Illinois Small Trust Termination Legislation

The following is from Helen W. Gunnarsson, Small-trust-termination amendment gets mixed reviews, 95 Ill. B.J. 624 (2007).

With the governor’s signature on SB 531, the trustee of a trust having a market value of less than $100,000 may, under certain conditions, terminate the trust and distribute its assets to the income beneficiaries if the trustee determines that the costs of continuing the trust will hamper the trust’s purpose. The new act, PA 95-0605, amends section 4 of the Trusts and Trustees Act, 760 ILCS 5/1 et seq, and adds new section 4.26. Its provisions are effective June 1, 2008. ***

Some attorneys are concerned that the new bill may defeat the settlor’s intent by failing to provide for the remainder beneficiaries and propose the following solution: 

For example, an amendment could provide that actuarial principles should govern the trust’s liquidation, with the income beneficiaries’ life expectancy used to calculate the present value of their interest, and the remainder to be distributed to the remainder beneficiaries.