97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB5883

 

Introduced 2/16/2012, by Rep. Jim Durkin

 

SYNOPSIS AS INTRODUCED:
 
765 ILCS 305/3.5 new
765 ILCS 305/4  from Ch. 30, par. 194
765 ILCS 305/5  from Ch. 30, par. 195

    Amends the Statute Concerning Perpetuities. Provides that a qualified perpetual trust is created by specified express terms. Provides that qualified perpetual trusts are not subject to the rule against perpetuities with respect to the vesting of interests in property. Provides that a trustee of a qualified perpetual trust shall have the unrestricted power and right to sell or convey the interest in the property after the end of the period of the rule against perpetuities and the power to sell property is not limited and the power of alienation is not suspended while the trustee or other person in being can convey the property. Provides that there is no time period in which the interests in property of a qualified perpetual trust are required to vest. Provides that language in a governing instrument of a trust which is not a qualified perpetual trust that is exempt from generation-skipping transfer tax seeks to (1) disallow the vesting or termination of an interests or trust beyond, (2) postpone the vesting or termination of an interest or trust until, or (3) operate in effect in a similar fashion upon, the later of (A) the expiration of a period of time not exceeding 21 years after the death of the survivor of specified lives in being at the creation of the trust or other property arrangement or (B) the expiration of a period of time that exceeds or might exceed 21 years after the death of the survivor of lives in being at the creation of the trust or other property arrangement, that language is inoperative to the extent it produces a period of time that exceeds 21 years after the death of the survivor of the specified lives.


LRB097 18587 AJO 63819 b

 

 

A BILL FOR

 

HB5883LRB097 18587 AJO 63819 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 Statute Concerning Perpetuities is amended
5by changing Sections 4 and 5 and adding Section 3.5 as follows:
 
6    (765 ILCS 305/3.5 new)
7    Sec. 3.5. Characteristics of and creation of qualified
8perpetual trusts.
9    (a) A qualified perpetual trust, as defined in subsection
10(a-5) of Section 3, may, without limitation, be created by (i)
11specific reference in the terms governing the trust to
12subsection (a-5) of Section 3, (ii) the express terms governing
13the trust stating that the rule against perpetuities does not
14apply, or (iii) the express terms governing the trust
15demonstrating an intent to establish a qualified perpetual
16trust or stating that the provisions of subsection (a-5) apply
17to the trust.
18    (b) Notwithstanding any contrary provision in the
19instrument governing a qualified perpetual trust, the
20following apply to the qualified perpetual trust:
21        (1) the rule against perpetuities with respect to the
22    vesting of interest in property does not apply;
23        (2) a trustee's power of alienation over any interest

 

 

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1    in property is not suspended for a period beyond the period
2    of the rule against perpetuities;
3        (3) a trust provision that, but for this subparagraph
4    (3), would (A) limit the power of the trustee (or other
5    person to whom the power is properly granted or delegated)
6    to sell property beyond the period of the rule against
7    perpetuities or (B) suspend the power of alienation over
8    any interest in property beyond the period of the rule
9    against perpetuities shall be invalid to the extent such
10    limitation or suspension extends beyond the period of the
11    rule against perpetuities, and, instead, the trustee shall
12    have the unrestricted power and right to sell or convey the
13    interest in that property after the end of the period of
14    the rule against perpetuities; and
15        (4) the power to sell is not limited and the power of
16    alienation is not suspended while the trustee or any other
17    person in being can, alone or in combination with others,
18    convey absolute fee in possession of real property, or full
19    ownership of personal property.
 
20    (765 ILCS 305/4)  (from Ch. 30, par. 194)
21    Sec. 4. Application of the Rule Against Perpetuities.
22    (a) The rule against perpetuities shall not apply:
23        (1) to any disposition of property or interest therein
24    which, at the effective date of this Act, does not violate,
25    or is exempted by statute from the operation of, the common

 

 

