2023 Illinois Compiled Statutes › Chapter 760 - TRUSTS AND FIDUCIARIES › 760 ILCS 3/ - Illinois Trust Code. › Article 9 - Illinois Prudent Investor Law; Life Insurance; Affiliated Investments

(760 ILCS 3/Art. 9 heading)
Article 9.  Illinois Prudent Investor Law; Life Insurance; Affiliated Investments.
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/900)
Sec. 900. Article title. This Article may be referred to as the Illinois Prudent Investor Law.
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/901)
Sec. 901. Prudent investor rule.
(a)  Except as otherwise provided in subsection (b), a trustee administering a trust has a duty to invest and manage the trust assets to comply with the prudent investor rule set forth in this Article.
(b)  The prudent investor rule, a default rule, may be expanded, restricted, eliminated, or otherwise altered by express terms of the trust.  A trustee is not liable to a beneficiary for the trustee's reasonable and good faith reliance on those express provisions.
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/902)
Sec. 902. Standard of care; portfolio strategy; risk and return objectives.
(a)  A  trustee has a duty to invest and manage trust assets as a prudent investor would, considering the purposes, terms, distribution requirements, and other circumstances of the trust.  This standard requires the  exercise of reasonable care, skill, and caution and applies not in isolation, but in the context of the trust portfolio as a whole and as a part of an overall investment strategy that incorporates risk and return objectives reasonably suitable to the trust.
(b)  A trustee has a duty to pursue an investment strategy that considers both the reasonable production of income and safety of capital, consistent with the trustee's duty of impartiality and the purposes of the trust. Whether investments are underproductive or overproductive of income shall be judged by the portfolio as a whole and not as to any particular asset.
(c)  The circumstances that a trustee may consider in making investment decisions include, without limitation:
(1)  the general economic conditions;
(2)  the possible effect of inflation or deflation;
(3)  the expected tax consequences of investment     decisions or strategies;
(4)  the role each investment or course of action     plays within the overall portfolio;
(5)  the expected total return including both income     yield and appreciation of capital;
(6)  the duty to incur only reasonable and     appropriate costs;
(7)   environmental and social considerations;
(8) governance policies of the entities in which the     trustee may invest;
(9)  needs for liquidity, regularity of income, and     preservation or appreciation of capital; and
(10)  an asset's special relationship or value, if     any, to the purpose of the trust or to one or more of the beneficiaries.
(d)  In addition to the circumstances listed in subsection (c), a trustee may, but need not, consider related trusts and the assets of beneficiaries known to the trustee when making investment decisions.
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/903)
Sec. 903. Diversification. A trustee has a duty to diversify the investments of the trust unless, under the circumstances, the trustee reasonably believes it is in the interests of the beneficiaries and furthers the purposes of the trust not to diversify.
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/904)
Sec. 904. Duties at inception of trusteeship. A trustee has a duty, within a reasonable time after the acceptance of a trusteeship,  to review trust assets and to make and implement decisions concerning the retention and disposition of original preexisting investments, in order to conform to this Article. A trustee's decision to retain or dispose of an asset may properly be influenced by the asset's special relationship or value to the purposes of the trust or to some or all of the beneficiaries, consistent with the trustee's duty of impartiality.
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/905)
Sec. 905. Court action. Nothing in this Article abrogates or restricts the power of an appropriate court in proper cases to: (i) direct or permit the trustee to deviate from the terms of the trust; or (ii) to direct or permit the trustee to take, or to restrain the trustee from taking, any action regarding the making or retention of investments.
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/906)
Sec. 906. (Reserved).
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/907)
Sec. 907. (Reserved).
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/908)
Sec. 908. Reviewing compliance. No specific investment course of action is, taken alone, prudent or imprudent. The trustee may invest in every kind of property and type of investment, subject to this Article. A trustee's investment decisions and actions are to be judged in terms of the trustee's reasonable business judgment regarding the anticipated effect on the trust portfolio as a whole under the facts and circumstances prevailing at the time of the decision or action. This Article is a test of conduct and not of resulting performance.
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/909)
Sec. 909. Delegation of investment and management functions. Notwithstanding any other provision of this Code, before delegating any investment functions to an agent in accordance with subsection (b) of Section 807, a trustee shall conduct an inquiry into the experience, performance history, professional licensing or registration, if any, and financial stability of the investment agent.
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/910)
Sec. 910. Language invoking standard of Article. The following terms or comparable language in the investment powers and related provisions  of a trust instrument, unless otherwise limited or modified by that instrument, shall be construed as authorizing any investment or strategy permitted under this Article: "investments permissible by law for investment of trust funds", "legal investments", "authorized investments", "using the judgment and care under the circumstances then prevailing that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital", "prudent man rule", "prudent trustee rule", "prudent person rule", and "prudent investor rule".
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/911)
Sec. 911. (See Section 900 for short title.)
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/912)
Sec. 912. Application to existing trusts. The Sections of this Article that precede this Section apply to all existing and future trusts, but only as to actions or inactions occurring on or after January 1, 1992.
