Why Avoiding Probate Matters

Probate is the court-supervised process of administering a deceased person's estate, validating their will (if any), paying debts and taxes, and distributing assets to beneficiaries. In Illinois, probate is governed by the Illinois Probate Act (755 ILCS 5/). While probate serves important purposes, it has significant disadvantages that make avoiding it highly desirable.

Disadvantages of Probate

• Time-Consuming: Illinois probate typically takes 6 months to 2 years, delaying asset distribution to beneficiaries
• Expensive: Court costs, executor fees, attorney fees, and other expenses can consume 3-7% of the estate value
• Public Record: Probate proceedings are public, exposing details about your assets, debts, and beneficiaries
• Complex: Executors must comply with court deadlines, filing requirements, and procedural rules
• Stressful: Grieving family members must deal with court proceedings during an already difficult time
• Potential for Disputes: Public proceedings can invite will contests and family conflicts

Benefits of Avoiding Probate

• Immediate Asset Transfer: Beneficiaries receive assets quickly without court delays
• Cost Savings: Eliminate or significantly reduce court costs and legal fees
• Privacy: Keep family financial matters confidential
• Simplicity: Reduce administrative burden on your family
• Flexibility: More options for controlling asset distribution
• Multi-State Efficiency: Avoid ancillary probate for out-of-state property

Method 1: Revocable Living Trust

A revocable living trust is the most comprehensive and flexible tool for avoiding probate in Illinois. It allows you to transfer ownership of your assets to a trust during your lifetime, with you typically serving as trustee and maintaining complete control.

How It Works

You create a trust document and transfer ownership of your assets (real estate, bank accounts, investments, etc.) to the trust. During your lifetime, you serve as trustee and maintain complete control over the assets. Upon your death, your successor trustee distributes assets to your beneficiaries according to your instructions, without court involvement.

Advantages

• Complete Probate Avoidance: All trust assets bypass probate entirely
• Incapacity Planning: Successor trustee can manage assets if you become incapacitated
• Privacy Protection: Trust terms remain private, not public record
• Flexibility: Can be amended or revoked at any time during your lifetime
• Detailed Instructions: Provide specific distribution instructions for complex family situations
• Multi-State Property: One trust can hold property in multiple states, avoiding multiple probate proceedings
• Creditor Protection: Can include provisions protecting beneficiaries from creditors

Disadvantages

• Initial Cost: Attorney fees for trust creation typically range from $1,500-$3,500
• Funding Requirement: You must transfer assets to the trust (a process called "funding")
• Ongoing Management: Need to ensure new assets are titled in trust name
• Complexity: More complex than simple probate avoidance tools like TODIs

Best For

Revocable living trusts are ideal for:

• People with estates over $200,000
• Owners of multiple properties or complex assets
• People with out-of-state real estate
• Those concerned about incapacity planning
• Families with complex distribution plans
• People who value privacy
• Business owners

Method 2: Transfer on Death Instrument (TODI)

Illinois' Transfer on Death Instrument (755 ILCS 27/) allows property owners to designate beneficiaries who will automatically inherit real estate upon the owner's death, bypassing probate entirely.

How It Works

You execute and record a Transfer on Death Instrument with the county recorder, naming beneficiaries who will inherit your property when you die. You retain complete ownership and control during your lifetime, including the right to sell, mortgage, or revoke the TODI.

Advantages

• Simple and Inexpensive: Easy to create, typically costs $100-$500
• Fully Revocable: Can change or cancel at any time
• Retain Complete Control: No impact on your ownership rights
• No Medicaid Penalty: Does not trigger 60-month lookback period
• No Gift Tax: Not a completed gift, no tax filing required
• Probate Avoidance: Property passes directly to beneficiaries

Disadvantages

• Real Estate Only: Can only be used for real property
• Limited Planning: Cannot include detailed distribution instructions
• Creditor Exposure: Property remains subject to your debts and creditor claims
• No Incapacity Protection: Does not provide management if you become incapacitated

Best For

TODIs work well for:

• People whose primary asset is a home
• Simple estate plans with clear beneficiaries
• Those who want to maintain flexibility
• People concerned about Medicaid eligibility
• Individuals on a budget

Method 3: Joint Ownership with Right of Survivorship

Property held in joint tenancy with right of survivorship automatically passes to the surviving owner(s) when one owner dies, without going through probate.

How It Works

You add a co-owner to your property deed or account. When you die, the property automatically transfers to the surviving co-owner(s) by operation of law, outside of probate.

Advantages

• Simple: Easy to establish by changing title or account ownership
• Immediate: Transfer happens automatically at death
• No Cost: Minimal expense to create
• Works for Multiple Assets: Can be used for real estate, bank accounts, investment accounts

Disadvantages

• Loss of Control: Cannot sell or mortgage without co-owner consent
• Creditor Exposure: Co-owner's creditors may be able to attach property
• Gift Tax Issues: Adding a co-owner may trigger gift tax reporting
• Medicaid Complications: Can affect Medicaid eligibility
• Unintended Consequences: May not align with overall estate plan
• Limited Control After Death: Cannot dictate what surviving owner does with property

Best For

Joint ownership is appropriate for:

• Married couples holding property together
• Parents who trust adult children completely
• Simple situations with no concerns about creditors or control

Method 4: Payable on Death (POD) and Transfer on Death (TOD) Designations

Illinois law allows you to designate beneficiaries for bank accounts, investment accounts, and securities, who will automatically inherit these assets without probate.

