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HB4436 - 104th General Assembly

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HB4436 Engrossed
LRB104 17445 JRC 30871 b
1

AN ACT concerning civil law.

2

Be it enacted by the People of the State of Illinois,
3
represented in the General Assembly:

4

Section 5.
The Illinois Trust Code is amended by changing
5
Sections 103, 110, 402, and 407 and by adding Section 409.5 as
6
follows:

7

(760 ILCS 3/103)
8

Sec. 103.
Definitions.
In this Code:
9

(1) "Action", with respect to an act of a trustee,
10
includes a failure to act.
11

(1.5) "Appointive property" means the property or property
12
interest subject to a power of appointment.
13

(2) "Ascertainable standard" means a standard relating to
14
an individual's health, education, support, or maintenance
15
within the meaning of Section 2041(b)(1)(A) or 2514(c)(1) of
16
the Internal Revenue Code and any applicable regulations.
17

(3) "Beneficiary" means a person that:
18

(A) has a present or future beneficial interest in a
19

trust, vested or contingent, assuming nonexercise of
20

powers of appointment, excluding the right of a settlor to
21

be reimbursed for tax obligations as provided in paragraph
22

(3) of subsection (a) of Section 505;
23

(B) in a capacity other than that of trustee, holds a

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1

power of appointment over trust property; or
2

(C) is an identified charitable organization that will
3

or may receive distributions under the terms of the trust.
4
"Beneficiary" does not include a permissible appointee of
5
power of appointment, other than the holder of a presently
6
exercisable general power of appointment, until the power is
7
exercised in favor of such appointee.
8

(4) "Charitable interest" means an interest in a trust
9
that:
10

(A) is held by an identified charitable organization
11

and makes the organization a qualified beneficiary;
12

(B) benefits only charitable organizations and, if the
13

interest were held by an identified charitable
14

organization, would make the organization a qualified
15

beneficiary; or
16

(C) is held solely for charitable purposes and, if the
17

interest were held by an identified charitable
18

organization, would make the organization a qualified
19

beneficiary.
20

(5) "Charitable organization" means:
21

(A) a person, other than an individual, organized and
22

operated exclusively for charitable purposes; or
23

(B) a government or governmental subdivision, agency,
24

or instrumentality, to the extent it holds funds
25

exclusively for a charitable purpose.
26

(6) "Charitable purpose" means the relief of poverty, the

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1
advancement of education or religion, the promotion of health,
2
municipal or other governmental purpose, or another purpose
3
the achievement of which is beneficial to the community.
4

(7) "Charitable trust" means a trust, or portion of a
5
trust, created for a charitable purpose.
6

(8) "Community property" means all personal property,
7
wherever situated, that was acquired as or became, and
8
remained, community property under the laws of another
9
jurisdiction, and all real property situated in another
10
jurisdiction that is community property under the laws of that
11
jurisdiction.
12

(9) "Current beneficiary" means a beneficiary that on the
13
date the beneficiary's qualification is determined is a
14
distributee or permissible distributee of trust income or
15
principal. The term "current beneficiary" includes the holder
16
of a presently exercisable general power of appointment but
17
does not include a person who is a beneficiary only because the
18
person holds any other power of appointment. In a revocable
19
trust, "current beneficiary" does not include a person who may
20
receive trust assets only through the exercise of a power to
21
make a gift on behalf of the settlor.
22

(10) "Directing party" means any investment trust advisor,
23
distribution trust advisor, or trust protector.
24

(11) "Donor", with reference to a power of appointment,
25
means a person that creates a power of appointment.
26

(12) "Environmental law" means a federal, state, or local

HB4436 Engrossed
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1
law, rule, regulation, or ordinance relating to protection of
2
the environment.
3

(13) "General power of appointment" means a power of
4
appointment exercisable in favor of a powerholder, the
5
powerholder's estate, a creditor of the powerholder, or a
6
creditor of the powerholder's estate.
7

(14) "Guardian of the estate" means a person appointed by
8
a court to administer the estate of a minor or adult
9
individual.
10

