Being a trustee means managing someone’s estate after they die. But what does that really mean? The information you are provided may not clearly define the limits or expectations of your role.
An experienced estate planning attorney can describe your legal and financial obligations as trustee, as well as the consequences for falling short. It’s important to understand your role as it carries real legal implications.
What Trusts Are, and Where Illinois Trust Law Comes From
Trusts are tools for passing the proceeds of an estate, including property, financial assets, and heirlooms, to beneficiaries. Trustees are given rights and responsibilities for shepherding the assets to their intended recipients.
Illinois trustees answer to the Illinois Trust Code, which took effect January 1, 2020, replacing the older Trusts and Trustees Act. The date a trust became irrevocable matters because some may still be partly governed by the older act.
The Core Duties Every Trustee Owes
Every trustee in Illinois has the same essential duties, including:
- Administering the trust in good faith and in line with its terms and purpose
- Investing prudently and diversifying trust assets
- Administering the trust for the beneficiaries’ benefit, not their own
- A duty of impartiality to beneficiaries who receive their portions early and those who inherit what’s left later
- Record keeping that must include adequate records of everything done in the trust administration
- Taking reasonable steps to pursue and defend claims involving the trust
Those with investment duties have additional (discretionary) responsibilities:
- Weighing environmental, social, and governance factors when making investment decisions
- Taking into account the sentimental or emotional value of an asset, which can mean retaining an item like a family home, even if selling it would be the more lucrative action to take.
Illinois-Specific Notice and Accounting Rules
Unlike many other states, Illinois has specific requirements for trustees of trusts that became irrevocable after January 1, 2020. Trustees of impacted trusts must notify each qualified beneficiary within 90 days of a trust becoming irrevocable and must provide annual accounting to beneficiaries.
Trusts that became irrevocable before 2020 require trustees to provide annual accountings to beneficiaries, along with records of receipts, disbursements, and a current inventory. These notice and accounting mechanics are the only pieces that shift based on the trust’s date. The core duties stated above apply to every Illinois trustee regardless of when the trust became irrevocable.
What Happens If a Trustee Falls Short
Trustees are usually compensated for their roles. The trust document may set the trustee’s compensation, but if the document is silent, Illinois law allows “reasonable” compensation. A court can adjust even trust-specified compensation if a trustee’s actual workload turns out to be very different from what the trust anticipated.
When a trustee does not meet the obligations required, the courts may respond. A beneficiary can ask a court to compel the trustee to:
- perform their required duties
- order an accounting
- reduce or deny the trustee’s compensation
- suspend or remove the trustee
- require the trustee to personally repay the trust for losses caused by a breach
Beneficiaries have a limited window to bring claims: as little as two years from when they receive adequate disclosure for trusts under the new code. Claims of breaches against trustees must be made within a five-year period. If a trustee never adequately discloses a matter, beneficiaries have an outer window of five years from events such as the trustee’s removal, resignation, or death, or the termination of the trust, to bring a claim. For trusts that became irrevocable before 2020, the window is three years from the date a beneficiary receives a current account, rather than two.
Understanding Trustee Obligations and Getting Help When Needed
Trust administration is full of state-specific deadlines and rules that don’t always match what a trustee might expect. An Illinois estate planning attorney from Legacy & Life Law Firm can help a new trustee figure out which rules apply to a given trust, meet notice and accounting deadlines, and administer the trust in a way that protects both the beneficiaries and the trustee personally. If you’ve recently been named trustee of an Illinois trust, it’s worth having the conversation early, before a missed deadline becomes a bigger problem. Call for a consultation today.