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91_SB1690eng SB1690 Engrossed 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 decedent'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 SB1690 Engrossed -2- LRB9111451DJcd 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 SB1690 Engrossed -3- LRB9111451DJcd 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 for30depreciation on property which is subject to depreciation31under generally accepted accounting principles, but no32allowance shall be made for depreciation of any property33subject to a trust under an instrument executed beforeSB1690 Engrossed -4- LRB9111451DJcd 1the effective date of this Act, or for depreciation of2that portion of any real property used by a beneficiary3as a residence; such allowance shall be charged only4against the income from the property subject to5depreciation 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, SB1690 Engrossed -5- LRB9111451DJcd 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 SB1690 Engrossed -6- LRB9111451DJcd 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 SB1690 Engrossed -7- LRB9111451DJcd 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) allif anestate, inheritance, andor10 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 penaltiestax is levied in13respect of a trust in which both an income beneficiary14and a remainderman have an interest, any amount15apportioned to the trust, including interest and16penalties, even though the income beneficiary also has17rights in the principal, except that interest on any18portion of the tax deferred under a provision of the19statute 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.