May is National Elder Law Month and Christina Mermigas, principal in Chuhak & Tecson, P.C.’s Estate Planning & Asset Protection practice, explains what a TODI is.

Acknowledging National Elder Law Month in May, this is a brief explanation about TODIs. What is a TODI?

TODI stands for “Transfer on Death Instrument.” Commonly called a ‘TODI,’ it is an estate planning tool that allows for owners of residential real estate to transfer title upon death to one or more specified beneficiaries, thereby bypassing probate and court involvement. A TODI is generally used as an alternative to creating a revocable living trust, but it should only be used for very simplified estates and in limited situations.

There are a couple points to keep in mind when you’re utilizing this estate planning instrument.

• A TODI must be signed, notarized and witnessed by two uninterested witnesses prior to the owner’s death and it has to be recorded prior to that owner’s death. As soon as the owner dies, a signed but unrecorded TODI is ineffective and cannot be recorded in the chain of title.
• The owner of the property retains full control over the property during their life.
• The TODI can be changed at any time. The owner’s current exemption, such as a homestead exemption or a senior citizen’s exemption is maintained. It does not wipe out or eliminate any liens or mortgages that are currently on the property.
• The TODI’s use is restricted to residential property only; it cannot be used for commercial property.
• A TODI is a relatively inexpensive option to avoid probate. The form itself is pretty straightforward and can be obtained from your county clerk. However, we recommend that you consult with an attorney to complete the TODI because common errors can cause a TODI to fail and can result in the property passing back into probate.
• TODIs are susceptible to title disputes. Because they’re such simple documents, they are subject to potential elder abuse, such as forcing an elderly person to sign a TODI by undue influence. It also doesn’t provide guidelines on how multiple beneficiaries will eventually own the property. So if you want to transfer title to two children and those two children don’t get along, there are no guidelines on how they’re supposed to own that property, which can lead to ownership disputes.
• Lastly, not every state recognizes a TODI. Illinois recognizes TODIs, but if you live in a state that doesn’t, then you have to seek alternative measures in order to put a transfer on death instrument in place.

Ultimately, a TODI can be a very helpful estate planning tool, but they need to be used strategically and sparingly. Again, contact an estate planning attorney for further information and assistance on using a TODI in your estate plan.

Client alert authored by Christina M. Mermigas, (312 855 4354), principal.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.