What Is a Transfer on Death Instrument (TODI)?

A Transfer on Death Instrument (TODI), also called a Transfer on Death Deed or Beneficiary Deed, is a legal document that allows Illinois property owners to transfer real estate directly to named beneficiaries upon death without going through probate. This powerful estate planning tool was authorized by the Illinois Real Property Transfer on Death Instrument Act (755 ILCS 27/) in 2012.

A TODI functions similarly to a payable-on-death (POD) designation for bank accounts or a transfer-on-death (TOD) designation for securities. You retain complete ownership and control of the property during your lifetime, but upon your death, the property automatically transfers to your designated beneficiaries without court involvement.

How TODIs Work in Illinois

The Illinois TODI statute creates a simple, flexible mechanism for property transfer:

• Complete Control: You maintain full ownership rights, including the ability to sell, mortgage, lease, or give away the property without beneficiary consent
• Revocability: You can revoke or change the TODI at any time by recording a revocation or new TODI
• No Gift: Creating a TODI is not a completed gift for tax purposes and does not trigger gift tax reporting
• Automatic Transfer: Upon your death, title transfers directly to beneficiaries without probate
• Creditor Protection: Beneficiaries take the property free from claims against them (but not from claims against you)

The TODI must be executed, notarized, and recorded with the county recorder before your death to be effective. Once recorded, it creates a future interest in the property that activates automatically upon your death.

Advantages of Transfer on Death Instruments

1. Complete Probate Avoidance

Property transferred via TODI bypasses Illinois probate entirely. This saves thousands of dollars in court costs, executor fees, and attorney fees, and avoids the 6-12 month (or longer) probate timeline. The beneficiary can take ownership by simply recording an affidavit confirming your death along with a death certificate.

2. Full Retention of Control

Unlike life estate deeds or adding joint owners, a TODI allows you to maintain complete control over the property. You can:

• Sell or mortgage the property without beneficiary involvement
• Change or revoke the TODI at any time
• Retain all income and tax benefits from the property
• Make all decisions about the property independently

3. Flexibility and Revocability

One of the greatest advantages of a TODI is its complete revocability. If your circumstances change, you experience a falling out with a beneficiary, or you simply change your mind, you can revoke or amend the TODI by recording a new document. No one's permission is required.

4. No Medicaid Lookback Period

Creating a TODI does not trigger the 60-month Medicaid lookback period because you retain complete ownership and control during your lifetime. This makes TODIs ideal for Illinois residents concerned about long-term care costs who do not want to jeopardize Medicaid eligibility.

5. Step-Up in Tax Basis

Beneficiaries who inherit property via TODI receive a stepped-up basis equal to the property's fair market value at your death under Internal Revenue Code Section 1014. This can eliminate or significantly reduce capital gains taxes if the beneficiaries sell the property.

6. Privacy

While the TODI itself is recorded and becomes public record, the transfer at death does not go through probate court, which means the asset transfer remains relatively private compared to probate proceedings.

Requirements for Creating a Valid TODI in Illinois

Illinois law (755 ILCS 27/15) establishes specific requirements that must be met for a TODI to be valid. Failure to comply with these requirements can invalidate the TODI and force the property through probate.

Essential Requirements

1. Required Language

The TODI must contain the exact statutory language required by 755 ILCS 27/15. The document must state that it is a "Transfer on Death Instrument" and include language substantially similar to the statutory form.

2. Property Description

The TODI must include a complete legal description of the property being transferred. A street address alone is insufficient. The legal description should match the description in the current deed.

3. Transferor Information

The TODI must identify the current owner (transferor) and include their mailing address and the property's Property Index Number (PIN).

4. Beneficiary Designation

You must clearly identify the beneficiary or beneficiaries who will receive the property. You can name:

• One or more individuals
• A trust (but not a trustee in their individual capacity)
• Multiple beneficiaries who will take as tenants in common or joint tenants
• Alternate beneficiaries if primary beneficiaries predecease you

5. Execution Requirements

The TODI must be:

• Signed by the property owner in the presence of a notary public
• Notarized with proper acknowledgment
• Executed while the owner has mental capacity
• Executed voluntarily without duress or undue influence

6. Recording Requirements

The TODI must be recorded with the recorder's office in the county where the property is located before the owner's death. Recording fees typically range from $50 to $100 depending on the county. The TODI is not effective until it is recorded.

