Updates To The Transfer on Death Instrument Act

February 10, 2022

On January 1, 2022, the Transfer on Death Instrument (TODI) Act was amended to better provide another option for clients seeking cost-effective and straight-forward ways to transfer real property upon their death. The TODI Act’s purpose, as originally enacted, was to provide a mechanism for the transfer of residential real estate title to named beneficiaries upon death of the owner, without the need for probate administration. The TODI Act has no legal impact during the life of the owner; however, upon the owner’s death, the named beneficiaries take title to the real estate without the hassle of the probate process.

Prior to January 1, 2022, the TODI Act restricted the use of transfer on death instruments to residential real estate. This restriction will no longer apply in the updated version of the TODI Act. Illinois has now joined other states in allowing the transfer at death of any type of real property. Section 21 of the Act has been added and states that a TODI may name the trustee of a trust as the designated beneficiary. It also clarifies that the designated trust may be amended, modified, revoked, or terminated after the date the TODI is executed, similar to trusts designed under a pour over will.

Additional Changes

Another question often raised by practitioners is whether a TODI is subject to renunciation by a surviving spouse. The Illinois Supreme Court has made clear that rights of a surviving spouse and the creditors of the decedent are dependent on whether the decedent’s assets are subject to probate. New Section 66 of the TODI Act clarifies that unless waived by the surviving spouse, a TODI is subject to renunciation by the survivor. The only exception to this is where the transfer is to a trust created under the decedent’s will or otherwise that is for the sole benefit of the surviving spouse.

Section 85 of the Act has been substantially amended to set forth a procedure and process for making claims against assets passing under a revocable trust, which now allows creditors and statutory claimants to assert claims against assets passing under revocable trusts outside of probate. To provide consistency in the law regarding claims against real property passing by a TODI, section 85 adopts, by reference, the same procedure as set forth in section 505 of the Illinois Trust Code. Under section 505, a creditor or statutory claimant of the decedent may assert a claim against the decedent’s non-probate assets passing under a trust if the probate assets passing under a trust are insufficient to satisfy the claim. Similarly, Section 85 of the Act will permit the personal representative of the owner’s estate to assert a claim against the real property passing by a TODI.

Sections 5 and 35 have been updated to clarify that a fiduciary for the owner cannot execute a TODI on the owner’s behalf, even if the underlying document purports to grant such authority. Section 3 specifies that the presence of a TODI in the record of title does not limit the power of attorney’s authority to sell, transfer, or encumber the real property. Lastly, Section 30 clarifies that even though a TODI meets execution requirements for a will, a TODI cannot be admitted to probate as the owner’s will or as a codicil.

If you have any questions or concerns regarding the updates to the TODI Act please contact the attorneys at Rock Fusco & Connelly.

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