New Beneficiary Notice Requirements For Trusts that Become Irrevocable After December 31, 2019
Effective January 1, 2020, the Illinois Trust Code (“ITC”) will replace the Illinois Trust and Trustees Act as the law governing Illinois trusts. With the adoption of the ITC, Illinois becomes the 34th state to adopt a form of the Uniform Trust Code. Most of the new ITC provisions are elective and can be modified or waived by the trust creator (commonly known as the the “settlor”).
For trusts that become irrevocable after December 31, 2019, the trustee must notify each qualified beneficiary of the trust’s existence within 90 days of a trust becoming irrevocable and also must inform a beneficiary whether or not he or she is entitled to trust accountings and a copy of the trust. The term “qualified beneficiary” is defined in the ITC as anyone who could receive a distribution from the trust currently or is likely to receive trust property when the current beneficiaries die or the trust terminates. The Code also requires other notices and information be given to beneficiaries, but the settlor can modify or eliminate those requirements. Below are a few notable non-modifiable changes under the new ITC:
Read MoreAnnual Accountings
Under the ITC, a trustee must also send an accounting to each current beneficiary of a trust at least annually, and to all beneficiaries after a trust terminates. This change does not apply to trusts that were irrevocable prior to 2020 and trustees of revocable trusts who began to act before 2020.
Creditor’s Ability to Reach Trust Assets
Under the ITC, certain creditors may be able to reach trust assets more easily depending on whether a beneficiary has a current right of withdrawal or future right of withdrawal over trust assets. This is an important change from prior law. Please contact us if you are concerned that a beneficiary of your trust may have creditor issues.
Delegation to Agent
The ITC makes it easier for a trustee to delegate discretionary powers to an agent. The trustee must exercise reasonable care, skill and caution in selecting the agent and has a duty to periodically review the agent’s actions to ensure compliance with the trust terms.
Time to Contest
The ITC shortens the limitations period for a beneficiary to bring a claim against the trustee from three years to two years after the date on which the beneficiary receives the information necessary to make a claim. This change applies to trusts that become irrevocable after January 1, 2020, or trustees who begin to act after that date. The ITC also creates a new limitations period for actions to contest the validity of a trust that is revocable upon the settlor’s death. The contest must be commenced within the earlier of two years after the settlor’s death, or six months from the date the trustee sends notice of the trust to the beneficiaries.
The above list is only a brief overview of notable changes under the ITC. The ITC will have a significant impact on how Illinois trusts are administered. Please contact a member of our Private Client, Trusts and Estates team to review how the new ITC may impact your estate plan.
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