Sen. Kirk W. Dillard

Filed: 3/19/2014

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 2984

2    AMENDMENT NO. ______. Amend Senate Bill 2984 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Trusts and Trustees Act is amended by
5changing Sections 5.3 and 16.1 as follows:
 
6    (760 ILCS 5/5.3)
7    Sec. 5.3. Total return trusts.
8    (a) Conversion by trustee. A trustee may convert a trust to
9a total return trust as described in this Section if all of the
10following apply:
11        (1) The trust describes the amount that may or must be
12    distributed to a beneficiary by referring to the trust's
13    income, and the trustee determines that conversion to a
14    total return trust will enable the trustee to better carry
15    out the purposes of the trust and the conversion is in the
16    best interests of the beneficiaries;

 

 

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1        (2) conversion to a total return trust means the
2    trustee will invest and manage trust assets seeking a total
3    return without regard to whether that return is from income
4    or appreciation of principal, and will make distributions
5    in accordance with this Section (such a trust is called a
6    "total return trust" in this Section);
7        (3) the trustee sends a written notice of the trustee's
8    decision to convert the trust to a total return trust,
9    specifying a prospective effective date for the conversion
10    and including a copy of this Section, to the following
11    beneficiaries, determined as of the date the notice is sent
12    and assuming nonexercise of all powers of appointment:
13            (A) all of the legally competent beneficiaries who
14        are currently receiving or eligible to receive income
15        from the trust; and
16            (B) all of the legally competent beneficiaries who
17        would receive or be eligible to receive a distribution
18        of principal or income if the current interests of
19        beneficiaries currently receiving or eligible to
20        receive income ended;
21        (4) there are one or more legally competent income
22    beneficiaries under subdivision (3)(A) of this subsection
23    (a) and one or more legally competent remainder
24    beneficiaries under subdivision (3)(B) of this subsection
25    (a), determined as of the date of sending the notice;
26        (5) no beneficiary objects to the conversion to a total

 

 

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1    return trust in a writing delivered to the trustee within
2    60 days after the notice is sent; and
3        (6) the trustee has signed acknowledgments of receipt
4    confirming that notice was received by each beneficiary
5    required to be sent notice under subdivision (3) of this
6    subsection (a).
7    (b) Conversion by agreement. Conversion to a total return
8trust may be made by agreement between a trustee and (i) all
9primary beneficiaries, acting either individually or by their
10respective representatives in accordance with Section
11subsection 16.1(a)(2) of this Act, or (ii) all beneficiaries
12currently eligible to receive income or principal from the
13trust and all beneficiaries who are presumptive remaindermen,
14either individually or by their respective representatives in
15accordance with subsection 16.1(a)(3) of this Act. The
16agreement may include any actions a court could properly order
17under subsection (g) of this Section; however, any distribution
18percentage determined by the agreement may not be less than 3%
19nor greater than 5%.
20    (c) Conversion or reconversion by court.
21        (1) The trustee may for any reason elect to petition
22    the court to order conversion to a total return trust,
23    including without limitation the reason that conversion
24    under subsection (a) is unavailable because:
25            (A) a beneficiary timely objects to the conversion
26        to a total return trust;

 

 

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1            (B) there are no legally competent beneficiaries
2        described in subdivision (3)(A) of subsection (a); or
3            (C) there are no legally competent beneficiaries
4        described in subdivision (3)(B) of subsection (a).
5        (2) A beneficiary may request the trustee to convert to
6    a total return trust or adjust the distribution percentage.
7    If the trustee declines or fails to act within 6 months
8    after receiving a written request to do so, the beneficiary
9    may petition the court to order the conversion or
10    adjustment.
11        (3) The trustee may petition the court prospectively to
12    reconvert from a total return trust or adjust the
13    distribution percentage if the trustee determines that the
14    reconversion or adjustment will enable the trustee to
15    better carry out the purposes of the trust. A beneficiary
16    may request the trustee to petition the court prospectively
17    to reconvert from a total return trust or adjust the
18    distribution percentage. If the trustee declines or fails
19    to act within 6 months after receiving a written request to
20    do so, the beneficiary may petition the court to order the
21    reconversion or adjustment.
22        (4) In a judicial proceeding under this subsection (c),
23    the trustee may, but need not, present the trustee's
24    opinions and reasons (A) for supporting or opposing
25    conversion to (or reconversion from or adjustment of the
26    distribution percentage of) a total return trust,

