Illinois Transfer on Death Instruments

Everything you need to know about transfer on death (TOD) instruments in Illinois.

A transfer on death (TOD) instrument (more often called "transfer on death deeds" or "beneficiary deeds" in other states) works similarly to a deed you might use to transfer your Illinois real estate, but with a crucial difference: It doesn't take effect until your death. At your death, the real estate goes automatically to the person you named to inherit it (your "beneficiary"), without the need for probate court proceedings. (755 Ill. Comp. Stat. § 27/1 and following.)

You and two witnesses must sign the TOD instrument while in the presence of a notary public, and then record (file) the document with the county recorder of deeds before your death. (See "Finalizing the Document.") Otherwise, it won't be valid.

How the TOD Instrument Works

The beneficiary's rights. The person you name in the TOD instrument to inherit the property doesn't have any legal right to it until your death—or, if you own the property as "joint tenants" or "tenants by the entirety" with someone else, until the last surviving owner dies. (More on this below.) The beneficiary doesn't sign the TOD instrument, but it's a good idea to let the beneficiary know you've recorded it. Otherwise, the beneficiary might not know about it, even after your death.

Earlier wills or TOD instruments. If you have made a will or previous TOD instrument that leaves the property to someone, your new TOD instrument will override it.

Your rights. You keep complete ownership of, and control over, the real estate while you're alive. You pay the taxes on it, and it's not protected from your creditors. You can sell it, give it away, or mortgage it. Because you're not making a gift of the property during your lifetime, there's no federal gift tax.

Medicaid. Creating a TOD instrument won't affect whether or not you are eligible for Medicaid. Because you own the property and are not actually giving it away during your lifetime, a TOD instrument won't help you "spend down" your assets to help you qualify for Medicaid. Beware, though, that if you do end up receiving Medicaid benefits—for example, to pay for nursing home care—your home might be liable for reimbursement of Medicaid expenditures. If you have questions, consult a local attorney.

Other creditors. Your TOD beneficiary may be liable for the claims of your creditors, up to the value of the property they receive from you.

Revoking the TOD instrument. If you later change your mind about whom you want to inherit the property, you are not locked in. You have two options: (1) sign and record a revocation or (2) record another TOD instrument, leaving the property to someone else. You cannot use your will to revoke or override a TOD instrument.

How ownership is transferred. Upon your death, your beneficiary should file a document called a "notice of death affidavit" in the recorder of deeds in the county where the property is located. This affidavit should include: (1) the names and addresses of all beneficiaries who are receiving the property under the TOD instrument, (2) the property's legal description, street address, and parcel identification number (PIN), (3) the date of the TOD instrument and its document number, (4) the deceased owner's name and date and place of death, and (5) the name and address where future tax bills should be mailed.

Finalizing the Document

You and two adult witnesses must sign the TOD instrument while in the presence of a notary public. Under Illinois law, you may not use a beneficiary of your TOD instrument or a beneficiary's spouse as a witness. This rule helps prevent conflicts of interest. After the TOD instrument is signed, witnessed, and notarized, you must then record (file) the document with the county recorder of deeds.

Special Rules for Co-Owned Property

If you own the property with someone else, how to proceed depends on how you and the other co-owners hold title to the property. If you don't know how you hold title, start by looking at the deed that transferred the property to you. It might say, for example, "to Ellen Bauman and Edward M. Bauman, as joint tenants," or "to Jonathan G. Costa and Sandra L. White, as tenants in common."

There are three common ways to co-own property in Illinois:

Joint tenancy. If you co-own real estate as joint tenants (also called "joint tenants with right of survivorship," when one co-owner dies, that co-owner's share of the property will automatically go to the surviving co-owner(s).

When you make a TOD instrument together with the other joint tenant(s), you are naming someone to receive the property after all of the joint tenants have died.

Example: Claire and Kendra co-own their home as joint tenants. They make a TOD instrument together and name Oscar as the beneficiary. When Claire dies, Claire's half of the home goes to Kendra, who becomes the sole owner of the entire home. When Kendra dies, the home goes to Oscar under the TOD instrument.

Tenancy by the entirety. If your deed specifies that you own the property as tenants by the entirety—a form of ownership available only to married couples—you and your spouse also own the property with right of survivorship. When one spouse dies, the surviving spouse automatically owns the entire property. (For purposes of the TOD instrument, a tenancy by the entirety works like a joint tenancy.) If you both make a TOD instrument together, it will take effect only after both spouses have died.

Tenancy in common. If your deed doesn't state how you own the property, you and your co-owners are presumed to own it as tenants in common, unless you've agreed otherwise in writing. If you own your property as a tenant in common, you must create a TOD instrument on your own (without the other tenants in common). That TOD instrument will transfer only your share of the property to the TOD beneficiary when you die.

