Transfer on Death Instrument vs. Trust for an Illinois Home

The Short Answer

It depends. A properly executed and recorded Illinois transfer on death instrument (TODI) can transfer real estate at the owner’s death without making the beneficiary an owner during the owner’s lifetime. A revocable living trust can also hold real estate and direct what happens after death, while potentially addressing broader management and incapacity issues. Which approach fits depends on the property, family, beneficiaries, other assets, title, creditor issues, and planning goals.

What Is an Illinois Transfer on Death Instrument?

A TODI is a statutory instrument that allows an owner to designate who will receive Illinois real property at the owner’s death. It must satisfy Illinois execution requirements and be recorded before the owner’s death to be effective.

What Happens During the Owner’s Lifetime?

A recorded TODI generally does not give the designated beneficiary a present ownership interest during the owner’s lifetime. The owner can generally continue to sell, transfer, or encumber the property, subject to the facts and other applicable law.

How Is a Revocable Living Trust Different?

With a revocable living trust, property may be transferred into the trust and managed under the trust terms. A successor trustee can be named to manage trust property if the original trustee can no longer serve. A trust can also address assets and beneficiaries beyond a single parcel of real estate.

Can Either Method Keep a Home Out of Probate?

Potentially, yes. A valid TODI can transfer covered real estate at death, and real estate properly held in a revocable trust can generally be administered under the trust rather than through probate. Whether probate is avoided depends on title, validity, funding, beneficiary survival, and other facts.

Do TODIs or Revocable Trusts Eliminate Creditor Issues?

No. Neither should be assumed to shield the owner’s property from the owner’s creditors. Illinois law also provides rules for certain claims after death involving TODI property and property held in a revocable trust.

What Factors Commonly Affect the Choice?

Common considerations include whether there are multiple or contingent beneficiaries, whether property should remain in trust after death, incapacity planning, other assets, family circumstances, creditor concerns, taxes, mortgage or title issues, and how much ongoing administration the owner wants.

Bottom Line

A TODI may be a relatively focused way to plan for transfer of Illinois real estate, while a trust can address a broader set of management and distribution goals. The right choice depends on the actual deed, family situation, assets, and objectives. A qualified attorney can review the available options and how they fit with the rest of the estate plan.