 

 

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1    including whether the trustee believes conversion (or
2    reconversion or adjustment of the distribution percentage)
3    would enable the trustee to better carry out the purposes
4    of the trust, and (B) about any other matters relevant to
5    the proposed conversion (or reconversion or adjustment of
6    the distribution percentage). A trustee's actions in
7    accordance with this subsection (c) shall not be deemed
8    improper or inconsistent with the trustee's duty of
9    impartiality unless the court finds from all the evidence
10    that the trustee acted in bad faith.
11        (5) The court shall order conversion to (or
12    reconversion prospectively from or adjustment of the
13    distribution percentage of) a total return trust if the
14    court determines that the conversion (or reconversion or
15    adjustment of the distribution percentage) will enable the
16    trustee to better carry out the purposes of the trust and
17    the conversion (or reconversion or adjustment of the
18    distribution percentage) is in the best interests of the
19    beneficiaries.
20        (6) Notwithstanding any other provision of this
21    Section, a trustee has no duty to inform beneficiaries
22    about the availability of this Section and has no duty to
23    review the trust to determine whether any action should be
24    taken under this Section unless requested to do so in
25    writing by a beneficiary described in subdivision (3) of
26    subsection (a).

 

 

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1    (d) Post conversion. While a trust is a total return trust,
2all of the following shall apply to the trust:
3        (1) the trustee shall make income distributions in
4    accordance with the governing instrument subject to the
5    provisions of this Section;
6        (2) the term "income" in the governing instrument means
7    an annual amount (the "distribution amount") equal to a
8    percentage (the "distribution percentage") of the net fair
9    market value of the trust's assets, whether the assets are
10    considered income or principal under the Principal and
11    Income Act, averaged over the lesser of:
12            (i) the 3 preceding years; or
13            (ii) the period during which the trust has been in
14        existence;
15        (3) the distribution percentage for any trust
16    converted to a total return trust by a trustee in
17    accordance with subsection (a) shall be 4%;
18        (4) the trustee shall pay to a beneficiary (in the case
19    of an underpayment) and shall recover from a beneficiary
20    (in the case of an overpayment) an amount equal to the
21    difference between the amount properly payable and the
22    amount actually paid, plus interest compounded annually at
23    a rate per annum equal to the distribution percentage in
24    the year or years while the underpayment or overpayment
25    exists; and
26        (5) a change in the method of determining a reasonable

 

 

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1    current return by converting to a total return trust in
2    accordance with this Section and substituting the
3    distribution amount for net trust accounting income is a
4    proper change in the definition of trust income
5    notwithstanding any contrary provision of the Principal
6    and Income Act, and the distribution amount shall be deemed
7    a reasonable current return that fairly apportions the
8    total return of a total return trust.
9    (e) Administration. The trustee, in the trustee's
10discretion, may determine any of the following matters in
11administering a total return trust as the trustee from time to
12time determines necessary or helpful for the proper functioning
13of the trust:
14        (1) the effective date of a conversion to a total
15    return trust;
16        (2) the manner of prorating the distribution amount for
17    a short year in which a beneficiary's interest commences or
18    ceases;
19        (3) whether distributions are made in cash or in kind;
20        (4) the manner of adjusting valuations and
21    calculations of the distribution amount to account for
22    other payments from or contributions to the trust;
23        (5) whether to value the trust's assets annually or
24    more frequently;
25        (6) what valuation dates and how many valuation dates
26    to use;

 

 

