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Estate-Planning Tools: Transfer on Death Instrument


By Doug Warren, JD

The Illinois Real Estate Transfer on Death Instrument Act (755 ILCS 27/1 et seq.) has been in existence for a little over a decade now, and consideration should be given to using a transfer on death instrument (“TODI” in this article) as part of your estate plan. But what is a TODI? And does everyone need one? The goal of this article is to provide a general overview of the TODI and help you determine if your estate plan should include one.

What is a TODI?

A TODI is a document where an owner of real estate can designate a beneficiary (or beneficiaries) to receive that real estate at the time of the owner’s death. Analogous to this concept is the beneficiary of a life insurance policy: when the insured on a life insurance policy dies, the beneficiary receives the life insurance death benefit. A TODI works in much the same way: when the owner of the real estate dies, the beneficiary receives the property.

Why would someone utilize a TODI?

A TODI is a way to transfer real estate quickly and easily at the time of your death WITHOUT your loved ones having to go through the probate process (thereby saving time and money). The property subject to the TODI immediately transfers to the named beneficiaries at the time of the owner’s death. While it is true that revocable trusts are probably the most commonly utilized probate-avoidance document in Illinois, the TODI is another tool in the estate planner’s toolbelt that can be accessed if it is determined a revocable trust is not the right fit for the client.

What are some advantages of using a TODI?

There are several advantages to using a TODI as part of your estate plan: • It helps to avoid probate at the time of death. • It is a quick and easy way to transfer real estate at the time of death, particularly in simple situations (where there is one beneficiary receiving the property, and no mortgage). • It can be utilized by spouses to fund a revocable trust at their deaths with their primary residence while allowing the spouses to retain a “tenants by the entirety” ownership of the home to preserve asset protection.

Are there any potential pitfalls I should be aware of?

Unfortunately, yes! When utilizing a TODI as part of your estate plan, be mindful of the following:

  1. The TODI trumps a Last Will and Testament or a revocable trust. So, you must make sure your TODI and other estate planning documents are consistent.
  2. If you have a TODI and sell the property and purchase a new one, you must have another TODI prepared for the new home. The TODI does not carry over to the new property.
  3. Be aware that the property passes to the beneficiaries subject to any mortgage that may be on the property. Accordingly, you need to ensure the beneficiaries of the property have the wherewithal and ability to pay the mortgage note!
  4. The TODI must be properly prepared by an attorney, must be signed in like manner as a Will, and must be recorded with the local Recorder’s Office. These formalities are not insignificant, and if they are done incorrectly, it can mean the TODI is not effective at your death.

A TODI is not for everyone but can be an effective probate-avoidance tool for your real estate. If you would like to discuss this further, please do not hesitate to reach out to one of our Midland Wealth Management Trust Officers.