HB4662 Summary

• Amends the Trust and Trustees Act by adding Section 16.4 to allow authorized trustees to distribute trust principal to a second trust without settlor or beneficiary consent, subject to specific conditions and restrictions.

• Trustees with absolute discretion over distributions may create a second trust for current beneficiaries and successor/remainder beneficiaries, and may grant powers of appointment to beneficiaries if they could receive principal outright under the original trust terms.

• Trustees without absolute discretion may distribute to a second trust only if current beneficiaries, successor beneficiaries, and remainder beneficiaries are identical to those in the first trust, with exceptions for supplemental needs trusts for disabled beneficiaries.

• Requires trustees to provide written notice to legally competent beneficiaries with a 60-day objection period; if beneficiaries object, either party may petition the court to approve, modify, or deny the distribution, with the trustee bearing the burden of proof that distribution furthers trust purposes.

• Prohibits distributions that reduce mandatory income/principal rights, eliminate trustee removal provisions, or violate federal tax requirements regarding annual exclusions, marital deductions, charitable deductions, or S-corporation shareholder rules.