Transfer on Death Deeds: State Amends New York Real Property Law
The latest 2024 New York State Budget Bill includes a significant amendment that introduces the concept of Transfer on Death Deeds (TODD) in the state. This allows property owners to designate a beneficiary who will automatically inherit their real property upon the owner’s death without having to go through the probate process, which can be costly and burdensome.
Beneficiary Designation & Recording
First, there are specific forms for creating and revoking TODDs that must be accurately completed and recorded to be effective. Primarily, two witnesses and a Notary Public are required and the transferor must have the mental capacity to understand and execute the TODD. The TODD must also be recorded during the transferor’s lifetime in the county where the property is located.
Transferors can designate a primary as well as an alternate beneficiary. However, if the designated beneficiary dies before the transferor, the TODD does not extend to their heirs.
Revocability
Additionally, the TODD can be revoked at any time before the transferor’s death. This can be done by recording a revocation form; executing and recording a new TODD; or transferring the property through another deed that explicitly revokes the TODD. Divorce or any other dissolution of marriage also revokes the TODD. Notably though, a TODD cannot be revoked through a will.
Public Assistance Eligibility, Creditors and Taxes
The transferor also retains full control over the property until their death. As such, the transfer does not affect a creditor’s interest of the transferor, nor does it impact the transferor’s eligibility for public assistance. That said, if the transferor’s estate is insufficient to cover debts or statutory allowances, creditors can make claims against the property transferred via TODD within 18 months of the transferor’s death.
On par with revocable trusts, TODDs also don’t trigger the gift tax or affect the transferor’s cost basis in the property because the TODD does not benefit the beneficiary during the transferor’s lifetime. On a similar note, creditors of the designated beneficiary cannot make claim on the subject property during the transferor’s lifetime.
Simplified Estate Planning
Overall, this change simplifies a significant part of the estate planning process and provides certainty — especially for those whose only major asset is their primary residence. Even so, as always, consult with a legal professional before utilizing a TODD as part of an estate plan due to its complexities and potential legal implications.
