons, including but not limited to each beneficiary,
15fiduciary, excluded fiduciary, and any other party having an
16interest in the trust. The governing instrument may use the
17title "investment trust advisor" or any similar name or
18description demonstrating the intent to provide for the office
19and function of an investment trust advisor. Unless the terms
20of the governing instrument provide otherwise, the investment
21trust advisor has the authority to:
22        (1) direct the trustee with respect to the retention,
23    purchase, transfer, assignment, sale, or encumbrance of
24    trust property and the investment and reinvestment of
25    principal and income of the trust;
26        (2) direct the trustee with respect to all management,

 

 

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1    control, and voting powers related directly or indirectly
2    to trust assets, including but not limited to voting
3    proxies for securities held in trust;
4        (3) select and determine reasonable compensation of
5    one or more advisors, managers, consultants, or
6    counselors, including the trustee, and to delegate to them
7    any of the powers of the investment trust advisor in
8    accordance with subsection (b) of Section 5.1; and
9        (4) determine the frequency and methodology for
10    valuing any asset for which there is no readily available
11    market value.
12    (c) Powers of distribution trust advisor. A distribution
13trust advisor may be designated in the governing instrument of
14a trust. The powers of a distribution trust advisor may be
15exercised or not exercised in the sole and absolute discretion
16of the distribution trust advisor, and are binding on all other
17persons, including but not limited to each beneficiary,
18fiduciary, excluded fiduciary, and any other party having an
19interest in the trust. The governing instrument may use the
20title "distribution trust advisor" or any similar name or
21description demonstrating the intent to provide for the office
22and function of a distribution trust advisor. Unless the terms
23of the governing instrument provide otherwise, the
24distribution trust advisor has authority to direct the trustee
25with regard to all decisions relating directly or indirectly to
26discretionary distributions to or for one or more

 

 

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1beneficiaries.
2    (d) Powers of trust protector. A trust protector may be
3designated in the governing instrument of a trust. The powers
4of a trust protector may be exercised or not exercised in the
5sole and absolute discretion of the trust protector, and are
6binding on all other persons, including but not limited to each
7beneficiary, investment trust advisor, distribution trust
8advisor, fiduciary, excluded fiduciary, and any other party
9having an interest in the trust. The governing instrument may
10use the title "trust protector" or any similar name or
11description demonstrating the intent to provide for the office
12and function of a trust protector. The powers granted to a
13trust protector by the governing instrument may include but are
14not limited to authority to do any one or more of the
15following:
16        (1) modify or amend the trust instrument to achieve
17    favorable tax status or respond to changes in the Internal
18    Revenue Code, federal laws, State law, or the rulings and
19    regulations under such laws;
20        (2) increase, decrease, or modify the interests of any
21    beneficiary or beneficiaries of the trust;
22        (3) modify the terms of any power of appointment
23    granted by the trust; provided, however, such modification
24    or amendment may not grant a beneficial interest to any
25    individual, class of individuals, or other parties not
26    specifically provided for under the trust instrument;

 

 

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1        (4) remove, appoint, or remove and appoint, a trustee,
2    investment trust advisor, distribution trust advisor,
3    another directing party, investment committee member, or
4    distribution committee member, including designation of a
5    plan of succession for future holders of any such office;
6        (5) terminate the trust, including determination of
7    how the trustee shall distribute the trust property to be
8    consistent with the purposes of the trust;
9        (6) change the situs of the trust, the governing law of
10    the trust, or both;
11        (7) appoint one or more successor trust protectors,
12    including designation of a plan of succession for future
13    trust protectors;
14        (8) interpret terms of the trust instrument at the
15    request of the trustee;
16        (9) advise the trustee on matters concerning a
17    beneficiary; or
18        (10) amend or modify the trust instrument to take
19    advantage of laws governing restraints on alienation,
20    distribution of trust property, or to improve the
21    administration of the trust.
22    If a charity is a current beneficiary or a presumptive
23remainder beneficiary of the trust, a trust protector must give
24notice to the Attorney General's Charitable Trust Bureau at
25least 60 days before taking any of the actions authorized under
26item (2), (3), (4), (5), or (6) of this subsection. The

 

 

