How to Handle Transfer on Death Deed Changes in New York

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The following blog is part of our New York team's "To the Point" title insurance news blog series. Learn more about the series via our New York Metro or Upstate New York markets.

New York Real Property Law, Chapter 50, Article 12, Section 424

This law was adopted on April 28, 2024, providing an additional legal method to dispose of real property upon the death of the owners entitled a Transfer on Death Deed, referred to herein as a “TOD” deed. TOD deeds provide an alternative to the longstanding options for disposition of real property upon death including trusts and judicial probate/administrative proceedings. See, NY Real Prop Law § 424 (2024).

What is a Transfer on Death Deed?

A TOD deed allows owners of real property to execute and record a deed during their lifetime automatically transferring their real estate to beneficiaries upon their death. As you can readily surmise, a plethora of questions are already populating such as what happens if the property is held as tenants by the entirety versus joint tenants or tenants in common? Can an owner execute a TOD deed without the consent of the other owner? How is a surviving owner protected against a beneficiary taking title to the premises and possibly taking possession? What happens if the owners change their mind and seek to revoke a TOD deed? What rights will the beneficiaries to a TOD deed receive? These are all excellent questions that are addressed in the legislation and just beyond the purpose of this TOD deed introduction. The intention here is to address TOD deeds from a procedural “how to” execute a TOD deed instead of a substantive analysis of whether a TOD deed is the right option for a client.

As title underwriters we are asked to review deeds for recording compliance. We assume going forward that we will become a valuable resource for TOD deed questions and review. It is important to know that the adopted legislation contains a sample TOD deed and a sample TOD revocation form, together with a question-and-answer summary. Id. at § 424 (15)(16) Form of Transfer on Death Deed and Form of Revocation. In addition to the above, below is a procedural summary and short analysis of key points of the legislation to assist in preparing a TOD deed.

TOD deeds (1) must be in writing; (2) must be acknowledged before a notary public; (3) must be witnessed by two persons at the same time; (4) must contain a statement that the deed is a TOD deed; (5) must be recorded with the County Clerk/Register in the County where the property is located and (5) must be recorded during the lifetime of the owners. Id. at § 424 (7).

Additionally, yet not an exhaustive summary (1) the owner/transferor must maintain the same capacity required to execute a will; (2) TOD deeds are revocable even if the deed states that the transfer is irrevocable; (3) the beneficiaries do NOT receive any present rights to ownership or occupancy; (4) upon the death of the transferor, a TOD deed does not appear to exempt creditors from making claim against the real property and does not address transferee Medicaid issues. Id at § 424 (4)(6)(10). Finally, if a Trust or Will is already part of the owners’ estate plan, said documents will need to be updated to avoid possible conflicts if a TOD deed is executed.

When presenting a TOD deed for review and recording, TOD deeds will also require the customary transfer tax forms, together with the fee for recording. Id. at § 424 (7)(a). If the transferors of a TOD deed decide to change their mind, the legislation sets forth express ways in which to revoke a recorded TOD deed including, but not limited to, execution and recordation during the lifetime of the transferor of a written revocation of the TOD deed. Id. at § 424 (9)(B). The legislation also specifically states that transfer or encumbrance of the real property during the lifetime of the owner/transferor is not affected by the existence of a TOD deed. Id. at § 424 (10)(A). As such, real property subject to a TOD deed does not preclude the owner from selling, transferring or otherwise encumbering fee title to the real property.

Whether a TOD deed is the right legal choice as an estate planning tool is a discussion to be had between attorneys and their clients. Our underwriting Team at Stewart NY Metro remains committed to providing the best service and support that we can, hence, if questions arise regarding TOD deeds, please feel free to contact the undersigned at your convenience.