(760 ILCS 5/16.1)
Sec. 16.1. Virtual representation.
(a) Representation by a beneficiary with a substantially similar interest, by the primary beneficiaries and by others.
(1) To the extent there is no conflict of interest
between the representative and the represented beneficiary with respect to the particular question or dispute, a beneficiary who is a minor or a disabled or unborn beneficiary, or a beneficiary whose identity or location is unknown and not reasonably ascertainable (hereinafter referred to as an "unascertainable beneficiary"), may for all purposes be represented by and bound by another beneficiary having a substantially similar interest with respect to the particular question or dispute; provided, however, that the represented beneficiary is not otherwise represented by a guardian or agent in accordance with subdivision (a)(4) or by a parent in accordance with subdivision (a)(5).
(2) If all primary beneficiaries of a trust either
have legal capacity or have representatives in accordance with this subsection (a) who have legal capacity, the actions of such primary beneficiaries, in each case either by the beneficiary or by the beneficiary's representative, shall represent and bind all other beneficiaries who have a successor, contingent, future, or other interest in the trust.
(3) For purposes of this Act:
(A) "Primary beneficiary" means a beneficiary of
a trust who as of the date of determination is either: (i) currently eligible to receive income or principal from the trust, or (ii) a presumptive remainder beneficiary.
(B) "Presumptive remainder beneficiary" means a
beneficiary of a trust, as of the date of determination and assuming nonexercise of all powers of appointment, who either: (i) would be eligible to receive a distribution of income or principal if the trust terminated on that date, or (ii) would be eligible to receive a distribution of income or principal if the interests of all beneficiaries currently eligible to receive income or principal from the trust ended on that date without causing the trust to terminate.
(C) "Disabled person" as of any date means either
a disabled person within the meaning of Section 11a-2 of the Probate Act of 1975 or a person who, within the 365 days immediately preceding that date, was examined by a licensed physician who determined that the person lacked the capacity to make prudent financial decisions, and the physician made a written record of the physician's determination and signed the written record within 90 days after the examination.
(D) A person has legal capacity unless the person
is a minor or a disabled person.
(4) If a trust beneficiary is represented by a court
appointed guardian of the estate or, if none, guardian of the person, the guardian shall represent and bind the beneficiary. If a trust beneficiary is a disabled person, an agent under a power of attorney for property who has authority to act with respect to the particular question or dispute and who does not have a conflict of interest with respect to the particular question or dispute may represent and bind the principal. An agent is deemed to have such authority if the power of attorney grants the agent the power to settle claims and to exercise powers with respect to trusts and estates, even if the powers do not include powers to make a will, to revoke or amend a trust, or to require the trustee to pay income or principal. Absent a court order pursuant to the Illinois Power of Attorney Act directing a guardian to exercise powers of the principal under an agency that survives disability, an agent under a power of attorney for property who in accordance with this subdivision has authority to represent and bind a disabled principal takes precedence over a court appointed guardian unless the court specifies otherwise. This subdivision applies to all agencies, whenever and wherever executed.
(5) If a trust beneficiary is a minor or a disabled
or unborn person and is not represented by a guardian or agent in accordance with subdivision (a)(4), then a parent of the beneficiary may represent and bind the beneficiary, provided that there is no conflict of interest between the represented person and either of the person's parents with respect to the particular question or dispute. If a disagreement arises between parents who otherwise qualify to represent a child in accordance with this subsection (a) and who are seeking to represent the same child, the parent who is a lineal descendant of the settlor of the trust that is the subject of the representation is entitled to represent the child; or if none, the parent who is a beneficiary of the trust is entitled to represent the child.
(6) A guardian, agent or parent who is the
representative for a beneficiary under subdivision (a)(4) or (a)(5) may, for all purposes, represent and bind any other beneficiary who is a minor or a disabled, unborn, or unascertainable beneficiary who has an interest, with respect to the particular question or dispute, that is substantially similar to the interest of the beneficiary represented by the representative, but only to the extent that there is no conflict of interest between the beneficiary represented by the representative and the other beneficiary with respect to the particular question or dispute; provided, however, that the other beneficiary is not otherwise represented by a guardian or agent in accordance with subdivision (a)(4) or by a parent in accordance with subdivision (a)(5).
(7) The action or consent of a representative who may
represent and bind a beneficiary in accordance with this Section is binding on the beneficiary represented, and notice or service of process to the representative has the same effect as if the notice or service of process were given directly to the beneficiary represented.
(8) Nothing in this Section limits the discretionary
power of a court in a judicial proceeding to appoint a guardian ad litem for any minor, disabled, unborn, or unascertainable beneficiary with respect to a particular question or dispute, but appointment of a guardian ad litem need not be considered and is not necessary if such beneficiary is otherwise represented in accordance with this Section.
(b) Total return trusts. This Section shall apply to enable conversion to a total return trust by agreement in accordance with subsection (b) of Section 5.3 of this Act, by agreement between the trustee and all primary beneficiaries of the trust, in each case either by the beneficiary or by the beneficiary's representative in accordance with this Section.
(c) Representation of charity. If a trust provides a beneficial interest or expectancy for one or more charities or charitable purposes that are not specifically named or otherwise represented (the "charitable interest"), the Illinois Attorney General may, in accordance with this Section, represent, bind, and act on behalf of the charitable interest with respect to any particular question or dispute, including without limitation representing the charitable interest in a nonjudicial settlement agreement or in an agreement to convert a trust to a total return trust in accordance with subsection (b) of Section 5.3 of this Act. A charity that is specifically named as beneficiary of a trust or that otherwise has an express beneficial interest in a trust may act for itself. Notwithstanding any other provision, nothing in this Section shall be construed to limit or affect the Illinois Attorney General's authority to file an action or take other steps as he or she deems advisable at any time to enforce or protect the general public interest as to a trust that provides a beneficial interest or expectancy for one or more charities or charitable purposes whether or not a specific charity is named in the trust. This subsection (c) shall be construed as being declarative of existing law and not as a new enactment.
