New Yorkers looking to simplify the transfer of their real estate to loved ones after their passing often turn to trusts to avoid the complexities and potential costs of probate. The Transfer on Death (TOD) deed is a new legal option that provides a simpler way to pass real estate directly to named individuals, bypassing probate.
Let’s explore how this deed can help streamline the transfer of your home.
What Is a Transfer on Death Deed?
A TOD allows you, the property owner, to name one or more individuals who will automatically receive the property when you die. Until your passing, you retain complete ownership and control. You can still sell, mortgage, or otherwise deal with the property as you see fit.
Legal Requirements and Key Details
To be valid in New York, a TOD deed must meet specific conditions:
- It must state that the property will transfer only at the owner’s death.
- It must be notarized and signed in front of two witnesses, similar to a will.
- It must be filed with the county clerk’s office before the owner dies.
Who Can Use a TOD Deed?
Generally, any owner of real property in New York can use a TOD deed. This includes individuals who own property on their own, as well as those who hold property as tenants-in-common or with rights of survivorship.
If multiple owners hold title with rights of survivorship and a TOD deed is in place, the surviving owner(s) will continue to own the property. The deed will only take effect after the death of the last surviving owner.
Benefits of Using a TOD Deed
The following are some of the advantages of using a Transfer on Death deed:
1.Avoids Probate: The most obvious benefit is skipping probate. This can save time, legal fees, and stress for family members during an already difficult period.
2.Keeps the Owner in Control: The property owner keeps full rights during their lifetime. That means they don’t lose flexibility or access to the home.
3.Allows for a Revocable Plan: The deed can be changed or canceled at any time before death.
4.Reduces Estate Administration Work: Because the property transfers automatically, the estate executor doesn’t have to manage its sale or distribution.
Considerations and Limitations
While a TOD deed can be helpful, it isn’t right for everyone. Here are some common concerns:
No Management Structure
If multiple people inherit a home through a Transfer on Death deed, there’s no clear person in charge of decision-making. This can lead to disagreements about whether to sell, rent, or keep the property.
Limited Succession Planning
If a named beneficiary dies before the owner, that share passes to the other surviving beneficiaries. There’s no default way to pass that portion to the deceased beneficiary’s children unless alternates are named explicitly.
Not Suitable for Minors
Minors can’t hold legal title to real estate. If you want to leave property to young children or grandchildren, a trust may still be the better option.
Medicaid Implications
The TOD deed does not transfer any interest during life, so the property remains part of the owner’s estate for Medicaid eligibility. However, because it avoids probate, it may reduce the risk of Medicaid recovery after death. This is particularly relevant for clients planning for long-term care.
Creditors Still Have Some Reach
Creditors can’t directly place a lien on property passed through a TOD deed. However, if the estate doesn’t have enough assets to cover debts, the TOD property may be pulled back in to pay them.
While Transfer on Death deed is a welcome addition to estate planning options, a trust may be necessary if your plan involves multiple beneficiaries or minor children. Our team at Voekl Law PC can help you navigate these complexities. We will carefully consider your individual circumstances to determine the most effective estate planning strategy. Call our firm at 716-633-4030 to set up a consultation.
