January 2022 updates to the Transfer on Death Instrument

 

It's a great day. It's a happy Friday here. And it's a real pleasure to be with you today. My name is Christopher Nudo and I'm an attorney in Illinois serving the Chicago Metro Area. I have offices in Arlington Heights and Elgin and now Bannockburn, Illinois, and our practice really concentrates on estate planning, real estate, and corporate transaction law. we are a Christian-based law firm and uphold our faith along with caring for our clients. Today, we are going to dive into a very specific topic related to a very small nuance of estate planning and that is the transfer of real estate and one way to handle it. We're going to be talking about the upcoming amendment to the Transfer on Death Instrument here in Illinois Now, many of you may or may not know what a Transfer on Death Instrument is. Uh a Transfer on Death Instrument, first of all, has an affectionate name that is called a TODI. T O D I, TODI. And of course, that means transfer on death instrument And the Transfer and Death Instrument is not exclusive to Illinois Many. states have them, but they call them different things. Some call them a death deed, and others have other names, but here in Illinois, it's a TODI Transfer on Death Instrument. And what a Transfer on Death Instrument is, is a document that specifically transfers your property, real estate of some fashion to somebody upon your death. And you would think that this would be something that would have been in existence for a very long time because it has a very practical application. But that's not the case. It's a relatively new law here in Illinois. And it's been amended a few times. With the most recent amendment being signed on July 9th of 21 by Governor Pritzker Where he the Illinois Residential Property Transfer on Death Instrument Act and renamed that act, the Real Property Transfer on Death Instrument Act Is. that important? No, but it's revealing in the title. So, when they change the title from the Illinois Residential Real Property Transfer on Death Instrument Act to just the Real Property Transfer on Death Instrument Act we, note that they removed the term residential and that's going to be an important key here in today's discussion. 

So, let's go over our agenda for today. Uh today, we are going to be talking about the scope of a tote who can benefit from a tote, extreme formality execution with regard to a tote, renunciation, afforded to wives or spouses, claims of creditors, and the potential to contest the TODI. That's going to be our agenda for today. So, let's dive right in, shall we? Um so, the most significant change to the for a TODI is that as of January twenty twenty-two toadies can be used for any type of real estate. Previously, it was restricted to just residential real estate. As of January 22, we can now use toadies to transfer commercial real estate, investment real estate. So, the breath of the to the that is much more powerful starting this January, the act clarified a real confusion that many practitioners had and it said that the beneficiary of a TODI maybe a trust that is in existence at the time that TODI is signed so one real vo use of Pitoti in Illinois is specific with the city of Chicago. Practitioners like myself have found that transferring property to a trust is very expensive in the city of Chicago due to water certs, zoning certs, and other documents and procedures that need to be filed in order to transfer title in the city of Chicago. Now, there's many times that we do go through the exercise and transfer it but on occasion, when money is an issue, what we will do is we will file a TODI in the city, in Cook County and the TODI will say that upon the death of the owner, the property shall transfer to the owner's living trust And thereby we, still get the property funded into the living trust of the owner. But bypass the extreme expense initially in making that transfer during the owner's lifetime This can be extreme an extremely cost-effective way of handling this kind of transfer when people own multiple properties in the city of Chicago.

Let's see. So, I just made mention to how a revocable living trust and a TODI can work together and some people might have this moment of aha. I no longer have to transfer my real estate into my trust. I can just file a TODI and then when I die, my trust is in control of the real estate. And that's true. But that aha moment should come with a little caveat and that caveat is that the tote is only effective upon your death. So, if you become disabled, the TODI will not help you and your trust most likely and should have language in it that addresses what happens if you become disabled and it appoints a successor trustee to help manage your property in the event that you no longer can do it and you're suffering from some form of incapacity. Now, many of you should be saying to yourselves, well, Chris, isn't that why I should have a power attorney for property Specifically, the Illinois durable Power of Attorney for Property and the answer is yes. Having an Illinois durable power of attorney for property will assist in ensuring that somebody has control of your property in the event of disability. However, we all know that there are many third parties out there that are bucking or not accepting powers of attorney these days. Uh for one reason or another for their own policy decisions and so having the power of attorney in and of itself is not a foolproof mechanism to overcome incapacity. So, we still recommend to the extent possible that if you have a revocable living trust, you transfer the property into the trust but some people say, Chris, I really don't want the hassle of a revocable living trust. I mean, they are a bit complicated. They can they require some time, energy money to keep them current and to keep them and to administer them upon my death. So, I just don't want that type of complexity in my life and so, how is it, Chris, that I can avoid probate and still transfer my real estate upon my death and the answer is with a TODI and thankfully, now that we have this January 2022 amendment, we can Transfer that real estate whether it would be commercial real estate, residential real estate, investment, real estate, any kind of real estate, really. We're able to transfer as of January twenty twenty-two. Now, I talked about extreme formality in the execution of a tote and this is super important. First of all, did you know that prior to January of twenty twenty-two, only Illinois licensed attorneys in good standing could prepare a Transfer on Death Instrument? The January 20 twenty-two amendment changed the law still requiring a lawyer to prepare the Transfer on Death Instrument the, TODI But did no longer limit it to an Illinois attorney. Now, attorneys from other states are permitted to produce a TODI. 

