Illinois Estate Law

Table of contents

Article Summary

Transfer-on-Death Instruments (TODIs) allow Illinois homeowners to transfer residential real estate directly to beneficiaries without probate. This comprehensive guide explores how TODIs work, their advantages and limitations, legal requirements, and how they compare to trusts. Learn when a TODI is the right choice for your estate plan and the critical steps to ensure proper execution.

When planning your estate in Illinois, one of your primary concerns is likely ensuring that your home passes smoothly to your loved ones without the delays, costs, and public exposure of probate. For many Illinois homeowners, a Transfer-on-Death Instrument (TODI) offers an elegant and cost-effective solution to this challenge.

Since Illinois enacted the Residential Real Property Transfer on Death Instrument Act in 2012, property owners have had the ability to designate beneficiaries who will automatically inherit their home upon death—similar to how payable-on-death (POD) designations work for bank accounts. This powerful tool has become an increasingly popular component of Illinois estate plans, but it's not right for every situation.

This guide will walk you through everything you need to know about TODIs in Illinois: how they work, their advantages and limitations, when they're the best choice, and how they compare to other estate planning tools like trusts. Whether you're a first-time homeowner establishing your estate plan or reviewing existing documents, understanding TODIs can help you make informed decisions that protect your family and your legacy.

What Is a Transfer on Death Instrument (TODI)?

A Transfer-on-Death Instrument is a legal document that allows you to name one or more beneficiaries who will automatically become the owners of your residential real estate when you die. Think of it as a beneficiary designation for your home, similar to the "payable on death" feature available for bank accounts or the "transfer on death" option for securities.

The key distinction that makes TODIs so valuable is that they allow property to transfer outside of probate. When you die, instead of your home becoming part of your probate estate—subject to court supervision, creditor claims periods, and potential delays—ownership passes directly and immediately to your named beneficiaries.

Under Illinois law (755 ILCS 27/1 et seq.), TODIs can only be used for residential real estate, which includes:

Single-family homes
Condominiums
Townhouses
Multi-unit residential buildings (up to 4 units) where you occupy one unit as your primary residence

Importantly, TODIs do not apply to commercial properties, vacant land, or certain other types of real estate. For those assets, other estate planning tools such as trusts may be more appropriate.

How TODIs Work in Illinois

Understanding how a TODI functions is essential to appreciating both its power and its limitations. Unlike a will, which only takes effect after death and must go through probate, a TODI creates a future interest in your property that springs into effect automatically upon your death.

The TODI Process: Step by Step

1
Execution of the TODI
You (the "transferor" or property owner) create a Transfer-on-Death Instrument that names one or more beneficiaries who will receive the property upon your death. The document must be in writing and comply with specific Illinois legal requirements.
2
Witnessing and Notarization
The TODI must be signed by you in the presence of at least two credible witnesses who also sign the document. Additionally, your signature must be acknowledged before a notary public, just like a traditional deed.
3
Recording with County Recorder
The TODI must be recorded with the Recorder of Deeds in the county where the property is located before your death. If the TODI is not recorded, it is legally ineffective. This is a critical step that cannot be overlooked.
4
During Your Lifetime
You retain complete ownership and control of the property. You can sell it, mortgage it, renovate it, or make any other decisions about the property without needing the beneficiary's consent. The beneficiary has no current ownership interest or rights to the property while you are alive.
5
Upon Your Death
When you die, the beneficiary automatically becomes the legal owner of the property. The transfer happens by operation of law—no court approval is needed, no probate case must be opened, and no executor needs to be appointed.
6
Beneficiary's Next Steps
To perfect title and establish their ownership on the public record, the beneficiary must record an Affidavit of Death (or similar documentation) with the county recorder, along with a certified copy of your death certificate. This step updates the public records to show the beneficiary as the new owner.

Legal Requirements for a Valid TODI

For a TODI to be legally valid and enforceable in Illinois, it must satisfy several strict requirements:

Requirement	Details	Why It Matters
Written Document	Must be in writing and properly executed	Oral agreements are not recognized
Property Description	Must contain a legal description of the property	Ensures clarity about which property is being transferred
Owner's Signature	Must be signed by the property owner (transferor)	Proves the owner's intent to create the TODI
Two Witnesses	Must be signed by at least two credible witnesses	Provides independent verification of execution
Notarization	Owner's signature must be notarized	Provides official authentication
Recording	Must be recorded with the county recorder before death	Creates public notice; failure to record makes the TODI void
Beneficiary Designation	Must clearly identify the beneficiary or beneficiaries	Ensures property goes to the intended recipient

Major Advantages of Using a TODI

TODIs have become increasingly popular in Illinois estate planning because they offer several compelling benefits for homeowners who want a straightforward, cost-effective way to transfer real estate to the next generation.

