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Transfer on Death Instruments: TODIs

Published on March 29th, 2018

Your first step in avoiding Probate at your death when all you’re leaving is a house…

I’ve been an attorney for Twenty-Eight (28) years. If you’ve been reading this blog, you’re aware I’ve seen some action and worked in a lot of areas. In my Peoria days I did a lot of Estate planning work and handled a fair amount of Probate. Due to a few twists and turns from 2003 through 2015 I handled little or no Estate planning or Probate Work. When I started where I am now in 2015 I became aware of a new Estate Planning document which had only been authorized by statute since 2012. This “new” document is the Transfer on Death Instrument or TODI; you find the statute in the Illinois Compiled Statutes at Chapter 755 Section 27/20 and later sections (755 ILCS 27-20 et. Seq.).

This was developed to help ordinary people avoid Probate Court to transfer what is usually the only significant asset they own at the time of their passing; being their home.

Prior to the TODI there were ways to avoid Probate Court and pass your home on to your heirs (people who are considered the “natural objects of your bounty”; usually your children or other relatives) or legatees (people you want to take from your estate but not your “natural heirs”). One of these is a Living/Land Trust. The Living/Land Trust is a topic so vast it will be the subject of its own article in the short-term future. Another example was the Life Estate Deed; this is a special deed recorded where the grantor (owner of the property) signs a deed to the grantees (heirs/legatees of the owner) granting (giving) them the property subject to the right of the grantor to live in the property for the remainder of their life (the Life Estate). The problem with the Life Estate Deed is in the drafting. In the late 1990’s I had a bankruptcy client whose mother had thought she had prepared a Life Estate Deed on her home to avoid probate by deeding the house to my client and his siblings. That Life Estate Deed was supposed to have retained the right for the mother to live in the house for the rest of her life and then it became her children’s. However, the Life Estate Deed was not drafted correctly and the land was deeded immediately to my client and his siblings. We had to arrange to buy back my client’s share of his mother’s home to keep it from being sold by the Bankruptcy Court. Scary stuff at the time.

The TODI changes all this. Under a TODI an owner may transfer residential real estate by a transfer on death instrument to one or more beneficiaries as owners, concurrently or successively (meaning at the same time or one after the other) upon any contingency (meaning you can set a condition such as a beneficiary being married or having children) effective on the owner’s death. The statute also describes the TODI as non-testamentary (not part of a Last Will and Testament) and being subject to all the law related to non-testamentary documents. Every TODI must contain the same basic information you need to include in a deed, be executed (signed) by the grantor, witnessed (usually only by two (2) witnesses and a notary public), state the transfer to the beneficiary takes place on the grantor’s death, and most critically; the TODI must be recorded before the death of the Grantor with the Recorder of Deeds’ Office in the County where the land is located. There is no requirement of notice to the beneficiary in the grantor’s lifetime, no requirement of delivery to the beneficiary in the grantor’s lifetime, requirement of acceptance by the beneficiary in the grantor’s lifetime, and no consideration (payment to the grantor) by the beneficiary in the grantor’s lifetime.

The beneficiary may choose not to accept the transfer after the death of the grantor for various reasons: there could be environmental issues with the land, there could be a public aid lien on the land from the time the grantor spent in a nursing home, or any other reason the beneficiary deems appropriate.

If you just want to pass your home on to your heirs/legatees and help them avoid the financial and emotional stress of Probate Court; the TODI may be your way to go. Consulting an attorney on any matter where the Courts or the Government’s involved is your best move.

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