Example: Raymond and Jack, who are brothers, own a house together as tenants in common. Raymond signs a TOD instrument that leaves his half-interest to his daughter. At Raymond's death, his daughter will become a tenant in common with Jack.

Your co-owners are free to make their own TOD instruments to transfer their individual shares of the property, and they may name the same beneficiary as you, or they may choose different beneficiaries.

If you're not sure how you co-own the property or whether or not your spouse has any rights to it, consult a lawyer. While the guidance here fits most situations, if you have a complicated situation or more complex aims, you should turn to a lawyer for a more tailored solution.

Note on trust property. If you hold real estate in a trust, you probably won't need to use a TOD instrument, because trust property doesn't need to go through probate anyway. If for some reason you want to use a TOD instrument instead, you'll probably need to transfer the property out of the trust first. Talk to a lawyer about your estate plan.

Naming Beneficiaries

You can name anyone you please to inherit your real estate—a person, more than one person, or an organization such as a favorite charity. But if you want to name more than one person, or a minor, there are some issues you should consider.

More than one beneficiary. Before you name multiple beneficiaries on your transfer on death instrument, make sure you consider 1) how the co-beneficiaries will hold title to the property after you die, 2) what will happen if one of the co-beneficiaries dies before you do, and 3) how the beneficiaries will feel about co-owning the property.

As to the first issue, when you make WillMaker's transfer on death designation instrument for Illinois, your property will transfer to your beneficiaries in equal shares with no right of survivorship. This is the default under Illinois law. In other words, your beneficiaries will own your property as tenants in common, and each beneficiary will be free to leave his or her share to someone else or to sell that share of the property.

Example: You name Tim, Stephanie, and Rebekah as your TOD beneficiaries. After you die, they will own the property as tenants in common. Tim leaves his one-third share of the property to his son Cameron in his will. Stephanie sells her one-third share of the property to Anya. After Tim dies, Cameron, Anya, and Rebekah own the property.

As to the second issue, your WillMaker transfer on death instrument will specify that if one or more of the beneficiaries dies before you do, their share or shares of the property will be transferred to the surviving beneficiaries.

Example: You name Tim, Stephanie, and Rebekah as your TOD beneficiaries. Tim dies before you do. Stephanie and Rebekah would each inherit half the property. They would own it as tenants in common, and are each free to sell or leave their half of the property to someone else.

Finally, think carefully about how your beneficiaries will feel about owning the property together. Co-ownership is cumbersome and often causes tension. For example, one co-owner could force a sale of the property even if the other co-owners didn't want to sell.

Children under 18. Think twice about naming a child under age 18 as a beneficiary. A child can take title to the property, but an adult will need to manage it.

When making a TOD instrument with WillMaker, you can name an adult "custodian" under the Illinois Uniform Transfers to Minors Act (UTMA) to manage the property. Under Illinois's UTMA, the beneficiary becomes the outright owner of the property at age 21.

You may have other options for naming an adult property manager, including:

  • using your will to name a property guardian who will take care of any property you leave to your own young children, including property transferred by this TOD instrument, and
  • setting up a trust for a child and naming the trust as the TOD beneficiary.

For more information, see Naming a Minor Beneficiary for a Transfer on Death Deed. For help setting up a property management method, consult a qualified estate planning lawyer.

Sample Legal Descriptions

Your transfer on death instrument must identify your property using the legal description of your property. You can find this legal description on the previous deed that transferred the property to you—look for it in the body of the deed or in an "attachment" or "exhibit" to the deed. Here are two examples:

  • "Lot 5 in Adam B. Raggio's Subdivision of that part of Block Three in Hamilton's Subdivision of the South sixty acres of the East half of the Southwest quarter of Section Forty-Four, Township 40 North, Range 13, East of the Third Principal Meridian, lying East of the center line of North Forty-Fifth Avenue, in Cook County, Illinois."
  • "The West 30 feet of the East 208 feet of Lots 8 and 9 (except the South 30 feet of said Lot 7) in Block 11 in Lincoln Grove, being a subdivision of the South 90 acres and the West 30 acres of the North 72 acres of the Northwest ¼ of Section 21, Township 38 North, Range 14, East of the Third Principal Meridian, in Cook County, Illinois."

If the legal description is too long to safely type out (they can even run several pages long), simply photocopy or scan and print it, and attach it to the transfer on death instrument as "Exhibit A."

lf You Need Legal Advice

Accurate, plain-English legal information can help many people create useful legal documents. But general information is never a substitute for personalized advice from a knowledgeable lawyer. If you want professional advice about the best way to craft or use legal documents in your particular circumstances, consult an attorney licensed to practice in Illinois.