SB 2984 — TRUST-DISTRIBUTION-OTHER TRUST

SB2984 EngrossedEnrolled LRB098 12960 HEP 49929 b AN ACT concerning civil law.

(3) the trustee sends a written notice of the trustee's SB2984 EngrossedEnrolled - 2 - LRB098 12960 HEP 49929 b decision to convert the trust to a total return trust, specifying a prospective effective date for the conversion and including a copy of this Section, to the following beneficiaries, determined as of the date the notice is sent and assuming nonexercise of all powers of appointment:

Conversion to a total return SB2984 EngrossedEnrolled - 3 - LRB098 12960 HEP 49929 b trust may be made by agreement between a trustee and (i) all primary beneficiaries, acting either individually or by their respective representatives in accordance with Section subsection 16.1(a)(2) of this Act, or (ii) all beneficiaries currently eligible to receive income or principal from the trust and all beneficiaries who are presumptive remaindermen, either individually or by their respective representatives in accordance with subsection 16.1(a)(3) of this Act.

If the trustee declines or fails to act within 6 months SB2984 EngrossedEnrolled - 4 - LRB098 12960 HEP 49929 b after receiving a written request to do so, the beneficiary may petition the court to order the conversion or adjustment.

A trustee's actions in accordance with this subsection (c) shall not be deemed SB2984 EngrossedEnrolled - 5 - LRB098 12960 HEP 49929 b improper or inconsistent with the trustee's duty of impartiality unless the court finds from all the evidence that the trustee acted in bad faith.

(2) the term "income" in the governing instrument means an annual amount (the "distribution amount") equal to a SB2984 EngrossedEnrolled - 6 - LRB098 12960 HEP 49929 b percentage (the "distribution percentage") of the net fair market value of the trust's assets, whether the assets are considered income or principal under the Principal and Income Act, averaged over the lesser of:

and (5) a change in the method of determining a reasonable current return by converting to a total return trust in accordance with this Section and substituting the distribution amount for net trust accounting income is a proper change in the definition of trust income notwithstanding any contrary provision of the Principal and Income Act, and the distribution amount shall be deemed a reasonable current return that fairly apportions the SB2984 EngrossedEnrolled - 7 - LRB098 12960 HEP 49929 b total return of a total return trust.

and (C) whether to exclude the value of such an asset from the net fair market value of the trust's assets SB2984 EngrossedEnrolled - 8 - LRB098 12960 HEP 49929 b under subdivision (d)(2) for purposes of determining the distribution amount.

and any SB2984 EngrossedEnrolled - 9 - LRB098 12960 HEP 49929 b other property that can reasonably be expected to be sold within one week of the decision to sell without extraordinary efforts by the seller;

first from net income (as the term would be determined if the trust were not a total return trust), then from other ordinary income as determined for federal income tax purposes, then from net realized short-term capital gains as determined for federal income tax purposes, then from net realized long-term capital gains as SB2984 EngrossedEnrolled - 10 - LRB098 12960 HEP 49929 b determined for federal income tax purposes, then from trust principal comprised of assets for which there is a readily available market value, and then from other trust principal.

(2) directing or authorizing the trustee to distribute SB2984 EngrossedEnrolled - 11 - LRB098 12960 HEP 49929 b a fixed annuity or a fixed fraction of the value of trust assets;

A trustee may irrevocably release the power SB2984 EngrossedEnrolled - 12 - LRB098 12960 HEP 49929 b granted by this Section if the trustee reasonably believes the release is in the best interests of the trust and its beneficiaries.

Any claim by any person interested in the trust that an act or omission by a trustee under this Section was an abuse of discretion is barred if not asserted in a proceeding commenced by or on behalf of the person within 2 years after the trustee has sent to the person or the person's personal representative a notice or report in writing sufficiently disclosing facts fundamental to SB2984 EngrossedEnrolled - 13 - LRB098 12960 HEP 49929 b the claim such that the person knew or reasonably should have known of the claim.

(1) This subsection (m) does not apply to a charitable SB2984 EngrossedEnrolled - 14 - LRB098 12960 HEP 49929 b remainder unitrust as defined by Section 664(d), Internal Revenue Code of 1986 (26 U.S.C.

SB2984 EngrossedEnrolled - 15 - LRB098 12960 HEP 49929 b (4) The allocations provision of subdivision (2) of subsection (f) of Section 5.3 applies to a unitrust except to the extent its governing instrument expressly provides otherwise.

provided, however, that the represented beneficiary such person is not otherwise represented by a court appointed guardian or agent in accordance with subdivision (a)(4) or by a parent SB2984 EngrossedEnrolled - 16 - LRB098 12960 HEP 49929 b in accordance with subdivision (a)(5) as provided in the next sentence.

