Transfer on Death Instrument or Living Trust - Which One Should You Use?

 Posted on July 25, 2017 in Estate Planning

Historically, estate planning has been overlooked by the non-wealthy. Times are changing, however. Retirees and even younger adults are starting to recognize the benefits of an effective estate plan - especially when there is a smaller estate. You see, probate can quickly eat away at the value of a moderate estate, which may lead to significant losses for beneficiaries. In situations where the only transferable item is real estate, the loss may even prevent the procurement of the asset.

Thankfully, there are some preventative strategies that you can use, including Transfer on Death Instruments (TODI) and living trusts. How do you decide which is most appropriate for your situation? The following explores these two solutions and explains where to find assistance with your Illinois estate planning needs.

Living Trusts

Revocable trusts (otherwise known as living trusts) are legal documents that authorize a trustee (beneficiary) to hold and manage the grantor's assets before death. This authorization can be extremely beneficial for those suffering from a degenerative brain disease, or someone that is at risk for incapacitation. However, it can be used by anyone to avoid probate upon their death. It should also be noted that grantors still own their funds until death, and they can alter or revoke a living trust at any time (provided they are of sound mind).

Unfortunately, there are some limitations and concerns with living trusts. They must be funded, so they can be expensive to set up. It should also be noted that a single mistake - even a minor one - can invalidate the trust and cause the estate to go to probate. Living trusts do not replace a will either, and there may be confusion about what should go in a will and what should be designated to the trust.

Transfer on Death Instrument

A TODI deals only with the transfer of real estate, so it is not a comprehensive estate plan. However, they are less complex (and often less expensive) than a living trust, and they can still be altered or revoked (with a few exclusions). Still, there are some limitations and exclusions that one must be aware of before setting up a Transfer on Death Instrument. For example, a TODI can only be signed by someone of sound mind who is not under duress. A TODI must also comply with all deed requirements, and it must be registered in the county or counties where the property is located.

Contact Our DuPage County Estate Planning Lawyers

Because each situation is unique, it is crucial that estate planners seek experienced legal assistance before moving forward. The skilled DuPage County estate planning lawyers at Stock, Carlson & Asso. LLC can help. Knowledgeable and dedicated to protecting your best interests and the interests of your heirs, we will examine your situation and then strive to develop a creative solution that works for you. Schedule a personalized consultation to learn more. Call 630-665-2500 today.

Sources:

http://www.bankrate.com/finance/estate-planning/living-revocable-trust-facts-1.aspx

http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=3382&ChapterID=60