Illinois Transfer On Death Instruments (TODI) For Residential Real Estate

Illinois, as of January 1, 2012, provides an easy tool for transferring ownership of residential real estate at the death of the owner to another individual or to a trust, business, charity and other entities—the Transfer on Death Instrument or TODI. An owner of residential real estate may designate the future owner of the property in a written document which is signed by the owner and witnessed by 2 credible witnesses whose signatures along with the owner’s are notarized. The document must then be recorded before the owner’s death with the recorder of deeds in the county in which the real estate is located. Only an attorney or the owner of the real estate may prepare a TODI.

The benefits of a TODI are significant:

  1. The cost of a TODI is less expensive to have prepared than a Will or Trust. There are no ongoing fees to maintain the TODI;
  2. The TODI avoids probate at the death of the owner—only a death certificate and a Notice of Death Affidavit is required to transfer ownership to the designated person or entity;
  3. A TODI is always revocable by the owner.

Although relatively inexpensive and simple to establish, a TODI may not be appropriate in many circumstances, such as:

  1. A TODI doesn’t provide any creditor protection if the owner or designated death owners were to be sued because of an auto accident;
  2. The TODI option may not be a good choice if any of the designated beneficiaries are minors when the owner dies;
  3. The TODI option would probably not be the best plan if any of the designated beneficiaries are spendthrifts or have tax liens or judgments against them (instead, a trust might make sense, where such beneficiary’s share is held in trust, so that the spendthrift’s creditors can’t access it and the spendthrift won’t spend their inheritance up quickly);
  4. The TODI option is not the best plan if any of the designated beneficiaries are receiving Medicaid benefits or are on SSI. A Special Needs Trust would need to be established for these beneficiaries;
  5. The TODI option might not be a good choice in a family where there is conflict among the designated beneficiaries or one of them is very unreasonable and would be a big problem to work with in maintaining and selling the real estate. In such a case it might make sense to have one or two persons in charge as executors or trustees to deal with the sale of the real estate and the disbursement of the sales proceeds; and
  6. A TODI doesn’t transfer ownership of any personal property in the real estate such as major appliances and other items in the home (washer, dryer, stove, refrigerator, freezer, curtains/drapes, etc.).

An owner cannot change the TODI except by signing and recording a revocation of the TODI with the recorder of deeds or by signing and recording a new TODI with the recorder of deeds.

When used in the appropriate circumstances a TODI can save a family considerable expense in estate administration and streamline the process of transferring title to residential real estate after the death of the owner.

This information is not to be considered legal advice. If you have questions about it, please contact us.

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