This past year we have witnessed three of the most substantive changes in the law that I have seen in over 35 years. This week concerns the Illinois Residential Real Property Transfer on Death Instrument Act
This new law effective Jan 1, 2012 provides for a non-probate transfer of real estate upon the death of the owner. The benefit of the new law is that allows for the creation of a "transfer on death instrument" (T.O.D.I.) that when properly witnessed, acknowledged, (Just like a will) and recorded, allows an owner of residential real estate to transfer the property to a stated beneficiary effective only upon the owner's death. It must be residential real estate; and the TODI must be recorded prior to the owner's death.
After the owner's death, the beneficiary must record a Notice of Death Affidavit and Acceptance. Failure to do that can lead to loss of the beneficiary's interest in the property as it goes back to the estate of the owner.
The law provides a way to contest the validity of a TODI if an action is commenced within the earlier of 2 years after the date of the owner's death or 6 months from the date that letters of office are issued.
One very big problem with using a TODI to pass title of real estate to someone is that title is not insurable during this 2 year contest period. Title companies will not insure title for a new buyer until the contest threat is over.
I like these for same sex couples because: with many couples one person will own the house when the relationship starts and has many reasons not to put their partner in title while alive. One such reason is that there could be a gift tax issue if they do. That leaves only a will or a trust to pass title to their partner.
Problem with Trusts is that clients find them very complex and expensive. The problem with just a will is that you usually have to probate the will to pass title to the beneficiary of the will AND Probate opens the estate and the house to claims of creditors of the owner Such as. credit card bills and student loans.
The benefit of the TODI is the potential it has preserve the real estate from the creditors of the decedent owner by avoiding probate. More next week on TODI.