How 2024 Illinois Law Changes TOD Deeds for Property Owners

 Posted on October 15, 2025 in Estate Planning / Probate

In 2024, the state of Illinois quietly expanded one of its most flexible estate planning tools – the Transfer on Death Instrument (TODI). Before this change, transfer-on-death instruments were limited to residential real estate, but now they extend to some commercial and mixed-use properties.

Business owners and investors can now transfer commercial real estate directly to heirs without probate, thanks to amendments to 755 ILCS 27/5. The goal is to modernize property succession and reduce the backlog in probate courts. As with most things, however, with broader use comes additional complications.

Not every property or owner qualifies for a TODI. If mistakes are made in the beneficiary designation or execution of the TODI, the transfer can be invalidated. If you are wondering whether your commercial real estate can be transferred via a TODI upon your death, the best step you can take is to consult with an experienced Geneva, IL estate planning lawyer.  

What Is a Transfer-on-Death Instrument?

A transfer-on-death instrument is a deed that allows property to pass automatically to a named beneficiary without having to go through probate following the owner’s death. The primary advantage of a TODI is that the owner retains full ownership and control during life, including the right to sell or revoke the instrument. Up until 2024, Illinois law restricted TODIs to residential real estate with four or fewer units.

The legislative expansion broadened the definition of "real property." That definition now includes qualifying commercial and mixed-use parcels, such as:

• A mixed-use building where the owner also lives
• An industrial property held by individuals or single-member LLCs
• Small office buildings
• Retail spaces

It is important to note that corporations are not allowed to use TODIs, but LLC-owned property may qualify if it is a single-member LLC. A missed filing can void a TODI; the updated law mandates notarized signatures and timely recording before the owner’s death. The most significant benefit of the expanded TODI law in Illinois is that probate can be avoided for business assets. This allows small business owners and investors to pass real estate directly to a trust, heir, or partner.

Additional Benefits of TODIs for Business Assets

The TODI, when used for a small business, does not trigger property tax reassessment or capital gains until the property transfers after death. Commercial real estate is kept outside of probate, which allows heirs to access rental income or business premises more quickly. While a TODI for a small business is easier than creating a trust, it still requires legal precision to avoid challenges in the future.

Common Mistakes Made in Commercial TODIs

Although the expansion in Illinois law for TODIs is beneficial for many, mistakes can be made that can void the entire instrument, a common issue among those who attempt to DIY. Some of the most common mistakes include:

• Naming multiple recipients without clear percentages can trigger disputes.
• TODI property remains subject to the decedent’s debts for up to two years after the death.
• Errors in notarization, witnesses, or recording can invalidate the entire document.
• Jointly owned property or land held by an entity may not qualify for a TODI.
• A conflicting will or deed may unintentionally revoke a TODI.

A TODI can be a good alternative to a pour-over trust and can be useful in succession planning for family businesses. When aligned with business operating agreements, insurance policies, and buy-sell provisions, a TODI is especially useful for those who own multiple small commercial parcels.

Contact a DuPage County, IL Estate Planning Attorney

The expansion of Illinois’ transfer-on-death instrument law offers both new opportunities and new risks for investors and property owners. If you own commercial or mixed-use real estate, it could be time to revisit your estate plan. A skilled Geneva, IL trust lawyer from DLAW, PC can help you determine whether a TODI fits your goals. Attorney Walker has more than 25 years of legal experience and is personally involved with every client. Call 331-222-7978 to schedule your free consultation.