What Is an Illinois Transfer on Death Instrument?

An Illinois Transfer on Death Instrument, often called a TODI, is a recorded document that lets a property owner name one or more beneficiaries to receive real estate automatically when the owner dies, without probate. The owner keeps full control of the property during life and can revoke or replace the instrument at any time. The beneficiary gets nothing until the owner’s death, at which point title passes by operation of law.

Illinois first authorized these instruments in 2012 for residential property only. A 2022 amendment expanded the law to cover all real property, so what you may have read in older guides no longer tells the whole story.

What Property a TODI Can Cover

Since January 1, 2022, a TODI can be used for virtually any real property in Illinois, including commercial buildings, vacant land, and multi-unit apartment buildings. Public Act 102-68 made that change and renamed the law the Real Property Transfer on Death Instrument Act.¹

For owners who died before January 1, 2022, only residential real estate qualifies. The statute defines that as property with one to four dwelling units, a residential condominium unit, or a single tract of agricultural land of 40 acres or less with a single-family home on it.¹

How to Create a Valid TODI

A TODI must be in writing and include the essential elements of a recordable deed: a legal description of the property and identification of the beneficiary. It must also state that the transfer takes effect at the owner’s death.²

The signing formalities are strict. The owner signs the instrument (or directs someone to sign in the owner’s presence). At least two credible witnesses must watch the owner sign and then sign the document themselves, attesting in writing that the owner signed freely and voluntarily and appeared to be of sound mind. All signatures must then be acknowledged before a notary public.³

If a beneficiary or a beneficiary’s spouse serves as one of the two required witnesses, that beneficiary’s interest is voided unless enough other qualified witnesses also signed.³

Finally, the TODI must be recorded with the county recorder in the county where the property is located, and it must be recorded before the owner dies. An unrecorded TODI is void.² Skip any of these steps and the instrument fails; the property then passes under the owner’s will or through intestacy.

The mental capacity required is the same as the capacity to make a will: the owner must generally understand what property they own, who their natural beneficiaries are, and what the TODI does. An agent under a power of attorney cannot create or revoke a TODI for the owner, no matter how broad the agent’s authority over real estate.⁴

What the Owner Can Still Do During Life

A TODI does not transfer any interest while the owner is alive. The owner can sell, mortgage, lease, or otherwise deal with the property without the beneficiary’s permission. The statute states this plainly: during the owner’s lifetime, the instrument does not affect creditor rights, does not create any interest in the beneficiary, and does not expose the property to claims from the beneficiary’s creditors.⁵ It sits dormant until death.

If the owner sells the property through a regular deed before death, the TODI becomes moot. There is nothing left to transfer.

Naming Beneficiaries

Beneficiaries can be individuals, trusts, or other legal entities, with no restrictions based on family relationship. The statute permits any form of ownership that is valid under Illinois law, including conditional, contingent, and successive interests.⁶ An owner could, for example, condition a transfer on the beneficiary reaching a certain age.

When two or more beneficiaries are named to take at the same time, they take equal undivided shares with no right of survivorship, unless the TODI specifies otherwise.⁷

If a Beneficiary Dies First

What happens depends on how many beneficiaries were named and whether the deceased beneficiary was a descendant of the owner.

If a sole beneficiary dies before the owner, the property passes to the owner’s estate and goes through probate or under the owner’s will.
If one of several beneficiaries dies before the owner, the lapsed share is redistributed proportionally among the surviving beneficiaries.
If the deceased beneficiary was the owner’s descendant, that beneficiary’s own living descendants inherit the share per stirpes. This anti-lapse rule overrides the other two.

Where there is no sufficient evidence of the order of death, the law presumes the beneficiary died first.⁷ Naming alternate beneficiaries is the simplest way to keep the property out of probate if your first choice dies before you.

Minor Beneficiaries

If a beneficiary is a minor at the owner’s death, the property may need to be managed by a custodian under the Illinois Uniform Transfers to Minors Act. Illinois defines a “minor” as someone under 21 for purposes of that act, not 18.⁸ The custodianship ends at age 21, when the beneficiary receives the property outright.

Co-Owned Property

How a TODI operates on co-owned property depends on the form of ownership.

A tenant in common can execute a TODI covering only their share, without consent from the other owners. At that owner’s death, their share passes to the named beneficiary; the other owners keep their interests unchanged.

Joint tenants and tenants by the entirety are more complicated. One or more joint owners can execute a TODI, but if all joint owners sign the same instrument, it can only be revoked if all the living joint owners agree. The last surviving joint owner can always revoke it, regardless of any earlier agreement. If fewer than all joint owners execute a TODI, the transfer is governed by the instrument of whichever joint owner is the last to die. If that last survivor never executed a TODI, any earlier joint owner’s designation becomes ineffective.⁹ The logic is that the last survivor ends up holding the entire property through the right of survivorship, so their choice controls.

Changing or Canceling a TODI

A TODI is fully revocable during the owner’s lifetime, and the beneficiary has no say because they hold no interest.