(Source: P.A. 101-48, eff. 1-1-20.)
(760 ILCS 3/913)
Sec. 913. Life insurance.
(a)  Notwithstanding any other provision, the duties of a trustee with respect to acquiring or retaining as a trust asset a contract of insurance upon the life of the settlor, upon the lives of the settlor and the settlor's spouse, or upon the life of any person for which the trustee has an insurable interest in accordance with Section 113, do not include any of the following duties:
(1)  to determine whether any contract of life     insurance in the trust, or to be acquired by the trust, is or remains a proper investment, including, without limitation, with respect to:
(A)  the type of insurance contract;
(B)  the quality of the insurance contract;
(C)  the quality of the insurance company;
or
(D)  the investments held within the insurance         contract;
(2)  to diversify the investment among different     policies or insurers, among available asset classes, or within an insurance contract;
(3)  to inquire about or investigate into the health     or financial condition of an insured;
(4)  to prevent the lapse of a life insurance     contract if the trust does not receive contributions or hold other readily marketable assets to pay the life insurance contract premiums; or
(5)  to exercise any policy options, rights, or     privileges available under any contract of life insurance in the trust, including any right to borrow the cash value or reserve of the policy, acquire a paid-up policy, or convert to a different policy.
(b)  The trustee is not liable to the beneficiaries of the trust, the beneficiaries of the contract of insurance, or to any other party for loss arising from the absence of these duties regarding insurance contracts under this Section.
(c)  This Section applies to an irrevocable trust created after the effective date of this Code or to a revocable trust that becomes irrevocable after the effective date of this Code.  This Section applies to a trust established before the effective date of this Code if the trustee of a trust described under this Section notifies the settlor in writing that, unless the settlor provides written notice to the contrary to the trustee within 90 days of the trustee's notice, this Section applies to the trust effective as of the date of the trustee's written notice.  This Section does not apply if, within 90 days of the trustee's notice, the settlor notifies the trustee in writing that this Section does not apply.  If the settlor is deceased, then the trustee shall give notice to all of the legally competent current beneficiaries, and this Section applies to the trust unless the majority of the beneficiaries notify the trustee to the contrary in writing within 90 days of the trustee's notice.
(Source: P.A. 101-48, eff. 1-1-20; 102-279, eff. 1-1-22; 102-558, eff. 8-20-21.)
(760 ILCS 3/914)
Sec. 914. Investments in affiliated investments; transactions with affiliates.
(a)  As used in this Section:
(1)  "Affiliate" means any corporation or other     entity that directly or indirectly is controlled by a financial institution acting in a fiduciary capacity, or is related to the  financial institution by shareholding or other means of common ownership and control.
(2)  "Affiliated investment" means an investment for     which the fiduciary or an affiliate of the fiduciary acts as advisor, administrator, distributor, placement agent, underwriter, broker, or in any other capacity for which the fiduciary or an affiliate of the fiduciary receives or has received compensation from the investment.
(3)  "Fiduciary capacity" includes an agent with     investment discretion to determine what securities or other assets to purchase or sell on behalf of a fiduciary account.
(b)  A financial institution acting in any fiduciary capacity may purchase any affiliated investment, including, but not limited to, insurance, equity derivatives, or securities underwritten or otherwise distributed by the financial institution or by an affiliate, through or directly from the financial institution or an affiliate or from a syndicate or selling group that includes the financial institution or an affiliate, if the purchase is otherwise prudent under the applicable fiduciary investment standard.
(c)  The compensation paid to a financial institution acting in any fiduciary capacity or an affiliate of the financial institution for any affiliated investment under this Section must be reasonable and may not be prohibited by the instrument governing the fiduciary relationship. The compensation for the affiliated investment may be in addition to the compensation that the financial institution is otherwise entitled to receive from the fiduciary account.
(d)  A financial institution shall disclose, at least annually:
(1)  any purchase of an affiliated investment     authorized by this Section, including all compensation paid or to be paid by the fiduciary account or to be received by an affiliate arising from the affiliated investment;
(2)  the capacities in which the financial     institution or an affiliate acts for the issuer of the securities or the provider of the products or services; and
(3)  that the financial institution or an affiliate     may have an interest in the affiliated investment.
(e)  The disclosure shall be given, in writing or electronically by any document prepared for an affiliated investment under federal or state securities laws or in a written summary that includes all compensation received or to be received by the financial institution or any affiliate and an explanation of the manner in which the compensation is calculated (either as a percentage of the assets invested or by some other formula or method), to each principal in an agency relationship and to all persons entitled to receive account statements of any other fiduciary account.
(f)  This Section applies to the purchase of securities made at the time of the initial offering of the securities or at any time thereafter.
(g)  A financial institution that has complied with the terms of this Section has full authority to administer an affiliated investment, including the authority to vote proxies on the affiliated investment.
(Source: P.A. 101-48, eff. 1-1-20.)