Now, let's talk about the extreme need for very specific execution requirements. Every TODI needs to be witnessed by two credible witnesses. And needs to be recorded before the owner's death. Also, neither of the witnesses can be beneficiary under the TODI. So, they cannot be interested parties. Now, one really specific item here, I want to highlight, Not in addition to the witnesses, the TODI must be recorded before the owner's death and this is super important because I do a lot of estate planning in like the last moments of people's lives. They call me in a panic. They're literally on death's door. And they want to get their stuff in order. So that their errors have the least amount of frustration once they die managing their estate. Many times, I cannot do a TODI in these instances because I can never get the TODI recorded quickly enough before the person's going to die. That's how short of a window many give us. Less than a week, typically. So, a tote is something that is used when prepared and recorded when we're not at that store in the eleventh hour just before your last breath. It's more of a planning tool that should be planned and used when you're not walking out the door because you've waited too long. Now, another unique amendment to the January twenty twenty-two amendment to the real estate transfer on Death is that a spouse now has the right to renounce a TODI which is a big deal. in the Illinois probate Act a surviving spouse has the right to renounce a will. What does renounce a will mean? That means that a surviving spouse has the right to treat the will and treat the estate as if a will never existed. Why and when would a spouse want to do this? Well, an owner of Property dies and the wife or the husband, the surviving spouse, finds out that the owner of the property transferred the property to their cousin, brother, I don't know. Somebody other than the spouse The spouse feels that they are entitled to that property. So, they renounce the will or in this case, renounce the TODI which then the property is treated as if the TODI or the will didn't exist. Thereby, giving the surviving spouse an interest in the property. And the minimum interest that this surviving spouse would be entitled to is one third of the real estate If the owner also left descendants. And one half of the real estate interest, if there were no descendants. In order for a surviving spouse to renounce a tote. The spouse must file a written instrument renouncing TODI. Within seven months of death and file it in the recorder's office in which the original TODI was filed.  So, that is a big new addition to the amendment Similarly, the TODI is affected  Similarly, the probate act has influenced the new TODI amendment. In that, a beneficiary under a TODI now is subject to the claims of creditors of the owner as someone who would take under a revocable trust. So, what does that mean? That means that in the past, prior to January of twenty twenty-two, the claims creditors did not transfer or were not affected or did not affect the transfer of real estate by using a tote but as of January of twenty twenty-two, now, creditors can attach or the real estate value can be subject to the claims of creditors of an estate similarly as a revocable living trust. Now, what does that mean? Here in Illinois there's traditionally three different ways dead. Property is transferred. It's either by some sort of beneficiary transfer which a TODI does or a revocable living trust which is a beneficiary transfer or finally, through probate which is a form of transfer and what we know based on the Illinois laws, whether it would be the TODI Law, the Illinois Trust Actor, the Illinois probate act is that First, the claims of creditors are affected by any open probate that exists upon the death of a person. But if there is no open probate, but the person who died had a revocable living, revocable living trust, then, that trust is required to care for the claims of the deceased. And in that vein, a TODI is treated exactly the same way. If there no probate or the probate has insufficient funds to pay the creditors of an estate, then, the real estate transferred by a tote will be subject to those claims. Now, interestingly enough, a TODI if a probate is open, if a probate is open, then, the claims of those creditors would be filed in that probate and that's where those credit, those creditors would make those claims against those totes as well. Finally, the amendment clarified the fact that a TODI can be contested like a will is contested and a trust can be contested. Now, the only contest really is to the validity of the tote. Meaning that somebody didn't fraudulently make it or it's not counterfeit and an individual has up to two years to contest the validity of a TODI unless a probate is open and if a probate is open, then, the contestability period is 6 months which is the claim period which is 6 months after the letters of office are issued to the executor. I believe that it's not only when letters of office are issued to the executor, but also in line as the probate act with when publication of the estate is made. So, that is kind of a quick snapshot of what we're looking at with the January twenty twenty-two TODI Amendment. The amendment of the Real Property Transfer on Death Act. 