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1        (7) valuation decisions about any asset for which there
2    is no readily available market value, including:
3            (A) how frequently to value such an asset;
4            (B) whether and how often to engage a professional
5        appraiser to value such an asset; and
6            (C) whether to exclude the value of such an asset
7        from the net fair market value of the trust's assets
8        under subdivision (d)(2) for purposes of determining
9        the distribution amount. Any such asset so excluded is
10        referred to as an "excluded asset" in this subsection
11        (e), and the trustee shall distribute any net income
12        received from the excluded asset as provided for in the
13        governing instrument, subject to the following
14        principles:
15                (i) unless the trustee determines there are
16            compelling reasons to the contrary considering all
17            relevant factors including the best interests of
18            the beneficiaries, the trustee shall treat each
19            asset for which there is no readily available
20            market value as an excluded asset;
21                (ii) if tangible personal property or real
22            property is possessed or occupied by a
23            beneficiary, the trustee shall not limit or
24            restrict any right of the beneficiary to use the
25            property in accordance with the governing
26            instrument whether or not the trustee treats the

 

 

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1            property as an excluded asset;
2                (iii) examples of assets for which there is a
3            readily available market value include: cash and
4            cash equivalents; stocks, bonds, and other
5            securities and instruments for which there is an
6            established market on a stock exchange, in an
7            over-the-counter market, or otherwise; and any
8            other property that can reasonably be expected to
9            be sold within one week of the decision to sell
10            without extraordinary efforts by the seller;
11                (iv) examples of assets for which there is no
12            readily available market value include: stocks,
13            bonds, and other securities and instruments for
14            which there is no established market on a stock
15            exchange, in an over-the-counter market, or
16            otherwise; real property; tangible personal
17            property; and artwork and other collectibles; and
18        (8) any other administrative matters as the trustee
19    determines necessary or helpful for the proper functioning
20    of the total return trust.
21    (f) Allocations.
22        (1) Expenses, taxes, and other charges that would be
23    deducted from income if the trust were not a total return
24    trust shall not be deducted from the distribution amount.
25        (2) Unless otherwise provided by the governing
26    instrument, the trustee shall fund the distribution amount

 

 

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1    each year from the following sources for that year in the
2    order listed: first from net income (as the term would be
3    determined if the trust were not a total return trust),
4    then from other ordinary income as determined for federal
5    income tax purposes, then from net realized short-term
6    capital gains as determined for federal income tax
7    purposes, then from net realized long-term capital gains as
8    determined for federal income tax purposes, then from trust
9    principal comprised of assets for which there is a readily
10    available market value, and then from other trust
11    principal.
12    (g) Court orders. The court may order any of the following
13actions in a proceeding brought by a trustee or a beneficiary
14in accordance with subdivision (c)(1), (c)(2), or (c)(3):
15        (1) select a distribution percentage other than 4%;
16        (2) average the valuation of the trust's net assets
17    over a period other than 3 years;
18        (3) reconvert prospectively from or adjust the
19    distribution percentage of a total return trust;
20        (4) direct the distribution of net income (determined
21    as if the trust were not a total return trust) in excess of
22    the distribution amount as to any or all trust assets if
23    the distribution is necessary to preserve a tax benefit; or
24        (5) change or direct any administrative procedure as
25    the court determines necessary or helpful for the proper
26    functioning of the total return trust.

 

 

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1    Nothing in this subsection (g) limits the equitable powers
2of the court to grant other relief.
3    (h) Restrictions. Conversion to a total return trust does
4not affect any provision in the governing instrument:
5        (1) directing or authorizing the trustee to distribute
6    principal;
7        (2) directing or authorizing the trustee to distribute
8    a fixed annuity or a fixed fraction of the value of trust
9    assets;
10        (3) authorizing a beneficiary to withdraw a portion or
11    all of the principal; or
12        (4) in any manner that would diminish an amount
13    permanently set aside for charitable purposes under the
14    governing instrument unless both income and principal are
15    so set aside.
16    (i) Tax limitations. If a particular trustee is a
17beneficiary of the trust and conversion or failure to convert
18would enhance or diminish the beneficial interest of the
19trustee, or if possession or exercise of the conversion power
20by a particular trustee would alone cause any individual to be
21treated as owner of a part of the trust for income tax purposes
22or cause a part of the trust to be included in the gross estate
23of any individual for estate tax purposes, then that particular
24trustee may not participate as a trustee in the exercise of the
25conversion power; however:
26        (1) the trustee may petition the court under

