Lady Bird Deed in Illinois: TODI Rules and Medicaid Planning

Illinois does not recognize the Lady Bird deed. If you have been researching one for an Illinois property, the tool you actually need is the Transfer on Death Instrument, or TODI, created by the Real Property Transfer on Death Instrument Act at 755 ILCS 27. A TODI lets you name a beneficiary who receives your property automatically at your death, outside probate, while you keep full control during your lifetime. The end result resembles a Lady Bird deed, but the drafting and execution rules are different enough that using an out-of-state Lady Bird form on Illinois property will leave you with an invalid document.

How a TODI Differs From a Lady Bird Deed

A Lady Bird deed is an enhanced life estate deed used in a handful of states, most prominently Florida and Texas. It grants a remainder interest to a beneficiary while reserving an enhanced life estate that lets the owner sell, mortgage, or revoke without the beneficiary’s consent. Illinois never adopted that structure. The legislature instead built a statutory instrument that reaches the same probate-avoidance goal through a different mechanism.

The core distinction is what the beneficiary owns before the owner dies. Under a Lady Bird deed the beneficiary technically holds a defeasible remainder interest. Under a TODI the beneficiary holds nothing at all. The statute states plainly that recording a TODI gives the beneficiary no legal or equitable interest in the property during the owner’s lifetime.¹ That difference matters for creditor claims, Medicaid analysis, and how a court would treat the arrangement in a dispute.

A second difference: an Illinois TODI is always revocable. A clause claiming to make one irrevocable has no effect.² In Texas a Lady Bird deed can be drafted to become irrevocable. Illinois will not honor that.

Since January 1, 2022, the TODI applies to all real property in Illinois, including commercial buildings and vacant land, not just residential real estate.³

What You Keep While You Are Alive

Recording a TODI changes nothing about how you use your property. Section 60 confirms that during your life the instrument does not affect your right to sell, transfer, or mortgage the property, and you need no permission from the beneficiary.⁴ The same section addresses several practical worries:

Your existing creditors keep their rights against the property. The beneficiary’s creditors have no claim while you are alive.
The TODI does not affect your eligibility, or the beneficiary’s, for any form of public assistance, including Medicaid.
The instrument is revocable at any time, regardless of what its text says.

What the Document Must Contain

A TODI must meet the requirements of any recordable deed in Illinois, plus a few additions in Section 40. It must state that the transfer to the named beneficiary occurs at the owner’s death, and it must be recorded in the county where the property sits before the owner dies. Miss either and the document is void.⁵

In practice the document needs:

Your full legal name as it appears on your current deed.
The full legal names of the beneficiaries. Beneficiary addresses are not required.
A legal description of the property, including lot number, subdivision name, and permanent index number. A street address alone is not enough.
A clear statement that the transfer takes effect at your death.

Pull the legal description from the most recent recorded deed rather than an older document or memory. A description that does not match the current county record creates a title defect the beneficiary will have to clean up later.

Signing, Witnessing, and Notarization

Illinois imposes tighter execution rules on a TODI than on a standard deed. Section 45 requires you to sign in the presence of at least two credible witnesses, and every signature must be acknowledged before a notary public. Missing witnesses void the instrument, and there is no substantial compliance exception.⁶

There is a trap around beneficiaries as witnesses. If a beneficiary or a beneficiary’s spouse signs as a witness, that beneficiary’s interest under the TODI is void unless enough other qualifying witnesses also signed. The beneficiary-witness can still be compelled to testify about the signing, but they lose anything beyond what they would have inherited without the TODI.⁶ Keep beneficiaries and their spouses away from the witness line entirely.

Recording the Instrument

A TODI has no effect until it is recorded with the County Recorder of Deeds in the county where the property is located. If the owner dies before the document is on the public record, the transfer fails and the property goes through probate.⁵ This is the single most common failure. People sign the document, put it in a drawer, and never file it.

Once the recorder processes the instrument, you get back a stamped copy with a document number and recording date. Keep it with your estate planning file so your beneficiaries can find proof of the recording.