Probate Avoidance

The single most important advantage of a TODI is that it allows your home to bypass probate entirely. In Illinois, any estate that includes real estate or has more than $150,000 in assets (excluding vehicles) must go through probate—a court-supervised process that typically takes 6 to 18 months or longer.

Probate involves:

Court filing fees (approximately $479 in Cook County)
Publication costs ($150-$500 for required creditor notices)
Possible bond premiums ($460-$600+ annually)
Attorney fees (typically $5,000-$12,000 or more for moderately complex estates)
A mandatory six-month creditor claim period before assets can be distributed
Public court proceedings where your will and estate inventory become public record

With a properly executed TODI, your beneficiary receives the property within weeks rather than months, saving thousands of dollars in probate costs and preserving your family's privacy.

Full Control During Your Lifetime

Unlike making an outright gift of property or transferring ownership to a trust, a TODI allows you to maintain complete ownership and control of your home throughout your life. You can:

Sell the property without anyone's permission
Refinance or take out a home equity loan
Make improvements or modifications
Rent the property to tenants
Continue to claim homestead exemptions and property tax benefits

The beneficiary has no current interest in the property and cannot interfere with your decisions in any way. Their rights only come into existence upon your death.

Flexibility and Revocability

Life circumstances change, and your estate plan should be able to adapt. One of the most valuable features of a TODI is that it is completely revocable at any time during your life, as long as you remain legally competent.

You can:

Change beneficiaries by executing a new TODI
Revoke the TODI entirely by filing a revocation document with the county recorder
Sell the property, which automatically revokes the TODI for that property

Important Note:

A will cannot revoke a TODI. If you want to change or cancel your TODI, you must do so by executing a new TODI or filing an express revocation with the county recorder. Simply writing in your will that you want to revoke the TODI will not be effective.

Cost-Effectiveness

Creating a TODI is significantly less expensive than establishing a comprehensive trust-based estate plan. While a revocable living trust typically costs $1,500 to $3,500 or more to prepare (depending on complexity), a TODI can often be prepared for $200 to $500 in attorney fees, plus nominal recording costs.

For Illinois homeowners with simple estate plans who primarily want to ensure their home passes smoothly to a specific beneficiary, a TODI offers excellent value.

Important Limitations and Drawbacks

While TODIs offer many advantages, they are not perfect for every situation. Understanding their limitations is crucial to making an informed decision about whether a TODI is right for your estate plan.

Limited to Residential Real Estate

Illinois law strictly limits TODIs to residential real property. You cannot use a TODI for:

Commercial properties or office buildings
Vacant land or undeveloped lots
Agricultural property or farmland
Investment properties where you don't reside
Personal property, bank accounts, or financial assets

If your estate includes these types of assets, you'll need additional estate planning tools to ensure they transfer efficiently.

Debts and Liens Transfer with the Property

A TODI does not eliminate or forgive any debts, mortgages, or liens attached to the property. When the beneficiary receives the property, they receive it subject to all existing encumbrances. This means:

If there's a mortgage on the property, the beneficiary must either continue making payments or pay off the loan
Property tax liens, homeowners association dues, and other obligations remain attached to the property
Creditors of the deceased owner may still be able to make claims against the property under certain circumstances

This is an important consideration when choosing beneficiaries. Make sure they understand they're receiving the property with its associated financial obligations.

No Protection During Incapacity

A TODI only becomes effective upon death. It provides no mechanism for managing your property if you become incapacitated. If you suffer a serious illness or injury that leaves you unable to manage your affairs, a TODI won't help.

In contrast, a revocable living trust names a successor trustee who can step in and manage trust property during your incapacity, providing seamless continuity without court involvement.

If incapacity planning is important to you, you'll need additional documents such as a durable power of attorney for property, or you may want to consider a trust instead of or in addition to a TODI.

Not Ideal for Complex Family Situations

TODIs work best when you want to transfer property outright to one or more beneficiaries who will receive equal shares. They don't offer the flexibility to:

Create staggered distributions (such as giving property to your spouse for life, then to children)
Impose conditions on inheritance (such as requiring beneficiaries to reach a certain age)
Protect beneficiaries who have creditor problems, substance abuse issues, or receive government benefits
Address blended family situations where you want to balance the interests of a current spouse and children from a previous marriage

For these more complex scenarios, a trust offers greater control and flexibility.

TODI vs. Trust: Which Is Right for You?

One of the most common questions Illinois homeowners ask is whether they should use a TODI or establish a revocable living trust. The answer depends on your specific circumstances, goals, and the complexity of your estate.

Transfer-on-Death Instrument (TODI)

Best For:

Simple estates with residential real estate, single beneficiaries or equal distribution among multiple beneficiaries, and straightforward family situations.

Cost:

Low ($200-$500 in attorney fees plus recording costs)

Complexity:

Simple to create and maintain

Assets Covered:

Residential real estate only

Limitations:

No incapacity protection, limited flexibility, property transfers with all debts and liens, not suitable for complex distributions.

