A homeowner may have every intention of selling a property, only to have health or other circumstances change before the transaction is completed.
That possibility becomes especially important for older homeowners. If the owner dies before the sale and the property is still titled in that person’s name, determining who has authority to complete the transaction can create delays.
A Transfer on Death Instrument, or TODI, may provide another option in the right circumstances.
What Does a TODI Do?
In Illinois, a TODI allows an owner to designate who will receive real estate upon the owner’s death.
The owner retains their rights to the property during their lifetime, and the TODI is revocable. To be effective, it must satisfy Illinois execution requirements and be recorded before the owner’s death.
That last requirement makes timing particularly important. A TODI cannot be created after someone has died, and Illinois law does not permit an agent acting under a power of attorney to create one for the owner.
When a Sale and a Health Crisis Collide
Our firm recently encountered a situation involving an elderly homeowner who had moved to California to live with her daughter while her Illinois home was being renovated for sale.
The daughter had power of attorney so she could handle the sale for her mother. Then her mother developed pneumonia and was hospitalized. Because a power of attorney ends when the person who granted it dies, the daughter’s authority to complete the transaction would not continue if her mother died.
The mother was still able to make decisions and sign documents, so a TODI was prepared, signed and recorded. The property later went under contract.
If the mother remained alive through the closing, her daughter could use the power of attorney to sign on her behalf. If the mother died beforehand, the TODI provided a means for the property to transfer to her daughters.
When Might a TODI Be Appropriate?
A TODI can be particularly useful when an Illinois property owner wants to identify who will receive the real estate at death without transferring ownership during the owner’s lifetime. Because the transfer occurs at death, the beneficiary does not become the owner simply because the TODI has been recorded.
For an older homeowner preparing to sell, it can also address a very practical question: What happens to the property if the owner dies before the sale is completed?
Without the appropriate arrangements, a seller’s death before closing can change who has authority to proceed and potentially affect the transaction’s timeline.
A TODI Is Not the Only Option
A TODI should not be viewed as an automatic solution for every homeowner.
How the property is currently titled, whether it is held in a personal trust, who the intended beneficiaries are, and the owner’s broader circumstances can all affect which approach is appropriate.
The instrument also has specific legal requirements. Illinois requires the owner’s signature, two witnesses and acknowledgment before a notary, as well as recording before death.
Timing Is the Key
The situation involving the mother in California illustrates why these decisions should not wait until a real estate transaction is already facing a crisis.
Her daughter had authority to act through a power of attorney while her mother was alive, but that authority had limits. Because the family addressed the ownership question while the mother could still act, they had another path if her health changed before the property was sold.
For older homeowners preparing to sell or transfer Illinois real estate, a TODI can be a useful tool in the right circumstances.
The important question is not simply whether a TODI is available, but whether it fits the property owner’s situation before circumstances take the decision out of their hands.
The Minchella & Associates Difference
With over 40 years of experience in Illinois real estate law, Erica Minchella has represented thousands of home sellers and buyers, landlords, and commercial and investment property owners.
For more information, schedule a consultation today.
