Owning income property brings real rewards, and it also asks for a clear plan for what happens next. Estate planning helps you protect that work, keep things smooth for your family or partners, and cut down on future headaches. At Woods & Bates, P.C., we focus on practical planning that fits your goals, your risks, and your timeline.
Our firm handles estate and trust administration, estate planning, and real estate matters across Illinois. We listen first, then help you choose the right tools. This article explains how Illinois Transfer on Death Instruments, often called TODIs, can work for commercial real estate you hold today.
What is a Transfer on Death Instrument (TODI)?
A TODI is a document that lets you name a beneficiary for real property, so the property passes at your death without probate. You keep full control while you are alive, and the beneficiary receives title later. Think of it as a deed with a built-in delay until you pass away.
Illinois started TODIs for residential property, then expanded the concept to include some commercial and mixed-use parcels. That shift opened the door for more business owners and landlords to use this simple tool. The Illinois Residential Real Property Transfer on Death Instrument Act (755 ILCS 27/1) provides the framework for how TODIs work.
With that foundation, let’s look at why a TODI can make sense for certain commercial holdings.
Benefits of Using a TODI for Commercial Real Estate
For many owners, a TODI strikes a balance between control while alive and a clean transfer later. Here are the advantages in plain terms.
Avoiding Probate
A TODI lets a building pass to your chosen person without opening probate, which can shorten timelines and reduce legal costs. That can be a big relief for families and business partners who need clarity quickly.
Maintaining Control During Life
You keep full ownership, including the right to sell, refinance, lease, or change your plan. You can revoke the TODI at any time before death, and nothing transfers while you are living.
Tax Advantages
Signing a TODI does not cause a property tax reassessment or capital gains at that time. Tax issues generally come later, after the actual transfer at death or a sale by the beneficiary.
Quick Access to Assets
Skipping probate helps heirs or partners access rental income, business premises, or lease files sooner. That speed can limit interruptions for tenants and customers.
Estate Planning Simplification
A TODI can be a simpler option than creating a trust, especially for owners with a single building or a small portfolio. It can also work as a short-term bridge while a broader plan is still taking shape.
While these benefits are attractive, TODIs do not fit every property or ownership setup.
Eligible Properties and Owners
Not every parcel or owner qualifies for a TODI. Title and use both matter, and so does who holds ownership.
Here are examples that can qualify in the right circumstances:
- Mixed-use buildings where you also live in one unit.
- Industrial properties held by individuals or single-member LLCs.
- Small office buildings owned in your personal name.
- Retail spaces that you hold as an individual landlord.
Corporations cannot use TODIs. Property held by an LLC can qualify if it is a single-member LLC and the structure lines up with TODI requirements, so title review is important.
With eligibility in mind, it is smart to avoid common errors that can wreck a good plan.
Common Mistakes to Avoid When Creating a Commercial TODI
A well-drafted TODI can save months of stress. A sloppy one can get tossed out or spark fights that drain value.
- Naming multiple recipients without listing clear percentages, which invites conflict later.
- Forgetting that TODI property stays exposed to the decedent’s debts for up to two years after death.
- Errors with witnesses, notary, or recording with the county, any of which can void the TODI.
- Assuming jointly-owned land or entity-owned parcels always qualify without checking title closely.
- Overlooking a will or deed that conflicts with the TODI, which can create accidental revocation or confusion.
A short meeting with counsel and a clean checklist can prevent most of these problems.
Next, let’s compare a TODI with other tools you might already have or plan to add.