How to Create a TODI in Illinois

Creating a valid TODI in Illinois requires attention to detail and compliance with specific legal requirements. Here's a comprehensive guide to the process:

Step 1: Consult with an Estate Planning Attorney

While Illinois provides statutory forms for TODIs, consulting with an experienced estate planning attorney ensures the document is properly prepared and fits within your overall estate plan. An attorney can also advise whether a TODI is the best tool for your situation or if other options might better serve your goals.

Step 2: Prepare the TODI Document

The TODI must include: the owner's name and address, a legal description of the property, the beneficiary's full name (and alternate beneficiaries if desired), and language indicating the transfer is effective upon death. The document should state that it is a "Transfer on Death Instrument" to avoid any confusion.

Step 3: Execute the Document Properly

You must sign the TODI in the presence of at least two credible witnesses who are not beneficiaries. The witnesses must also sign. Your signature must be notarized by a licensed notary public. All of these requirements must be met for the TODI to be valid.

Step 4: Record with the County Recorder

Take the executed TODI to the Recorder of Deeds office in the county where the property is located. Pay the recording fee (typically $50-$150) and ensure the document is properly recorded. Keep a copy of the recorded document for your records. This step is absolutely critical—if the TODI is not recorded before your death, it is invalid.

Step 5: Inform Your Beneficiary

While not legally required, it's wise to inform your beneficiary about the TODI and where to find the recorded document. Make sure they understand they'll need to record an Affidavit of Death after your passing to complete the transfer.

Step 6: Review and Update as Needed

Review your TODI periodically, especially after major life events like marriage, divorce, birth of children, or death of beneficiaries. If changes are needed, execute and record a new TODI or a formal revocation document.

Common Mistakes to Avoid

Even though TODIs are relatively straightforward, several common mistakes can render them ineffective or create problems for your beneficiaries:

Failing to Record the TODI

This is the most critical mistake. An unrecorded TODI is legally void, no matter how carefully it was prepared. Always ensure your TODI is recorded before relying on it.

Not Updating After Major Life Events

If your beneficiary dies before you, or if you experience divorce, remarriage, or other significant changes, failing to update your TODI can result in unintended consequences.

Assuming It Covers All Assets

A TODI only covers the specific real estate described in the document. It does not transfer bank accounts, investments, vehicles, or other property. You'll need additional estate planning for those assets.

Not Considering Tax Implications

While a TODI doesn't trigger immediate taxes, the property will still be included in your taxable estate for Illinois estate tax purposes (if your estate exceeds $4 million). Beneficiaries should also understand potential capital gains tax implications when they eventually sell the property.

Using a TODI When a Trust Would Be Better

If you need incapacity planning, have complex family situations, own multiple properties in different states, or want conditional distributions, a trust is usually the better choice despite the higher initial cost.

When Should You Use a TODI?

A TODI is an excellent estate planning tool when your situation fits these criteria:

Your Primary Asset Is Your Home

If your home is your most valuable asset and you want a simple, cost-effective way to transfer it, a TODI is ideal.

Simple Family Structure

You have one or more beneficiaries who will share equally, and you don't need special conditions or protections.

Budget Constraints

You want probate avoidance but can't afford or don't want to pay for a comprehensive trust.

No Incapacity Concerns

You have other incapacity planning documents (like powers of attorney) or incapacity planning is not a priority.

Consider a trust instead if:

You own property in multiple states
You have significant assets beyond your home (over $500,000 in total estate value)
You have a blended family or complex beneficiary designations
You want to control when and how beneficiaries receive inheritance
Incapacity planning is a priority
You have beneficiaries with special needs or creditor problems
You value comprehensive privacy and control

Frequently Asked Questions About TODIs

Taking the Next Step

Transfer-on-Death Instruments offer Illinois homeowners a powerful, cost-effective way to ensure their residential real estate passes smoothly to chosen beneficiaries without the delays, expenses, and public exposure of probate. For many people with straightforward estates, a TODI provides an excellent solution that balances simplicity with effectiveness.

However, TODIs are not one-size-fits-all. They work best in specific situations and have important limitations that make them unsuitable for complex estates or situations requiring more sophisticated planning. Understanding these distinctions is crucial to making the right choice for your family.

Whether a TODI, a trust, or a combination of estate planning tools is right for you depends on your unique circumstances, goals, and family situation. The most important step is to take action—consult with an experienced estate planning attorney who can assess your situation and recommend the best approach to protect your legacy and provide peace of mind for your loved ones.

If you're ready to explore whether a TODI is right for your Illinois estate plan, contact Illinois Estate Law today. Attorney Mary Liberty can review your situation, answer your questions, and help you create a comprehensive plan that ensures your wishes are honored and your family is protected. Call (312) 373-0731 or schedule a consultation online to get started.

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