(15) "Guardian of the person" means a person appointed by
11
a court to make decisions regarding the support, care,
12
education, health, and welfare of a minor or adult individual.
13

(16) "Incapacitated" or "incapacity" means the inability
14
of an individual to manage property or business affairs
15
because the individual is a minor, adjudicated incompetent,
16
has an impairment in the ability to receive and evaluate
17
information or make or communicate decisions even with the use
18
of technological assistance; or is at a location that is
19
unknown and not reasonably ascertainable. Without limiting the
20
ways in which incapacity may be established, an individual is
21
incapacitated if:
22

(i) a plenary guardian has been appointed for the
23

individual under subsection (c) of Section 11a-12 of the
24

Probate Act of 1975;
25

(ii) a limited guardian has been appointed for the
26

individual under subsection (b) of Section 11a-12 of the

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1

Probate Act of 1975 and the court has found that the
2

individual lacks testamentary capacity; or
3

(iii) the individual was examined by a licensed
4

physician who determined that the individual was
5

incapacitated and the physician made a signed written
6

record of the physician's determination within 90 days
7

after the examination and no licensed physician
8

subsequently made a signed written record of the
9

physician's determination that the individual was not
10

incapacitated within 90 days after examining the
11

individual.
12

(17) "Internal Revenue Code" means the Internal Revenue
13
Code of 1986 as amended from time to time and includes
14
corresponding provisions of any subsequent federal tax law.
15

(18) "Interested persons" means: (A) the trustee; and (B)
16
all beneficiaries, or their respective representatives
17
determined after giving effect to the provisions of Article 3,
18
whose consent or joinder would be required in order to achieve
19
a binding settlement were the settlement to be approved by the
20
court. "Interested persons" includes a trust advisor,
21
investment advisor, distribution advisor, trust protector, or
22
other holder, or committee of holders, of fiduciary or
23
nonfiduciary powers, if the person then holds powers material
24
to a particular question or dispute to be resolved or affected
25
by a nonjudicial settlement in accordance with Section 111 or
26
by a judicial proceeding.
"Interested persons" includes the

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1
members of a trust purpose committee and trust enforcers of a
2
virtuous trust created under Section 409.5.

3

(19) "Interests of the beneficiaries" means the beneficial
4
interests provided in the trust instrument.
5

(20) "Jurisdiction", with respect to a geographic area,
6
includes a State or country.
7

(21) "Legal capacity" means that the person is not
8
incapacitated.
9

(22) "Nongeneral power of appointment" means a power of
10
appointment that is not a general power of appointment.
11

(22.5) "Permissible appointee" means a person in whose
12
favor a powerholder may exercise a power of appointment.
13

(23) "Person" means an individual, estate, trust, business
14
or nonprofit entity, public corporation, government or
15
governmental subdivision, agency, or instrumentality, or other
16
legal entity.
17

(24) "Power of appointment" means a power that enables a
18
powerholder acting in a nonfiduciary capacity to designate a
19
recipient of an ownership interest in or another power of
20
appointment over the appointive property. The term "power of
21
appointment" does not include a power of attorney.
22

(25) "Power of withdrawal" means a presently exercisable
23
general power of appointment other than a power:
24

(A) exercisable by the powerholder as trustee that is
25

limited by an ascertainable standard; or
26

(B) exercisable by another person only upon consent of

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1

the trustee or a person holding an adverse interest.
2

(26) "Powerholder" means a person in which a donor creates
3
a power of appointment.
4

(27) "Presently exercisable power of appointment" means a
5
power of appointment exercisable by the powerholder at the
6
relevant time. The term "presently exercisable power of
7
appointment":
8

