New York's TODD Law: What Property Owners Need to Know in 2024

Given that the Heirs Property Protection and Deed Theft Prevention Act of 2024 (New Real Property Law (RPL) § 424) went into effect on July 19, 2024 (the “Effective Date”), we wanted to take this opportunity to update you on what is known, as well as unknown, regarding the use of a Transfer on Death Deed (“TODD”). 

A link to New RPL § 424 (the “TODD Law”) is set forth below.
https://mcusercontent.com/684414a9e2c939c9532812949/files/0f9a6d8a-8782-23d1-3559-c2ce31975640/NY_CLS_Real_P___424_.pdf

The intent of the TODD Law was to provide property owners with the option to record a Deed naming a Designated Beneficiary(ies) which would effectively transfer title to the property immediately upon the owner’s death without the need to probate or administer, as the case may be, the owner’s estate.  The concept is very similar to a payable-on-death designation for a bank account or a beneficiary designation for a retirement account. 

WHAT WE KNOW:
 
                1. The TODD Law provides specific forms for both the TODD as well as the Revocation of the TODD.  NOTE – a TODD must include the following specific language to be effective:  “At my death, I transfer my interest in the described property to the beneficiaries as designated above. Before my death, I have the right to revoke this deed.”  
Forms will be added to our website @ https://www.homeabstractcorp.com/resources/documents
                2. The TODD must be executed by the Owner (Transferor) and witnessed by two (2) separate witnesses and then acknowledged by a Notary Public (all of whom must witness the execution of the TODD similar to the execution of a Will).  Once properly executed, the TODD must be recorded, prior to the death(s) of either or both the Owner (Transferor) and Designated Beneficiary (Transferee), in the Office of the County Clerk or City Register in the County where the property is located, in order to be effective. NOTE –  if a particular Designated Beneficiary(ies) dies prior to the date of death of the Owner (Transferor) that Designated Beneficiary(ies) interest in the property lapses in its entirety and automatically reverts to the remaining Co-Designated Beneficiary(ies) in equal interests.  (ie. Designated Beneficiary(ies) interest in a TODD do not pass to Designated Beneficiary(ies)’s heirs or their beneficiaries, per stirpes).  In the event that the sole Designated Beneficiary(ies) pre-deceases the Owner (Transferor), the TODD shall be deemed null, void and of no further effect, resulting in the property remaining an asset of the Owner (Transferor) to be distributed in accordance with the Owner’s (Transferor’s) estate proceedings.     
                3.  In order to execute a TODD, the Owner (Transferor) must possess the same legal capacity required to execute a Will (see EPTL § 3-1.1).
                4.  Upon recording, the TODD creates only a Contingent Interest in favor of the Designated Beneficiary(ies) named in the TODD.  The Owner (Transferor) retains the fee title interest in the property during the Owner’s (Transferor’s) lifetime and is free to use, sell, mortgage, rent, lease or otherwise encumber the property (all without any consent or authorization from the Designated Beneficiary(ies)) at all times prior to Owner’s (Transferor’s) death.
                5. Owner (Transferor) may revoke the TODD at any time during Owner’s (Transferor’s) lifetime provided that the revocation is completed in one of following three (3) ways (see RPL § 424 (9)).
                                a. Complete, acknowledge and record a new TODD that disposes of the same property which expressly or by inconsistency revokes the TODD.
                                b. Complete, acknowledge and record a Revocation Form.
                                c. Transfer the property to any party during Owner’s (Transferor’s) lifetime by a recorded deed that expressly revokes the TODD (emphasis added).
                6. Neither notice to, delivery to, acceptance by, nor consideration from, the Designated Beneficiary(ies)(Transferee) is required.
                7. TODDs can be recorded without any accompanying TP 484, RP 5217 or ACRIS Transfer Tax Documents (collectively “Transfer Tax Forms”) in all New York Counties.   NOTE – The Offices of all County Clerks and City Registers in New York State are updating their recording procedures specifically related to TODDs so as to permit recordings without the Transfer Tax Forms. Please contact Home if you have any delays or issues recording a TODD in a particular County so that we contact the applicable County Clerk or City Register to find out when their individual recording system will be fully updated.
                8. Recording a TODD shall not adversely affect the right of any of the Owner’s (Transferor’s) creditors (ie. During the Owner’s (Transferor’s lifetime, all creditors may still seek to enforce liens and judgments against the property described in the TODD and, upon the death of the Owner (Transferor) the Designated Beneficiary(ies) take title subject to all existing Mortgages and Judgments).  Likewise, the recording of a TODD does not subject the property to claims or process of a creditor of the Designated Beneficiary(ies). The Designated Beneficiary(ies)’s creditors cannot attach the property unless and until the transfer of fee title is completed upon the death of the Owner (Transferor) in accordance with all requirements of the TODD Law.
                9. RPL § 424 (14) defines liability for creditor claims and statutory allowances which may, in limited circumstances, result in the “claw back” of property purportedly conveyed by a TODD into the Owner’s (Transferor’s) Estate.  The relevant language of RPL§ 424 (14) is set forth herein as follows:
                                (a) To the extent the Owner’s (Transferor’s) probate estate is insufficient to satisfy an allowed claim against the estate or a statutory allowance to a surviving spouse or child, the estate may enforce the liability against property transferred at the Owner’s (Transferor’s) death by a TODD.
                                (b)  If more than one property is transferred by one or more TODDs, the liability under paragraph (a) of this subdivision is apportioned among the properties in proportion to their net values at the Owner’s (Transferor’s) death.
                                (c)  A proceeding to enforce the liability under this section must be commenced no later than eighteen (18) months after the Owner’s (Transferor’s) death.
                10.  Recording a TODD does not affect the eligibility of any party to qualify for any form of public assistance.
                11.  The ultimate interest conveyed by a TODD to multiple Designated Beneficiaries shall be a Tenancy in Common in concurrent, equal shares.  (ie. A TODD cannot be used to convey disparate percentages of ownership ((Ie. No 60/40%; 80/20%, etc. splits are permitted in TODD)) or to create a Joint Tenancy with Right of Survivorship interest in multiple surviving Designated Beneficiary(ies).
                12.  A TODD cannot be used to transfer property currently titled with a Joint Tenant with Rights of Survivorship interest (a “JTWROS Deed”).  A properly recorded JTWROS Deed shall take priority over a subsequent TODD.  NOTE – If the Owner (Transferor) is the last surviving Joint Tenant,  a TODD that is subsequently recorded by that surviving Joint Tenant Owner (Transferor) shall be deemed effective upon the death of that surviving Joint Tenant Owner (Transferor).             
                13.  Notwithstanding any contrary language or provision contained in a TODD, upon the death of the Owner (Transferor), title to the property is transferred to the Designated Beneficiary(ies) without covenant or warranty of title.
                14.  A Designated Beneficiary(ies) may renounce all or part of the Designated Beneficiary(ies)’s interest in the TODD in the same manner as if the interest was transferred in a Will (see EPTL § 2-1.11).
                15.  A TODD recorded prior to the Effective Date (7/19/2024) shall remain effective provided that both the Owner (Transferor) and at least one (1) Designated Beneficiary(ies) survived the Effective Date, and all other statutory requirements were satisfied.
                16.  A TODD can be used to transfer title to any form of Real Property.  

