§ 808 — Directed trusts

Illinois § 808

• Jurisdiction: Illinois
• Topic: RIGHTS AND REMEDIES
• Ch. 760: TRUSTS AND FIDUCIARIES
• Act 760 ILCS 3/: Illinois Trust Code.
• Art.: Article 8 - Duties and Powers of Trustee

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(a) In this Section: (1) "Distribution trust advisor" means any one or more persons given authority by the trust instrument to direct, consent to, veto, or otherwise exercise all or any portion of the distribution powers and discretions of the trust, including, but not limited to, authority to make discretionary distribution of income or principal. (2) "Excluded fiduciary" means any fiduciary that by the trust instrument is directed to act in accordance with the exercise of specified powers by a directing party, in which case the specified powers are deemed granted not to the fiduciary but to the directing party and the fiduciary is deemed excluded from exercising the specified powers. If a trust instrument provides that a fiduciary as to one or more specified matters is to act, omit action, or make decisions only with the consent of a directing party, then the fiduciary is an excluded fiduciary with respect to the matters. Notwithstanding any provision of this Section, a person does not fail to qualify as an excluded fiduciary solely by reason of having effectuated, participated in, or consented to a transaction, including, but not limited to, any transaction described in Section 111 or 411 or Article 12 invoking this Section with respect to any new or existing trust. (3) "Fiduciary" means any person expressly given one or more fiduciary duties by the trust instrument, including, but not limited to, a trustee. (4) "Investment trust advisor" means any one or more persons given authority by the trust instrument to direct, consent to, veto, or otherwise exercise all or any portion of the investment powers of the trust. (5) "Power" means authority to take or withhold an action or decision, including, but not limited to, an expressly specified power, the implied power necessary to exercise a specified power, and authority inherent in a general grant of discretion. (6) "Trust protector" means any one or more persons given any one or more of the powers specified in subsection (d), regardless of whether the power is designated with the title of trust protector by the trust instrument. (b) An investment trust advisor may be designated in the trust instrument of a trust. The powers of an investment trust advisor may be exercised or not exercised in the sole and absolute discretion of the investment trust advisor, and are binding on all other persons, including, but not limited to, each beneficiary, fiduciary, excluded fiduciary, and any other party having an interest in the trust. The trust instrument may use the title "investment trust advisor" or any similar name or description demonstrating the intent to provide for the office and function of an investment trust advisor. Unless the terms of the trust provide otherwise, the investment trust advisor has the authority to: (1) direct the trustee with respect to the retention, purchase, transfer, assignment, sale, or encumbrance of trust property and the investment and reinvestment of principal and income of the trust; (2) direct the trustee with respect to all management, control, and voting powers related directly or indirectly to trust assets, including, but not limited to, voting proxies for securities held in trust; (3) select and determine reasonable compensation of one or more advisors, managers, consultants, or counselors, including the trustee, and to delegate to them any of the powers of the investment trust advisor in accordance with Section 807; and (4) determine the frequency and methodology for valuing any asset for which there is no readily available market value. (c) A distribution trust advisor may be designated in the trust instrument of a trust. The powers of a distribution trust advisor may be exercised or not exercised in the sole and absolute discretion of the distribution trust advisor, and are binding on all other persons, including, but not limited to, each beneficiary, fiduciary, excluded fiduciary, and any other party having an interest in the trust. The trust instrument may use the title "distribution trust advisor" or any similar name or description demonstrating the intent to provide for the office and function of a distribution trust advisor. Unless the terms of the trust provide otherwise, the distribution trust advisor has authority to direct the trustee with regard to all decisions relating directly or indirectly to discretionary distributions to or for one or more beneficiaries. (d) A trust protector may be designated in the trust instrument of a trust. The powers of a trust protector may be exercised or not exercised in the sole and absolute discretion of the trust protector, and are binding on all other persons, including, but not limited to, each beneficiary, investment trust advisor, distribution trust advisor, fiduciary, excluded fiduciary, and any other party having an interest in the trust. The trust instrument may use the title "trust protector" or any similar name or description demonstrating the intent to provide for the office and function of a trust protector. The powers granted to a trust protector by the trust instrument may include but are not limited to authority to do any one or more of the following: (1) modify or amend the trust instrument to achieve favorable tax status or respond to changes in the Internal Revenue Code, federal laws, state law, or the rulings and regulations under such laws; (2) increase, decrease, or modify the interests of any beneficiary or beneficiaries of the trust; (3) modify the terms of any power of appointment granted by the trust; however, such modification or amendment may not grant a beneficial interest to any individual, class of individuals, or other parties not specifically provided for under the trust instrument; (4) remove, appoint, or remove and appoint, a trustee, investment trust advisor, distribution trust advisor, another directing party, investment committee member, or distribution committee member, including designation of a plan of succession for future holders of any such office; (5) terminate the trust, including determination of how the trustee shall distribute the trust property to be consistent with the purposes of the trust; (6) change the situs of the trust, the governing law of the trust, or both; (7) appoint one or more successor trust protectors, including designation of a plan of succession for future trust protectors; (8) interpret terms of the trust at the request of the trustee; (9) advise the trustee on matters concerning a beneficiary; or (10) amend