Transfer on Death Deeds in New York

A New Way to Transfer Your Property

 Earlier this year, a new type of deed for the transfer of real estate was authorized in New York.  This deed is known as a Transfer on Death Deed or TOD Deed for short.

The TOD Deed gives estate planners a new way to assist clients who wish to pass on their real estate to beneficiaries.  Below is a set of questions and answers to help you understand how this new deed works and how it compares to other options.

What is a TOD Deed?

A TOD Deed allows you to give your property to a beneficiary, but to delay the vesting of their interest until after your death.  Upon your death, the property is owned by the beneficiary and no court proceeding is required to facilitate their ownership.

Does a TOD Deed need to be notarized?

Yes.  A TOD Deed needs to be signed before a notary public and two witnesses.  This is different than a typical real estate deed, which needs to be signed before a notary public but does not need to be witnessed.

Does the TOD Deed need to be recorded?

Yes.  Like all deeds, the TOD Deed should be recorded in the County Clerk’s Office where the real property is located.  In addition to the deed, two forms need to be filed: a TP-584, which calculates the transfer tax, and a RP-5217, which informs the assessment authorities about the transfer.  The recording fee generally is around $200.00.

What happens after the TOD deed is recorded?

The County Clerk will return it to your attorney or to you, depending on who you asked them to return it to.  Please be aware that there are scammers out there that will likely send you a letter offering to send you a certified copy of your deed for a fee.  That fee is usually several times more than it would cost you to obtain a certified copy yourself from the County Clerk, which you can do at any time.

Why would you want to do a TOD deed?

The TOD Deed is a simple way to transfer property to a beneficiary after you die, without the need to have a Surrogate’s Court proceeding or creating a living trust.  Since the beneficiary is obtaining the property after your death, they will get a step-up in tax basis to the value as of the time of your death.

What does it mean to get a step-up in basis?

When you own property your tax basis is what you paid for it plus any capital improvements you made.  So, if you paid $300,000 and did $50,000 in capital improvements, your tax basis would be $350,000.  If the property is worth $500,000 when you die, then the TOD beneficiary gets the $500,000 tax basis.  If they sell the property later for $550,000, their capital gain would only be $50,000.

What happens if the beneficiary dies before you do?

If the beneficiary dies before you do, the TOD provision is ineffective.  You would simply continue to own the property and it would be part of your estate when you die.

Can I revoke a TOD deed?

Yes.  If you change your mind and do not want to leave the property to the TOD beneficiary, you can revoke the deed and take it back into your sole ownership.

Is a TOD deed used with Medicaid Planning?

No.  If you do a TOD Deed and you apply for Medicaid for nursing home care, the property will still be counted as a resource when determining your Medicaid eligibility.  A better option for Medicaid Planning would be the use of a Medicaid Asset Protection Trust or a life estate deed.

What are the alternatives to a TOD deed?

If you are interested in transferring property to a beneficiary upon your death, your other options would include leaving it to them in your Will, creating a Trust which leaves it to them upon your death, or doing a life estate deed.

What is a life estate deed?

In a life estate deed, you transfer your property to one or more beneficiaries, while retaining a life estate for yourself.  This will allow you to live in the property for the rest of your life, and, upon your death, your beneficiaries continue to own the property without the need of a court proceeding.

Will a TOD deed affect my STAR eligibility?

No.  As soon as you were eligible for the STAR exemption before the deed on that particular property, you will continue to be eligible.

A TOD Deed is a welcome addition to the options available for estate planning for your real property.  As always, you should consult with an experienced estate planning attorney to understand what options are best for you and your family.

Matthew J. Dorsey, Esq. is a Shareholder with O’Connell and Aronowitz, 1 Court Street, Saratoga Springs, NY. Over his twenty-seven years of practice, he has focused in the areas of elder law, estate planning, and estate administration. Mr. Dorsey can be reached at (518)584-5205, mdorsey@oalaw.com and www.oalaw.com.