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The Transfer on Death Instrument: A Great Option for Passing Real Estate to Your Beneficiaries

A new estate planning tool is available for Illinois* residents that can help avoid probate and speed up the administration of your estate when you pass away. It is called the "Transfer on Death Instrument," or "TODI" for short. A TODI is basically a delayed deed that takes effect upon the death of all of the current owners of a piece of real estate. A TODI can be amended or revoked at any time by the people who created the TODI. Furthermore, a TODI has no effect whatsoever on your ability to sell or refinance the real estate.

This new planning tool matters because it can be very useful for avoiding the probate of your estate in Illinois when you die. For many people, the primary residence is the largest asset in their estates. In general, if you die owning real estate in Illinois, your estate must be probated. Probate ties up your assets for at least 6 months (usually longer) after your death. However, if we can pass the house directly to your intended beneficiaries ("outside of probate") and ensure that the other probate thresholds will not be triggered through careful planning, probate can be avoided entirely and your estate distributed to your beneficiaries much sooner after your death than probate would allow.
Many people attempt to avoid probate by placing their home in "joint tenancy" with their children. This can often lead to gift tax and other adverse consequences, such as the attachment of judgments to your house and increased difficulty in the future if you need to sell the home. The TODI would be a much better option in many circumstances.
Finally, a TODI is much less costly to create than a living trust, which is the traditional method for keeping your real estate out of probate. Keep in mind that a living trust still might be better for your situation - everyone has different planning needs! For example, a TODI may only be used for *residential* real estate. If you own commercial real estate, additional planning will be needed for those assets.
*The TODI does not yet exist in Iowa. However, the legislature is in the early stages of creating a something similar. This tool will likely be available to Iowans in the future - we'll update when it becomes available!
If you have questions about this or any other real estate or estate planning topic, please contact Brent Bogen at 309-797-3000, bbogen@katzlawfirm.com, or use the contact form here on the blog!
Reference: Illinois Residential Real Property Transfer on Death Instrument Act. 755 ILCS 27/1.

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