This article explains the Illinois Trust Code and changes to Illinois trust and estate law for 2020. January 1, 2020, will mark the outset of the Illinois Trust Code (or ITC, as it will be known.) The Illinois Trust Code is an adaptation of the Uniform Trust Code (UTC) that has already been implemented in 33 states. Most of the new code is elective and can be modified or waived by the trust's creator (known as the settlor), but some parts of the new statutes cannot be waived, such as the information a trustee must provide to beneficiaries. The most notable changes to state law include:
- Beneficiary notifications. Trustees will be required to notify each qualified beneficiary of the trust's existence within 90 days of a trust becoming irrevocable, as well as whether or not the beneficiary may request trust accountings. The term "qualified beneficiary" is defined as anyone who could receive a distribution from the trust currently or is likely to receive trust property when the current beneficiaries die, or the trust terminates.
Trustees must also provide notice to all beneficiaries under any of the following circumstances:
- When it has been one year from the time of the last accounting;
- When there is a new trustee or a change of the trustee's contact information;
- When a trustee resigns;
- When a trustee is changed; or
- When there is a change in the trustee's compensation.
Beneficiaries can act as trustees. A beneficiary can act as a trustee of a trust for their benefit without causing creditors of the beneficiary to reach the trust assets as long as the beneficiary can only make distributions based on an ascertainable standard. An ascertainable standard is a standard that restricts the power of a trustee to make distributions to a beneficiary based on the beneficiary's needs for health, education, or support. An ascertainable standard is necessary to keep assets out of the estate for federal estate tax purposes.
- More detailed accountings. A trustee must disclose more information in the accounting than currently required by the state, including:
- Inventory;
- Receipts and disbursements of the trust;
- A description of the trustee's compensation;
- The value of the trust assets on hand at the close of the accounting period; and
- All other material facts related to the administration of the trust.
Fewer restrictions on delegation. The ITC makes it easier for a trustee to delegate discretionary powers. The trustee must exercise reasonable care, skill, and caution in:
- Selecting the agent
- Establishing the scope and terms of delegation within parameters of the trust
- Periodically reviewing the agent's actions to ensure compliance with the delegation.
- Shortened limitation periods. The ITC shortens the limitation periods for claims against trustees to two years, as opposed to the current state law, which allows claims for three years. The time period to contest the validity of an irrevocable trust upon the settlor's death will also be shortened. The contest must be commenced in less than two years after the settlor's death or six months from the date the trustee sends notice of the trust to the beneficiaries.
Silent trusts and the designated representative. The new Illinois Trust Code allows a settlor to waive the duty to account to particular beneficiaries for a period of time, during which the trustee need not disclose the terms, existence, or assets of a trust to the beneficiary. This allows Illinois settlors to create a "silent trust" by waiving the trustee's obligation to account or provide information about the trust to beneficiaries under the age of 30 and to appoint a designated representative to receive the accounting on behalf of the beneficiary during the silent period. If no designated representative is acting, the trustee must notify qualified beneficiaries of the following circumstances:
- The trust's existence;
- The beneficiary's right to request a complete copy of the trust instrument; and
- Whether the beneficiary has the right to receive or request trust accounts.
It is important to note that a settlor cannot waive the duty to notify the beneficiary in such situations.
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