 

 

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1    subdivision (c)(1) to order conversion in accordance with
2    this Section; and
3        (2) if the trustee has one or more co-trustees to whom
4    this subsection (i) does not apply, the co-trustee or
5    co-trustees may convert the trust to a total return trust
6    in accordance with this Section.
7    (j) Releases. A trustee may irrevocably release the power
8granted by this Section if the trustee reasonably believes the
9release is in the best interests of the trust and its
10beneficiaries. The release may be personal to the releasing
11trustee or may apply generally to some or all subsequent
12trustees, and the release may be for any specified period,
13including a period measured by the life of an individual.
14    (k) Remedies. A trustee who reasonably and in good faith
15takes or omits to take any action under this Section is not
16liable to any person interested in the trust. If a trustee
17reasonably and in good faith takes or omits to take any action
18under this Section and a person interested in the trust opposes
19the act or omission, the person's exclusive remedy is to obtain
20an order of the court directing the trustee to convert the
21trust to a total return trust, to reconvert from a total return
22trust, to change the distribution percentage, or to order any
23administrative procedures the court determines necessary or
24helpful for the proper functioning of the trust. An act or
25omission by a trustee under this Section is presumed taken or
26omitted reasonably and in good faith unless it is determined by

 

 

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1the court to have been an abuse of discretion. Any claim by any
2person interested in the trust that an act or omission by a
3trustee under this Section was an abuse of discretion is barred
4if not asserted in a proceeding commenced by or on behalf of
5the person within 2 years after the trustee has sent to the
6person or the person's personal representative a notice or
7report in writing sufficiently disclosing facts fundamental to
8the claim such that the person knew or reasonably should have
9known of the claim. The preceding sentence shall not apply to a
10person who was under a legal disability at the time the notice
11or report was sent and who then had no personal representative.
12For purposes of this subsection (k), a personal representative
13refers to a court appointed guardian or conservator of the
14estate of a person.
15    (l) Application. This Section is available to trusts in
16existence on the effective date of this amendatory Act of the
1792nd General Assembly or created after that date. This Section
18shall be construed as pertaining to the administration of a
19trust and shall be available to any trust that is administered
20in Illinois under Illinois law or that is governed by Illinois
21law with respect to the meaning and effect of its terms unless:
22        (1) the trust is a trust described in Internal Revenue
23    Code Section 642(c)(5), 664(d), 2702(a)(3), or 2702(b); or
24        (2) the governing instrument expressly prohibits use
25    of this Section by specific reference to this Section. A
26    provision in the governing instrument in the form: "Neither

 

 

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1    the provisions of Section 5.3 of the Trusts and Trustees
2    Act nor any corresponding provision of future law may be
3    used in the administration of this trust" or a similar
4    provision demonstrating that intent is sufficient to
5    preclude the use of this Section.
6    (m) Application to express trusts.
7        (1) This subsection (m) does not apply to a charitable
8    remainder unitrust as defined by Section 664(d), Internal
9    Revenue Code of 1986 (26 U.S.C. Section 664), as amended.
10        (2) In this subsection (m):
11            (A) "Unitrust" means a trust the terms of which
12        require distribution of a unitrust amount, without
13        regard to whether the trust has been converted to a
14        total return trust in accordance with this Section or
15        whether the trust is established by express terms of
16        the governing instrument.
17            (B) "Unitrust amount" means an amount equal to a
18        percentage of a trust's assets that may or must be
19        distributed to one or more beneficiaries annually in
20        accordance with the terms of the trust. The unitrust
21        amount may be determined by reference to the net fair
22        market value of the trust's assets as of a particular
23        date or as an average determined on a multiple year
24        basis.
25        (3) A unitrust changes the definition of income by
26    substituting the unitrust amount for net trust accounting

 

 

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1    income as the method of determining current return and
2    shall be given effect notwithstanding any contrary
3    provision of the Principal and Income Act. By way of
4    example and not limitation, a unitrust amount determined by
5    a percentage of not less than 3% nor greater than 5% is
6    conclusively presumed a reasonable current return that
7    fairly apportions the total return of a unitrust.
8        (4) The allocations provision of subdivision (2) of
9    subsection (f) of Section 5.3 applies to a unitrust except
10    to the extent its governing instrument expressly provides
11    otherwise.
12(Source: P.A. 96-479, eff. 1-1-10.)
 
