January 5, 2012
Authored by: Stephanie Moll
Starting on January 1, 2012, Illinois property owners have a new option when it comes to transferring their residential real estate on death. Now that the Illinois Residential Real Property Transfer of Death Instrument Act (the “Act”) has been signed into law, Illinois joins several other states, including Missouri and Colorado, that allow some form of transfer on death instrument for real estate.
The Act allows owners to transfer their Illinois residential real estate at death without probate by using a “Transfer on Death Instrument”. Therefore, the owner of the real estate can continue to own the property in his or her individual name, but immediately upon death, title to the property will transfer to the beneficiary designated in the Transfer on Death Instrument without having to open a probate estate to transfer the property.
There are several rules and requirements in the Act.
A Transfer on Death Instrument will only be effective with respect to “residential real estate”, which is defined as “real property improved with not less than one nor more than 4 residential dwelling units, units in residential cooperatives; or condominium units, including the limited common elements allocated to the exclusive use thereof that form an integral part of the condominium unit; or a single tract of agriculture real estate consisting of 40 acres or less which is improved with a single family residence”.
The Act sets forth three minimum requirements for a valid Transfer on Death Instrument:
1. It must “contain the essential elements and formalities of a properly recordable inter vivos deed” and must be signed by the owner and two witnesses, with all three of those signatures acknowledged by a notary public;
2. It must state that the transfer is to occur upon the owner’s death; and
3. It must be recorded before the owner’s death in the public records in the recorder of the county or counties in which any part of the property is located.
What if the owner changes his or her mind before death? The Act requires that a Transfer on Death Instrument must be revocable, meaning the owner can change his or her mind at anytime. A Transfer on Death Instrument can only be revoked in two ways:
1. By a new Transfer on Death Instrument that either expressly revokes the prior Transfer on Death Instrument or is inconsistent with the prior Transfer on Death Instrument; or
2. By an instrument of revocation that expressly revokes the prior Transfer on Death Instrument.
These documents must be executed with the same formality as the original Transfer on Death Instrument and must be recorded.
What if the beneficiary doesn’t want the property? Just like in aprobate estate, the beneficiary can disclaim the gift after the donor’s death. If you intend to disclaim a gift you receive through a Transfer on Death Instrument, you should promptly contact your attorney so that you follow the proper procedure, otherwise, you may find yourself subject to unintended consequences.
If you own residential real property in Illinois, you should consider consulting with your estate planning attorney to determine whether a Transfer on Death Instrument would be an effective tool for you.