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The Ins and Outs of Real Estate Titles in New York

Your Guide to Title Transfers, Adding or Removing Names, and Tax Implications

title deeds

Understanding Real Estate Titles in New York

In New York, a real estate title represents legal ownership and the right to use and transfer a property. It's different from a deed, the physical document that transfers ownership. While the title encompasses all the rights associated with a property, the deed serves as the legal instrument that conveys those rights. A clear title is crucial for ensuring secure property ownership and avoiding disputes.

What Is Involved in a Title Search?

A title search is a crucial step in any real estate transaction. In New York, it involves reviewing public records to verify the property's ownership and uncover any issues that could affect the transfer. Title searches typically identify potential problems such as:

  • Liens or Encumbrances: Unpaid taxes, mortgages, or other debts attached to the property.

  • Chain of Title Issues: Gaps or discrepancies in ownership history that could cloud the title.

  • Easements or Restrictions: Legal rights allowing others to use the property or limiting its use.

Title companies or attorneys typically conduct title searches to ensure a clean transfer and issue title insurance to protect against potential issues​​. In New York, title insurance is often required to secure a mortgage and protect against undiscovered title defects.

The Process of Title Transfers in New York

In New York, transferring a title involves specific legal steps to ensure a smooth and compliant process.

Adding a Name to a Title:

Adding a name to a title is common in estate planning, marital changes, or financial arrangements. The process typically involves choosing the appropriate deed type, such as a warranty or quitclaim deed. After selecting the appropriate deed, it should be drafted with accurate information about the property and the parties involved.

The deed must then be signed before a notary public and filed with the county clerk's office. Additionally, a Real Property Transfer Report (RP-5217) and Combined Real Estate Transfer Tax Return (TP-584) are required in New York. These forms ensure that the state's transfer tax is correctly assessed. Updating property records to reflect the changes completes the process. Adding a name may have tax implications, so consulting a legal professional is advisable.

Removing a Name from a Title:

Removing a name from a title typically involves similar steps as adding a name, including drafting a new deed and updating the county records. This is common in divorce cases or estate planning changes. A real estate attorney can help ensure the appropriate deed type is chosen and all paperwork is correctly filed.

Tax Implications of Title Transfers in New York

Gift Tax Implications:

The IRS considers adding a family member to a property title as a gift. The annual gift tax exclusion allows gifting up to $17,000 per person (as of 2024) without tax consequences. If the transfer exceeds this limit, it may trigger a gift tax. However, leveraging the lifetime gift tax exemption can help bypass the annual gift tax limit. Understanding these limits is crucial to avoid unexpected tax liabilities​.

New York Real Estate Transfer Tax:

In New York, a state transfer tax of $2 for every $500 of consideration applies to most property transfers. Additionally, New York City has its own Real Property Transfer Tax (RPTT), ranging from 1% to 2.625% of the consideration, depending on the property's value.

Capital Gains Tax:

The cost basis (original property value) determines the capital gains tax on future sales. Adding a name can affect the cost basis, potentially leading to varying capital gains tax liabilities when the property is sold. Strategic improvements, such as renovations, can help increase the cost basis and reduce future tax liability.

Loss of Tax Benefits:

Altering the title could result in losing homestead exemptions or other property tax benefits. Consulting a real estate attorney or tax professional can help identify and mitigate potential tax losses​.

Navigating the complexities of real estate titles and transfers requires careful planning and professional guidance. Title searches, deed drafting, and understanding tax implications are critical to ensuring a smooth transaction. At the Law Office of Taub & Bogaty, we can help you navigate this process confidently. Contact us at (516) 531-2500 or visit our contact page for personalized assistance with your title transfer needs.

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