By Anna Gavrysh, Esq.
A New York Transfer on Death Deed (“TOD Deed”) has been gaining popularity since it came into an existence in July of 2024. So, what is a TOD Deed? A TOD Deed provides a property owner with an ability to essentially select a beneficiary for the owner’s real property. That selected beneficiary (or beneficiaries) will inherit the real property upon the owner’s passing without a need for probate.
A TOD Deed allows the owner to transfer their real property to one or more beneficiary which would become effective at the owner’s death. A TOD Deed is revocable even if the deed or another document contains a contrary provision. Meaning, the owner can undo the transfer as long as he or she is still alive and competent.
TOD Deeds give no creditor protection. If the probate estate of the owner is insufficient, a creditor may enforce liability against the real property transferred via TOD Deed. For example, a Medicaid recovery action could begin after the owner’s passing if he or she was on Medicaid at the time of (or before) their death. Said liability proceeding must begin no later than eighteen (18) months after the owner’s death.
Cons
One of the downsides of a TOD Deed is that it does not allow to select a backup beneficiary in the event the designated beneficiary predeceased the owner. If no new TOD Deed is created and recorded timely, the interest of the selected beneficiary lapses. Also, TOD Deeds limit the owner as to how the beneficiaries inherit the property. All TOD Deeds must transfer the property to the selected beneficiaries only in equal shares. Similarly to Wills, an interested party could make an argument of invalidating the TOD Deed. Some of those arguments include: fraud, undue influence, duress, mistake, or other invalidating cause to a transfer of property.
Requirements
TOD Deeds have some strict requirements to ensure the Deeds’ enforcement. One of the requirements is that the signing of the TOD Deed must be done in front of two (2) witnesses, who also need to sign the Deed. Also, the witnesses’ signatures must be acknowledged before a notary public. Lastly, the law provides that a TOD Deed must be recorded with the clerk’s office of the respective county where the property is located prior to the owner’s death.
Bottom line is that TOD Deeds may be useful for some, but not all people. It is crucial to consult with a skilled estate planning attorney prior to transferring your real property with a TOD Deed. It is often recommended that people explore Trusts as an alternative option for purposes of transferring their real property to the decided beneficiaries.
