NEWSFLASH! Illinois Broadens Use of Transfer on Death Instruments

Author: Tara M. Coffman, Esquire

Effective January 1, 2022, the Illinois Residential Real Property Transfer on Death Instrument Act will be amended as the Real Property Transfer on Death Instrument Act (the “Act”). The new Act is intended to expand the use of transfer on death instruments (“TODI”) and streamline the probate process.

The existing Act permits owners of residential real estate to bypass probate by designating one or more beneficiaries who will receive interest in the residential property on the owner's death. Once the amendment becomes effective, a TODI may be used to transfer interest in any real estate that is located in Illinois, including commercial real estate.   

Another new section of the Act allows owners of real property to name trusts as beneficiaries of a TODI. As amended, the Act permits an owner to transfer real property by a TODI to a trustee of a trust even if the trust is subject to amendment, modification, revocation, or termination.  A transfer to a trustee of a trust is permitted if (i) the trust is in existence when the TODI is executed and the trust is identified in the TODI, (ii) the trust is created under the owner's will, (iii) the trust is created under the TODI, or (iv) the trust is created under the will of another individual who has predeceased the owner. The property will be governed by the trust’s instructions, including any amendments or modifications made before and after the execution of the TODI as well as after the death of the owner.

The Act also allows a surviving spouse to renounce the TODI in favor of a one-third or one-half interest in the real property transferred by the TODI, depending on whether the owner leaves a descendant. A surviving spouse wishing to renounce a TODI must file a written renunciation instrument within 7 months after the date of the owner's death, or within such additional time as an appropriate court may grant.

While the Act largely expands the use of TODI, it also Act restricts certain interested individuals from serving as a witness to a TODI execution. A TODI must be attested to by two credible witnesses and acknowledged by a notary. The Act, as amended, clarifies that if a named beneficiary or his or her spouse serves as a witness to the TODI, the interest transferred to that beneficiary is void.

While the Act makes TODIs a flexible and cost-effective tool for transfer of real property in Illinois, there is no substitution for the protection and control offered by a living trust, which can be more effectively structured to avoid the probate process and estate taxes and prevent creditors of the beneficiary from reaching the assets of the trust. Property owners should consult an attorney regarding the estate planning instruments that are right for them.

CONTACT:

Tara M. Coffman, Esquire
tcoffman@satclaw.com
Mobile: (312) 554-3103

John W. Campbell, Jr., Esquire
jcampbell@satclaw.com
Direct: (312) 554-3126

Websites:
https://satclaw.com/
https://www.satcsolutions.com/
https://www.BridgingChicago.com