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1Attorney General's Charitable Trust Bureau may, however, waive
2this notice requirement.
3    (e) Duty and liability of directing party. A directing
4party is a fiduciary of the trust subject to the same duties
5and standards applicable to a trustee of a trust as provided by
6applicable law unless the governing instrument provides
7otherwise, but the governing instrument may not, however,
8relieve or exonerate a directing party from the duty to act or
9withhold acting as the directing party in good faith reasonably
10believes is in the best interests of the trust.
11    (f) Duty and liability of excluded fiduciary. The excluded
12fiduciary shall act in accordance with the governing instrument
13and comply with the directing party's exercise of the powers
14granted to the directing party by the governing instrument.
15Unless otherwise provided in the governing instrument, an
16excluded fiduciary has no duty to monitor, review, inquire,
17investigate, recommend, evaluate, or warn with respect to a
18directing party's exercise or failure to exercise any power
19granted to the directing party by the governing instrument,
20including but not limited to any power related to the
21acquisition, disposition, retention, management, or valuation
22of any asset or investment. Except as otherwise provided in
23this Section or the governing instrument, an excluded fiduciary
24is not liable, either individually or as a fiduciary, for any
25action, inaction, consent, or failure to consent by a directing
26party, including but not limited to any of the following:

 

 

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1        (1) if a governing instrument provides that an excluded
2    fiduciary is to follow the direction of a directing party,
3    and such excluded fiduciary acts in accordance with such a
4    direction, then except in cases of willful misconduct on
5    the part of the excluded fiduciary in complying with the
6    direction of the directing party, the excluded fiduciary is
7    not liable for any loss resulting directly or indirectly
8    from following any such direction, including but not
9    limited to compliance regarding the valuation of assets for
10    which there is no readily available market value;
11        (2) if a governing instrument provides that an excluded
12    fiduciary is to act or omit to act only with the consent of
13    a directing party, then except in cases of willful
14    misconduct on the part of the excluded fiduciary, the
15    excluded fiduciary is not liable for any loss resulting
16    directly or indirectly from any act taken or omitted as a
17    result of such directing party's failure to provide such
18    consent after having been asked to do so by the excluded
19    fiduciary; or
20        (3) if a governing instrument provides that, or for any
21    other reason, an excluded fiduciary is required to assume
22    the role or responsibilities of a directing party, or if
23    the excluded party appoints a directing party or successor
24    to a directing party, then the excluded fiduciary shall
25    also assume the same fiduciary and other duties and
26    standards that applied to such directing party.

 

 

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1    (g) Submission to court jurisdiction; effect on directing
2party. By accepting an appointment to serve as a directing
3party of a trust that is subject to the laws of this State, the
4directing party submits to the jurisdiction of the courts of
5this State even if investment advisory agreements or other
6related agreements provide otherwise, and the directing party
7may be made a party to any action or proceeding if issues
8relate to a decision or action of the directing party.
9    (h) Duty to inform excluded fiduciary. Each directing party
10shall keep the excluded fiduciary and any other directing party
11reasonably informed regarding the administration of the trust
12with respect to any specific duty or function being performed
13by the directing party to the extent that the duty or function
14would normally be performed by the excluded fiduciary or to the
15extent that providing such information to the excluded
16fiduciary or other directing party is reasonably necessary for
17the excluded fiduciary or other directing party to perform its
18duties, and the directing party shall provide such information
19as reasonably requested by the excluded fiduciary or other
20directing party. Neither the performance nor the failure to
21perform of a directing party's duty to inform as provided in
22this subsection affects whatsoever the limitation on the
23liability of the excluded fiduciary as provided in this
24Section.
25    (i) Reliance on counsel. An excluded fiduciary may, but is
26not required to, obtain and rely upon an opinion of counsel on

 

 

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1any matter relevant to this Section.
2    (j) Applicability. On and after its effective date, this
3Section applies to:
4        (1) all existing and future trusts that appoint or
5    provide for a directing party, including but not limited to
6    a party granted power or authority effectively comparable
7    in substance to that of a directing party as provided in
8    this Section; or
9        (2) any existing or future trust that:
10            (A) is modified in accordance with applicable law
11        or the terms of the governing instrument to appoint or
12        provide for a directing party; or
13            (B) is modified to appoint or provide for a
14        directing party, including but not limited to a party
15        granted power or authority effectively comparable in
16        substance to that of a directing party, in accordance
17        with (i) a court order, or (ii) a nonjudicial
18        settlement agreement made in accordance with Section
19        16.1, whether or not such order or agreement specifies
20        that this Section governs the responsibilities,
21        actions, and liabilities of persons designated as a
22        directing party or excluded fiduciary.
23(Source: P.A. 97-921, eff. 1-1-13.)