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LRB096 07137 AJO 17223 b |
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| AN ACT concerning civil law.
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| Be it enacted by the People of the State of Illinois, |
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| represented in the General Assembly:
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| Section 5. The Trusts and Trustees Act is amended by adding |
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| Section 5.4 as follows:
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| (760 ILCS 5/5.4 new) |
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| Sec. 5.4. Spendthrift trusts. |
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| (a) For trusts created on or after the effective date of |
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| this amendatory Act of the 96th General Assembly, a settlor who |
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| in writing irrevocably transfers property in any manner to a |
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| trust having at least one trustee as defined in subsection (b) |
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| of this Section may, subject to the limitations in subsection |
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| (c) of this Section, provide that the income or principal |
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| interest of the settlor as beneficiary may not be either |
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| voluntarily or involuntarily transferred before payment or |
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| delivery to the settlor as beneficiary by the trustee. This |
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| Section shall be considered to be a restriction on the transfer |
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| of the settlor's beneficial interest in the trust that is |
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| enforceable under applicable nonbankruptcy law within the |
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| meaning of Section 541(c)(2) of the Bankruptcy Code or any |
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| successor provision. |
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| (b) If the settlor is a beneficiary of the trust, at least |
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| one trustee of a trust described in this Section must be a |
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LRB096 07137 AJO 17223 b |
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| corporate fiduciary who: |
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| (1) is authorized by the laws of this State to act as a |
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| trustee and whose activities are subject to supervision by |
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| the Director of the Division of Banking of this State, the |
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| Office of the Comptroller of the Currency, or the Office of |
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| Thrift Supervision, or any successor thereto; and |
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| (2) maintains or arranges for custody in this State of |
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| some or all of the property that is the subject of the |
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| trust described in this Section, maintains records for the |
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| trust on an exclusive or nonexclusive basis, prepares or |
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| arranges for the preparation of fiduciary income tax |
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| returns for the trust, or otherwise materially |
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| participates in the administration of the trust. |
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| (c)(1) Except as provided in this subsection, if a trust |
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| has a restriction as provided in subsection (a) of this |
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| Section, a creditor or other claimant of the settlor may not |
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| satisfy a claim, or liability on a claim, in either law or |
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| equity, out of the settlor's transfer or the settlor's |
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| beneficial interest in the trust. For purposes of this Section, |
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| a creditor includes one holding or seeking to enforce a |
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| judgment entered by a court or other body having adjudicative |
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| authority as well as one with a right to payment, whether or |
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| not reduced to judgment, liquidated, unliquidated, fixed, |
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| contingent, matured, unmatured, disputed, undisputed, legal, |
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| equitable, secured, or unsecured. |
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| (2) A trust described in this Section does not prevent a |
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| creditor or person described in this subsection (c) from |
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| satisfying a claim or liability out of the settlor's beneficial |
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| interest in or transfer into trust if: |
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| (A) the claim is a judgment, order, decree, or other |
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| legally enforceable decision or ruling resulting from a |
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| judicial, arbitration, mediation, or administrative |
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| proceeding commenced prior to or within 3 years after the |
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| trust is created; |
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| (B) the settlor's transfer into trust is made with |
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| actual intent to hinder, delay, or defraud that creditor or |
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| claimant; |
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| (C) the trust provides that the settlor may revoke or |
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| terminate all or part of the trust; |
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| (D) the claim is for a payment owed by the settlor |
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| under a child support judgment or order; |
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| (E) the claim is by a spouse or former spouse of the |
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| settlor on account of an agreement or court order for the |
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| payment of support or maintenance or for a division or |
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| distribution of property; |
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| (F) the claim is a tax or other amount owed by the |
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| settlor to any governmental entity; |
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| (G) the claim is by a governmental entity for recovery |
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| of public assistance received by the settlor from the |
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| governmental entity; |
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| (H) the transfer is made when the settlor is insolvent |
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| or the transfer renders the settlor insolvent; |
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| (I) the claim is a judgment, award, order, sentence, |
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| fine, penalty, or other determination of liability of the |
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| settlor for conduct of the settlor constituting fraud, |
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| intentional infliction of harm, or a crime; or |
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| (J) the settlor transferred assets into the trust that: |
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| (i) were listed in a written representation of the |
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| settlor's assets given to a claimant to induce the claimant |
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| to enter into a transaction or agreement with the settlor; |
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| or (ii) were transferred from the settlor's control in |
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| breach of any written agreement, covenant, or security |
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| interest between the settlor and the claimant. |
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| (d) The statute of limitations for actions to satisfy a |
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| claim or liability out of the settlor's beneficial interest in |
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| or transfer into trust under this Section is the statute of |
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| limitations applicable to the underlying action. |
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| (e) The satisfaction of a claim under this Section is |
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| limited to that part of the trust or transfer to which it |
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| applies. |
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| (f) For purposes of this Section, a trust is not revoked or |
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| terminated by: |
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| (1) a power to veto a distribution from the trust; |
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| (2) a testamentary special power of appointment or |
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| similar power; |
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| (3) the right to receive a distribution of income, |
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| principal, or both in the discretion of another, including |
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| a trustee other than the settlor; |
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| (4) an interest in a charitable remainder unitrust or |
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| charitable remainder annuity trust as defined in Internal |
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| Revenue Code Section 664 or any successor provision; |
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| (5) a right to receive principal subject to an |
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| ascertainable standard set forth in the trust; or |
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| (6) the power to appoint a nonsubordinate adviser or |
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| trust protector who can remove and appoint trustees, who |
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| can direct, consent to, or disapprove distributions, or who |
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| is an investment adviser or has the power to appoint an |
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| investment adviser or investment director pursuant to the |
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| laws of this State. |
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| (g) The courts of this State shall have exclusive |
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