How Transfer on Death Instruments Work in Illinois

When it comes to estate planning, many people want to avoid probate and ensure that their assets pass seamlessly to their beneficiaries. One tool available in Illinois for real estate owners is the Transfer on Death Instrument (TODI). This document allows a property owner to name a beneficiary who will automatically inherit the property upon their passing—without the need for probate.

What Is a Transfer on Death Instrument (TODI)?

A Transfer on Death Instrument (TODI) is a legal document that allows real estate in Illinois to transfer directly to a named beneficiary upon the owner’s death. This is similar to how a payable-on-death (POD) designation works for bank accounts.

The key advantage of a TODI is that it bypasses probate, meaning the beneficiary receives the property faster and with less legal hassle.

TODIs became available in Illinois through the Illinois Residential Real Property Transfer on Death Instrument Act (755 ILCS 27/1 et seq.), which became effective on January 1, 2012. This law allows property owners to name a beneficiary who will receive ownership of the property without court intervention.

How Does a TODI Work?

A TODI functions similarly to a beneficiary designation on a financial account. The process generally works as follows:

1. Property Owner Executes a TODI

   • The property owner (called the transferor) completes a Transfer on Death Instrument that designates one or more beneficiaries.

   • The TODI must comply with Illinois law, including being in writing, signed by the property owner, and notarized.

   • It must also be witnessed by at least two credible witnesses.

2. Recording the TODI

   • The TODI must be recorded with the Recorder of Deeds in the county where the property is located before the transferor’s death.

   • Failure to record the TODI makes it legally ineffective.

3. Revocation or Changes

   • A TODI can be revoked or changed at any time before the property owner’s death.

   • Revocation must be done by executing a new TODI or by filing an express revocation document with the county recorder.

   • A will cannot revoke a TODI—changes must be made through a new TODI.

4. Transfer Upon Death

   • Upon the death of the transferor, the named beneficiary automatically becomes the legal owner of the property.

   • The beneficiary must record an Affidavit of Death and comply with any required tax filings to officially update the title.

Benefits of Using a TODI in Illinois

A TODI offers multiple advantages for Illinois property owners who want a simple and efficient way to transfer real estate:

✅ Avoids Probate

One of the biggest benefits of a TODI is that it allows property to pass outside of probate, which can be a lengthy and expensive process.

✅ Retains Full Control During Life

Unlike an irrevocable trust or a gift, a TODI allows the owner to retain full ownership and control over the propertywhile alive. The owner can sell, mortgage, or change the beneficiary at any time.

✅ Simplifies Estate Administration

Since the property automatically transfers to the beneficiary upon death, there’s no need for court involvement, saving time and money for heirs.

✅ Flexible and Revocable

Unlike some estate planning tools, a TODI is completely revocable as long as the owner is alive. If circumstances change, the owner can modify or revoke the TODI at any time.

✅ No Immediate Tax Implications

Executing a TODI does not trigger gift tax or property tax reassessment because ownership remains with the transferor during their lifetime.

Limitations and Considerations

While a TODI can be a powerful estate planning tool, it’s important to be aware of its limitations:

❌ Applies Only to Residential Real Estate

Illinois law currently limits TODIs to residential real estate, meaning commercial properties and certain other types of property do not qualify.

❌ Subject to Debts and Liens

If the transferor has outstanding debts or a mortgage on the property, those obligations transfer to the beneficiary. The property is not protected from creditors.

❌ Not Ideal for Complex Family Situations

If there are multiple heirs, a trust may be a better option than a TODI to prevent conflicts and ensure fair distribution of assets.

❌ Must Be Properly Executed and Recorded

A TODI must be signed, witnessed, notarized, and recorded to be valid. If any steps are skipped, the TODI will be invalid, and the property may go through probate.

How to Create a TODI in Illinois

If you are considering using a TODI as part of your estate plan, follow these steps:

1. Consult an Estate Planning Attorney

   • While Illinois provides statutory forms for TODIs, it’s best to work with an attorney to ensure compliance with the law and alignment with your overall estate plan.

2. Prepare the TODI

   • Draft a Transfer on Death Instrument that names a beneficiary and meets all legal requirements.

3. Sign, Witness, and Notarize

   • Have the document signed by the property owner in the presence of two witnesses and a notary public.

4. Record with the County Recorder

   • The TODI must be recorded in the same county where the property is located before the owner’s death.

5. Keep a Copy and Inform Beneficiaries

   • Store a copy of the recorded TODI with other estate planning documents and inform your beneficiary of its existence.

A Transfer on Death Instrument (TODI) is a useful and cost-effective way for Illinois property owners to ensure their real estate transfers seamlessly to a chosen beneficiary without probate. However, it must be properly executed, recorded, and maintained to be valid.

For those with complex estate plans, multiple properties, or concerns about creditors, a trust may be a better solution. Consulting with an experienced estate planning attorney can help determine the best approach for your individual situation.

If you need assistance setting up a TODI or reviewing your estate plan, Illinois Estate Law can help! Contact us today to ensure your property passes smoothly to your loved ones.