(A) includes a power of appointment exercisable only
9

after the occurrence of a specified event, the
10

satisfaction of an ascertainable standard, or the passage
11

of a specified time only after:
12

(i) the occurrence of the specified event;
13

(ii) the satisfaction of the ascertainable
14

standard; or
15

(iii) the passage of the specified time; and
16

(B) does not include a power exercisable only at the
17

powerholder's death.
18

(28) "Presumptive remainder beneficiary" means a
19
beneficiary of a trust, as of the date of determination and
20
assuming nonexercise of all powers of appointment, who either:
21
(A) would be a distributee or permissible distributee of trust
22
income or principal if the trust terminated on that date; or
23
(B) would be a distributee or permissible distributee of trust
24
income or principal if the interests of all distributees
25
currently eligible to receive income or principal from the
26
trust terminated on that date without causing the trust to

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1
terminate.
2

(29) "Property" means anything that may be the subject of
3
ownership, whether real or personal, legal or equitable, or
4
any interest therein.
5

(30) "Qualified beneficiary" means each current
6
beneficiary and presumptive remainder beneficiary.
7

(31) "Revocable", as applied to a trust, means revocable
8
by the settlor without the consent of the trustee or a person
9
holding an adverse interest. A revocable trust is deemed
10
revocable during the settlor's lifetime.
11

(32) "Settlor", except as otherwise provided in Sections
12
113 and 1225, means a person, including a testator, who
13
creates, or contributes property to, a trust. If more than one
14
person creates or contributes property to a trust, each person
15
is a settlor of the portion of the trust property attributable
16
to that person's contribution except to the extent another
17
person has the power to revoke or withdraw that portion.
18

(33) "Sign" means, with present intent to authenticate or
19
adopt a record:
20

(A) to execute or adopt a tangible symbol; or
21

(B) to attach to or logically associate with the
22

record an electronic symbol, sound, or process.
23

(34) "Spendthrift provision" means a term of a trust that
24
restrains both voluntary and involuntary transfer of a
25
beneficiary's interest.
26

(35) "State" means a State of the United States, the

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1
District of Columbia, Puerto Rico, the United States Virgin
2
Islands, or any territory or insular possession subject to the
3
jurisdiction of the United States. The term "state" includes
4
an Indian tribe or band recognized by federal law or formally
5
acknowledged by a state.
6

(36) "Terms of the trust" means:
7

(A) except as otherwise provided in paragraph (B), the
8

manifestation of the settlor's intent regarding a trust's
9

provisions as:
10

(i) expressed in the trust instrument; or
11

(ii) established by other evidence that would be
12

admissible in a judicial proceeding; or
13

(B) the trust's provisions as established, determined,
14

or modified by:
15

(i) a trustee or other person in accordance with
16

applicable law;
17

(ii) a court order; or
18

(iii) a nonjudicial settlement agreement under
19

Section 111.
20

(37) "Trust" means (A) a trust created by will, deed,
21
agreement, declaration, or other written instrument, or (B) an
22
oral trust under Section 407.
23

(38) "Trust accounting" means one or more written
24
communications from the trustee with respect to the accounting
25
year that describe: (A) the trust property, liabilities,
26
receipts, and disbursements, including the amount of the

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1
trustee's compensation; (B) the value of the trust assets on
2
hand at the close of the accounting period, to the extent
3
feasible; and (C) all other material facts related to the
4
trustee's administration of the trust.
5

(39) "Trust instrument" means the written instrument
6
stating the terms of a trust, including any amendment, any
7
court order or nonjudicial settlement agreement establishing,
8
construing, or modifying the terms of the trust in accordance
9
with Section 111, Sections 410 through 416, or other
10
applicable law, and any additional trust instrument under
11
Article 12.
12

(40) "Trustee" includes an original, additional, and
13
successor trustee, and a co-trustee.
14

(41) "Unascertainable beneficiary" means a beneficiary
15
whose identity is uncertain or not reasonably ascertainable.
16
(Source: P.A. 101-48, eff. 1-1-20; 102-279, eff. 1-1-22
.)

