by Matt Buckley, ATG Law Clerk

Governor J.B. Pritzker signed the Illinois Real Property Transfer on Death Instrument Act on July 9, 2021, and the Act went into effect on January 1, 2022.

The Transfer on Death Instrument (TODI) allows an owner of property to designate a beneficiary who will receive the property on the owner’s passing. The TODI allows the property transfer to be done outside of probate through simple form submissions with the county recorder’s office. The basic requirements are like those for a will. The owner must be eighteen years or older and be of sound mind and memory.

The first major change to note is that the Act applies to all property and not just residential property, as reflected in the Act’s change in name. This means we can expect to see greater use of the TODI as a means of property transfer.

The Act also updated the procedure and requirements for a valid TODI. Contained in the document there must be a grantor, a grantee, a description of the property to be conveyed, language of conveyance, and a signature by the grantor. The TODI must be notarized and include two witnesses and must be recorded before the owner’s death. The witnesses shall not be the notary or beneficiary. The TODI does not have to state whether any consideration was given to the owner. The Act requires that a lawyer draft the TODI, but the requirement that they be licensed in Illinois has been removed in the most recent update to the TODI. The owner of real property can draft their own TODI and this will not void the transfer.

The language was updated in several areas to clear up where there had previously been confusion.

The amendments clarify that the beneficiary of a TODI may be a trust that is in existence at the time the TODI is signed, that is created under the owner’s will or under the TODI itself, or that is created under the will of someone else who has predeceased the owner even if that trust is revocable or amendable. If the beneficiary trust is later amended, the amended terms control the disposition of the real estate.

An “owner” under the act does not include a trustee or any other individual acting in a fiduciary, representative, or agency capacity. An agent under a durable power of attorney or other instrument creating an agency, even if authorized, does not have the authority to create or revoke a transfer on death instrument on behalf of the owner.

A beneficiary under a TODI is subject to the same claims of creditors of the owner as someone who would take under a revocable trust.

The last major change to the Act was to allow for the possible renunciation of the TODI by a surviving spouse. This renunciation is treated the same as a will renunciation. If the owner left a descendant, the spouse is entitled to ⅓ of the real estate and ½ if there was no descendant.

The renunciation must be made at the same recorder’s office as the TODI was recorded in, within seven months after the death. The rest of the estate passes pursuant to the TODI as if the spouse had predeceased the owner.

The amendments to the Illinois Real Property Transfer on Death Instrument Act provide for clarity that should make the TODI a more effective instrument and allow for simpler property transfers in the future.

[Last update: 1-10-22]