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91_HB4276
LRB9112233JSpc
1 AN ACT concerning distribution of trust income and
2 principal.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Principal and Income Act is amended by
6 adding Section 13.5 as follows:
7 (760 ILCS 15/13.5 new)
8 Sec. 13.5. Underproductive marketable property.
9 (a) In any calendar year, if a trust does not yield a
10 net income of at least 4% of the value of the total
11 marketable principal of the trust, the trustee shall pay to
12 the income beneficiary an amount equal to the excess of 4% of
13 the value of the marketable principal, over the net income
14 earned by the trust (from both marketable and non-marketable
15 principal) in the year. The marketable principal shall be
16 valued at the close of the last business day of the preceding
17 calendar year, with no accrual of interest or other periodic
18 payments.
19 (b) This Section shall apply only if the trustee elects
20 to have it apply to the trust. The trustee may revoke the
21 election, and make the election again, at any time. The
22 trustee has no duty to inform beneficiaries about the
23 availability of the election, and the trustee shall not be
24 liable for making or not making the election.
25 (c) The marketable principal of a trust is (i) cash and
26 moneys held at financial institutions, (ii) securities
27 (including mutual funds) for which market quotations are
28 readily available, and (iii) interests in common trust funds.
29 (d) In determining the amount to be paid to the income
30 beneficiary under this Section, the trustee shall prorate the
31 amount on a daily basis for a short year and for a year in
-2- LRB9112233JSpc
1 which the income interest terminates.
2 (e) This Section does not apply:
3 (A) to a charitable remainder trust under Internal
4 Revenue Code section 664 or 642(c)(2) or to a pooled
5 income fund under Internal Revenue Code section
6 642(c)(5);
7 (B) if possessing or exercising the power to make
8 the election would cause an individual to be treated as
9 the owner of all or part of the trust for income tax
10 purposes, and the individual would not be treated as the
11 owner if the trustee did not possess the power to make
12 the election;
13 (C) if possessing or exercising the power to make
14 the election would cause all or part of the trust assets
15 to be included for estate tax purposes in the estate of
16 an individual who has the power to remove a trustee or
17 appoint a trustee, or both, and the assets would not be
18 included in the estate of the individual if the trustee
19 did not possess the power to make the election; or
20 (D) if the trustee is a beneficiary of the trust.
21 However, if paragraph (B), (C), or (D) applies to a
22 trustee and there is more than one trustee, a co-trustee to
23 whom the provision does not apply may make the election
24 unless the exercise of the power by the remaining trustee or
25 trustees is not permitted by the trust.
26 (f) A trust that limits the power of a trustee to make
27 an adjustment between principal and income does not affect
28 the application of this Section, unless the trust makes
29 specific reference to this Section.
30 Section 99. Effective date. This Section takes effect
31 January 1, 2001.