Illinois Trustee powers

The general powers

A trustee, without authorization by the court, may exercise the powers conferred by the terms of the trust and, except as the terms limit them, all powers over the trust property that an unmarried owner with legal capacity has over individually owned property, any other powers appropriate to achieve the proper investment, management and distribution of the trust property, and the other powers the Code confers (760 ILCS 3/815). The exercise of every power is subject to the fiduciary duties the Code prescribes.

The specific powers

Without limiting the general powers, 760 ILCS 3/816 lists thirty-eight specific ones, among them:

• To collect trust property and accept or reject additions to the trust.
• To acquire or sell property, for cash or on credit, at public or private sale, and to exchange, partition or otherwise change the character of property.
• To deposit trust money in a financial institution, to borrow and to encumber trust property.
• To continue a business, exercise an owner's rights over securities, and manage, improve, lease and insure real property.
• To pay taxes, assessments, the trustee's reasonable compensation and the expenses of administration, and to make tax elections.
• To engage attorneys, accountants, investment advisors, appraisers and other agents, and pay their reasonable compensation.
• To make a distribution for an incapacitated beneficiary in the ways the section lists, to divide in kind, to wind up the trust on termination, and to rely on affidavits and certificates reasonably believed genuine.

Discretion, and the standard that governs it

However broad the discretion the instrument grants — "absolute", "sole" or "uncontrolled" — a fiduciary exercises a discretionary power in good faith and in accordance with the terms and purposes of the instrument (760 ILCS 3/814). Unless the instrument expressly says otherwise, a beneficiary-trustee other than a settlor may make discretionary distributions for the trustee's own benefit only under an ascertainable standard, and may not use them to satisfy the trustee's own support obligation; a creditor of a beneficiary may not compel a discretionary distribution (760 ILCS 3/504).

Delegation and co-trustees

A trustee may delegate duties and powers a prudent trustee of comparable skills could properly delegate, using reasonable care in selecting the agent, setting the terms and reviewing the agent's performance (760 ILCS 3/807), after inquiring into an investment agent's experience, licensing and financial stability (760 ILCS 3/909). Co-trustees who cannot agree may act by majority after written notice to each other co-trustee, and a trustee may delegate a function to a co-trustee (760 ILCS 3/703).

Directed trusts

Where the instrument names an investment trust advisor, a distribution trust advisor or a trust protector, that directing party is a fiduciary whose powers, exercised in its sole discretion, bind the trust; the excluded fiduciary acts in accordance with the direction, has no duty to monitor, review, inquire, investigate, recommend, evaluate or warn about it, and is not liable for a loss from following it except for the excluded fiduciary's own willful misconduct (760 ILCS 3/808). The trust's own terms say who holds which power.

Decanting: distributing to a second trust

Under the Trust Decanting Law, an authorized fiduciary may exercise the decanting power without consent or court approval, but gives notice in a record of the intended exercise — the manner, the proposed effective date, the first-trust instrument and every second-trust instrument — not later than 60 days before the exercise, to each living settlor, each qualified beneficiary, each holder of a presently exercisable power of appointment, each person who may remove or replace the fiduciary, every other fiduciary of the first trust, each fiduciary of the second trust and, where there is a charitable interest, the Attorney General (760 ILCS 3/1207). The notice period ends 59 days after notice is given unless everyone entitled to notice waives it in a signed record.

Dealing with banks and title companies: the certification of trust

Instead of the trust instrument, a trustee may furnish a person other than a beneficiary a certification of trust stating that the trust exists and the date the instrument was executed, the settlor, the currently acting trustee and address, the trustee's powers, whether the trust is revocable or amendable and who may revoke or amend it, the co-trustees' signing authority, the trust's taxpayer identification number and the manner of taking title (760 ILCS 3/1013). It is signed by one or more trustees, may be required to be acknowledged, and states that the trust has not been revoked, modified or amended in a way that would make it incorrect. A person who relies on it in good faith is protected; one who demands the instrument without good faith is liable for damages. The section prints a sample form.

When a licensed Illinois attorney is the right next call

TrusteeClear explains the powers; it does not say whether a particular sale, loan or distribution fits the trust's terms. A licensed Illinois attorney of your choosing can advise before a significant transaction, a decanting, or a question under a directed-trust provision.