17

(760 ILCS 3/110)
18

Sec. 110.
Others treated as qualified beneficiaries.
19

(a) A person appointed to enforce a trust created for the
20
care of an animal or another noncharitable purpose as provided
21
in Section 408 or 409 has the rights of a qualified beneficiary
22
under this Code.
23

(b) The Attorney General has the rights of a qualified
24
beneficiary with respect to a charitable trust having its
25
principal place of administration in this State.

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1

(c) A trust enforcer of a virtuous trust as provided in
2
Section 409.5 has the rights of a qualified beneficiary under
3
this Code.

4
(Source: P.A. 101-48, eff. 1-1-20
.)

5

(760 ILCS 3/402)
6

Sec. 402.
Requirements for creation.
7

(a) A trust is created only if:
8

(1) the settlor or other person creating the trust has
9

capacity to create a trust;
10

(2) the settlor or other person creating the trust
11

indicates an intention to create the trust;
12

(3) the trust has a definite beneficiary or is:
13

(A) a charitable trust;
14

(B) a trust for the care of an animal, as provided
15

in Section 408;
or

16

(C) a trust for a noncharitable purpose, as
17

provided in Section 409;
or

18

(D) a virtuous trust, as provided in Section
19

409.5;

20

(4) the trustee has duties to perform; and
21

(5) the same person is not the sole trustee and sole
22

beneficiary.
23

(b) A beneficiary is definite if the beneficiary can be
24
ascertained now or in the future, subject to any applicable
25
rule against perpetuities.

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1

(c) A power in a trustee to select a beneficiary from an
2
indefinite class is valid. If the power is not exercised
3
within a reasonable time, the power fails and the property
4
subject to the power passes to the persons who would have taken
5
the property had the power not been conferred.
6
(Source: P.A. 101-48, eff. 1-1-20; 102-279, eff. 1-1-22
.)

7

(760 ILCS 3/407)
8

Sec. 407.
Evidence of oral trust.
Except as required by a
9
statute other than this Code
or by Section 409.5
, a trust need
10
not be evidenced by a trust instrument, but the creation of an
11
oral trust and its terms may be established only by clear and
12
convincing evidence.
13
(Source: P.A. 101-48, eff. 1-1-20
.)

14

(760 ILCS 3/409.5 new)
15

Sec. 409.5.
Virtuous trust.
16

(a) A trust may be created for a business or other
17
noncharitable purpose without a definite or definitely
18
ascertainable beneficiary. The business purpose may seek
19
economic and noneconomic benefits.
20

(b) A trust authorized by this Section shall be created by
21
a written instrument. The trust instrument may designate one
22
or more categories of stakeholders for whose benefit the trust
23
is created, which may include, but shall not be limited to,
24
employees, suppliers, and customers of a business or its

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1
subsidiaries or communities in which offices or other
2
establishments of a business or its subsidiaries are located.
3

(c) A trust authorized by this Section may hold an
4
ownership interest of any corporation, partnership, limited
5
partnership, cooperative, limited liability company, limited
6
liability partnership, or joint venture.
7

(d) A trustee of a trust created under this Section shall
8
not be deemed to violate the trustee's duties under Article 9
9
by virtue of the trustee investing and managing the trust's
10
assets pursuant to the terms and the purposes of the trust,
11
which may include retaining an ownership interest in a
12
specific corporation, partnership, limited partnership,
13
cooperative, limited liability company, limited liability
14
partnership, or joint venture.
15

(e) A trust authorized by this Section shall be exempt
16
from the common law rule against perpetuities.
17

(f) A trust authorized by this Section may be enforced by
18
one or more trust enforcers appointed in the trust instrument,
19
and the trust instrument may provide a process for appointing
20
successor trust enforcers. If at any time no person is acting
21
as trust enforcer, the court shall appoint one or more trust
22
enforcers. Each trust enforcer shall enforce the purpose and
23
the terms of the trust and shall exercise authority as a
24
fiduciary. If more than one person is acting as a trust
25
enforcer, action may be taken by a majority of the persons
26
acting as trust enforcers. A trust enforcer is not a

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1
beneficiary of a trust created pursuant to this Section, but a
2
trust enforcer has the rights of a qualified beneficiary.
3

