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Full Text of SB1294  97th General Assembly

SB1294eng 97TH GENERAL ASSEMBLY

  
  
  

 


 
SB1294 EngrossedLRB097 00144 AJO 47196 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 Trusts and Trustees Act is amended by adding
5Sections 16.3 and 16.7 as follows:
 
6    (760 ILCS 5/16.3 new)
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.
6        (4) "Fiduciary" means any person expressly given one or
7    more fiduciary duties by the governing instrument,
8    including but not limited to a trustee.
9        (5) "Governing instrument" refers to the instrument
10    stating the terms of a trust, including but not limited to
11    any court order or nonjudicial settlement agreement
12    establishing, construing, or modifying the terms of the
13    trust in accordance with Section 16.1, 16.4, or 16.6 or
14    other applicable law.
15        (6) "Investment trust advisor" means any one or more
16    persons given authority by the governing instrument to
17    direct, consent to, veto, or otherwise exercise all or any
18    portion of the investment powers of the trust.
19        (7) "Power" means authority to take or withhold an
20    action or decision, including but not limited to an
21    expressly specified power, the implied power necessary to
22    exercise a specified power, and authority inherent in a
23    general grant of discretion.
24        (8) "Trust protector" means any one or more persons
25    given any one or more of the powers specified in subsection
26    (d), whether or not designated with the title of trust

 

 

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1    protector by the governing instrument.
2    (b) Powers of investment trust advisor. An investment trust
3advisor may be designated in the governing instrument of a
4trust. The powers of an investment trust advisor may be
5exercised or not exercised in the sole and absolute discretion
6of the investment trust advisor, and are binding on all other
7persons, including but not limited to each beneficiary,
8fiduciary, excluded fiduciary, and any other party having an
9interest in the trust. The governing instrument may use the
10title "investment trust advisor" or any similar name or
11description demonstrating the intent to provide for the office
12and function of an investment trust advisor. Unless the terms
13of the governing instrument provide otherwise, the investment
14trust advisor has the authority to:
15        (1) direct the trustee with respect to the retention,
16    purchase, transfer, assignment, sale, or encumbrance of
17    trust property and the investment and reinvestment of
18    principal and income of the trust;
19        (2) direct the trustee with respect to all management,
20    control, and voting powers related directly or indirectly
21    to trust assets, including but not limited to voting
22    proxies for securities held in trust;
23        (3) select and determine reasonable compensation of
24    one or more advisors, managers, consultants, or
25    counselors, including the trustee, and to delegate to them
26    any of the powers of the investment trust advisor in

 

 

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

 

 

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1advisor, fiduciary, excluded fiduciary, and any other party
2having an interest in the trust. The governing instrument may
3use the title "trust protector" or any similar name or
4description demonstrating the intent to provide for the office
5and function of a trust protector. The powers granted to a
6trust protector by the governing instrument may include but are
7not limited to authority to do any one or more of the
8following:
9        (1) modify or amend the trust instrument to achieve
10    favorable tax status or respond to changes in the Internal
11    Revenue Code, federal laws, State law, or the rulings and
12    regulations under such laws;
13        (2) increase, decrease, or modify the interests of any
14    beneficiary or beneficiaries of the trust;
15        (3) modify the terms of any power of appointment
16    granted by the trust; provided, however, such modification
17    or amendment may not grant a beneficial interest to any
18    individual, class of individuals, or other parties not
19    specifically provided for under the trust instrument;
20        (4) remove, appoint, or remove and appoint, a trustee,
21    investment trust advisor, distribution trust advisor,
22    another directing party, investment committee member, or
23    distribution committee member, including designation of a
24    plan of succession for future holders of any such office;
25        (5) terminate the trust, including determination of
26    how the trustee shall distribute the trust property to be

 

 

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1    consistent with the purposes of the trust;
2        (6) change the situs of the trust, the governing law of
3    the trust, or both;
4        (7) appoint one or more successor trust protectors,
5    including designation of a plan of succession for future
6    trust protectors;
7        (8) interpret terms of the trust instrument at the
8    request of the trustee;
9        (9) advise the trustee on matters concerning a
10    beneficiary; or
11        (10) amend or modify the trust instrument to take
12    advantage of laws governing restraints on alienation,
13    distribution of trust property, or to improve the
14    administration of the trust.
15    (e) Duty and liability of directing party. Each directing
16party is a fiduciary of the trust unless the governing
17instrument provides otherwise; provided, however, the
18governing instrument may not exonerate a directing party from
19the duty to act or withhold acting as the directing party in
20good faith reasonably believes is in the best interests of the
21trust. A directing party who the governing instrument specifies
22is a fiduciary is subject to the same duties and standards that
23are applicable to a trustee of a trust as provided by
24applicable law, except to the extent the governing instrument
25provides otherwise.
26    (f) Duty and liability of excluded fiduciary. The excluded

 

 

