In January 2012, Illinois enacted the Residential Real Property Transfer on Death Instrument Act, which authorized a way to transfer property upon death. More specifically, this instrument allowed an owner of residential real property to designate one or more beneficiaries to receive interest in the property upon the owner’s death. This allowed for the bypassing of probate claims.
When making or revoking a Transfer on Death instrument in Illinois, the owner of the property must have the same capacity required in a will. Specifically, this capacity is any person who is eighteen years or older and is of sound mind and memory. The transfer on death instrument must be recorded before the owner’s death. Then the beneficiary has a right to either accept or decline the transfer on death instrument. Until the owner passes away, the beneficiary does not have any rights to the property. The transfer on death instrument remains revocable by the owner during their life.
One of the limitations of the original Act was that it could only be applied to residential real property and was not available for commercial real property. As of January 1, 2022, an amendment to the Act was made and provides that the Transfer on Death Instrument will no longer be limited to only residential real estate but can be used for any real estate located in the state of Illinois. The Act has been renamed the “Real Property Transfer on Death Instrument Act.” Therefore, an owner of a commercial building can use the Transfer on Death Instrument to also avoid probate upon death.
The Amendment also clarifies some outstanding issues that came to light under the prior Act. This includes the clarification that the beneficiary of a Transfer on Death Instrument may be a trust that is in existence at the time the instrument is signed. The trust must be created under the owner’s Will or under the instrument itself.
The Amendment also includes an additional section involving renunciation of a Transfer on Death Instrument by a surviving spouse. If the spouse renounces the instrument, it is treated the same way as if the spouse renounces a Will, per the Probate Act. In order to renounce an instrument, the spouse prepare a written renunciation and then record it with the Recorder’s Officer in the county where the instrument was originally recorded. This must be completed within seven months of the owner’s death. Additionally, a beneficiary named under a Transfer of Death Instrument is subject to the same claims of creditors as would a revocable trust. If an owner’s probate estate is not sufficient to pay creditors, costs of administration, owner’s funeral expenses, etc. then the property recorded under the instrument is still subject to pay those amounts.
One of the many benefits of a transfer on death instrument is that it is less complex and less costly to draft than a living trust. It is also revocable, which in turn, gives the owner flexibility to change their mind on who to designate as the beneficiary. Furthermore, the transfer on death instrument allows an owner to retain the real property interest during their life, since the interest only transfers upon the owner’s death.
Contact our office if we can help you use this new law for your benefit.