What are the Disadvantages of NY Transfer on Death Deeds?

New York Transfer on Death (“TOD”) deeds can be used effective July 20, 2024. There are numerous advantages and disadvantages to TOD deeds which you should discuss with a NY estate planning attorney. The alternatives to TOD deeds to avoid probate are:

• 1. Life Estate Deeds
• 2. Intervivos (Living) Trusts;
• 3. Joint tenancy with the right of survivorship; and
• 4. Tenancy by the Entirety (husband and wife).

Warning about TODs:

Unlike life estate deeds and irrevocable living trusts, which also avoid probate

• 1. TODs will not protect your home if Medicaid is needed for skilled nursing, assisted living, or home care.
• 2. Your estate is still liable for creditor claims, including Medicaid recovery, and statutory allowances. To the extent your probate estate assets are insufficient to satisfy an allowed claim against the estate or a statutory allowance to a surviving spouse or child, the estate may enforce the liability against real estate transferred by a TOD deed.

What does the New York Transfer on Death (TOD) deed do?

The TOD deed transfers your real estate, subject to any liens or mortgages (or other encumbrances) upon your death. Probate or estate administration is not required. The TOD deed has no effect until you die. You can revoke it at any time. You are also free to transfer the property to someone else during your lifetime. If you do not own any interest in the property when you die, this deed will have no effect. Unlike a typical deed, two witnesses must sign a TOD deed. A TOD deed must be recorded before the transferor’s death.

How do I make a New York TOD deed?

Sign the TOD deed before a notary public. Record the deed with the county clerk where the property is located. The deed has no effect unless it is acknowledged and recorded before your death.

Is the “legal description” of the property necessary for the NY TOD deed?

Yes. The “legal description” of the property is contained in the deed you received when you became an owner of the property. This information is also be available in the county clerk’s office of the county where the property is located.

Can I change my mind before I record the NY TOD deed?

Yes. If you have not yet recorded the deed and want to change your mind, simply tear up or otherwise destroy the deed.

Can I later revoke the NY TOD deed if I change my mind after it is recorded?

Yes. You can revoke the TOD deed. No one, including the beneficiaries, can prevent you from revoking the deed. There are three ways to revoke a recorded TOD deed:

• (1) Complete and acknowledge a TOD revocation form and record it in each county where the property is located.
• (2) Complete and acknowledge a new TOD deed that disposes of the same property and record it in each county where the property is located.
• (3) Transfer the property to someone else during your lifetime by a recorded deed that expressly revokes the TOD deed. You cannot revoke the TOD deed by your will.

Am I required to notify the beneficiaries about the NY TOD deed?

No, but it is recommended. Secrecy can cause later complications and might make it easier for others to commit fraud.

How does the NY TOD deed benefit property owners?

• 1. Avoidance of Probate: Unlike property solely governed by a will, property transferred via a TOD deed does not go through the probate process. This means beneficiaries can gain access to the property (or sell it) more quickly after the owner’s death, without the legal costs and delays associated with probate.
• 2. Maintain Control: Owners retain complete control over the property during their lifetime. They can sell or encumber the property as they see fit without needing the consent of the designated beneficiary (unlike a life estate deed where the remaindermen must agree to a sale).
• 3. Revocability: The TOD deed is fully revocable. Owners can change their minds at any time prior to their death, offering flexibility if their circumstances or intentions change. However, if multiple owners signed a TOD deed, they must all revoke it.
• 4. Straightforward Process: Establishing a TOD deed is less complex and costly than setting up a living trust. It requires fewer formalities while still allowing owners to specify their beneficiaries directly.

What are the drawbacks of NY Transfer on Death Deeds?

Despite the benefits, TOD deeds have limitations that make them unsuitable for some estate planning objectives:

• 1. Lack of Control Over Succession Details: Once the property transfers on death, there is no one officially in charge of managing or selling the property. This can lead to potential disputes among beneficiaries regarding the use or sale of the property.
• 2. Lapsed Rights: The TOD deed does not allow for nuanced succession planning. If the transferor names two or more designated beneficiaries on the TOD deed and one beneficiary predeceases the transferor, that person’s share is automatically transferred to the other beneficiary. This does not allow for the common per stirpes allocation to the beneficiary’s children.
• 3. Cannot Transfer to Minors: A TOD deed will not be beneficial for parents with young children since minors cannot own real property. The property must be in trust for their benefit.
• 4. Multiple Owners and Beneficiaries Can Cause Complications and Confusion. If tenancy-in-common owners transfer their individual interests, they can name their own beneficiaries for their portion of the property. The potential for multiple owners and multiple beneficiaries can make the TOD deed very complicated, leading to disputes over the sale of the property.
• 5. Estate Claims. If the transferor’s estate does not have enough assets to satisfy creditor claims or statutory allowances to surviving spouses or children, a property subject to a TOD deed can be brought back into the estate to satisfy those claims.
• 9. No Asset Protection. A TOD deed is not a Medicaid planning (LIN https://www.wny-lawyers.com/buffalo-nursing-home-lawyers/ tool. The transferor is still the owner of the property, and it is therefore a resource for Medicaid planning purposes. Transferring real property to an irrevocable trust (five years in advance), or to an exempt person, is still the only way to protect real property for Medicaid purposes.
• 10. Estate Recovery. Medicaid recovery and pay-back is limited to estate assets. Unlike assets held in a Trust that are not subject to estate recovery, a TOD deed provides that the property can be brought back into the estate to satisfy creditors.
• 11. Interpretations of the Law. The law is so new that interpretations and issues of its implementation have not all been resolved. Call or text estate planning attorney Robert Friedman at 716.541.3405 if you have any estate planning questions.