13    (760 ILCS 5/16.1)
14    Sec. 16.1. Virtual representation.
15    (a) Representation by a beneficiary with a person having
16substantially similar identical interest, by the primary
17beneficiaries and by others ; contingent remainder
18beneficiaries.
19        (1) To the extent there is no conflict of interest
20    between the representative and the person represented
21    beneficiary with respect to the particular question or
22    dispute, a beneficiary who is a minor, or a disabled, or
23    unborn beneficiary person, or a beneficiary person whose
24    identity or location is unknown and not reasonably
25    ascertainable (hereinafter referred to as an

 

 

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1    "unascertainable beneficiary"), may for all purposes be
2    represented by and bound by another beneficiary individual
3    having a substantially similar identical interest with
4    respect to the particular question or dispute; provided,
5    however, that the represented beneficiary such person is
6    not otherwise represented by a court appointed guardian or
7    agent in accordance with subdivision (a)(4) or by a parent
8    in accordance with subdivision (a)(5) as provided in the
9    next sentence. If a person is represented by a court
10    appointed guardian of the estate or, if none, by a court
11    appointed guardian of the person, the actions of such
12    guardian shall represent and bind that person for purposes
13    of this subsection (a)(1).
14        (2) If all primary beneficiaries of a trust either have
15    legal capacity are adults and not disabled, or have
16    representatives in accordance with this subsection (a)(1)
17    who have legal capacity are adults and not disabled, the
18    actions of such primary beneficiaries, in each case either
19    by the beneficiary or by the beneficiary's representative
20    or their respective representatives, shall represent and
21    bind all other beneficiaries persons who have a successor,
22    contingent, future, or other interest in the trust and who
23    would become primary beneficiaries only by reason of
24    surviving a primary beneficiary.
25        For purposes of this Section, "primary beneficiary"
26    means a beneficiary who is either: (i) currently eligible

 

 

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1    to receive income or principal from the trust or (ii)
2    assuming nonexercise of all powers of appointment, will be
3    eligible to receive a distribution of principal from the
4    trust if the beneficiary survives to the final date of
5    distribution with respect to the beneficiary's share.
6        (3) For purposes of this Act:
7            (A) "Primary beneficiary" means a beneficiary of a
8        trust who as of the date of determination is either:
9        (i) currently eligible to receive income or principal
10        from the trust, or (ii) a presumptive remainder
11        beneficiary. If all presumptive remainder
12        beneficiaries either are adults and not disabled, or
13        have representatives in accordance with subsection
14        (a)(1) who are adults and not disabled, the actions of
15        such presumptive remainder beneficiaries, or their
16        respective representatives, shall represent and bind
17        all other beneficiaries who have a successor,
18        contingent, or other future interest in the trust. For
19        purposes of this Section, "presumptive remainder
20        beneficiaries" means,
21            (B) "Presumptive remainder beneficiary" means a
22        beneficiary of a trust, as of the date of determination
23        and assuming nonexercise of all powers of appointment,
24        all beneficiaries who either: (i) (A) would be eligible
25        to receive a distribution of income or principal if the
26        trust terminated on that date, or (ii) (B) would be

 

 

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1        eligible to receive a distribution of income or
2        principal if the interests of all beneficiaries
3        currently eligible to receive income or principal from
4        the trust ended on that date without causing the trust
5        to terminate.
6            (C) "Disabled person" as of any date means either a
7        disabled person within the meaning of Section 11a-2 of
8        the Probate Act of 1975 or a person who, within the 365
9        days immediately preceding that date, was examined by a
10        licensed physician who determined that the person
11        lacked the capacity to make prudent financial
12        decisions, and the physician made a written record of
13        the physician's determination and signed the written
14        record within 90 days after the examination.
15            (D) A person has legal capacity unless the person
16        is a minor or a disabled person.
17        (4) If a trust beneficiary is represented by a court
18    appointed guardian of the estate or, if none, guardian of
19    the person, the guardian shall represent and bind the
20    beneficiary. If a trust beneficiary is a disabled person,
21    an agent under a power of attorney for property who has
22    authority to act with respect to the particular question or
23    dispute and who does not have a conflict of interest with
24    respect to the particular question or dispute may represent
25    and bind the principal. An agent is deemed to have such
26    authority if the power of attorney grants the agent the

