The proposed Illinois Trust Act punctures healthy trust administration and so poses a real danger to Seniors.
PART 2: The disastrous impact of the proposed law on aging senior beneficiaries.
Executive Summary: The proposed law eviscerates protections for trust beneficiaries who are aging seniors.
There are three defects in the proposed law which combine as a powerful force against these beneficiaries. Under the proposed law:
- Trusts don’t have to benefit their beneficiaries.
- Trustees owe no loyalty to their beneficiaries.
- Trustees have no duty to administer trusts aligned with, or even conscious of, the interests of their beneficiaries.
The proposed law comes in the guise of bringing the Uniform Trust Code to Illinois. That model Code is arguably beneficiary-centric. However, in their proposed revision, the Illinois drafters have swung the pendulum much too far against beneficiaries.
In my first article, I discussed the details of the relevant parts of the proposed law, and why they don’t work. Key points include:
- The proposed law erases the rule that beneficiaries must benefit from their trusts, despite the fact that providing a benefit to the beneficiary is a basic premise of trusts. That’s why they call the person a “beneficiary”!
- The proposed law strengthens the ability of trustees to ignore beneficiaries with impunity. If beneficiaries don’t matter, they will be abused.
In other words, when driving this new statute, trusts are likely to injure the beneficiaries.
OVERVIEW: This series of articles addresses one set of the proposed changes out of the pending legislation for Illinois to adopt the model Uniform Trust Code (“UTC”). While this author might suggest other changes to the UTC, the focus in these articles is on the revision that is pending in Springfield.
Specifically, these articles focus on the proposed law’s deletion from the UTC of the idea that a beneficiary must benefit the trust. This idea is fundamental to trusts. And so, its deletion is a radical departure.
In my first article, I detailed the relevant parts of the proposed law, and how it deviates from the model law and, more importantly, from basic trust administration. Click HERE to review that article.
In this article, I look at how the proposed deletions impact one class of family trust beneficiaries, namely aging seniors. In looking more closely at this groups of beneficiaries, the reader will hopefully also understand the potentially devastating impact of the proposed legislation generally.
My opinion is shaped by my 30 plus years of service as an independent individual professional trustee, including considerable time helping families over trust’s that are broken. Trusts stop working for many reasons. Oftentimes they fall apart because of trustee’s who are indifferent or worse to the beneficiaries.
Like other professional trustees, I stand to gain considerably from this change in the law because the law makes it harder for beneficiaries to challenge their trustees. Contrary to that financial incentive, I find the proposed change abhorrent because it works against the basic premise that a trust should be administered for the good of the family, not the good of the trustee.
The Proposed Law Allows Trustees to Ignore the Needs and Wants of Aging Beneficiaries.
Trusts are often active during a period of disability of the grantor, and also after the death of the aging grantor to attend to a similarly senior spouse. Too often, the surviving spouse is often all the more spent — and vulnerable — for having tended to the deceased.
Sometimes these individuals are aging alone — what the Chicago Tribune and others calls “elder orphans.” These beneficiaries have no one other than their fiduciaries to make sure they are taken care of, and they are vulnerable to caring trust administration.
Despite their vulnerable condition and increased need of these trust beneficiaries, the proposed law imposes no duty for the trustee to attend to their wants and needs!
A few examples of problems under the proposed law,
- If these seniors want a particular care manager or care giver, the trustee can deny them and choose another provider of their own choice, or no provider at all!
- If these seniors prefer to age in place, and not be transferred to a facility, the trustee can refuse to pay for home care or assistance without fear of being second-guessed, and so cause the seniors to have to move out of their home and into facilities.
- If these seniors want to stay involved and review their personal bills and payments weekly or monthly, the trustee is under no obligation to supply that information on the beneficiary’s proposed frequency, other than a once a year accounting.
- If these seniors would benefit from certain remodeling of their home to make it more accessible, the trustee can refuse to pay for that remodeling.
In fact, under the proposed law, the trustee is not obligated to talk with the aging beneficiaries or give any consideration whatsoever to what these seniors need or want.
Is this what you want for your beloved aging family member?
Curiously, the proposed law arguably requires the trustee to pay attention to aging beneficiaries ONLY IF those beneficiaries are also the trusts’ grantors, that is, if they are the beneficiaries of their own trust that they created. Under his scenario, trustees might owe a duty of loyalty to these combination grantors/beneficiaries and so could be required to administer trusts to their benefit. This scenario demonstrates part of the perversity of the law, because this law treats aging beneficiaries far differently depending on if they were the grantors! The trustees would be free to ignore the surviving spouses who did not fund their trusts.
Leaving aging beneficiaries without legal standing is something society doesn’t even inflict on the worst criminal defendants. Even those criminals get their day in court. In other words, this proposed law treats aging trust beneficiaries worse than accused murderers.
Please join me in stopping this misguided proposal from becoming law in the state of Illinois.