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1    law rule against perpetuities;
2        (2) to powers of a trustee to sell, lease or mortgage
3    property or to powers which relate to the administration or
4    management of trust assets, including, without limitation,
5    discretionary powers of a trustee to determine what
6    receipts constitute principal and what receipts constitute
7    income and powers to appoint a successor trustee;
8        (3) to mandatory powers of a trustee to distribute
9    income, or to discretionary powers of a trustee to
10    distribute principal prior to termination of a trust, to a
11    beneficiary having an interest in the principal which is
12    irrevocably vested in quality and quantity;
13        (4) to discretionary powers of a trustee to allocate
14    income and principal among beneficiaries, but no exercise
15    of any such power after the expiration of the period of the
16    rule against perpetuities is valid;
17        (5) to leases to commence in the future or upon the
18    happening of a future event, but no such lease shall be
19    valid unless the term thereof actually commences in
20    possession within 40 years from the date of execution of
21    the lease;
22        (6) to commitments (A) by a lessor to enter into a
23    lease with a subtenant or with the holder of a leasehold
24    mortgage or (B) by a lessee or sublessee to enter into a
25    lease with the holder of a mortgage;
26        (7) to options in gross or to preemptive rights in the

 

 

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1    nature of a right of first refusal, but no option in gross
2    shall be valid for more than 40 years from the date of its
3    creation; or
4        (8) to qualified perpetual trusts as defined in Section
5    3 of this Act.
6    (b) The period of the rule against perpetuities shall not
7commence to run in connection with any disposition of property
8or interest therein, and no instrument shall be regarded as
9becoming effective for purposes of the rule against
10perpetuities, and no interest or power shall be deemed to be
11created for purposes of the rule against perpetuities as long
12as, by the terms of the instrument, the maker of the instrument
13has the power to revoke the instrument or to transfer or direct
14to be transferred to himself the entire legal and equitable
15ownership of the property or interest therein.
16    (c) In determining whether an interest violates the rule
17against perpetuities:
18        (1) it shall be presumed (A) that the interest was
19    intended to be valid, (B) in the case of an interest
20    conditioned upon the probate of a will, the appointment of
21    an executor, administrator or trustee, the completion of
22    the administration of an estate, the payment of debts, the
23    sale or distribution of property, the determination of
24    federal or state tax liabilities or the happening of any
25    administrative contingency, that the contingency must
26    occur, if at all, within the period of the rule against

 

 

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1    perpetuities, and (C) where the instrument creates an
2    interest in the "widow", "widower", or "spouse" of another
3    person, that the maker of the instrument intended to refer
4    to a person who was living at the date that the period of
5    the rule against perpetuities commences to run;
6        (2) where any interest, but for this subparagraph (c)
7    (2), would be invalid because it is made to depend upon any
8    person attaining or failing to attain an age in excess of
9    21 years, the age specified shall be reduced to 21 years as
10    to every person to whom the age contingency applies;
11        (3) if, notwithstanding the provisions of
12    subparagraphs (c) (1) and (2) of this Section, the validity
13    of any interest depends upon the possibility of the birth
14    or adoption of a child, (A) no person shall be deemed
15    capable of having a child until he has attained the age of
16    13 years, (B) any person who has attained the age of 65
17    years shall be deemed incapable of having a child, (C)
18    evidence shall be admissible as to the incapacity of having
19    a child by a living person who has not attained the age of
20    65 years, and (D) the possibility of having a child or more
21    remote descendant by adoption shall be disregarded.
22    (c-5) There is no time period in which the interests in
23property of a qualified perpetual trust, as defined in Section
243 of this Act, are required to vest. The exercise of a power of
25appointment over any part or all of a qualified perpetual trust
26(or any trust created therefrom), including an exercise that

 

 

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1creates one or more successor powers of appointment, does not
2postpone the vesting of any estate or interest in property
3subject to such exercise.
4    (d) Subparagraphs (a) (2), (3) and (6) and paragraph (b) of
5this Section shall be deemed to be declaratory of the law
6prevailing in this State at the effective date of this Act.
7(Source: P.A. 90-472, eff. 8-17-97; 90-796, eff. 12-15-98.)
 
