Pros and Cons of Transfer on Death Instruments

 Posted on January 28, 2025 in Strategy and Asset Protection

If you are new to estate planning, you might understandably think that it is all about wills and trusts. While wills and trusts are powerful and widely used ways to create your estate plan, there are other legal instruments that may be well suited to your needs. 

One of these is called the Illinois transfer on death instrument, and it is a way to transfer real property upon your death. An experienced Illinois estate planning attorney can offer advice on whether you should consider a transfer of death instrument for your estate plan. 

What Is a Transfer on Death Instrument?

A transfer of deed instrument (TODI)  is a revocable estate planning document that allows the owner of residential real estate to transfer the property upon their death while bypassing probate, the court process used to settle estates and determine if certain legal instruments such as wills are valid. With a TODI, the property owner selects one or more beneficiaries who will receive ownership interests in the property when the owner dies. 

Pros of a Transfer on Death Instrument

Inexpensive and Simple

A TODI is an inexpensive estate planning document and it is simple to set up, especially as compared to other estate planning documents such as a living trust. It is also cheaper than going through probate, which can be costly and time-consuming because it allows owners to transfer residential property while bypassing the expense of probate.

Owner Keeps Possession

Another benefit of a TODI is that the owner stays in possession of the property during their lifetime. Since beneficiaries have no interest in the property until the owner’s death, the beneficiaries’ creditors cannot reach the property. 

Offers Flexibility

A TODI offers flexibility for the property owner. Because a TODI is revocable, the owner can change their mind about the beneficiaries during their lifetime and revoke the document. 

Cons of Transfer on Death Instrument 

May Not Avoid Probate

There are limits to the TODI’s ability to bypass probate because there are situations in which property transferred via a TODI will go to probate, such as when a beneficiary passes away and no alternate beneficiaries are named in the TODI. 

Subject to Estate Taxes

A TODI usually does not avoid estate taxes in Illinois. This can be a big disadvantage, especially when one of the goals of estate planning is to minimize taxes.

Public Document

Once a TODI is recorded, it is a public document, which many people may dislike given it puts into the public what is private information about their estate plan.

Contact a Yorkville, IL Estate Planning Attorney

Making an estate plan is one of the best things you can do to plan for your and your family’s future. It is also a process that takes time and involves many different considerations. That is why at Gateville Law Firm our experienced Kendall County, IL estate planning attorneys are here to ensure that your estate plan reflects your wishes. Call our offices at 630-780-1034 for a complimentary consultation.