New York State has recently introduced a new estate planning tool: the Transfer on Death (TOD) deed. This legal instrument allows property owners to designate beneficiaries who will automatically inherit their real estate upon their death, bypassing the often complex and time-consuming probate process.
How Does a TOD Deed Work?
Similar to beneficiary designations on retirement accounts or payable-on-death accounts, a TOD deed specifies who will receive ownership of the property after the owner's passing. The deed becomes effective upon the owner's death, and the designated beneficiaries can assume ownership without going through probate court.
Benefits of a TOD Deed
Avoids Probate: Probate can be a lengthy and costly process. A TOD deed eliminates the need for court involvement, saving time and money for beneficiaries.
Clear Ownership: By designating beneficiaries in advance, a TOD deed prevents potential disputes among heirs over property ownership.
Privacy: Probate proceedings are public records. A TOD deed keeps property transfer information private.
Considerations and Limitations
While TOD deeds offer several advantages, it's essential to understand their limitations:
Not a substitute for a last will: A TOD deed only addresses real property. It does not cover other assets like bank accounts, investments, or personal belongings.
A TOD deed does not provide any rights or benefits to beneficiaries to possess or occupy the property before the transferor’s death.
Potential estate tax implications: Depending on the value of the property and other factors, a TOD deed may have estate tax consequences.
TOD deeds do not exempt creditors from making claim against the real property and does not address possible Medicaid issues.
Due to the complexities of estate planning and potential legal implications, it's highly recommended to consult with the team of real estate attorneys at The Donaldson Law Firm, PLLC before creating a TOD deed. However, if it’s determined that a TOD deed is appropriate based on the circumstances, The Donaldson Law Firm offers clients an affordable flat rate fee to create, execute, and record a TOD deed.
New York's TOD deed law represents a significant step forward in estate planning. By understanding its benefits and limitations, property owners can make informed decisions about how their real estate will be transferred upon their death. Call or email our office for more information.