In my previous blog posts, I have emphasized how important it is to put your estate plan together, especially if one of your goals is to avoid Probate. If you own real property in Illinois, there are several ways to transfer your real property to your loved ones at the time of death including joint tenancy with the right of survivorship or deeding the property into your Revocable Trust. In Illinois, one of the lesser-known ways to transfer property at the time of your death is through a document called a Transfer on Death Instrument (“TODI”)[1].
What is a TODI?
A TODI is a legal document that the owner of real property, including joint owners, completes to transfer that property to beneficiaries after the last owner’s death. Unlike a Deed which transfers the property upon execution and recording of the Deed, a TODI does not become effective until after the death of the last owner to die. To illustrate, A and R own a house as joint tenants with the right of survivorship and they want their children, G and D to inherit their house after they die. A and R will draft a TODI naming G and D as beneficiaries. After A dies, R still owns the house through their joint tenancy. However, after R dies, the property will transfer to G and D. It is important to note that a TODI is revocable until the last owner’s death.
Requirements for Validity
To ensure that the TODI is valid it must: 1. Comply with the requirements for a deed; 2. State that the transfer occurs on the owner’s death; 3. Be recorded in the county or counties where the property is physically located before the owner’s death; and 4. Be executed with the same formalities and requirements as a Will. Specifically, the owner must have legal capacity to sign a Will (see our blog on Testamentary Capacity) and the owner must sign the TODI in front of two witnesses and a notary public.
Beneficiaries of a TODI
The beneficairies of a TODI do not have to be individual people. In fact, you can name any legal entity that can own real estate as a beneficiary, such as a trust, corporation, or other legal entity.
TODIs are a useful estate planning tool as they generally are less expensive to complete than a transfer of real property into a revocable trust and they provide flexibility for the owner since the transfer does not occur until after their death. Please note that the law is constantly changing so it is important to work with an attorney experienced in estate planning and transfers of real property to draft and properly record this document.
If you are interested in learning more about TODIs or other estate planning tools, please contact me at lkaplan@curlerlaw.com or (312) 952-1077 ext. 2 for a free consultation.
[1] The Illinois statute governing TODIs is 755 ILCS 27/1