 

 

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1    power to settle claims and to exercise powers with respect
2    to trusts and estates, even if the powers do not include
3    powers to make a will, to revoke or amend a trust, or to
4    require the trustee to pay income or principal. Absent a
5    court order pursuant to the Illinois Power of Attorney Act
6    directing a guardian to exercise powers of the principal
7    under an agency that survives disability, an agent under a
8    power of attorney for property who in accordance with this
9    subdivision has authority to represent and bind a disabled
10    principal takes precedence over a court appointed guardian
11    unless the court specifies otherwise. This subdivision
12    applies to all agencies, whenever and wherever executed.
13    The consent of a person who may represent and bind another
14    person in accordance with this Section is binding on the
15    person represented, and notice to a person who may
16    represent and bind another person in accordance with this
17    Section has the same effect as if notice were given
18    directly to the other person.
19        (5) If a trust beneficiary is a minor or a disabled or
20    unborn person and is not represented by a guardian or agent
21    in accordance with subdivision (a)(4), then a parent of the
22    beneficiary may represent and bind the beneficiary,
23    provided that there is no conflict of interest between the
24    represented person and either of the person's parents with
25    respect to the particular question or dispute. If a
26    disagreement arises between parents who otherwise qualify

 

 

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1    to represent a child in accordance with this subsection (a)
2    and who are seeking to represent the same child, the parent
3    who is a lineal descendant of the settlor of the trust that
4    is the subject of the representation is entitled to
5    represent the child; or if none, the parent who is a
6    beneficiary of the trust is entitled to represent the
7    child.
8        (6) A guardian, agent or parent who is the
9    representative for a beneficiary under subdivision (a)(4)
10    or (a)(5) may, for all purposes, represent and bind any
11    other beneficiary who is a minor or a disabled, unborn, or
12    unascertainable beneficiary who has an interest, with
13    respect to the particular question or dispute, that is
14    substantially similar to the interest of the beneficiary
15    represented by the representative, but only to the extent
16    that there is no conflict of interest between the
17    beneficiary represented by the representative and the
18    other beneficiary with respect to the particular question
19    or dispute; provided, however, that the other beneficiary
20    is not otherwise represented by a guardian or agent in
21    accordance with subdivision (a)(4) or by a parent in
22    accordance with subdivision (a)(5).
23        (7) The action or consent of a representative who may
24    represent and bind a beneficiary in accordance with this
25    Section is binding on the beneficiary represented, and
26    notice or service of process to the representative has the

 

 

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1    same effect as if the notice or service of process were
2    given directly to the beneficiary represented.
3        (8) Nothing in this Section limits the discretionary
4    power of a court in a judicial proceeding to appoint a
5    guardian ad litem for any minor, disabled, unborn, or
6    unascertainable beneficiary with respect to a particular
7    question or dispute, but appointment of a guardian ad litem
8    need not be considered and is not necessary if such
9    beneficiary is otherwise represented in accordance with
10    this Section.
11    (b) Total return trusts. This Section shall apply to enable
12conversion to a total return trust by agreement in accordance
13with subsection (b) 5.3(b) of the total return trust provisions
14of Section 5.3 of this Act, by whether such agreement is made
15between the trustee and (A) all primary beneficiaries of the
16trust, in each case either by the beneficiary or by the
17beneficiary's representative in accordance with this Section ,
18either individually or by their respective representatives in
19accordance with subsection (a)(1), or (B) all beneficiaries
20currently eligible to receive income or principal from the
21trust and all beneficiaries who are presumptive remaindermen of
22the trust, in each case either individually or by their
23respective representatives in accordance with subsection
24(a)(1).
25    (c) Representation of charity. If a trust provides a
26beneficial interest or expectancy for one or more charities or