Changing or Canceling a TODI

You can revoke a recorded TODI at any point during your life, but only through the methods Section 55 allows. You can record a new TODI that either expressly revokes the earlier one or is inconsistent with it, or you can record a separate instrument of revocation. Either document must be signed, witnessed, and notarized like the original, and it must be recorded before you die.⁷

What does not work: tearing up the original, writing “VOID” on it, drafting an unrecorded revocation, or trying to revoke it in your will. The statute rules all of those out.⁷ Selling the property and recording the sale deed effectively overrides the TODI because you no longer own it. To simply cancel a beneficiary designation without selling, you need a recorded revocation.

What the Beneficiary Does After the Owner Dies

Title does not switch automatically on the day the owner dies. To finalize the transfer, the beneficiary records a Notice of Death Affidavit and Acceptance with the same Recorder of Deeds office where the TODI was filed. The office may ask for the owner’s death certificate and beneficiary identification.

The beneficiary has two years from the owner’s death to record the affidavit. Miss that window and the TODI becomes void, sending the property back into the owner’s estate and potentially into probate. Once the affidavit is recorded, the transfer relates back to the date of death, so the beneficiary is treated as owner from that moment forward.

If a Beneficiary Dies Before You

Section 65 handles this, and the answer depends on who the beneficiary was to you:

A single beneficiary who is not your descendant dies before you: the TODI lapses and the property passes through your estate.
Multiple beneficiaries, one dies before you: the survivors take the deceased beneficiary’s share proportionally.
The beneficiary is your descendant, such as a child or grandchild, and dies before you: their living descendants step into their place and take their share.

If the order of deaths is unclear and the owner and beneficiary die close together, the law presumes the beneficiary died first, which lapses the TODI.⁸ If a named beneficiary dies, update the document. Do not assume the property will land where you want it.

Tax Basis for the Beneficiary

Property that passes through a TODI receives a stepped-up basis under federal law. The beneficiary’s cost basis for capital gains purposes is the property’s fair market value on the owner’s date of death, not what the owner originally paid.⁹ If a parent bought a house for $80,000 and it is worth $350,000 at death, the beneficiary’s basis is $350,000. Selling for that amount produces no capital gains tax.

That is a real advantage over simply adding a child to the deed during life. A child added as a joint owner takes the parent’s original basis on that share and can face a substantial capital gains bill on a later sale.

For federal estate tax, the filing threshold for 2026 is $15 million per individual.¹⁰ Most Illinois homeowners will never owe it. Illinois has its own estate tax with a lower exemption, which matters for higher-value estates.

Mortgages and the Due-on-Sale Question

A mortgage on the property does not vanish at death. It travels with the property. The beneficiary is not automatically personally liable on the note, but the lender’s lien remains, so the beneficiary must keep paying, refinance in their own name, or sell and pay off the balance.

A common worry is whether transfer through a TODI triggers the loan’s due-on-sale clause. Federal law blocks that outcome for residential loans. The Garn-St. Germain Act prohibits lenders from accelerating a residential mortgage when property transfers to a relative because of the borrower’s death.¹¹ The protection applies to residential properties with fewer than five dwelling units.

Medicaid Planning Considerations

A frequent reason people ask about Lady Bird deeds is protection from Medicaid estate recovery. Illinois builds part of the answer into the statute itself. Section 60 provides that recording a TODI does not affect the owner’s or the beneficiary’s eligibility for public assistance during the owner’s life.⁴ Signing and recording will not trigger a disqualifying transfer or start a Medicaid penalty period.

After death the analysis gets harder. Illinois Medicaid estate recovery collects from assets in the deceased recipient’s probate estate, and a TODI transfers outside probate, which suggests some shelter. Federal law lets states expand recovery to non-probate assets, and whether Illinois pursues that in a given case can turn on administrative policy and the facts. Anyone using a TODI as part of a Medicaid strategy should work with an elder law attorney rather than treat the instrument as automatic protection.

1
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27 – Real Property Transfer on Death Instrument Act
2
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/25 – Transfer on Death Instrument Revocable
3
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/10 – Applicability
4
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/60 – Effect of Transfer on Death Instrument During Owners Life
5
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/40 – Requirements
6
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/45 – Signing, Attestation, and Acknowledgment
7
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/55 – Revocation by Recorded Instrument Authorized
8
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/65
9
Office of the Law Revision Counsel. 26 US Code 1014 – Basis of Property Acquired From a Decedent
10
Internal Revenue Service. Estate Tax
11
Office of the Law Revision Counsel. 12 US Code 1701j-3 – Preemption of Due-on-Sale Prohibitions