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1fiduciary shall act in accordance with the governing instrument
2and comply with the directing party's exercise of the powers
3granted to the directing party by the governing instrument.
4Unless otherwise provided in the governing instrument, an
5excluded fiduciary has no duty to monitor, review, inquire,
6investigate, recommend, evaluate, or warn with respect to a
7directing party's exercise or failure to exercise any power
8granted to the directing party by the governing instrument,
9including but not limited to any power related to the
10acquisition, disposition, retention, management, or valuation
11of any asset or investment. Except as otherwise provided in
12this Section or the governing instrument, an excluded fiduciary
13is not liable, either individually or as a fiduciary, for any
14action, inaction, consent, or failure to consent by a directing
15party, including but not limited to any of the following:
16        (1) if a governing instrument provides that an excluded
17    fiduciary is to follow the direction of a directing party,
18    and such excluded fiduciary acts in accordance with such a
19    direction, then except in cases of willful misconduct on
20    the part of the excluded fiduciary in complying with the
21    direction of the directing party, the excluded fiduciary is
22    not liable for any loss resulting directly or indirectly
23    from following any such direction, including but not
24    limited to compliance regarding the valuation of assets for
25    which there is no readily available market value;
26        (2) if a governing instrument provides that an excluded

 

 

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1    fiduciary is to act or omit to act only with the consent of
2    a directing party, then except in cases of willful
3    misconduct on the part of the excluded fiduciary, the
4    excluded fiduciary is not liable for any loss resulting
5    directly or indirectly from any act taken or omitted as a
6    result of such directing party's failure to provide such
7    consent after having been asked to do so by the excluded
8    fiduciary; or
9        (3) if a governing instrument provides that, or for any
10    other reason, an excluded fiduciary is required to assume
11    the role or responsibilities of a directing party, then
12    except in cases of willful misconduct, the excluded
13    fiduciary is not liable for any loss resulting directly or
14    indirectly from any act taken or omitted in complying with
15    that requirement.
16    (g) Submission to court jurisdiction; effect on directing
17party. By accepting an appointment to serve as a directing
18party of a trust that is subject to the laws of this State, the
19directing party submits to the jurisdiction of the courts of
20this State even if investment advisory agreements or other
21related agreements provide otherwise, and the directing party
22may be made a party to any action or proceeding if issues
23relate to a decision or action of the directing party.
24    (h) Duty to inform excluded fiduciary. Each directing party
25shall keep the excluded fiduciary and any other directing party
26reasonably informed regarding the administration of the trust

 

 

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1with respect to any specific duty or function being performed
2by the directing party to the extent that the duty or function
3would normally be performed by the excluded fiduciary or to the
4extent that providing such information to the excluded
5fiduciary or other directing party is reasonably necessary for
6the excluded fiduciary or other directing party to perform its
7duties, and the directing party shall provide such information
8as reasonably requested by the excluded fiduciary or other
9directing party. Neither the performance nor the failure to
10perform of a directing party's duty to inform as provided in
11this subsection affects whatsoever the limitation on the
12liability of the excluded fiduciary as provided in this
13Section.
14    (i) Reliance on counsel. An excluded fiduciary may, but is
15not required to, obtain and rely upon an opinion of counsel on
16any matter relevant to this Section.
17    (j) Applicability. On and after its effective date, this
18Section applies to:
19        (1) all existing and future trusts that appoint or
20    provide for a directing party, including but not limited to
21    a party granted power or authority effectively comparable
22    in substance to that of a directing party as provided in
23    this Section; or
24        (2) any existing or future trust that:
25            (A) is modified in accordance with applicable law
26        or the terms of the governing instrument to appoint or

 

 

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1        provide for a directing party; or
2            (B) is modified to appoint or provide for a
3        directing party, including but not limited to a party
4        granted power or authority effectively comparable in
5        substance to that of a directing party, in accordance
6        with (i) a court order, or (ii) a nonjudicial
7        settlement agreement made in accordance with Section
8        16.1, whether or not such order or agreement specifies
9        that this Section governs the responsibilities,
10        actions, and liabilities of persons designated as a
11        directing party or excluded fiduciary.
 
12    (760 ILCS 5/16.7 new)
13    Sec. 16.7. Application. Section 16.3 applies to all trusts
14in existence on the effective date of this amendatory Act of
15the 97th General Assembly or created after that date. Section
1616.3 shall be construed as pertaining to the administration of
17a trust and shall be available to any trust that is
18administered in Illinois under Illinois law or that is governed
19by Illinois law with respect to the meaning and effect of its
20terms, except to the extent the governing instrument expressly
21prohibits that Section by specific reference to that Section. A
22provision in the governing instrument in the form: "The
23provisions of Section 16.3 of the Trusts and Trustees Act and
24any corresponding provision of future law may not be used in
25the administration of this trust." or a similar provision

 

 

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1demonstrating that intent is sufficient to preclude the use of
2Section 16.3.
 
3    Section 99. Effective date. This Act takes effect upon
4becoming law.