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Life Estate vs. Transfer on Death Deed (TODD): Which is Right for Your Estate Plan in New York?

 

When planning for the future of your real estate in New York, you may be looking for ways to transfer property to your heirs while avoiding probate. Traditionally, reserving a life estate in a deed has been a common tool for estate planning. However, with the recent introduction of the Transfer on Death Deed (TODD) under New York Real Property Law § 424, property owners now have a new option that may offer greater flexibility.

 

In this post, we’ll compare Life Estates and Transfer on Death Deeds (TODDs), explaining how each works, the key differences between them, and why the predictability of life estates may still be preferred in some cases.

 

What is a Life Estate?

A life estate is a type of ownership where a property owner (the “life tenant”) retains the right to live in and use the property for the rest of their life. Upon the life tenant’s passing, ownership automatically transfers to the person(s) named as the remainderman (the future owner).

Key Features of a Life Estate Deed:

    ✅ The original owner (life tenant) can live in the property for life.
    ✅ The future owner (remainderman) is guaranteed to inherit the property when the life tenant dies.
    ✅ The property avoids probate, as it automatically transfers upon the life tenant’s death.
    ✅ The life tenant remains responsible for property taxes, maintenance, and expenses.

Downsides of a Life Estate:

    ❌ Loss of full control: The life tenant cannot sell or mortgage the property without the remainderman’s consent.
    ❌ Risk of remainderman’s debts: If the remainderman has financial troubles, their creditors may place a lien on the property before the life tenant passes away.
    ❌ Potential Medicaid penalties: If the life tenant applies for Medicaid within five years of creating a life estate, it may be considered a gift transfer, impacting eligibility.

 

What is a Transfer on Death Deed (TODD)?

The Transfer on Death Deed (TODD) is a brand-new tool in New York real estate and estate planning law, enacted in 2024. It allows a property owner to name a beneficiary to inherit real property outside of probate, while retaining full ownership and control during their lifetime.

Key Features of a TODD:

    ✅ The owner keeps full control of the property during their lifetime.
    ✅ The property automatically transfers to the named beneficiary upon death.
    ✅ The owner can sell, mortgage, or revoke the deed at any time.
    ✅ No impact on Medicaid eligibility (as long as the deed is revoked before applying).

Downsides of a TODD:

    ❌ The beneficiary has no rights until the owner passes away.
    ❌ If the beneficiary has financial problems, creditors could try to claim the property after the owner’s death.
    ❌ The deed must be properly recorded before the owner’s death, or it won’t be valid.

 

⚖️ Legal Certainty: A Key Difference Between TODDs and Life Estates

While TODDs offer a modern, flexible approach to property transfers, it's important to recognize that they are still legally untested in many ways.

• Life estates have been used in New York for decades and are well understood by courts, Medicaid offices, and title insurers.
• TODDs, by contrast, are new to New York as of 2024, and there is very limited case law or administrative guidance on how they will be treated in litigation, probate court, or Medicaid applications.
• Questions remain about how TODDs might interact with creditor claims, disputes among heirs, or mistakes in recording.

Because of this, TODDs offer less legal certainty than life estates—for now. Over time, these concerns may resolve as TODDs become more widely used and interpreted by the courts. But at this early stage, property owners should proceed with careful guidance from an attorney and understand that this option, while promising, may carry more risk in certain situations.

 

Key Differences Between Life Estates and TODDs

Feature	Life Estate	Transfer on Death Deed (TODD)
Owner retains full control?	❌ No – must get remainderman's consent	✅ Yes – can sell, mortgage, or revoke
Avoids probate?	✅ Yes	✅ Yes
Beneficiary’s rights before death?	✅ Yes	❌ No
Can be revoked?	❌ No	✅ Yes
Risk from beneficiary’s creditors?	✅ Yes – before death	❌ No – but risk after death
Impact on Medicaid eligibility?	⚠️ Yes – may count as a gift	✅ No – unless property still owned
Legal certainty?	✅ High – well-established in NY	⚠️ Low – new and largely untested

 

Which One is Right for You?

Choose a Life Estate if:

    ✔️ You want to live in the property for life but ensure it passes to a specific person.
    ✔️ You don’t mind giving up full control over future decisions.
    ✔️ You want a tested, reliable option that has stood the test of time in NY law.

Choose a TODD if:

    ✔️ You want to avoid probate but still retain full control of your property.
    ✔️ You want the flexibility to change your mind.
    ✔️ You’re working with an estate planning attorney who understands the emerging landscape of TODDs in New York.

 

Final Thoughts

Both Life Estates and TODDs can be useful tools, but they come with very different trade-offs. While TODDs are exciting and flexible, their novelty means more uncertainty—especially in legal or administrative settings.  If you're unsure which is right for your situation, consult a New York attorney familiar with both traditional estate planning and the new TODD statute.