Revocation must follow the same formalities as the original. The owner can execute a new TODI that expressly revokes the earlier one (or is inconsistent with it), or sign a separate revocation document. Either way, the revocation must be signed, witnessed by two people, acknowledged before a notary, and recorded with the county recorder before the owner’s death.¹⁰

This is where people lose property to the wrong beneficiary. The statute is explicit that none of the following revoke a TODI:

Tearing up or destroying the document.
Crossing out a beneficiary’s name on the instrument.
Writing a new will that contradicts the TODI.
Signing a revocation that is never recorded.

A TODI cannot be revoked by a physical act on the document, by an unrecorded instrument, or by a provision in a will.¹⁰

What Happens at the Owner’s Death

The property transfers to the beneficiary automatically by operation of law. No court proceeding is required.

The beneficiary may file a notice of death affidavit with the county recorder to confirm title. The affidavit includes the beneficiary’s name and address, a legal description of the property, the recording information for the TODI, and the owner’s date and place of death.¹¹ Filing it is not legally required for the transfer to take effect, but it updates the public record and makes the property easier to insure, sell, or refinance later. Filing a certified copy of the death certificate alongside the affidavit helps establish the chain of title.

The beneficiary can also disclaim all or part of the transfer under the Illinois Disclaimer Under Nontestamentary Instrument Act.¹² A disclaimer is useful when the property carries more debt than value, or for tax reasons.

The Property Comes With Its Debts

The beneficiary takes the property subject to every mortgage, lien, encumbrance, and other interest that exists at the owner’s death. The TODI transfers without any warranty of title, even if the instrument says otherwise.⁷ If $150,000 remained on the mortgage at death, the beneficiary inherits the obligation along with the property and must make arrangements with the lender to continue payments.¹³

Federal law offers meaningful protection against lenders calling the loan due. The Garn-St. Germain Act prohibits lenders from triggering a due-on-sale clause when residential property (up to four dwelling units) transfers at the borrower’s death to a relative or to a joint tenant.¹⁴ Transfers to a spouse or child of the borrower are specifically protected. The protection is less clear when the beneficiary is an unrelated person or an entity, because the federal exceptions focus on family. Simply filing a TODI during life does not affect an existing mortgage.¹³

Tax Treatment

Because a TODI transfers no interest until death, filing one does not trigger federal gift tax. The owner is not making a gift; the transfer may never happen if the TODI is revoked or the property is sold first.

At death, the beneficiary receives a stepped-up cost basis under federal tax law: the basis becomes the property’s fair market value on the date of death rather than what the owner originally paid.¹⁵ If the owner bought a home for $100,000 and it was worth $350,000 at death, the beneficiary’s basis is $350,000. Sell at $360,000, and only $10,000 is subject to capital gains tax.

Medicaid and Creditor Issues

For most Medicaid recipients, Illinois uses the standard probate definition of estate when seeking reimbursement after death, so property that passes outside probate through a TODI is generally not reached.¹⁶

There is an exception worth flagging. For individuals who received benefits under a long-term care insurance policy and had assets disregarded because of that policy, Illinois expands the definition of estate to include property in which the deceased had any legal interest at death, including assets passing through joint tenancy, living trusts, and similar arrangements.¹⁷ Whether that expanded definition reaches TODI property is not something to assume one way or the other without legal advice.

On creditor claims generally: during life, the TODI does not shield the property from the owner’s creditors, and it does not expose the property to the beneficiary’s creditors.⁵ After death, the beneficiary takes the property subject to all existing liens.⁷ Whether unsecured creditors of the deceased can reach TODI property depends on the specifics of the estate and is an area where facts matter.

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 27/40 – Requirements
3
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/45 – Signing, Attestation, and Acknowledgment
4
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/35 – Capacity of Owner and Agent’s Authority
5
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/60 – Effect of Transfer on Death Instrument During Owner’s Life
6
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/20 – Transfer on Death Instrument Authorized
7
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/65 – Effect of Transfer on Death Instrument at Owner’s Death
8
Illinois General Assembly. Illinois Compiled Statutes 760 ILCS 20 – Illinois Uniform Transfers to Minors Act
9
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/70 – Joint Owners
10
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/55 – Revocation by Recorded Instrument Authorized
11
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/75 – Notice of Death Affidavit
12
Illinois General Assembly. Illinois Compiled Statutes 755 ILCS 27/80 – Disclaimer
13
Illinois Legal Aid Online. Transfer on Death Instrument Common Questions
14
Office of the Law Revision Counsel. 12 U.S. Code 1701j-3 – Preemption of Due-on-Sale Prohibitions
15
Office of the Law Revision Counsel. 26 U.S. Code 1014 – Basis of Property Acquired From a Decedent
16
Illinois Department of Healthcare and Family Services. Medicaid Estate Recovery FAQs
17
Illinois General Assembly. Illinois Compiled Statutes 305 ILCS 5/5-13