Trust Administration in Illinois

Trust administration is not probate

A trust is run under the Illinois Trust Code, 760 ILCS 3, and not the Probate Act. The trustee works from the trust document and the Code. The Code requires the trustee to administer the trust in good faith, in line with its purposes and its terms (760 ILCS 3/801). It also sets duties to inform and account that the trustee cannot ignore.

If you are still deciding whether a trust fits your family, read about the revocable living trust and will versus trust.

The first notice: 90 days

Section 813.1 says the trustee must notify each qualified beneficiary of three things:

1. the trust's existence
2. the beneficiary's right to request a complete copy of the trust instrument, or, if the trust says so, only the part that sets out the terms in which that beneficiary has an interest
3. whether the beneficiary has a right to receive or request trust accountings

A qualified beneficiary is a current beneficiary or a presumptive remainder beneficiary (760 ILCS 3/103). The notice is due within 90 days of the trust becoming irrevocable, or within 90 days of the trustee accepting the job if no trustee was acting. A new 90 day clock starts when the trustee learns of a new qualified beneficiary, or learns that a beneficiary gained or lost a representative.

Other notices the trustee owes

• Within 90 days after accepting the job, tell each qualified beneficiary of the acceptance and of the trustee's name, address and phone number.
• Tell qualified beneficiaries in advance if the trustee's pay, or the way it is figured, will change.
• Tell qualified beneficiaries if the trustee resigns.
• If a co-trustee dies, becomes incapacitated, is disqualified or is removed, a trustee who keeps acting must tell qualified beneficiaries within 90 days.
• Report a change in the trustee's address, phone number or other contact details within 90 days after the change takes effect.

These come from 813.1(d). A corporate trustee that succeeds another by merger gets limited relief in some cases, as the statute describes.

Accountings

The trustee must send a trust accounting at least once a year to all current beneficiaries and to all presumptive remainder beneficiaries. When the trust ends, a final accounting goes to every beneficiary entitled to a share of what is left (813.1(b)(2) to (4)). On the reasonable request of a qualified beneficiary, the trustee must promptly provide a complete copy of the trust instrument. The statute lets a trustee decide how to value an asset with no market price, such as a closely held business, and when to hire an appraiser.

A qualified beneficiary may waive the right to an accounting in writing, and may later withdraw that waiver for future accountings. A trustee can also ask a court to approve a current or final accounting.

Older trusts follow a different section

813.1 applies to trusts that became irrevocable after the Trust Code took effect, and to certain revocable trusts. Trusts that became irrevocable before then are covered by 813.2, which has its own annual account rule. If the trust is old, Jeff checks which section applies before anyone sends a notice.

A deadline to challenge a trust

A person who wants to contest a trust that was revocable at the settlor's death has a limited time. Under 760 ILCS 3/604, it is the earlier of two years after the settlor's death or, when the settlor's will leaves a legacy to the trust and the will is admitted to probate, the time to contest the will. For other trusts, it is six months after the trustee sends the person a copy of the trust and a notice that gives the trustee's name and address and states the six month period. The Probate Act repeats the first rule at 755 ILCS 5/8-1(f). Nine months after the settlor's death, a trustee may start distributing, with limits the statute spells out. For wills, see contesting a will.

Costs and good practice

The Code limits a trustee to costs that are reasonable in relation to the trust property and its purposes (760 ILCS 3/805) and tells the trustee to act as a prudent person would (3/804). Keep records of every payment and send notices in writing. See the page on executor duties for the court side of an estate when a will also has to be probated.

Reviewed by Jeff McCarthy, Attorney, Inspired Law Group, 136 E 9th St, Lockport, IL 60441.