Estate Planning for New York Homeowners

Marcus and Diane owned a brownstone in Crown Heights for 31 years. They bought it for $210,000 in 1994. By 2024 it was worth $1.4 million. They had simple wills leaving everything to each other and then to their two adult children. They thought they were set.

Then Diane died. Marcus inherited the brownstone — no problem, because of the way they held title. But five years later, Marcus died too. The brownstone had to go through New York Surrogate's Court probate. The process took 11 months. It cost the family more than $22,000 in legal fees and court costs. Their daughter, Keisha, had to postpone a job offer in Atlanta because she couldn't sell the property until probate closed.

A revocable living trust would have cost them $3,500 to set up. It would have transferred the brownstone to their children in 30 days — with no court, no judge, no $22,000 in fees, and no delay for Keisha's job offer.

For New York homeowners, real estate is the single most important asset to plan around. It's the one asset that almost always requires probate if you leave it through a will. And it's the one asset where the difference between good planning and no planning is measured in months and thousands of dollars.

Here's what you need to know.

Why a Will Isn't Enough for New York Real Estate

A will works well for many assets. Bank accounts with beneficiary designations. Life insurance. Retirement accounts. These pass directly to named beneficiaries without going through Surrogate's Court.

Real property in New York is different. Unless you take specific steps to keep it out of probate, your home must go through the Surrogate's Court probate process before your heirs can take title. No bank, title insurance company, or buyer will close on a property without either a deed from the executor (backed by Letters Testamentary) or a deed from an heir with clean title.

New York also doesn't have a transfer-on-death deed option. Many other states let homeowners record a beneficiary deed during their lifetime that automatically transfers property at death, bypassing probate entirely. New York has never adopted that mechanism. Your options here are different from what your friend in Florida or California might tell you.

So what are your actual options in New York? Four of them are worth understanding in depth.

Option 1: Revocable Living Trust (The Most Flexible Approach)

A revocable living trust is the most common and most flexible tool for keeping New York real estate out of probate. You create the trust during your lifetime, transfer title to the property into the trust, and name a successor trustee who takes over when you die.

While you're alive, nothing changes. You remain in full control. You can sell the property, refinance it, amend the trust, or revoke it entirely. You don't lose your STAR exemption. You don't lose your homeowner's insurance policy (though you should notify your insurer). The trust is invisible to you during your lifetime.

When you die, the successor trustee uses the trust document to transfer title to your named beneficiaries. No court. No judge. No probate filing fee. No 6–12 month wait. Typically done in 30–45 days.

There's one step many people miss: you have to actually deed the property into the trust. The trust document alone doesn't transfer the property. An attorney prepares a new deed naming the trust as owner, and that deed gets recorded with the county clerk. If this step doesn't happen — if you create the trust but forget to retitle the property — the property goes through probate anyway.

What About the Mortgage?

Deeding your home into a revocable living trust doesn't trigger the due-on-sale clause in your mortgage. Federal law — specifically the Garn-St. Germain Depository Institutions Act — exempts transfers into revocable trusts where the borrower remains a beneficiary. Your lender can't call the loan due because you transferred the property to your trust.

Tax Implications

For income tax purposes, a revocable living trust is a "grantor trust" — meaning the IRS ignores it. You report income and expenses exactly as you did before. Your real estate taxes don't change. Your STAR exemption remains intact (New York Tax Law §425 allows trusts to maintain STAR exemptions). Your homestead exemption from creditors is preserved.

New York real estate transfer tax — the tax owed when real property changes hands — does not apply when you transfer your home into your own revocable trust. The transfer is exempt because you control the trust and remain the beneficial owner. You pay no transfer tax on the way in, and no transfer tax applies when the property passes to heirs at death through the trust. What does apply is the step-up in cost basis — heirs inherit property at its fair market value at the date of your death, not at your original purchase price. That eliminates most capital gains tax exposure even on highly appreciated property.

Option 2: Life Estate Deed (Simpler, But With Tradeoffs)

A life estate deed is an older, simpler tool. You deed your home to your children (the "remaindermen") now, but you retain a "life estate" — the right to live in, use, and control the property for the rest of your life. When you die, full ownership passes automatically to the remaindermen by operation of law, without any probate.

No court proceeding. No delays. No fees. The deed already vests ownership in the remaindermen at your death.

Life estate deeds are faster and cheaper to set up than a trust. For a straightforward situation — one property, one owner, children who all get along — they work well.

But they have significant downsides that a revocable trust avoids:

The loss of control is the big one. Once you execute a life estate deed, you own only the right to live there for your lifetime. Your children own the remainder. If you want to sell the property — to downsize, to fund long-term care, to move — every remainderman must agree and sign the deed. If one child refuses, you're stuck. I've seen families paralyzed by this exact situation.

Option 3: Joint Ownership (Works Only in Specific Circumstances)

Property owned in joint tenancy with right of survivorship passes automatically to the surviving owner at death. No probate. The surviving owner files an affidavit of survivorship with the county clerk and a copy of the death certificate. Done.

For married couples who want the property to pass to the survivor, joint tenancy works well. New York also recognizes tenancy by the entirety for married couples — a stronger form of joint ownership that protects the property from individual creditors of either spouse.

Joint ownership's limitation: it only solves the first death. When the surviving spouse or co-owner dies, the property is now owned solely by that person — and unless they've done separate planning, it goes through probate at that point. Marcus and Diane's situation exactly.