I see that while we've been here, we've had some just a few questions come in. So, why don't we do this? Why don't we do a recap For those of you who joined a little late and then we'll get to our questions and we'll wrap up and head on out for the rest of our day. So, again, my name is Christopher Nudo and I'm the founding partner of a law firm that serves the Chicago Metro Area. We have offices in Elgin, Arlington Heights, and now Bannockburn. We focus our practice on estate planning, probate, real, estate, and commercial transaction law. Our clients, our parents, and just about business owners and just everybody in the community. We have a Christian-based firm, meaning that we let our faith influence us in many of our decisions in which we do. So, today, we were talking about the revisions to the Transfer on Death Instrument Act. Now, known as The Real Property Transfer on Death Instrument Act. If you missed last week's session, I discussed estate planning considerations for the LGBTQ community and so that was a fascinating topic. One that has many nuances that is useful for many. Please go back and take a look at that. Share it with your friends and hey, let's get on to our questions. 

So, first question I see is, how can I use a TODI with my current estate plan? Great question. So, again, TODI's can work with simple wills. They can work if you don't have a will. They can work if you have a revocable living trust. TODI's are very flexible and useful and so, what we would do is figure out what the best economic option is to accomplish your goal in your estate plan. I always start every meeting with the simple fact that one size does not fit all. So, we would sit down and see how a TODI would fit in your estate plan. To transfer real estate, avoid probate. Excellent question. Thank you. 

Second question I have is, I own commercial real estate. Should I use a TODI? Again, the answer is as January 2022, you can use a TODI to transfer commercial real estate. We will want to sit down and evaluate if that is the best tool to use. Many considerations will have to be considered such as how do you hold title to your commercial real estate right now? Do you hold it individually? Do you hold it in a limited liability company? Do you hold it in some form of trust? What does your estate plan look like and what documents have in your estate plan. When we decipher all of those things, we'll be able to determine if a TODI is the right instrument for you in transferring commercial real estate. 

Let's see. What do we have next? Can anyone prepare a TODI or do you need an attorney? Oh, great question. I did touch upon this. You need a lawyer in order to prepare a TODI. Now, the good news is, if you're watching this and you're outside of the state of Illinois, as, of January 2022, a lawyer from any state in good standing can prepare an Illinois transfer on Death Instrument. Just make sure they know what they're doing because it has extreme need for it to be executed with specific formality including the two independent witnesses that we've discussed. 

next question. My dad died and I had done a TODI. What do I have to do to transfer title on myself? Oh, good question. So, first of all, sorry for the loss of your father but what you need to do is visit Illinois Licensed Attorney and we will prepare the appropriate document in order to one to clear up title for your interest in the property. Now, when I say that, I want to be very clear. When your dad died through the Transfer on Death Instrument the, TODI, your vesting in the real property, in the real estate took place. So, you own it But what our firm likes to do is go in and just clarify the title record so that when you go to sell the property, should you go sell the property? The record's very clear that you're the owner and so, we recommend that you visit a Illinois licensed attorney to help you with that. 

Alright, coming to the end here, let's see. Do you offer virtual appointments or on-site visits? Of course. So, I offer virtual appointments. Um I I will tell you they're not my favorite. I think the world of virtual appointment is kind of run its course but if it's not convenient for you and I to get together, please, let's set up a virtual meeting. In addition, there's many instances where I will come to you. Me or some of my staff attorneys can come to your house, your place of business, sit with you and have meetings there if it's not convenient for you to come to one of our local offices. 

Finally, where can I contact you to set up a consultation? Great question. I believe at the bottom of my screen, we're going to have phone number that you can text, you can call. If you go to my website, you, there's a place there where you can chat and so, there are lots of different ways that you can get a hold of me. 

Listen, I really want to thank all of you for your questions today. I cherish the opportunity to earn your trust and your work and your future and just really secure your legacy for your family, like anything in life, proper planning is a process. It takes time. So, I encourage you to reach out, call our office, many times you're going to get the most awesome gal in the world. Her name is Stephanie. She's going to answer the phone and she is going to be able to help you make an appointment, understand the things that you need, give you real comfort that when you visit with us, the process is going to be done in a very professional way and make your life easy. We are going to focus on your goals and the goals of your family. Hey, I invite you to join us here next week. We have Facebook Live Fridays 8 AM Central. Please feel free to invite your friends and share our recordings with your colleagues, friends, and anybody that you think would find them useful. Hey, I hope to see you again next week. Stay well and God bless. I'm Chris Nudo.


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