What You Need to Know about Transfer Upon Death Deeds
In July, New York joined 31 other states in allowing “Transfer on Death deeds” (TOD) for real estate – making an incredibly impactful change in estate planning you need to know.
The “Heirs Property Protection and Deed Theft Prevention Act of 2024,” was included in the 2024-25 State Budget. TOD deeds are now integrated into New York’s real estate landscape – and these tweaks to how property gets divided after an owner dies will provide important protections for heirs, especially in low-income communities.
The TOD deed makes it easier and less expensive to plan for the disposition of what is for many New Yorkers their most valuable asset. They also stand as a shield for would-be heirs of homes whose owners died without a will. In too many cases, predatory real estate speculators target these individuals and try to scoop up shares to force a sale.
As President of the New York State Land Title Association (NYSLTA), it’s important for our group to help New Yorkers understand the implications and protections TOD deeds provide.
The new law allows New Yorkers to designate one or more beneficiaries to inherit their property upon their death. It does not affect the ownership rights until after death. It’s like naming a beneficiary on a bank account, the assets automatically transfer to the named beneficiary(s). It can be revoked at anytime by the owner of the property during their lifetime.
As revealed in The City, this law was created to avoid predatory real estate investors looking to rip off unsuspecting heirs (predominately in Black and Latino neighborhoods), looking to swoop in and purchase a share of property from one heir well below market value, then going to court to force a sale of the property called a “partition action.” With TOD, only those who inherit property can initiate a “partition action” in court.
The simplicity of the TOD deed law is appealing, allowing a quick transfer of the real estate property upon death. Traditionally, to avoid probate – the complex and time-consuming process of going to the Surrogate’s Court – for the inheritance of real estate, one needed to create a trust and transfer the deed into the name of the trust. This new Section of the New York Real Property Law will avoid probate as well.
However, a TOD deed must meet specific requirements to be legally binding, and can bring new complexities in preparing, executing, and recording a deed. This isn’t a “DIY” project. There is a multitude of ways a transaction may veer off into scenarios not addressed by the Act, and not intended by the legislature or the Governor. I can tell you from experience changes in the real estate industry can have unintended consequences.
Whether a TOD deed is the right legal choice as an estate planning tool is a discussion to be had between you and your attorney. It’s not an “end-all-be-all” solution for transferring real estate. It’s not a one-step process: the deed must include language that the transfer to the designated beneficiary occurs at the transferor’s death. All deeds require a notary, and like a Will, a TOD requires two witnesses.
In short, credit should go to Governor Hochul and legislators. Their efforts to protect vulnerable New Yorkers is well-intended and can be beneficial. But any sweeping developing law in New York real estate may pose an underwriting risk or require clarification that’s decided in the courts.
We look forward to working with policymakers in Albany in the coming months to continue to build on the protections our neighbors need when inheriting, buying, or selling a property in New York.
For more information about TOD deeds and the valuable work of our members, please visit: www.nyslta.org
Catherine Castiglia Canino, Esq. is the President of the NYS Land Title Association.
