How Will the New Illinois Trust Code Affect Beneficiary Rights?

 Posted on January 09,2020 in Estate Planning

There are a variety of estate planning tools that a person can use to protect their assets and pass them on to beneficiaries. Trusts are some of the most powerful and flexible of these tools, allowing a trustmaker (also known as a “settlor”) to place assets in the control of a trustee, who will then distribute the assets to the beneficiaries according to the terms of the trust. There are certain requirements that must be met during the trust administration process, and trustees and beneficiaries should be sure to understand how recent changes to Illinois law will affect their rights and responsibilities.

The Illinois Trust Code

In 2019, the Illinois legislature passed the Illinois Trust Code (ITC), which took effect on January 1, 2020, replacing the Illinois Trusts and Trustees Act. This new law addresses the rights of trust beneficiaries in a number of ways, including:

• For trusts that become irrevocable on or after January 1, 2020, the trustee must provide an annual accounting of the trust’s inventory, receipts, and disbursements to ALL beneficiaries. These include beneficiaries who are currently receiving or could receive a distribution from the trust, as well as presumptive remainder beneficiaries who would be eligible to receive a distribution if the trust was terminated or if the interests of other beneficiaries ended. In the case of married couples, it is typical for one spouse to create a trust for the benefit of the surviving spouse during the surviving spouse’s lifetime, and then, upon the death of the surviving spouse, the trust would distribute the trust assets to their children. This new law REQUIRES the children to receive annual accountings during the surviving spouse’s lifetime, which may or may not be desire of the creator of the trust. If not desired, the creator of the trust can “opt-out” of this requirement.   
• A settlor may create a “silent trust” that waives the requirement for the trustee to provide an accounting of the trust to beneficiaries under the age of 30. However, the trustee will be required to make an annual account to a “designated representative” nominated or authorized by the settlor, and the beneficiary will have the right to receive an annual accounting upon reaching the age of 30.
• Trustees are not required to provide beneficiaries with advance notice of transactions involving property owned by the trust.
• A beneficiary of a trust can serve as the designated representative of other beneficiaries, including minors, unborn children, or beneficiaries who have not been located.
• A beneficiary can serve as the sole trustee of a trust, but in these cases, they will only be able to make distributions to themselves based on an “ascertainable standard.” This means that distributions should be used to provide for needs such as healthcare, living expenses, or education, rather than to pay off personal obligations or debts.

Contact a Kane County Trusts Attorney

If you are the beneficiary of a trust, you should be sure to understand how your rights will change under the ITC. At Ariano Hardy Ritt Nyuli Richmond Lytle & Goettel, P.C., our experienced Elgin estate planning lawyers can answer your questions about trusts, and we can assist you in any matters involving trust administration. To arrange a free consultation, contact us today at 847-695-2400.

Sources:

http://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=4001&ChapterID=61