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Full Text of SB1294  97th General Assembly

SB1294sam003 97TH GENERAL ASSEMBLY

Sen. Kirk W. Dillard

Filed: 3/22/2011

 

 


 

 


 
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1
AMENDMENT TO SENATE BILL 1294

2    AMENDMENT NO. ______. Amend Senate Bill 1294 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Trusts and Trustees Act is amended by
5adding Sections 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

 

 

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1    discretionary distribution of income or principal.
2        (3) "Excluded fiduciary" means any fiduciary that by
3    the governing instrument is directed to act in accordance
4    with the exercise of specified powers by a directing party,
5    in which case such specified powers shall be deemed granted
6    not to the fiduciary but to the directing party and such
7    fiduciary shall be deemed excluded from exercising such
8    specified powers. If a governing instrument provides that a
9    fiduciary as to one or more specified matters is to act,
10    omit action, or make decisions only with the consent of a
11    directing party, then such fiduciary is an excluded
12    fiduciary with respect to such matters.
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    (e) Duty and liability of directing party. Each directing
23party is a fiduciary of the trust unless the governing
24instrument provides otherwise; provided, however, the
25governing instrument may not exonerate a directing party from
26the duty to act or withhold acting as the directing party in

 

 

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1good faith reasonably believes is in the best interests of the
2trust. A directing party who the governing instrument specifies
3is a fiduciary is subject to the same duties and standards that
4are applicable to a trustee of a trust as provided by
5applicable law, except to the extent the governing instrument
6provides otherwise.
7    (f) Duty and liability of excluded fiduciary. The excluded
8fiduciary shall act in accordance with the governing instrument
9and comply with the directing party's exercise of the powers
10granted to the directing party by the governing instrument.
11Unless otherwise provided in the governing instrument, an
12excluded fiduciary has no duty to monitor, review, inquire,
13investigate, recommend, evaluate, or warn with respect to a
14directing party's exercise or failure to exercise any power
15granted to the directing party by the governing instrument,
16including but not limited to any power related to the
17acquisition, disposition, retention, management, or valuation
18of any asset or investment. Except as otherwise provided in
19this Section or the governing instrument, an excluded fiduciary
20is not liable, either individually or as a fiduciary, for any
21action, inaction, consent, or failure to consent by a directing
22party, including but not limited to any of the following:
23        (1) if a governing instrument provides that an excluded
24    fiduciary is to follow the direction of a directing party,
25    and such excluded fiduciary acts in accordance with such a
26    direction, then except in cases of willful misconduct on

 

 

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1    the part of the excluded fiduciary in complying with the
2    direction of the directing party, the excluded fiduciary is
3    not liable for any loss resulting directly or indirectly
4    from following any such direction, including but not
5    limited to compliance regarding the valuation of assets for
6    which there is no readily available market value;
7        (2) if a governing instrument provides that an excluded
8    fiduciary is to act or omit to act only with the consent of
9    a directing party, then except in cases of willful
10    misconduct on the part of the excluded fiduciary, the
11    excluded fiduciary is not liable for any loss resulting
12    directly or indirectly from any act taken or omitted as a
13    result of such directing party's failure to provide such
14    consent after having been asked to do so by the excluded
15    fiduciary; or
16        (3) if a governing instrument provides that, or for any
17    other reason, an excluded fiduciary is required to assume
18    the role or responsibilities of a directing party, then
19    except in cases of willful misconduct, the excluded
20    fiduciary is not liable for any loss resulting directly or
21    indirectly from any act taken or omitted in complying with
22    that requirement.
23    (g) Submission to court jurisdiction; effect on directing
24party. By accepting an appointment to serve as a directing
25party of a trust that is subject to the laws of this State, the
26directing party submits to the jurisdiction of the courts of

 

 

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

 

 

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1    provide for a directing party, including but not limited to
2    a party granted power or authority effectively comparable
3    in substance to that of a directing party as provided in
4    this Section; or
5        (2) any existing or future trust that:
6            (A) is modified in accordance with applicable law
7        or the terms of the governing instrument to appoint or
8        provide for a directing party; or
9            (B) is modified to appoint or provide for a
10        directing party, including but not limited to a party
11        granted power or authority effectively comparable in
12        substance to that of a directing party, in accordance
13        with (i) a court order, or (ii) a nonjudicial
14        settlement agreement made in accordance with Section
15        16.1, whether or not such order or agreement specifies
16        that this Section governs the responsibilities,
17        actions, and liabilities of persons designated as a
18        directing party or excluded fiduciary.
 
19    (760 ILCS 5/16.7 new)
20    Sec. 16.7. Application. Section 16.3 applies to all trusts
21in existence on the effective date of this amendatory Act of
22the 97th General Assembly or created after that date. Section
2316.3 shall be construed as pertaining to the administration of
24a trust and shall be available to any trust that is
25administered in Illinois under Illinois law or that is governed

 

 

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1by Illinois law with respect to the meaning and effect of its
2terms, except to the extent the governing instrument expressly
3prohibits that Section by specific reference to that Section. A
4provision in the governing instrument in the form: "The
5provisions of Section 16.3 of the Trusts and Trustees Act and
6any corresponding provision of future law may not be used in
7the administration of this trust." or a similar provision
8demonstrating that intent is sufficient to preclude the use of
9Section 16.3.
 
10    Section 99. Effective date. This Act takes effect upon
11becoming law.".