28 Jun TODI

You’ve worked hard to accumulate your assets over your life. Like most people, you want the future of your property after your death to be in your control. If you do not use proper estate planning tools to prepare for death, you risk leaving your loved ones behind with the time-consuming, expensive, and emotional process of probate. Many people think that a Will is the sole instrument used in estate planning; however, there are many estate planning tools that allow you to leave your property to your loved ones and some have the additional benefit of bypassing the probate process. In Illinois, one of the most commonly used estate planning devices is called a “Transfer on Death Instrument” or more commonly known as a “TODI”.

A TODI is an instrument that allows an owner of property to designate a beneficiary who will receive that property upon the owner’s passing. Thus, upon death, the property will transfer outside of probate. In Illinois, TODIs originally only applied to residential real estate. However, since 2022, The Real Property Transfer of Death Instrument Act amended this rule to expand the use of TODIs to also allow transfer of commercial real estate, which has made it a much more common tool.

Mechanically, there are seven main requirements of a TODI. First, there must be a grantor and grantee (i.e. the owner and beneficiary). Second, the TODI must include a description of the property being conveyed. The property description is generally found on the deed of the property. Third, the TODI must include language of conveyance. Fourth, the TODI must be signed by the grantor. Fifth, it must be notarized. Sixth, there must be two witnesses to the signature, with one exception; the witnesses and notaries may not be beneficiaries or owners of the TODI. And finally, the TODI must be recorded before the owner’s death and in the same county in which the real estate is located in. No consideration is required for a TODI.

Before the owner(s) and their attorney follow these steps, the most important part will be determining who the beneficiary will be. The TODI will not take effect until the owner (or in the case of multiple owners, last co-owner) dies. Thus, the beneficiary has no right or access to the property during the owner’s life. A beneficiary may be an individual or multiple individuals, an organization (such as a charity), or a trust that was in existence at the time the TODI was signed. While the owner records the TODI, the beneficiary must accept the property by filing an acceptance of the TODI after the owner’s death, otherwise, the TODI will be void. Additionally, the TODI may have contingent beneficiaries in the event the original intended beneficiary passes away or declines to accept the property.

TODIs are revocable. However, to revoke or cancel a TODI, you must follow specific steps. There are two main routes to revocation. First, owner may draft a document that specifically revokes the TODI. This document must also meet the same mechanical requirements as the TODI; two witnesses, a notary, signature by the owner, and recorded in the county where the property is located. Second, the owner may draft another TODI which revokes the prior TODI. Again, the same requirements apply. If you want to revoke a prior TODI, it’s important to contact your attorney to ensure it is properly revoked.

If you are interested in establishing a Transfer on Death Instrument for your property or are a beneficiary of a TODI and would like to discuss these details further, please contact GQ Law today.