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91_SB1690
LRB9111451DJcd
1 AN ACT to amend the Principal and Income Act by changing
2 Sections 6 and 14.
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 changing Sections 6 and 14 as follows:
7 (760 ILCS 15/6) (from Ch. 30, par. 506)
8 Sec. 6. Administration of a decedent's estate.
9 (a) Subject to subsection (b):,
10 (1) All expenses incurred in connection with the
11 settlement of a decedent's estate, including debts,
12 funeral expenses, disposition of remains, estate taxes,
13 family allowances, fees of attorneys, accountants,
14 fiduciaries, and representatives, and court costs shall
15 be charged against the principal of the estate.
16 (2) All other expenses incurred in connection with
17 the management of a decendent's estate, including fees of
18 attorneys, accountants, and fiduciaries, may be charged
19 against the principal or the income of the estate, or
20 partly against each; provided, however, that such
21 expenses may be charged against the income of an estate
22 in which an estate tax marital or charitable deduction is
23 claimed only to the extent that the payment of such
24 expenses will not cause a reduction or loss of such
25 deductions.
26 (b) After the death of a decedent and before
27 distribution, income from and expenses incurred in connection
28 with the assets of the decedent's estate, including assets
29 used to discharge liabilities, shall, subject to subsection
30 (a) with respect to the charging of expenses incurred in
31 connection with the settlement or management of the
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1 decedent's estate, be determined in accordance with the rules
2 applicable to a trustee under this Act and shall be allocated
3 as follows:
4 (1) to specific legatees, the income from the
5 property bequeathed to them, respectively, less property
6 taxes, ordinary repairs, interest and other expenses of
7 management and protection of the property, and an
8 appropriate portion of taxes imposed on all estate
9 income, excluding taxes on capital gains, which accrues
10 during the period of administration, and expenses in
11 excess of income to be charged against the property;
12 (2) to all other legatees, except as provided in
13 subsection (d), the balance of the income, less the
14 balance of property taxes, ordinary repairs, interest and
15 other expenses of management and protection of all
16 property from which the estate is entitled to income, and
17 taxes imposed on income, excluding taxes on capital
18 gains, which accrue during the period of administration,
19 in proportion to their respective interests from time to
20 time unpaid or undistributed in the principal of the
21 estate, computed on the basis of values as of the
22 decedent's death unless the estate is required to file a
23 Federal estate tax return and then on the basis of values
24 as finally determined for Federal estate tax purposes.
25 (c) Income received by a trustee under subsection (b)
26 shall be treated as income of the trust.
27 (d) A legatee (other than the testator's surviving
28 spouse) of a pecuniary legacy not in trust shall not be paid
29 interest on the legacy or be entitled to receive any part of
30 the income received by the representative during the period
31 of administration as income on the legacy. A legacy to the
32 testator's surviving spouse of a pecuniary amount shall carry
33 with it a proportionate part of the income of the estate from
34 the testator's death to the date of satisfaction determined
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1 in accordance with paragraph (2) of subsection (b).
2 (e) Except to the extent otherwise provided in paragraph
3 (7) of subsection (c) of Section 14, interest and penalties
4 on any tax shall be charged in the same manner as the tax.
5 (f) This Section governs the administration of a
6 decedent's estate whether settled by an executor or
7 administrator or by a trustee under a trust instrument and,
8 if by a trustee, whether the decedent is the person
9 establishing the trust or a beneficiary thereof; and the
10 references to representatives and to legacies shall be read
11 as applying to trustees and to distributions under a trust
12 instrument.
13 (Source: P.A. 83-1362; 87-714.)
14 (760 ILCS 15/14) (from Ch. 30, par. 514)
15 Sec. 14. Charges against income and principal.
16 (a) The following charges shall be made against income:
17 (1) ordinary expenses, other than compensation as
18 provided in paragraph (6) of this subsection (a),
19 incurred by the trustee in connection with the
20 administration or protection of the trust property,
21 including regularly recurring taxes assessed against any
22 portion of the principal, water rates, premiums on
23 insurance taken upon the interests of the income
24 beneficiary, remainderman, or trustee, interest paid by
25 the trustee (except interest on taxes as provided in
26 paragraph (7) of this subsection and paragraphs (5), (6),
27 and (7) of subsection (c)), ordinary repairs and
28 maintenance;
29 (2) (blank); a reasonable allowance for
30 depreciation on property which is subject to depreciation
31 under generally accepted accounting principles, but no
32 allowance shall be made for depreciation of any property
33 subject to a trust under an instrument executed before
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1 the effective date of this Act, or for depreciation of
2 that portion of any real property used by a beneficiary
3 as a residence; such allowance shall be charged only
4 against the income from the property subject to
5 depreciation and shall not accrue from year to year;
6 (3) one-half of court costs, attorney's fees and
7 other expenses and fees on any judicial accounting,
8 unless the court directs otherwise;
9 (4) court costs, attorney's fees and other expenses
10 and fees on other judicial proceedings if the matter
11 primarily concerns the income interest, unless the court
12 directs otherwise;
13 (5) special compensation and expenses of or
14 incurred by the trustee in connection with income;
15 (6) one-half of the regular compensation of the
16 trustee, attorney, investment counsel, custodian or
17 accountant, subject to paragraph (1) of subsection (c);
18 (7) any tax, including interest and penalties
19 thereon, levied upon receipts defined as income under
20 this Act or the trust instrument and payable by the
21 trustee;.