8    (765 ILCS 305/5)  (from Ch. 30, par. 195)
9    Sec. 5. Trusts.
10    (a) Subject to the provisions of paragraphs (e) and (f) of
11this Section a trust containing any limitation which, but for
12this paragraph (a), would violate the rule against perpetuities
13(as modified by Section 4) shall terminate at the expiration of
14a period of (A) 21 years after the death of the last to die of
15all of the beneficiaries of the instrument who were living at
16the date when the period of the rule against perpetuities
17commenced to run or (B) 21 years after that date if no
18beneficiary of the instrument was then living, unless events
19occur which cause an earlier termination in accordance with the
20terms of the instrument and then the principal shall be
21distributed as provided by the instrument. If, in measuring a
22period from the creation of a trust or other property
23arrangement which is not a qualified perpetual trust as defined
24in Section 3 of this Act, language in a governing instrument of
25a trust which is not a qualified perpetual trust as defined in

 

 

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1Section 3 of this Act that is exempt from generation-skipping
2transfer tax (i) seeks to disallow the vesting or termination
3of any interests or trust beyond, (ii) seeks to postpone the
4vesting or termination of any interest or trust until, or (iii)
5seeks to operate in effect in any similar fashion upon, the
6later of (A) the expiration of a period of time not exceeding
721 years after the death of the survivor of specified lives in
8being at the creation of the trust or other property
9arrangement or (B) the expiration of a period of time that
10exceeds or might exceed 21 years after the death of the
11survivor of lives in being at the creation of the trust or
12other property arrangement, that language is inoperative to the
13extent it produces a period of time that exceeds 21 years after
14the death of the survivor of the specified lives.
15    (b) Subject to the provisions of paragraphs (c), (d) and
16(e) of this Section when a trust terminates because of the
17application of paragraph (a) of this Section, the trustee shall
18distribute the principal to those persons who would be the
19heirs at law of the maker of the instrument if he died at the
20expiration of the period specified in paragraph (a) of this
21Section and in the proportions then specified by statute,
22unless the trust was created by the exercise of a power of
23appointment and then the principal shall be distributed to the
24person who would have received it if the power had not been
25exercised.
26    (c) Before any distribution of principal is made pursuant

 

 

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1to paragraph (b) of this Section, the trustee shall distribute,
2out of principal, to each living beneficiary who, but for
3termination of the trust because of the application of
4paragraph (a) of this Section, would have been entitled to be
5paid income after the expiration of the period specified in
6paragraph (a) of this Section, an amount equal to the present
7value (determined as provided in paragraph (d) of this Section
8of the income which the beneficiary would have been entitled to
9be paid after the expiration of that period.
10    (d) In determining the present value of income for purposes
11of any distribution to a beneficiary pursuant to paragraph (c)
12of this Section:
13    (1) when income payments would have been subject in whole
14or in part to any discretionary power, it shall be assumed (A)
15that the income which would have been paid to an individual
16income beneficiary would have been the maximum amount of income
17which could have been paid to him in the exercise of the power,
18(B) if the income would or might have been payable to more than
19one beneficiary, that (except as hereinafter provided) each
20beneficiary would have received an equal share of the income,
21unless the instrument specifies less than an equal share as the
22maximum amount or proportion of income which would have been
23paid to any beneficiary in the exercise of the power, in which
24event the maximum specified shall control, and (C) if the
25income would or might have been payable to the descendants of
26the maker of the instrument or of another person, that, unless

 

 

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1the instrument provides otherwise, the descendants would have
2received the income per stirpes;
3    (2) (A) present value shall be computed on an actuarial
4basis and there shall be assumed a return of 5%, at simple
5interest, on the value of the principal from which the
6beneficiary would have been entitled to receive income, and (B)
7where the interest in income was to be for the life of the
8beneficiary or for the life of another, the computation shall
9be made on the expectancy set forth in the most recently
10published American Experience Tables of Mortality and no other
11evidence of duration or expectancy shall be considered;
12    (3) if the trustee cannot determine the present value of
13any income interest in accordance with the provisions of the
14instrument and the foregoing rules concerning income payments,
15the present value of the interest shall be deemed to be zero.
16    (e) This Section applies only when a trust would violate
17the rule against perpetuities as modified by Section 4 and does
18not apply to any trust which would have been valid apart from
19this Act.
20    (f) This Section does not apply when a trust violates the
21rule against perpetuities because the trust estate may not vest
22in the trustee within the period of the rule.
23(Source: P.A. 76-1428.)