I’ve been asked a few times recently about the simplest way a person can transfer property, when they pass away, to loved ones. Undoubtedly, the probate horror stories reached a few ears. My response has generally been, “Glad you asked and good timing!” Then I start sharing the following information.
Photo Credit: Christa Richert, Berlin, Germany
On January 1, 2012, the Illinois Transfer on Death Instrument Act became public law. Under this law, the Illinois Transfer on Death Instrument (TODI) became available for Illinois residents who want to transfer property in a relatively efficient and inexpensive manner. The TODI only applies to residential property, primarily defined as 1-4 units or 40 acres or less of a single tract of land on which a family home was built.
The TODI cannot be cast in stone, meaning, its creator can change it; and it is only effective when the owner dies. Furthermore, only a natural person, not a corporation or similar entity, may create a TODI. However, a corporation, trust, or other legal entity may be a designated beneficiary of a TODI.
Another important point is although the TODI owner must have the same mental faculties to create a TODI that are required to create a will and a TODI allows for beneficiary designations, it is not a will.
A valid TODI must
- Contain the identical aspects of a recordable deed;
- Expressly state that the property will transfer to the designated beneficiary when the owner dies;
- Be recorded before the owner’s death in the appropriate county; and
- Be prepared by a lawyer. Admittedly, I like that part.
A few other items should also be noted about the TODI:
- It’s not a deed, even though it must be recorded.
- Beneficiaries have no legal interests in the TODI until death.
- A TODI beneficiary will not lose his or her needs assistance eligibility just because he or she is a beneficiary.
Finally, because this instrument is based on new law, it hasn’t been tested. And no, I don’t like that part. As a result, the outcome of the “right to challenge,” which is provided by the law and the ineffective acceptance of beneficiaries is unknown. Thus, a TODI may be very beneficial for individuals of modest means with a small piece of property they want to keep in the family. However, the unanswered questions about challenges and invalid acceptance might create a Pandora’s box for some.
Do you have questions or comments? Feel free to drop me a line here or by e-mail.
Dear Penny,
First, I’m sorry to hear of your loss. Secondly, be sure to check with an estate or probate attorney in your jurisdiction to ensure that you accomplish the proper steps. Typically, if a person dies without a will, an heir has to appear in court to start the process of probate, where the heirs are recognized and an administrator is designated. During this time assets are frozen and cannot be obtained or distributed. In Illinois, we have a small estate affidavit that allows for an estate with a value of no more than $100,000 to have an administrator designated and the estate distributed without having to open probate. Some institutions will allow an heir – spouse, child, or sibling – to access funds or carry out transactions for the estate or on behalf of other heirs if the heir provides a certified death certificate and proof of who they are as an heir. Again, check with an attorney in your state.
Be well and may peace find its way to you soon.