WHAT WE DON’T KNOW:
 
As the TODD Law just went into effect on 7/19/2024, Title Companies and their Underwriters may take differing approaches on issues not specifically covered or defined in the statute.  Please note that any guidance or opinion set forth in response to the below issues, questions or scenarios, is strictly that of Home Abstract Corp. and is intended solely to give you an indication as to how Home intends to proceed until further clarification is provided by our Legislators or the Courts.  In all situations where an application for Title Insurance is being made involving a TODD, it is vitally important that you consult with the particular Title Company and/or Underwriter that will be insuring your transaction to determine their specific position regarding any of the following issues or questions.
 
                1. Can a Notary Public also serve as one of the required witnesses to a TODD?    No. Since the TODD Law is silent on this issue, Home is taking the position that the Notary Public must be separate and apart from the two (2) Witnesses.
                2. Can a Designated Beneficiary serve as one of the required witnesses. No.  Again, since the TODD Law is silent on this issue, Home is taking the position that a Designated Beneficiary cannot also be a witness to the TODD (See, e.g., EPTL § 3-3.2; see also N.Y. General Obligations Law (“GOL”) § 5-1501B(b).
                3. Can a pre-existing, valid POA be used by an Agent to execute and record a TODD?  No. Given that many of the requirements for a TODD are the same as the requirements for a Will, and a Will cannot be executed via a POA, Home is taking the position that a TODD executed by an Agent using a POA is invalid absent further authorization by our Legislators or Courts.
                4. Can a Limited Liability Company be named as a Designated Beneficiary in a TODD?  No.  The TODD Law defines a “Person” as “a natural person, an association, board, any corporation, whether municipal, stock or non-stock, court, governmental agency, authority or subdivision, partnership or other firm and the state.”  Since the Defined Term “Person” does not expressly include an LLC, absent case law or legislation to the contrary, Home is taking the position that a TODD identifying an LLC as a Designated Beneficiary is invalid.
                5. With respect to a potential revocation of a TODD, if a subsequent recorded deed does not expressly revoke the TODD, does the subsequent recorded deed still effectively revoke the TODD?  YES.  Given that RPL § 424(10), states that the TODD does not affect an interest or right of the transferor or any other owner, including the right to transfer or encumber the property, Home is taking the position that any properly executed and recorded subsequent deed shall serve to revoke a TODD notwithstanding that it did not include specific revocation language.
                6. Does the Title Company still have to review Surrogate Court proceedings for an Owner (Grantor) if there is a recorded TODD on record?  Yes.  Home will continue to review any and all Surrogates Court proceedings solely for the purpose of determining whether the Probate or Administration proceeding identifies a conflicting beneficiary or heir that potentially might raise a competing claim for the property transferred by the TODD.  Part of our Underwriting guidelines require us to assess the likelihood and risks of potential reasonable claims that might be filed as against our Policies.  In the event that our review of Surrogate Court proceedings reveals potential conflicting heirs or beneficiaries to those named in a TODD, Home will reserve the right require additional Affidavits or Consent from any parties deemed to have a potential claim to the Property before issuing any Policies.

As with any new legislation, we anticipate that there will be challenges to the interpretation of TODD Law in the coming months and years.  The Team here at Home will continue to monitor and report to you any and all, important decisions or amendments we locate in an attempt to provide you with the most up to date information we can on this new method of transferring Real Property.