(d) Nonjudicial settlement agreements.
(1) For purposes of this Section, "interested
persons" means the trustee and all beneficiaries, or their respective representatives determined after giving effect to the preceding provisions of this Section, whose consent or joinder would be required in order to achieve a binding settlement were the settlement to be approved by the court. "Interested persons" also includes a trust advisor, investment advisor, distribution advisor, trust protector or other holder, or committee of holders, of fiduciary or nonfiduciary powers, if the person then holds powers material to a particular question or dispute to be resolved or affected by a nonjudicial settlement agreement in accordance with this Section or by the court.
(2) Interested persons, or their respective
representatives determined after giving effect to the preceding provisions of this Section, may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust as provided in this Section.
(3) (Blank).
(4) The following matters may be resolved by a
nonjudicial settlement agreement:
(A) Validity, interpretation, or
construction of the terms of the trust.
(B) Approval of a trustee's report or
accounting.
(C) Exercise or nonexercise of any power by
a trustee.
(D) The grant to a trustee of any necessary
or desirable administrative power, provided the grant does not conflict with a clear material purpose of the trust.
(E) Questions relating to property or an interest
in property held by the trust, provided the resolution does not conflict with a clear material purpose of the trust.
(F) Removal, appointment, or removal and
appointment of a trustee, trust advisor, investment advisor, distribution advisor, trust protector or other holder, or committee of holders, of fiduciary or nonfiduciary powers, including without limitation designation of a plan of succession or procedure to determine successors to any such office.
(G) Determination of a trustee's
compensation.
(H) Transfer of a trust's principal place
of administration, including without limitation to change the law governing administration of the trust.
(I) Liability or indemnification of a trustee for
an action relating to the trust.
(J) Resolution of bona fide disputes
related to administration, investment, distribution or other matters.
(K) Modification of terms of the trust
pertaining to administration of the trust.
(L) Termination of the trust, provided that
court approval of such termination must be obtained in accordance with subdivision (d)(5) of this Section, and the court must conclude continuance of the trust is not necessary to achieve any clear material purpose of the trust. The court may consider spendthrift provisions as a factor in making a decision under this subdivision, but a spendthrift provision is not necessarily a clear material purpose of a trust, and the court is not precluded from modifying or terminating a trust because the trust instrument contains a spendthrift provision. Upon such termination the court may order the trust property distributed as agreed by the parties to the agreement or otherwise as the court determines equitable consistent with the purposes of the trust.
(M) Any other matter involving a trust to the
extent the terms and conditions of the nonjudicial settlement agreement could be properly approved under applicable law by a court of competent jurisdiction.
(4.5) If a charitable interest or a specifically
named charity is a current beneficiary, is a presumptive remainder beneficiary, or has any vested interest in a trust, the parties to any proposed nonjudicial settlement agreement affecting the trust shall deliver to the Attorney General's Charitable Trust Bureau written notice of the proposed agreement at least 60 days prior to its effective date. The Bureau need take no action, but if it objects in a writing delivered to one or more of the parties prior to the proposed effective date, the agreement shall not take effect unless the parties obtain court approval.
(5) Any beneficiary or other interested person may
request the court to approve any part or all of a nonjudicial settlement agreement, including whether any representation is adequate and without conflict of interest, provided that the petition for such approval must be filed before or within 60 days after the effective date of the agreement.
(6) An agreement entered into in accordance with
this Section shall be final and binding on the trustee, on all beneficiaries of the trust, both current and future, and on all other interested persons as if ordered by a court with competent jurisdiction over the trust, the trust property, and all parties in interest.
(7) In the trustee's sole discretion, the trustee
may, but is not required to, obtain and rely upon an opinion of counsel on any matter relevant to this Section, including without limitation: (i) where required by this Section, that the agreement proposed to be made in accordance with this Section does not conflict with a clear material purpose of the trust or could be properly approved by the court under applicable law; (ii) in the case of a trust termination, that continuance of the trust is not necessary to achieve any clear material purpose of the trust; (iii) that there is no conflict of interest between a representative and the person represented with respect to the particular question or dispute; or (iv) that the representative and the person represented have substantially similar interests with respect to the particular question or dispute.
(e) Application. On and after its effective date, this Section applies to all existing and future trusts, judicial proceedings, or agreements entered into in accordance with this Section on or after the effective date.
(f) This Section shall be construed as pertaining to the administration of a trust and shall be available to any trust that is administered in this State or that is governed by Illinois law with respect to the meaning and effect of its terms, except to the extent the governing instrument expressly prohibits the use of this Section by specific reference to this Section. A provision in the governing instrument in the form: "Neither the provisions of Section 16.1 of the Illinois Trusts and Trustees Act nor any corresponding provision of future law may be used in the administration of this trust", or a similar provision demonstrating that intent, is sufficient to preclude the use of this Section.
(g) The changes made by this amendatory Act of the 98th General Assembly apply to all trusts in existence on the effective date of this amendatory Act of the 98th General Assembly or created after that date, and are applicable to judicial proceedings and nonjudicial matters involving such trusts. For purposes of this Section:
(i) judicial proceedings include any proceeding
before a court or administrative tribunal of this State and any arbitration or mediation proceedings; and
(ii) nonjudicial matters include, but are not limited
to, nonjudicial settlement agreements entered into in accordance with this Section and the grant of any consent, release, ratification, or indemnification.
(Source: P.A. 98-946, eff. 1-1-15.)
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Last modified: February 18, 2015