or modify the trust instrument to take advantage of laws governing restraints on alienation, distribution of trust property, or to improve the administration of the trust. If a trust contains a charitable interest, a trust protector must give notice to the Attorney General's Charitable Trust Bureau at least 60 days before taking any of the actions authorized under paragraph (2), (3), (4), (5), or (6) of this subsection. The Attorney General may waive this notice requirement. (e) A directing party is a fiduciary of the trust subject to the same duties and standards applicable to a trustee. (f) The excluded fiduciary shall act in accordance with the trust instrument and comply with the directing party's exercise of the powers granted to the directing party by the trust instrument. Unless otherwise provided in the trust instrument, an excluded fiduciary has no duty to monitor, review, inquire, investigate, recommend, evaluate, or warn with respect to a directing party's exercise or failure to exercise any power granted to the directing party by the trust instrument, including, but not limited to, any power related to the acquisition, disposition, retention, management, or valuation of any asset or investment. Except as otherwise provided in this Section or the trust instrument, an excluded fiduciary is not liable, either individually or as a fiduciary, for any action, inaction, consent, or failure to consent by a directing party, including, but not limited to, any of the following: (1) if a trust instrument provides that an excluded fiduciary is to follow the direction of a directing party, and such excluded fiduciary acts in accordance with such a direction, then except in cases of willful misconduct on the part of the excluded fiduciary in complying with the direction of the directing party, the excluded fiduciary is not liable for any loss resulting directly or indirectly from following any such direction, including but not limited to compliance regarding the valuation of assets for which there is no readily available market value; (2) if a trust instrument provides that an excluded fiduciary is to act or omit to act only with the consent of a directing party, then except in cases of willful misconduct on the part of the excluded fiduciary, the excluded fiduciary is not liable for any loss resulting directly or indirectly from any act taken or omitted as a result of such directing party's failure to provide such consent after having been asked to do so by the excluded fiduciary; or (3) if a trust instrument provides that, or for any other reason, an excluded fiduciary is required to assume the role or responsibilities of a directing party, or if the excluded fiduciary appoints a directing party or successor to a directing party other than in a nonjudicial settlement agreement under Section 111 or in a second trust under Article 12, then the excluded fiduciary shall also assume the same fiduciary and other duties and standards that applied to such directing party. (g) By accepting an appointment to serve as a directing party of a trust that is subject to the laws of this State, the directing party submits to the jurisdiction of the courts of this State even if investment advisory agreements or other related agreements provide otherwise, and the directing party may be made a party to any action or proceeding if issues relate to a decision or action of the directing party. (h) Each directing party shall keep the excluded fiduciary and any other directing party reasonably informed regarding the administration of the trust with respect to any specific duty or function being performed by the directing party to the extent that the duty or function would normally be performed by the excluded fiduciary or to the extent that providing such information to the excluded fiduciary or other directing party is reasonably necessary for the excluded fiduciary or other directing party to perform its duties, and the directing party shall provide such information as reasonably requested by the excluded fiduciary or other directing party. Neither the performance nor the failure to perform of a directing party's duty to inform as provided in this subsection affects whatsoever the limitation on the liability of the excluded fiduciary as provided in this Section. (i) Other required notices. (1) A directing party shall: (A) within 90 days after becoming a directing party, notify each qualified beneficiary of the acceptance and of the directing party's name, address, and telephone number, except that the notice requirement of this subdivision (A) does not apply with respect to a succession of a business entity by merger or consolidation with another business entity or by transfer between holding company affiliates if there is no change in the contact information for the directing party, in which case the successor entity has discretion to determine what timing and manner of notice is appropriate; (B) notify each qualified beneficiary in advance of any change in the rate of or the method of determining the directing party's compensation; and (C) notify each qualified beneficiary of the directing party's resignation. (2) In the event of the incapacity, death, disqualification, or removal of any directing party, a directing party who continues acting as directing party following such an event shall notify each qualified beneficiary of the incapacity, death, disqualification, or removal of any other directing party within 90 days after the event. (j) An excluded fiduciary may, but is not required to, obtain and rely upon an opinion of counsel on any matter relevant to this Section. (k) On and after January 1, 2013, this Section applies to: (1) all existing and future trusts that appoint or provide for a directing party, including, but not limited to, a party granted power or authority effectively comparable in substance to that of a directing party as provided in this Section; or (2) any existing or future trust that: (A) is modified in accordance with applicable law or the terms of the trust to appoint or provide for a directing party; or (B) is modified to appoint or provide for a directing party, including, but not limited to, a party granted power or authority effectively comparable in substance to that of a directing party, in accordance with: (i) a court order; (ii) a nonjudicial settlement agreement made in accordance with Section 111; or (iii) an exercise of decanting power under Article 12, regardless of whether the order, agreement, or second-trust instrument specifies that this Section governs the responsibilities, actions, and liabilities of a person designated as a directing party or excluded fiduciary.

Legislative History

(Source: P.A. 101-48, eff. 1-1-20; 102-279, eff. 1-1-22 .)