(g) A trust authorized by this Section must have a trust
4
purpose committee with at least 3 persons as members. Each
5
member of the trust purpose committee shall exercise authority
6
as a fiduciary. The trust instrument may appoint the initial
7
members of the trust purpose committee and may provide a
8
process for appointing successor members. A vacancy on the
9
trust purpose committee must be filled if the trust purpose
10
committee has fewer than 3 members.
11

(h) A vacancy on the trust purpose committee that is
12
required to be filled must be filled in the following order of
13
priority:
14

(1) by a person designated in the trust instrument or
15

selected through a process provided in the trust
16

instrument;
17

(2) by a person appointed by unanimous agreement of
18

the trust enforcers; or
19

(3) by a person appointed by the court.
20

(i) Unless the trust instrument provides otherwise and
21
except as provided in paragraph (4) of subsection (j) or
22
subsection (o), the trust purpose committee may take action by
23
a majority vote of its members.
24

(j) Unless the trust instrument provides otherwise, the
25
trust purpose committee has the power, in carrying out the
26
purposes of the trust and after notice to the trust enforcers,

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1
to:
2

(1) remove a trustee, with or without cause;
3

(2) appoint one or more successor trustees or
4

co-trustees;
5

(3) remove a trust enforcer, with or without cause;
6

(4) remove a member of the trust purpose committee, by
7

unanimous vote of all other members of the trust purpose
8

committee; and
9

(5) direct distributions from the trust.
10

(k) Property of a trust authorized by this Section may be
11
applied only to its intended use. No court shall have
12
authority to determine that the value of the trust property
13
exceeds the amount required for the intended use.
14

(l) Unless the trust instrument provides otherwise, a
15
member of the trust purpose committee or a trust enforcer may
16
resign:
17

(1) after at least 30 days' notice to the trustee, all
18

other trust enforcers, and all other members of the trust
19

purpose committee; or
20

(2) at any time with the approval of the court.
21

(m) The trust purpose committee must send a report to the
22
trustee and to the trust enforcers at least annually showing
23
receipts and disbursements and listing the trust property and
24
liabilities. The trust purpose committee shall keep the
25
trustee and the trust enforcers reasonably informed about the
26
administration of the trust and of the material facts

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1
necessary for the trustee to comply with the trustee's duties
2
under Section 813.1 and for the trust enforcers to protect the
3
purposes of the trust.
4

(n) A trustee of a trust authorized by this Section shall
5
act in accordance with a direction from the trust purpose
6
committee unless the action is manifestly contrary to the
7
terms of the trust or the trustee knows that the action would
8
constitute a serious breach of a fiduciary duty that the trust
9
purpose committee, the trust enforcer, or the trustee owes to
10
the trust. A trustee is liable only for willful misconduct and
11
is not liable for reliance on documents provided by the trust
12
purpose committee or the trust enforcer.
13

(o) Unless the terms of the trust provide otherwise, the
14
trust purpose committee and the trust enforcers, acting
15
together, may modify or terminate a trust authorized by this
16
Section by unanimous agreement of the members of the trust
17
purpose committee and unanimous agreement of the trust
18
enforcers.
19

(p) Upon termination of a trust authorized by this
20
Section, the trustee shall distribute all remaining trust
21
property as the terms of the trust provide, or if the terms of
22
the trust do not provide for complete distribution of the
23
property, as a court determines to be consistent with the
24
purposes for which the trust was created.
25

(q) A person serving as a trustee may not serve as a trust
26
enforcer or as a member of the trust purpose committee, and a

HB4436 Engrossed
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LRB104 17445 JRC 30871 b
1
person serving as a trust enforcer may not serve as a member of
2
the trust purpose committee.
3

(r) This Section does not apply to trusts created pursuant
4
to Section 7.65 of the Business Corporation Act of 1983.
5

(s) A trust created under this Section may be referred to
6
as a "virtuous trust".
7

(t) Section 808 shall not apply to a virtuous trust.

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