With legislation introduced this past January, Illinois could join those states which expressly authorize cemetery fiduciaries to take the unitrust election and make fixed distributions to cemeteries. Senate Bill No. 3207 proposes to amend Illinois’ Cemetery Care Act to add provisions which would define ‘total return distribution’ and thereby allow care fund trusts to make distributions between 3% and 5% of the trust value. To guard against a trust’s depletion, SB3207 would require the care fund trustee to adopt a written investment policy aimed at achieving growth and income. The bill also includes investment performance floors that could require the fixed distribution percentage to be decreased (or have the trust convert back to a net income distribution) if trust’s investment performance results in a 10% value decline.
Sensing that bill as introduced did not go far enough, an amendment has been proposed to expressly authorize small care fund trusts to be commingled within a master trust. Pursuant to a new Section 3.1, a care fund trustee would apply to the Illinois Comptroller’s Office to establish a master trust. As discussed in prior posts, the master trust concept is crucial to achieving investment diversification for small trust funds (a need for economies of scale). Without adequate diversification, small trust funds could not achieve the investment returns needed to avoid depletion of the trust. And as discussed in the previously linked post, few states have active cemetery associations. But Illinois is the exception to that rule. Since SB3207, as amended, touches all the bases, we would have to conclude the ICFHA is pushing to get this bill passed.