New York’s Transfer-on-Death Deed Law is set to take effect on July 19, 2024. The new law allows New York residents to designate a beneficiary to automatically inherit their real property upon their death, similar to beneficiary designations on retirement accounts.
To be effective, the Transfer-on-Death (“TOD”) Deed must be signed by the transferor in the presence of two witnesses and a Notary Public, include language that the transfer of the property to the designated beneficiary will occur only upon the death of the transferor, and must be filed with the Clerk of the County where the property is located before the transferor’s death. Further, in order to sign a TOD Deed, the transferor must have the same mental capacity as needed to make a Will.
During their lifetime, the transferor maintains total control over the property until their death. TOD Deeds are completely revocable during the transferor’s lifetime. For this reason, execution of a TOD Deed does not create a gift tax liability for the transferor.
The simplicity of the law is appealing: a quick transfer of the property upon death and the ability to bypass the court-supervised probate process. However, the new law leaves open many questions that would normally be answered under more traditional estate planning techniques. As a result, it has potential to cause ambiguity, arguable creditor rights abuses, and title problems, among other issues.
Anyone thinking of executing a TOD Deed should consult with an experienced estate planning attorney to ensure it will achieve the desired effect.