What Property Can Be Transferred via TODI

A TODI can be used to transfer most types of Illinois real estate, including:

• Single-family homes and condominiums
• Multi-unit residential properties
• Vacant land
• Commercial property
• Agricultural land

However, there are limitations. A TODI cannot be used for:

• Property held in trust
• Property subject to a land trust (unless the beneficiary is the land trust)
• Property with a homeowners association that prohibits TODIs
• Property that securing a reverse mortgage (in most cases)

Creating a TODI in Illinois: Step-by-Step Process

Step 1: Verify Property Ownership

Confirm that you have clear title to the property. Review your current deed to obtain the complete legal description and Property Index Number (PIN). If you own the property jointly with someone else, all owners must sign the TODI.

Step 2: Choose Your Beneficiaries

Decide who will inherit the property upon your death. Consider whether you want to name alternate beneficiaries in case your primary beneficiaries predecease you. Also decide whether multiple beneficiaries will own the property as joint tenants (with right of survivorship) or tenants in common.

Step 3: Prepare the TODI Document

The TODI must follow the statutory form provided in 755 ILCS 27/15. While you can prepare the document yourself, consulting an attorney ensures it complies with all legal requirements and accomplishes your goals.

Step 4: Execute the TODI

Sign the TODI in the presence of a notary public. The notary will verify your identity and witness your signature. If the property is owned jointly, all owners must sign.

Step 5: Record the TODI

Take the executed TODI to the recorder's office in the county where the property is located. You can typically record in person or by mail. Recording fees vary by county but are typically $50-$100. Some counties also allow electronic recording through approved vendors.

Step 6: Store Documentation

Keep a copy of the recorded TODI with your important estate planning documents. Inform your beneficiaries of the TODI's existence and location, though you are not legally required to do so.

Step 7: Update as Needed

Review your TODI periodically and update it if circumstances change. To revoke or amend a TODI, you must record a revocation or new TODI with the county recorder.

Revoking or Changing a TODI

One of the most valuable features of a TODI is the ability to revoke or change it at any time during your lifetime. There are several methods to revoke a TODI in Illinois:

Methods of Revocation

1. Recording a Revocation Document

The most straightforward method is to execute and record a "Revocation of Transfer on Death Instrument" with the county recorder. This document must identify the original TODI being revoked and be signed, notarized, and recorded in the same manner as the original TODI.

2. Recording a New TODI

Recording a new TODI for the same property automatically revokes any previous TODI for that property. The new TODI supersedes the old one.

3. Transferring the Property

If you sell, gift, or otherwise transfer the property during your lifetime, the TODI is automatically revoked because you no longer own the property.

4. Divorce

Under 755 ILCS 27/20, if you designate your spouse as a beneficiary and later divorce, the designation of your former spouse is automatically revoked. However, other beneficiaries named in the TODI remain valid.

Timing of Revocation

You can revoke a TODI at any time before your death, as long as you have mental capacity. The revocation must be recorded before your death to be effective. If you sign a revocation but die before recording it, the original TODI remains valid.

TODI vs. Other Estate Planning Tools

Feature	TODI	Life Estate Deed	Living Trust	Joint Tenancy
Avoids Probate	Yes	Yes	Yes	Yes
Revocable	Yes	No	Yes	Difficult
Retain Full Control	Yes	Limited	Yes	Shared
Medicaid Impact	None	60-month lookback	None	None
Cost	Low ($100-500)	Low ($200-800)	Moderate ($1,500-3,000)	Low
Flexibility	High	Low	Very High	Low

When to Use a TODI

A TODI is ideal if you:

• Want to avoid probate while maintaining complete control
• Have straightforward estate planning goals
• Want the flexibility to change your mind
• Are concerned about future Medicaid eligibility
• Want a simple, low-cost estate planning solution
• Own real estate but don't need a comprehensive trust

When to Consider Alternatives

Consider a revocable living trust instead if you:

• Have complex estate planning needs
• Own property in multiple states
• Want to plan for incapacity (trusts provide more robust management)
• Have minor children who may inherit
• Want to create detailed distribution instructions
• Need creditor protection features

Frequently Asked Questions About TODIs