 

 

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1charitable purposes that are not specifically named or
2otherwise represented (the "charitable interest"), the
3Illinois Attorney General may, in accordance with this Section,
4represent, bind, and act on behalf of the charitable interest
5with respect to any particular question or dispute, including
6without limitation representing the charitable interest in a
7nonjudicial settlement agreement or in an agreement to convert
8a trust to a total return trust in accordance with subsection
9(b) 5.3(b) of the total return trust provisions of Section 5.3
10of this Act. A charity that is specifically named as
11beneficiary of a trust or that otherwise has an express
12beneficial interest in a trust may act for itself. This
13subsection (c) shall be construed as being declarative of
14existing law and not as a new enactment. Notwithstanding any
15other provision, nothing in this Section shall be construed to
16limit or affect the Illinois Attorney General's authority to
17file an action or take other steps as he or she deems advisable
18at any time to enforce or protect the general public interest
19as to a trust that provides a beneficial interest or expectancy
20for one or more charities or charitable purposes whether or not
21a specific charity is named in the trust. This subsection (c)
22shall be construed as being declarative of existing law and not
23as a new enactment.
24    (d) Nonjudicial settlement agreements.
25        (1) For purposes of this Section, "interested persons"
26    means the trustee and all beneficiaries, or their

 

 

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1    respective representatives determined after giving effect
2    to the preceding provisions of this Section, other persons
3    and parties in interest whose consent or joinder would be
4    required in order to achieve a binding settlement were the
5    settlement to be approved by the court. "Interested
6    persons" also includes a trust advisor, investment
7    advisor, distribution advisor, trust protector or other
8    holder, or committee of holders, of fiduciary or
9    nonfiduciary powers, if the person then holds powers
10    material to a particular question or dispute to be resolved
11    or affected by a nonjudicial settlement agreement in
12    accordance with this Section or by the court.
13        (2) Interested Except as otherwise provided in
14    subsection (d)(3), interested persons, or their respective
15    representatives determined after giving effect to the
16    preceding provisions of this Section, may enter into a
17    binding nonjudicial settlement agreement with respect to
18    any matter involving a trust as provided in this Section.
19        (3) (Blank). A nonjudicial settlement agreement is
20    valid only to the extent its terms and conditions could be
21    properly approved under applicable law by a court of
22    competent jurisdiction.
23        (4) The following matters Matters that may be resolved
24    by a nonjudicial settlement agreement include but are not
25    limited to:
26            (A) Validity, interpretation, or construction of

 

 

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1        the terms of the trust. ;
2            (B) Approval approval of a trustee's report or
3        accounting. ;
4            (C) Exercise exercise or nonexercise of any power
5        by a trustee. ;
6            (D) The the grant to a trustee of any necessary or
7        desirable administrative power, provided the grant
8        does not conflict with a clear material purpose of the
9        trust. ;
10            (E) Questions questions relating to property or an
11        interest in property held by the trust, provided the
12        resolution does not conflict with a clear material
13        purpose of the trust. ;
14            (F) Removal, appointment, or removal and
15        appointment of a trustee, trust advisor, investment
16        advisor, distribution advisor, trust protector or
17        other holder, or committee of holders, of fiduciary or
18        nonfiduciary powers, including without limitation
19        designation of a plan of succession or procedure to
20        determine successors to any such office. resignation
21        or appointment of a trustee;
22            (G) Determination determination of a trustee's
23        compensation. ;
24            (H) Transfer transfer of a trust's principal place
25        of administration, including without limitation to
26        change the law governing administration of the trust. ;

 

 

