Estate Planning for New York Property Owners - Part II

In Part I, we explored Beneficiary Deeds (Transfer on Death deeds) and why they are such a streamlined tool for Colorado property owners. If you own property in New York, you now have access to a similar option — but whether it's the right tool for your situation deserves a closer look.

New York enacted the Transfer on Death Deed Law under Section 424 of the Real Property Law, effective July 19, 2024. With it, New York joined the majority of states that permit property owners to name a beneficiary who automatically inherits real estate at death — bypassing probate entirely.

That's meaningful. But the New York TOD deed comes with real constraints, and understanding them is essential before deciding whether to use one.

How New York's TOD Deed Works

A Transfer on Death deed allows a property owner to designate one or more beneficiaries who will receive the property at death — without court involvement, without a will, and without the delays of Surrogate's Court. The beneficiary receives nothing during the owner's lifetime; control remains entirely with the owner until death.

To be valid, a New York TOD deed must be signed in the presence of two witnesses, acknowledged before a notary public, and recorded in the county clerk's office where the property is located — before the owner's death. Once recorded, it becomes part of the public record.

The core benefits:

• Probate avoidance — property passes directly to the named beneficiary, sidestepping Surrogate's Court

• Full revocability — the owner can revoke, amend, or change beneficiaries at any time during their lifetime

• No present gift — recording the deed does not trigger gift tax consequences or a Medicaid look-back

• Step-up in tax basis — preserved at death, avoiding the capital gains exposure that can come with lifetime transfers

• Simplicity and cost — straightforward to execute compared to a full revocable trust

The Cost of Doing Nothing

Even with TOD deeds now available, plenty of New Yorkers will still find themselves in Surrogate's Court if they don't plan. Dying with New York real estate titled in your individual name — no deed designation, no trust, no joint ownership — means your family navigates a process that can take 6 to 12 months or longer (particularly in Kings, Queens, or Nassau County), generates meaningful legal and filing fees, and becomes part of the public record.

The TOD deed addresses all of that efficiently — in the right situation.

Where the TOD Deed Falls Short

The New York TOD deed is not a universal solution. Its statutory design limits what it can do, and those limits matter.

Equal shares only. New York law requires that all named beneficiaries inherit equal shares of the property. There is no mechanism for weighted or unequal distribution through a TOD deed. If one beneficiary predeceases the owner, the remaining beneficiaries split equally. If customized distribution — unequal shares, per stirpes provisions, or contingency planning — is important, a revocable trust is the better vehicle.

Joint ownership complications. If a property is co-owned, all joint owners must agree to execute and, later, to revoke a TOD deed. A disagreement among co-owners can create a stalemate with no clean resolution.

Medicaid estate recovery. New York uses an expanded definition of "estate" for Medicaid recovery purposes. Whether TOD assets fall within that definition remains an active elder law question. Clients with Medicaid concerns — or who are planning for long-term care — should not assume this deed is Medicaid-neutral without specific legal guidance.

Limited case law and title history. The TOD deed is still a relatively new instrument in New York. Title insurers and lenders are still developing their comfort level with it, and that can matter when beneficiaries go to sell or refinance. This is a practical consideration, not a reason to avoid TOD deeds — but it is worth understanding.

The Alternatives Still Have a Role

The TOD deed is a welcome addition to the New York planning toolkit, but it doesn't replace the full toolkit. Depending on a client's goals, one of the following may still be the better fit — or the right complement.

Revocable Living Trusts. For clients who want probate avoidance plus meaningful control over distribution — unequal shares, staggered timing, incapacity planning, or creditor protection for heirs — the revocable trust remains the most flexible and durable solution. It does everything the TOD deed does, and more.

Life Estate Deeds. Frequently used in long-term care planning, a life estate deed allows the owner to retain the right to live in the home for life while the remainder interest passes automatically at death, preserving the step-up in basis. The tradeoff: the owner cannot sell or refinance without the written consent of the remaindermen — typically the children.

Joint Ownership. Joint tenancy with right of survivorship and tenancy by the entirety (for married couples) remain functional probate-avoidance tools in limited, deliberate situations. They work best between spouses. The downsides — present ownership rights, refinancing complications, and exposure to co-owners' creditors — make them a poor fit in most other scenarios.

What to Avoid. Adding a child directly to the deed remains one of the most common and costly planning mistakes in New York. It creates immediate gift tax consequences, exposes the property to the child's creditors or divorce, and eliminates the step-up in basis for the child's share. A will alone is equally insufficient — it directs how the probate court distributes assets, but does not avoid the process.

Choosing the Right Tool

These questions help frame the analysis:

1. Do you want to avoid probate?

2. Do you need flexibility in how shares are divided among beneficiaries?

3. Are there multiple beneficiaries, and does distribution need to be unequal?

4. Is long-term care or Medicaid planning a concern?

5. Do you want incapacity protections built into the plan?

6. Is this part of a broader estate plan involving other assets?

If the answers are straightforward — one property, one or two beneficiaries, equal shares, no Medicaid concerns — the TOD deed may be exactly right. If the picture is more complex, a revocable trust will almost always serve the client better.

Final Thoughts

New York's Transfer on Death deed gives property owners something they haven't had before: a simple, low-cost path to pass real estate outside of probate without the overhead of a full trust. For the right client, it's an excellent tool.

But "the right client" matters. The TOD deed's limitations — equal shares only, joint-owner complications, open Medicaid questions, and still-developing title insurance practice — mean it isn't the answer in every situation. Colorado has long favored deed-based simplicity. New York now offers it too, but with guardrails that make thoughtful analysis essential.

If you own New York real estate and want to work through whether a TOD deed, a revocable trust, or another structure fits your goals, the time to think it through is now — not later in Surrogate's Court.

If you would like help comparing options or coordinating New York planning with property in other states, I am happy to assist.