Adding a child as joint tenant creates its own problems. The child becomes an owner immediately. If they have creditors, liens can attach to the property. If they divorce, their spouse may have a claim against the property. If they die before you, their share may need to go through their own estate. And like a life estate deed, you need their cooperation to sell or refinance.

Option 4: Irrevocable Medicaid Asset Protection Trust (MAPT)

For homeowners who are concerned about nursing home costs and Medicaid qualification, an irrevocable Medicaid Asset Protection Trust deserves consideration.

You transfer your home into an irrevocable trust, naming your children as beneficiaries. You retain the right to live in the home. You give up control over the asset — it's no longer legally "yours." After 5 years, the asset is outside of Medicaid's lookback window. If you later need nursing home care and apply for Medicaid, the home isn't counted as a resource.

The tradeoff is real: you permanently give up control. You can't sell the home, refinance it, or get the equity out without your trustee's cooperation. If your situation changes, unwinding the trust is difficult and may have tax consequences.

MAPTs make most sense for homeowners over 60 who have significant home equity, minimal other assets, and a realistic concern about future long-term care costs. In New York, nursing home costs average $14,000–$18,000 per month. A home worth $800,000 can disappear in under 5 years. For families with that exposure, a MAPT done today — before the 5-year clock becomes an issue — can protect the most significant asset the family owns.

The Co-op Problem: Estate Planning Is Harder for NYC Co-op Owners

If you own a co-op — and many New Yorkers do — your estate planning is more complicated than for condo or house owners. A lot of people don't realize this until they're sitting in the executor's chair.

A co-op isn't real property. You don't own an apartment. You own shares of stock in a cooperative corporation and a proprietary lease that gives you the right to occupy a specific unit. That distinction matters enormously for estate planning.

When a co-op owner dies, their shares and proprietary lease are estate assets like any other personal property. They can pass through a will or a trust. But there's a critical additional step: the co-op board must approve the transfer.

Most proprietary leases require board approval for any transfer of shares — including transfers to heirs at death. Boards have discretion to approve or reject. Most boards will approve a transfer to a spouse or direct descendant living in the unit. But transfers to a trust, to a non-resident beneficiary, or to someone the board finds financially unsuitable can face obstacles.

Before you put a co-op into a revocable living trust, read your proprietary lease. Check whether it requires board consent for a trust transfer. Some co-ops prohibit it entirely. Others allow it with a board resolution. Your attorney should review the proprietary lease and — if needed — get written approval from the co-op board before you record anything. A deed into a trust that the co-op doesn't recognize is worthless.

Co-op vs. Condo Estate Planning: The Difference

Condos are actual real property. You own the unit and a percentage interest in common areas. Condos can be transferred into a revocable living trust exactly like a house or brownstone — record a deed into the trust, done. Condo associations rarely have approval rights over inheritances the way co-op boards do.

If you own a co-op and are considering a trust, work with an attorney who has done this before with co-ops. It's not impossible — it just requires a few extra steps that a generic estate planning template won't catch.

New York Real Estate Transfer Tax: What You Actually Owe

Transfer tax comes up constantly in estate planning conversations. Let me give you the clear picture.

Transfers at death through a trust or will don't trigger transfer tax. New York's real estate transfer tax (Real Property Law §1440) applies to transfers of real property for consideration. Inheritances aren't sales. When your child inherits your home through your trust or estate, no transfer tax is owed.

The step-up in cost basis is the more important tax concept for heirs. When you inherit property, your tax basis is stepped up to the fair market value at the date of death — not the decedent's original purchase price. If Marcus and Diane bought their brownstone for $210,000 and it's worth $1.4 million when Marcus dies, the children's tax basis is $1.4 million. If they sell it for $1.4 million, they owe zero capital gains tax. The $1.19 million in appreciation is never taxed.

This is one reason lifetime gifting of real estate isn't always the right move. If Marcus had given the brownstone to his children while alive, they'd inherit his original $210,000 basis. The gain on a future sale would be taxed. By keeping the property until death, the step-up eliminates that tax.

What to Do If You're a New York Homeowner Right Now

Here's the practical checklist:

1. Check how your property is titled. Look at your deed (or your proprietary lease for co-ops). Is it in your name alone? Joint tenancy? Tenants in common? The current title determines your options.
2. Decide whether a revocable trust is right for you. For most homeowners, especially those with significant equity or multiple properties, a trust is the clearest path to probate avoidance and smooth transfer.
3. If you own a co-op, check your proprietary lease before doing anything. Get it reviewed before you create a trust.
4. Consider Medicaid planning if you're 60+ and concerned about long-term care costs. The 5-year lookback makes timing everything.
5. Update your plan when your situation changes. Divorce, death of a co-owner, purchase of a second property — all of these require revisiting your estate plan.

Our estate planning practice works with New York homeowners every week. We've helped families protect brownstones in Bedford-Stuyvesant, co-ops in Jackson Heights, two-families in the Bronx, and waterfront homes in Staten Island. We understand the co-op approval process, the Medicaid lookback rules, and the New York-specific tools that actually work here.

If you own a home in New York and you don't have a trust or other probate-avoidance strategy in place, schedule a consultation. Don't wait until you're dealing with illness, a family crisis, or probate after the fact. The planning costs a fraction of what probate costs — in money, time, and family stress. You can read our complete New York estate planning guide for more, or visit the Morgan Legal NY homeowner estate planning resource for additional detail on New York-specific rules.

We've guided more than 5,000 New York families through this process. Let us help yours.