How It Works

• POD (Payable on Death): For bank accounts, savings bonds, and CDs
• TOD (Transfer on Death): For investment accounts, brokerage accounts, and stocks

You complete a beneficiary designation form with your financial institution, naming who should receive the account when you die. You retain complete control during your lifetime, and the beneficiary has no rights until your death.

Advantages

• Free and Simple: Just complete a form with your bank or brokerage
• Fully Revocable: Change beneficiaries anytime
• Retain Control: Complete ownership rights during your lifetime
• Probate Avoidance: Accounts pass directly to beneficiaries
• Multiple Beneficiaries: Can name primary and contingent beneficiaries

Disadvantages

• Limited to Financial Accounts: Cannot be used for real estate or personal property
• No Incapacity Planning: Does not address management during incapacity
• Potential Family Disputes: May conflict with will provisions
• Creditor Exposure: Assets subject to your debts

Best For

POD and TOD designations are ideal for:

• Bank accounts and CDs
• Brokerage and investment accounts
• Individual stocks and bonds
• Simple beneficiary designations

Method 5: Retirement Accounts and Life Insurance

Retirement accounts (401(k)s, IRAs, pensions) and life insurance policies automatically pass to named beneficiaries outside of probate.

How It Works

When you establish retirement accounts or life insurance policies, you designate primary and contingent beneficiaries. These assets pass directly to beneficiaries upon your death without probate.

Key Considerations

• Keep Beneficiaries Updated: Review and update after marriages, divorces, births, and deaths
• Name Contingent Beneficiaries: Always have backup beneficiaries in case primary beneficiaries predecease you
• Coordinate with Estate Plan: Ensure beneficiary designations align with your will and trust
• Consider Tax Implications: Naming trusts as beneficiaries may offer tax advantages
• Spousal Rights: In Illinois, spouses may have rights to certain retirement benefits

Common Mistakes to Avoid

• Outdated Beneficiaries: Failing to update after divorce or death
• Naming Minors Directly: Court-supervised guardianship may be required; consider naming a trust instead
• Naming Your Estate: Forces assets through probate; name individuals or trusts instead
• No Contingent Beneficiaries: If primary beneficiaries predecease you, assets may go through probate

Method 6: Small Estate Affidavit

For estates under $100,000 in Illinois, beneficiaries can use a small estate affidavit (755 ILCS 5/25-1) to claim assets without formal probate proceedings.

How It Works

If the deceased person's estate (excluding real estate and certain exempt property) is worth less than $100,000, beneficiaries can file a small estate affidavit with institutions holding assets, bypassing formal probate.

Requirements

• Total estate value under $100,000 (excluding real estate and exempt property)
• At least 30 days have passed since death
• No petition for probate has been filed
• Affidavit includes required information about deceased and heirs

Advantages

• Avoids formal probate proceedings
• Quick asset transfer (can often be completed in weeks)
• Low cost (no court fees or extensive attorney fees)
• Simple process

Disadvantages

• Only available for small estates
• Does not work for real estate
• No court supervision to resolve disputes
• Assets still frozen for at least 30 days

Comparing Probate Avoidance Methods

Method	Cost	Complexity	Assets Covered	Best For
Revocable Living Trust	$1,500-$3,500	Moderate	All assets	Estates over $200k, complex situations
Transfer on Death Instrument	$100-$500	Low	Real estate only	Simple estates, primary asset is home
Joint Tenancy	Minimal	Low	Real estate, accounts	Married couples, trusted relationships
POD/TOD Designations	Free	Very Low	Bank/investment accounts	Financial accounts
Beneficiary Designations	Free	Very Low	Retirement, life insurance	All retirement and insurance
Small Estate Affidavit	Minimal	Low	Estates under $100k	Small, simple estates

Creating a Comprehensive Probate Avoidance Plan

The most effective approach usually combines multiple strategies tailored to your specific assets and circumstances.

Step-by-Step Planning Process

Step 1: Inventory Your Assets

Create a complete list of all your assets:

• Real estate (primary home, vacation property, rental property)
• Bank accounts and CDs
• Investment and brokerage accounts
• Retirement accounts (401k, IRA, pension)
• Life insurance policies
• Business interests
• Personal property of significant value

Step 2: Estimate Your Estate Value

Determine the total value of your estate to understand which strategies are appropriate and whether estate tax planning is necessary (Illinois estate tax applies to estates over $4 million).

Step 3: Choose Appropriate Strategies for Each Asset

• Real Estate: TODI for simple situations, trust for complex estates
• Bank Accounts: POD designations or transfer to trust
• Investment Accounts: TOD designations or transfer to trust
• Retirement Accounts: Review and update beneficiary designations
• Life Insurance: Review and update beneficiary designations
• Business Interests: Transfer to trust or establish buy-sell agreement

Step 4: Implement Your Plan

• Execute necessary legal documents (trust, TODI, etc.)
• Complete beneficiary designation forms
• Transfer assets to trust (if using a trust)
• Record deeds with county recorder

Step 5: Maintain Your Plan

• Review beneficiary designations every 2-3 years
• Update after major life events (marriage, divorce, births, deaths)
• Ensure new assets are properly titled
• Coordinate all strategies with overall estate plan

Frequently Asked Questions