(A) "Primary beneficiary" means a beneficiary of a SB2984 EngrossedEnrolled - 17 - LRB098 12960 HEP 49929 b trust who as of the date of determination is either:

(C) "Disabled person" as of any date means either a disabled person within the meaning of Section 11a-2 of SB2984 EngrossedEnrolled - 18 - LRB098 12960 HEP 49929 b the Probate Act of 1975 or a person who, within the 365 days immediately preceding that date, was examined by a licensed physician who determined that the person lacked the capacity to make prudent financial decisions, and the physician made a written record of the physician's determination and signed the written record within 90 days after the examination.

Absent a court order pursuant to the Illinois Power of Attorney Act directing a guardian to exercise powers of the principal under an agency that survives disability, an agent under a SB2984 EngrossedEnrolled - 19 - LRB098 12960 HEP 49929 b power of attorney for property who in accordance with this subdivision has authority to represent and bind a disabled principal takes precedence over a court appointed guardian unless the court specifies otherwise.

SB2984 EngrossedEnrolled - 20 - LRB098 12960 HEP 49929 b (6) A guardian, agent or parent who is the representative for a beneficiary under subdivision (a)(4) or (a)(5) may, for all purposes, represent and bind any other beneficiary who is a minor or a disabled, unborn, or unascertainable beneficiary who has an interest, with respect to the particular question or dispute, that is substantially similar to the interest of the beneficiary represented by the representative, but only to the extent that there is no conflict of interest between the beneficiary represented by the representative and the other beneficiary with respect to the particular question or dispute;

(8) Nothing in this Section limits the discretionary power of a court in a judicial proceeding to appoint a guardian ad litem for any minor, disabled, unborn, or unascertainable beneficiary with respect to a particular question or dispute, but appointment of a guardian ad litem SB2984 EngrossedEnrolled - 21 - LRB098 12960 HEP 49929 b need not be considered and is not necessary if such beneficiary is otherwise represented in accordance with this Section.

If a trust provides a beneficial interest or expectancy for one or more charities or charitable purposes that are not specifically named or otherwise represented (the "charitable interest"), the Illinois Attorney General may, in accordance with this Section, represent, bind, and act on behalf of the charitable interest with respect to any particular question or dispute, including without limitation representing the charitable interest in a nonjudicial settlement agreement or in an agreement to convert SB2984 EngrossedEnrolled - 22 - LRB098 12960 HEP 49929 b a trust to a total return trust in accordance with subsection (b) 5.3(b) of the total return trust provisions of Section 5.3 of this Act.

"Interested persons" also includes a trust advisor, investment advisor, distribution advisor, trust protector or other SB2984 EngrossedEnrolled - 23 - LRB098 12960 HEP 49929 b holder, or committee of holders, of fiduciary or nonfiduciary powers, if the person then holds powers material to a particular question or dispute to be resolved or affected by a nonjudicial settlement agreement in accordance with this Section or by the court.

(D) The the grant to a trustee of any necessary or desirable administrative power, provided the grant SB2984 EngrossedEnrolled - 24 - LRB098 12960 HEP 49929 b does not conflict with a clear material purpose of the trust.;

and SB2984 EngrossedEnrolled - 25 - LRB098 12960 HEP 49929 b (L) Termination termination of the trust, provided that court approval of such termination must be obtained in accordance with subdivision subsection (d)(5) of this Section, and the court must conclude continuance of the trust is not necessary to achieve any clear material purpose of the trust.;

(4.5) If a charitable interest or a specifically named charity is a current beneficiary, is a presumptive remainder beneficiary, or has any vested interest in a trust, the parties to any proposed nonjudicial settlement agreement affecting the trust shall deliver to the Attorney General's Charitable Trust Bureau written notice of the SB2984 EngrossedEnrolled - 26 - LRB098 12960 HEP 49929 b proposed agreement at least 60 days prior to its effective date.

(ii) in the case of a trust SB2984 EngrossedEnrolled - 27 - LRB098 12960 HEP 49929 b termination, that continuance of the trust is not necessary to achieve any clear material purpose of the trust;

(g) The changes made by this amendatory Act of the 98th SB2984 EngrossedEnrolled - 28 - LRB098 12960 HEP 49929 b General Assembly apply to all trusts in existence on the effective date of this amendatory Act of the 98th General Assembly or created after that date, and are applicable to judicial proceedings and nonjudicial matters involving such trusts.