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1            (I) Liability liability or indemnification of a
2        trustee for an action relating to the trust. ;
3            (J) Resolution of bona fide resolution of disputes
4        or issues related to administration, investment,
5        distribution or other matters. ;
6            (K) Modification modification of terms of the
7        trust pertaining to administration of the trust. ; and
8            (L) Termination termination of the trust, provided
9        that court approval of such termination must be
10        obtained in accordance with subdivision subsection
11        (d)(5) of this Section, and the court must conclude
12        continuance of the trust is not necessary to achieve
13        any clear material purpose of the trust. ; upon The
14        court may consider spendthrift provisions as a factor
15        in making a decision under this subdivision, but a
16        spendthrift provision is not necessarily a clear
17        material purpose of a trust, and the court is not
18        precluded from modifying or terminating a trust
19        because the trust instrument contains a spendthrift
20        provision. Upon such termination the court may order
21        the trust property distributed as agreed by the parties
22        to the agreement or otherwise as the court determines
23        equitable consistent with the purposes of the trust.
24            (M) Any other matter involving a trust to the
25        extent the terms and conditions of the nonjudicial
26        settlement agreement could be properly approved under

 

 

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1        applicable law by a court of competent jurisdiction.
2        (4.5) If a charitable interest or a specifically named
3    charity is a current beneficiary, is a presumptive
4    remainder beneficiary, or has any vested interest in a
5    trust, the parties to any proposed nonjudicial settlement
6    agreement affecting the trust shall deliver to the Attorney
7    General's Charitable Trust Bureau written notice of the
8    proposed agreement at least 60 days prior to its effective
9    date. The Bureau need take no action, but if it objects in
10    a writing delivered to one or more of the parties prior to
11    the proposed effective date, the agreement shall not take
12    effect unless the parties obtain court approval.
13        (5) Any beneficiary or other interested person may
14    request the court to approve any part or all of a
15    nonjudicial settlement agreement, including whether any
16    representation is adequate and without conflict of
17    interest, provided that the petition for such approval must
18    be filed before or within 60 days after the effective date
19    of the agreement.
20        (6) An agreement entered into in accordance with this
21    Section shall be final and binding on the trustee, on and
22    all beneficiaries of the trust, both current and future,
23    and on all other interested persons as if ordered by a
24    court with competent jurisdiction over the trust, the trust
25    property, and all parties in interest.
26        (7) In the trustee's sole discretion, the trustee may,

 

 

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1    but is not required to, obtain and rely upon an opinion of
2    counsel on any matter relevant to this Section, including
3    without limitation: (i) where required by this Section,
4    that the any agreement proposed to be made in accordance
5    with this Section does not conflict with a clear material
6    purpose of the trust or could be properly approved by the
7    court under applicable law; (ii) in the case of a trust
8    termination, that continuance of the trust is not necessary
9    to achieve any clear material purpose of the trust; (iii) ,
10    or that there is no conflict of interest between a
11    representative and the person represented with respect to
12    the particular question or dispute; or (iv) that the
13    representative and the person represented have
14    substantially similar interests with respect to the or
15    among those being represented with respect to a particular
16    question or dispute.
17    (e) Application. On and after its effective date, this
18Section applies to all existing and future trusts, judicial
19proceedings, or agreements entered into in accordance with this
20Section on or after the effective date.
21    (f) This Section shall be construed as pertaining to the
22administration of a trust and shall be available to any trust
23that is administered in this State or that is governed by
24Illinois law with respect to the meaning and effect of its
25terms, except to the extent the governing instrument expressly
26prohibits the use of this Section by specific reference to this

 

 

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1Section. A provision in the governing instrument in the form:
2"Neither the provisions of Section 16.1 of the Illinois Trusts
3and Trustees Act nor any corresponding provision of future law
4may be used in the administration of this trust", or a similar
5provision demonstrating that intent, is sufficient to preclude
6the use of this Section.
7    (g) The changes made by this amendatory Act of the 98th
8General Assembly apply to all trusts in existence on the
9effective date of this amendatory Act of the 98th General
10Assembly or created after that date, and are applicable to
11judicial proceedings and nonjudicial matters involving such
12trusts. For purposes of this Section:
13        (i) judicial proceedings include any proceeding before
14    a court or administrative tribunal of this State and any
15    arbitration or mediation proceedings; and
16        (ii) nonjudicial matters include, but are not limited
17    to, nonjudicial settlement agreements entered into in
18    accordance with this Section and the grant of any consent,
19    release, ratification, or indemnification.
20(Source: P.A. 96-479, eff. 1-1-10.)".