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Using Virtual Representation Agreements To Avoid Litigation

January 20, 2012 | Comments: 0 | Views: 154

Sometimes there can be a legitimate question regarding the manner in which a trust is to be administered. The terms of the trust may not provide guidance regarding how to proceed regarding a particular situation. Under these circumstances, trustees or beneficiaries in the past may have had to seek a court order to allow them to proceed.

A new section was recently added to the Illinois Trusts and Trustees Act which allows for "virtual representation agreements" to be made regarding the administration of trusts without the need for court action. These are agreements between a trustee of a trust and the primary beneficiaries of the trust that can bind other beneficiaries who would receive a distribution second in line only if the primary beneficiary died before the assets were to be distributed. The interests of all beneficiaries under the trust must be substantially identical.

The main benefit of this statute is that it allows a trustee, beneficiaries and remaindermen to execute agreements without going to court and without the need to appoint guardians ad litem for beneficiaries. These agreements can be used to settle ambiguities or construe certain provisions in the trust document. They can also be used to make decisions about the powers or duties of the trustee and many other issues that may arise in the course of trust administration. These agreements promote accord and consensus among beneficiaries without having to get court approval which can be costly in terms of both time and money.

In order for an agreement to be valid, all primary beneficiaries must be both adults and not incapacitated, that is, they must be legally competent to make decisions. It should also be emphasized that the trustee must be a party to the agreement, not just the beneficiaries.

There are some limitations on the use of virtual representation agreements. While matters of trust administration may be settled by agreement, a virtual representation agreement may not be used to change the terms of a trust.

Virtual representation agreements can serve to resolve a variety of issues relating to trust administration. Interested persons should consult an attorney to find out more about how virtual representation agreements can benefit them.

This article is intended to present general information for educational purposes, is not legal advice and should not be relied upon in connection with any particular matter. The reader is advised to immediately retain their own separate legal counsel with respect to any specific legal issue. Rights to bring a claim will expire through the passage of time by the applicable statute of limitations.

Ralph E. Elliott practices law at Law Offices of Ralph E. Elliott, A Professional Corporation which is comprised of Lawyers in Freeport, Illinois who have over 34 years of experience including an Estate Planning, Elder Law, Business and Estate And Trust Administration practice. The firm is situated at 1005 W. Loras Drive, Freeport, IL 61032 which serves business, individuals and the agriculture community in Northwest Illinois. ©Law Offices of Ralph E. Elliott, A Professional Corporation 2012.

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