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News

Does a Transfer on Death Deed Live up to the Hype?

By:
Anthony J. Enea, Esq.
Published Date:
Nov 1, 2024

Effective July 19, 2024, the Heirs Property Protection and Deed Theft Prevention Act of 2024 became law in New York. With the enactment of a new Section 424 of the Real Property Law (RPL), a Transfer on Death Deed (TODD) was authorized. One of the stated objectives of a TODD is to avoid probate for real property without having to use a costlier living trust. This purportedly simplifies and reduces the expense of conveying real property for persons of modest means and lower income.

Unfortunately, Section 424 of the RPL regarding estate recovery and the rights of creditors (including Medicaid) could negatively impact the very people the statute intends to help when a TODD is used.

The TODD is a revocable deed that allows the owner of real property to designate beneficiaries who will receive said real property upon the owner’s death. Because the owner can revoke the TODD, the transfer of the property is not considered a completed gift for estate and income tax purposes. The TODD must be executed, witnessed, acknowledged, and recorded with the county clerk where the real property is located prior to the owner’s death, in the same manner as any other deed for it to be effective upon the owner’s demise.

In my opinion, the TODD’s revocability creates the greatest issue for the owner of the property. Because the property owner retains full ownership interest, the property continues to be a resource against which Medicaid and other creditors will continue to have claims.

Section 424(9) of RPL specifies the deed or other type of instrument that can be used to revoke all or part of a TODD, all of which must be acknowledged by the owner of the property and recorded in the office of the county clerk where the original TODD was filed.

Section 424(14) of RPL allows a creditor to treat the real property conveyed by a TODD as an asset available to satisfy the debts of the property owner when the probate estate (assets owned in the decedent’s name alone on the date of death) is insufficient to satisfy the claim for a period up to 18 months from the date of death of the transferor/owner. This is an expansion of the standard period for creditors’ claims against estates, which is seven months. The TODD legally transfers ownership to the beneficiary of the TODD upon the death of the transferor/owner of the deed.

Thus, real property conveyed through a TODD is fully available to all creditors, lien holders, Medicaid claims and liens, and even the claims of one’s spouse and their elective share. A TODD does not require a higher mental capacity than is necessary to execute a Last Will and Testament (known as “testamentary capacity”).  Unlike a conveyance of real property under a Last Will and Testament, Revocable Living Trust, or Irrevocable Trust, however, the TODD limits who qualifies as a beneficiary to a person that is “a natural person, an association, board, any corporation, whether municipal, stock or non-stock, court, governmental agency, authority, partnership or other firm, and the state.” There is a question as to whether a trust can be a designated beneficiary.

Additionally, and most importantly, unlike when real property is conveyed by a Last Will and Testament, Revocable Trust, or Irrevocable Trust, the transfer lapses with a TODD if the designated beneficiary does not survive the transferor/owner. The beneficiary’s children, grandchildren, or other heirs will not receive the property, as they have no legal right to it. Thus, the real property will continue to be owned by the transferor/owner subject to the claims of their creditors. If more than one person owns the property utilizing a TODD and has rights of survivorship over the property, the death of the beneficiary before the owner poses even greater complications.

Unfortunately, unless Section 424 of the RPL is amended to correct the problems created by its use, which are significant in my opinion, I do not see how a TODD is a better option than using a deed with the reservation of a Life Estate, a Revocable Trust, or an Irrevocable Medicaid Asset Protection Trust for the owner of real property of modest means. Frankly, a person of modest means and income who wishes to protect their real property from future claims by Medicaid and other creditors will be much better served by using an Irrevocable Medicaid Asset Protection Trust.


Anthony J. Enea, Esq., is the managing attorney of Enea, Scanlan and Sirignano, LLP of White Plains, New York. He focuses his practice on wills, trusts, estates, and elder law. Anthony is the past chair of the elder law and special needs section of the New York State Bar Association (NYSBA) and is the past chair of the 50+ section of the NYSBA. He is a past president and founding member of the New York Chapter of the National Academy of Elder Law Attorneys (NAELA). Anthony is also the immediate past president of the Westchester County Bar Foundation and a past president of the Westchester County Bar Association. He is also fluent in Italian. More articles about the use of Revocable Trusts, Irrevocable Medicaid Asset Protection Trusts, and deeds with a reservation of a Life Estate can be found on our firm’s website at www.esslawfirm.com. He can be reached at (914) 948-1500 or at a.enea@esslawfirm.com.