Illinois Enacts New Trust Code

Illinois residents will have a new Illinois Trust Code that replaces the Illinois Trusts and Trustees Act. The new legislation has a few notable changes concerning fiduciaries. The new code goes into effect on January 1, 2020 and for the most part adheres to the Uniform Trust Code (UTC) which has been enacted in 33 other states and D.C. However, in many instances states will tailor the UTC to serve their specific needs.

The New Code is Elective in Many Areas

Many provisions of the new Code are discretionary because the settlor or creator of a trust can choose to quash the provisions of the Code in the trust instrument. But there are sections of the Code may not be overridden.


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Trustees are also required to submit an accounting to each current beneficiary every year or more frequently, and to all beneficiaries after a trust terminates. Irrevocable Trusts created before 2020 and trustees of revocable trusts who begin to act before 2020 will still be governed by current notice and accounting requirements. However, these can be modified by the settlor.

Here a few of the other changes:

“Decanting” Irrevocable Trusts

“Decanting power” is the power of an authorized fiduciary under Article 12 of the new Code to distribute property of a first trust to one or more second trusts or to modify the terms of the first trust.


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There is a change that will ease the task of decanting a trust without court approval. That is the notice provisions for decanting. Under current law, to avoid court approval, at least one competent current beneficiary and one competent presumptive remainder beneficiary are required.

Now an authorized fiduciary may exercise the decanting power without the consent of any person and without court approval. An authorized fiduciary must give notice in a record of the intended exercise of the decanting power within 60 days before the exercise to:

  • each settlor of the first trust, if living or then in existence;
  • each qualified beneficiary of the first trust;
  • each holder of a presently exercisable power of appointment over any part or all of the first trust;
  • each person that currently has the right to remove or replace the authorized fiduciary;
  • each other fiduciary of the first trust;
  • each fiduciary of the second trust; and
  • the Attorney General’s Charitable Trust Bureau, if the first trust contains a charitable interest.

Also, an authorized fiduciary isn’t required to give notice to a qualified beneficiary who is a minor and has no representative.

Section 1207(e) provides the specific for notice requirements.


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Changes for Noncharitable Irrevocable Trusts

The Code alters the law in Illinois for modifying or terminating a noncharitable irrevocable trust. Section 411 of the new Code states that modification or termination of noncharitable irrevocable trust is now by consent. Current court decisions hold that a showing of changed circumstances that could not have been anticipated at the time the trust was signed is required to modify a trust. Now, if the beneficiaries all consent, a noncharitable irrevocable trust may be terminated if the court finds that continuance of the trust “is not necessary to achieve any material purpose of the trust.”

The court will also consider spendthrift provisions as a “factor” in deciding to terminate the trust under Section 411; however, the court is not precluded from modifying or terminating a trust because the trust contains spendthrift provisions.

The new Code also details procedures in the event that not all of the beneficiaries consent to a proposed trust modification or termination.

Trustee Exculpation Provisions

Terms for trustee exculpation can be added to trust documents. The new Code states that any provision that attempts to restrict a trustee’s liability for a breach of trust is unenforceable to the level that it attempts to free a trustee for liability for a breach committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries.

The new code is also makes it unenforceable if an exculpation clause was inserted from an abuse by the trustee of a fiduciary or confidential relationship to the settlor—unless the trustee can prove that the term is fair and that its meaning was sufficiently relayed to the settlor. As such, a provision added by the drafting lawyer to exculpate herself may not be enforceable unless independent counsel represents the settlor as to that clause.

“These conditions are satisfied if the settlor was represented by independent counsel,” Section 1008(b) of the new Code states.

These provisions can’t be overridden by the settlor.

A copy of the new Illinois Trust Code can be found here.

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