Illinois TODI for Farmland: Where It Works and Falls Short
What a TODI Does Well
A Transfer on Death Instrument is an Illinois statutory tool (755 ILCS 27) that allows a property owner to designate a beneficiary who will receive title to real property at the owner's death without passing through probate. The TODI is signed, witnessed, notarized, and recorded with the county recorder during the owner's lifetime. At death, the beneficiary records the death certificate and an affidavit of survivorship and takes title by operation of law — no court order, no probate estate, no months-long process.
For a farmland owner with a clear succession picture — a single farm, a single intended heir who is already managing the property, no significant creditors, and an estate well below the Illinois $4 million threshold — a TODI is an efficient, low-cost tool that accomplishes the probate avoidance goal with minimal complexity. The beneficiary gets the land quickly and without the cost and delay of a formal estate proceeding. If the only goal is probate avoidance and the other conditions are clean and uncomplicated, a TODI does the job.
The problem is that most farm succession situations in Illinois are not that simple. Multiple heirs, an active farm tenant, an estate near or above the $4 million threshold, or a farm with debt create conditions where a TODI by itself is an incomplete answer — and sometimes makes the situation more complicated than a more complete plan would have.
Where It Breaks Down: Multiple Heirs
A TODI names a specific beneficiary or beneficiaries. If a farm owner names three children as equal beneficiaries, all three take title to the farmland as co-owners at death. Co-ownership without a management agreement is a common source of post-death family conflict. One sibling wants to sell, one wants to lease, and one wants to farm it personally. All three have an equal legal claim. A unanimous decision is required for most major actions, and unanimity is not guaranteed when heirs have different financial situations, different relationships with the land, and different timelines.
A TODI that names one farming heir as the sole beneficiary solves the co-ownership problem but creates a different one: the non-farming heirs receive nothing from the land transfer and must look to the will or other assets for their share of the estate. If the farmland is the majority of the estate's value — which it frequently is in agricultural families — a TODI that sends the land to one heir without coordinating with the overall estate plan can produce a distribution that is neither what the owner intended nor what the other heirs expected.
An estate plan that uses a TODI for the real property transfer should also address how other heirs are equalized. Life insurance, liquid assets, or an explicit provision in the will that acknowledges the TODI transfer and adjusts the remaining estate distribution accordingly are the typical tools. A TODI without that coordination is a half-plan.
Where It Breaks Down: Active Leases and Tenant Rights
A TODI transfers title to the beneficiary subject to the existing rights of the decedent's creditors and subject to any leases or encumbrances recorded against the property. A beneficiary who receives farmland through a TODI takes it with the existing tenant's lease in place. If the farm tenant has a written lease with two years remaining, the new owner inherits that obligation. If the tenant has been farming on a year-to-year basis and the TODI transfer occurs after November 1, the new owner may be unable to terminate the lease for the following crop year without having served proper notice before the October 31 deadline.
This is not a problem the TODI creates — it is a problem the TODI does not solve. The same lease obligation would exist if the property passed through probate. But a beneficiary who expects to take over farming the ground personally, or who expects to make immediate changes to the lease terms, needs to understand that the TODI does not convey any rights beyond what the decedent could have conveyed — and the decedent's existing lease obligations are part of what transfers.
A succession plan that anticipates a tenant transition should address timing. If the goal is for the beneficiary to farm the ground themselves starting in 2028, the notice to the tenant needs to be served before October 31, 2027, which means the plan needs to be in place and the notice decision needs to be made before that deadline — not after the TODI transfer occurs at death.
Where It Breaks Down: Estate Tax
A TODI does not reduce or eliminate Illinois estate tax. The property that transfers by TODI is included in the decedent's taxable estate for both Illinois and federal purposes. If the total estate exceeds the Illinois $4 million threshold, the estate tax is owed by the estate — not by the beneficiary who received the land through the TODI.
The complication arises when the primary asset is farmland transferred by TODI and the estate has limited liquid assets to pay the tax. The estate may owe $150,000 or more in Illinois estate tax, with assets to pay it consisting primarily of land that has already transferred to the beneficiary outside of probate. The estate's only recourse may be to ask the beneficiary to contribute funds from other sources, or to negotiate a claim against the transferred property.
An estate plan for a farm family with an estate above the $4 million Illinois threshold needs to address how the estate tax will be paid before the TODI is recorded. Life insurance held in an irrevocable life insurance trust, liquid assets reserved in the estate, or a credit shelter trust structure that preserves both spouses' exemptions are the tools that estate attorneys use for this problem. A TODI is not one of them.
Questions to Bring to an Estate Attorney
I am a real estate broker and licensed auctioneer — this article is not legal advice, and a TODI or any estate planning instrument should be prepared by a licensed Illinois attorney. What I can tell you is the questions worth bringing to that conversation: How many heirs are involved, and what does each one expect from the estate? Is there a farm tenant, and how long does the lease run? What is the current value of the farmland relative to the $4 million threshold? Are there other debts or obligations that the estate will need to satisfy? What happens to the land if the named beneficiary dies before the owner?
A TODI is one tool among several, and whether it is the right tool — or whether a revocable living trust, a family limited partnership, a gifting program, or some combination addresses the situation better — depends on answers to those specific questions. Fall is when those conversations happen. Get the appointment on the calendar.
Jared Williams is the Managing Broker and owner of Archer Realty & Auction LLC. He serves on the Menard County Board of Review and works with farm families, attorneys, and CPAs on land valuation for estate and succession planning across central and western Illinois. Start the conversation at archerrealty.net.