22 (8) one-half of the interest on all estate,
23 inheritance, and generation-skipping transfer taxes
24 apportioned to the trust and one-half of the interest on
25 any penalties on those taxes.
26 (a-5) A reasonable allowance for depreciation on
27 property that is subject to depreciation under generally
28 accepted accounting principles may be charged by the trustee,
29 but no allowance shall be made for depreciation of that
30 portion of any real property used by a beneficiary as a
31 residence. Such an allowance shall be charged only against
32 the income from the property subject to depreciation and
33 shall not accrue from year to year.
34 (b) If charges against income are of an unusual amount,
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1 the trustee may by means of reserves or other reasonable
2 means charge them over a reasonable period of time and
3 withhold from distribution sufficient sums to regularize
4 distributions.
5 (c) The following charges shall be made against
6 principal:
7 (1) one-half of the regular compensation of the
8 trustee, attorney, investment counsel, custodian or
9 accountant shall be paid out of principal, provided that,
10 if in the judgment of the trustee, the charging of a part
11 or all of that portion of such compensation to principal
12 is impracticable because of the lack of sufficient
13 principal cash and readily marketable intangible personal
14 property, or inadvisable because of the nature of the
15 assets, that part or all of such compensation shall be
16 paid out of income. The decision of the trustee to pay a
17 larger portion or all of such compensation out of income
18 shall be conclusive, and the income of the trust shall
19 not be entitled to reimbursement from principal at any
20 subsequent time or times;
21 (2) special compensation and expenses of or
22 incurred by the trustee in connection with principal,
23 trustee's compensation computed on principal as an
24 acceptance, distribution or termination fee, and, unless
25 the court directs otherwise, court costs, attorney's fees
26 and other expenses and fees in judicial proceedings
27 primarily concerning matters of principal or in any
28 action to construe the trust or protect it or the
29 property or assure the title to any trust property;
30 (3) charges not provided for in subsection (a),
31 including the cost of investing and reinvesting
32 principal, the payments on principal of an indebtedness
33 (including a mortgage amortized by periodic payments of
34 principal), and expenses for preparation of property for
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1 rental or sale;
2 (4) extraordinary repairs or expenses incurred in
3 making a capital improvement to principal, including
4 special assessments;
5 (4.5) costs and disbursements related to
6 environmental matters, including reclamation, assessing
7 environmental conditions, remedying and removing
8 environmental contamination, monitoring remedial
9 activities and the release of substances, preventing
10 future releases of substances, collecting amounts from
11 persons liable or potentially liable for the costs of
12 those activities, penalties imposed under environmental
13 laws or regulations and other payments made to comply
14 with those laws or regulations, statutory or common law
15 claims by third parties, and defending claims based on
16 environmental matters;
17 (5) any tax, including interest and penalties
18 thereon, levied upon profit, gain, or other receipts
19 allocated to principal notwithstanding denomination of
20 the tax as an income tax by the taxing authority;
21 (6) any tax, including interest and penalties
22 thereon, levied upon amounts not actually received by the
23 trustee before the date the tax is payable, including
24 extensions, notwithstanding the denomination of the tax
25 as an income tax by the taxing authority, except that if,
26 in the judgment of the trustee, the charging against
27 principal of part or all of the tax is impracticable
28 because of a lack of sufficient principal cash and
29 readily marketable intangible personal property or
30 inadvisable because of the nature of the assets that part
31 or all of the tax shall be charged against income. The
32 decision of the trustee to charge part or all of the tax
33 against income shall be conclusive, and the income of the
34 trust shall not be entitled to reimbursement from
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1 principal at any subsequent time or times. If any part
2 or all of the amount on which tax was previously paid and
3 charged against principal is later received by the
4 trustee and if the receipt is otherwise credited to
5 income, then when the amount is received the portion of
6 the tax previously paid and charged against principal
7 attributable to the amount so received shall be deducted
8 from the amount and credited to principal;
9 (7) all if an estate, inheritance, and or
10 generation-skipping transfer taxes and any penalties on
11 the taxes apportioned to the trust and one-half of the
12 interest on those taxes and penalties tax is levied in
13 respect of a trust in which both an income beneficiary
14 and a remainderman have an interest, any amount
15 apportioned to the trust, including interest and
16 penalties, even though the income beneficiary also has
17 rights in the principal, except that interest on any
18 portion of the tax deferred under a provision of the
19 statute imposing the tax shall be charged against income;
20 (8) a net loss in any fiscal or calendar year from
21 the operation of a business or an agricultural or farming
22 operation, to be repaid from income as available in the
23 succeeding year or years;
24 (9) monies paid for the purchase of options.
25 (Source: P.A. 82-390; 87-714.)
26 Section 99. Effective date. This Act takes effect upon
27 becoming law.