Illinois Compiled Statutes 205 ILCS 620/2-8 – Collateralizing fiduciary assets
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(a) A corporate fiduciary shall not be required and shall not have the power to collateralize or secure fiduciary funds except as provided in this Section.
(b) All funds, both principal and income, deposited with or held in a fiduciary capacity by any corporate fiduciary awaiting investment or distribution, and not otherwise subject to direction regarding investment or non-investment, shall to the extent reasonable under existing circumstances, be prudently invested for the beneficiaries at a rate of return commensurate with that available on trust quality investments.
(c) Funds, both principal and income awaiting investment or distribution, may be deposited in deposit accounts or other investment vehicles of the corporate fiduciary, or of any affiliate of the corporate fiduciary; and funds, both principal and income awaiting investment or distribution which need not be invested hereunder for the beneficiaries may be commingled with the corporate fiduciary’s own funds and used by the corporate fiduciary in the conduct of its business, provided that in either case the following apply:
(1) The corporate fiduciary or, in the case of the
(b) All funds, both principal and income, deposited with or held in a fiduciary capacity by any corporate fiduciary awaiting investment or distribution, and not otherwise subject to direction regarding investment or non-investment, shall to the extent reasonable under existing circumstances, be prudently invested for the beneficiaries at a rate of return commensurate with that available on trust quality investments.
Terms Used In Illinois Compiled Statutes 205 ILCS 620/2-8
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Fiduciary: A trustee, executor, or administrator.
- Lien: A claim against real or personal property in satisfaction of a debt.
- State: when applied to different parts of the United States, may be construed to include the District of Columbia and the several territories, and the words "United States" may be construed to include the said district and territories. See Illinois Compiled Statutes 5 ILCS 70/1.14
(c) Funds, both principal and income awaiting investment or distribution, may be deposited in deposit accounts or other investment vehicles of the corporate fiduciary, or of any affiliate of the corporate fiduciary; and funds, both principal and income awaiting investment or distribution which need not be invested hereunder for the beneficiaries may be commingled with the corporate fiduciary’s own funds and used by the corporate fiduciary in the conduct of its business, provided that in either case the following apply:
(1) The corporate fiduciary or, in the case of the
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deposit in an affiliate, such affiliate shall set aside in the corporate fiduciary or affiliate, as the case may be, as collateral, securities of the classes in which corporate fiduciaries are authorized to invest trust funds under the laws of the State of Illinois.
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(2) The market value of the collateral may not be
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less than 100% of the amount commingled or deposited.
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(3) No collateral shall be required or authorized if
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the deposit is made solely at the direction and determination of the settlor, beneficiary or other person, other than the corporate fiduciary, having the right to direct investment of funds.
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(4) No collateral shall be required or authorized
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with respect to any part of such deposit which is insured by the Federal Deposit Insurance Corporation.
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(d) Funds shall not be held commingled and uninvested or undistributed for an account any longer than is reasonable under existing circumstances for the proper management of the account.
(e) The collateralization required in this Section is not required or authorized if the corporate fiduciary or affiliate has in force a surety bond meeting the requirements of this Section if it is in a form approved by the Commissioner and if it indemnifies the owners, settlors, or beneficiaries of funds held in a fiduciary capacity against loss due to the failure of the corporate fiduciary or affiliate and is issued by a licensed insurance company authorized to transact business in the State that has been approved by the Commissioner for the purpose of issuing surety bonds under this Section. A corporate fiduciary or affiliate may also satisfy the requirements of this Section by a combination of a surety bond and collateralization as provided in this Section.
(f) In the event of the failure of the corporate fiduciary or affiliate in which the corporate fiduciary has made a deposit or commingled funds, the owners of the fiduciary funds shall have a first lien, to the extent of their interest in such funds, on the cash and securities used as collateral hereunder or the surety bond in addition to their claim against the estate of the corporate fiduciary.
(e) The collateralization required in this Section is not required or authorized if the corporate fiduciary or affiliate has in force a surety bond meeting the requirements of this Section if it is in a form approved by the Commissioner and if it indemnifies the owners, settlors, or beneficiaries of funds held in a fiduciary capacity against loss due to the failure of the corporate fiduciary or affiliate and is issued by a licensed insurance company authorized to transact business in the State that has been approved by the Commissioner for the purpose of issuing surety bonds under this Section. A corporate fiduciary or affiliate may also satisfy the requirements of this Section by a combination of a surety bond and collateralization as provided in this Section.
(f) In the event of the failure of the corporate fiduciary or affiliate in which the corporate fiduciary has made a deposit or commingled funds, the owners of the fiduciary funds shall have a first lien, to the extent of their interest in such funds, on the cash and securities used as collateral hereunder or the surety bond in addition to their claim against the estate of the corporate fiduciary.