Transfer on Death Instrument Illinois: How to Pass Real Estate Without Probate

Your parent owns a house. They're heading into a nursing home on Medicaid. You've heard the state can "take the house" after they die to recover what Medicaid paid. But there's a legal tool in Illinois that sidesteps that entire process — and most families never hear about it until it's too late to use it.

The Illinois Transfer on Death Instrument (TODI) lets a property owner designate a beneficiary who automatically receives the real estate when the owner dies, entirely outside of probate. Since Illinois Medicaid estate recovery is limited to probate assets, a properly recorded TODI can keep the family home out of the state's reach.

How the TODI Works

Under the Illinois Residential Real Property Transfer on Death Instrument Act (755 ILCS 27), a property owner can record a simple document with the county recorder's office that names one or more beneficiaries. When the owner dies, the property transfers directly to those beneficiaries by operation of law — no probate court, no executor, no waiting period.

The TODI functions similarly to a payable-on-death designation on a bank account. The owner retains complete control during their lifetime:

• They can sell the property, mortgage it, or live in it
• They can revoke or change the TODI at any time by recording a new instrument or a revocation
• The beneficiary has no ownership interest, no right of access, and no legal claim until the owner dies
• The property remains in the owner's name for tax, insurance, and Medicaid eligibility purposes

This last point is critical. Unlike an outright deed transfer to a child (which triggers the Medicaid lookback), executing a TODI does not transfer any present interest in the property. The owner still owns it. There is no gift, no divestment, and no lookback violation.

TODI Requirements in Illinois

The instrument must meet these requirements to be valid:

1. Written and signed by the property owner (or their agent under a properly executed property power of attorney with real estate authority)
2. Contains the legal description of the property (not just the street address)
3. Names one or more beneficiaries — individuals, trusts, or other entities
4. Recorded with the county recorder in the county where the property is located during the owner's lifetime
5. Two witnesses are NOT required — only the owner's signature and recording
6. Notarization is strongly recommended (and practically required for recording acceptance)

The TODI only applies to residential real property — one to four dwelling units. Commercial property, farmland, and vacant land are not eligible.

Why It Matters for Medicaid Estate Recovery

Illinois runs a probate-only estate recovery program through the HFS Bureau of Collections. After a Medicaid recipient dies, the state can file a claim against the probate estate to recover what it paid for long-term care services provided after age 55.

But the state can only recover from assets that pass through probate. Assets that transfer outside of probate — through joint tenancy, beneficiary designations, or a TODI — are beyond the state's recovery authority.

There's an additional safeguard. Under Public Act 102-1037, Illinois permanently waives any estate recovery claim if the gross probate estate is valued at $25,000 or less. So if the house passes outside probate via a TODI, and the remaining probate estate (bank accounts without POD designations, personal property) totals under $25,000, the family owes the state nothing.

Combined, these two protections — the TODI removing the house from probate, and the $25,000 threshold waiving recovery on small estates — can save families tens or hundreds of thousands of dollars.

TODI vs. Other Estate Avoidance Tools

TODI vs. Joint Tenancy: Adding a child to the deed as joint tenant also avoids probate, but it creates an immediate present interest. The child becomes a co-owner, which means the property is exposed to the child's creditors, divorce proceedings, and lawsuits. A TODI avoids all of these risks because the beneficiary has no ownership until death.

TODI vs. Living Trust: A revocable living trust achieves the same probate avoidance, but requires transferring the property into the trust, maintaining the trust, and potentially updating it. A TODI is a single recorded document — simpler and cheaper.

TODI vs. Outright Deed Transfer: Deeding the home to a child while the parent is alive triggers the 60-month lookback. If the transfer happens within five years of a Medicaid application, it creates a penalty period during which Medicaid refuses to pay. A TODI does not trigger the lookback because no present transfer occurs.

Timing Considerations

The TODI must be recorded during the owner's lifetime. If your parent is already in a nursing home on Medicaid, they can still execute a TODI — it doesn't affect their current Medicaid eligibility because the property remains theirs. The transfer only happens at death.

However, the owner must have mental capacity to sign the instrument. If your parent has advanced dementia, check whether their property power of attorney grants the agent authority over real estate transactions. If it does, the agent may be able to execute and record the TODI on the parent's behalf.

The Illinois Medicaid Long-Term Care & Asset Protection Guide covers the TODI alongside other estate recovery protections, including the $25,000 safe harbor threshold, probate avoidance strategies, and when a Medicaid Asset Protection Trust makes more sense than a simple TODI.

See more Illinois guides →