Thinking About Putting Your NYC Co-op in a Trust? What You Should Know Before You Transfer It

For many New York City homeowners, a cooperative apartment is one of their most valuable assets.  It may also be one of the more complicated assets to incorporate into an estate plan.

A common question we hear is: Should I put my co-op into a trust?

The answer depends on the owner’s circumstances, the purpose of the trust, the terms of the co-op’s governing documents, and the owner’s broader estate and long-term care plan.  A trust can provide meaningful benefits, but transferring a co-op into a trust is not simply a matter of changing the name on a deed.  In some situations, a trust may provide little additional benefit or create unnecessary complexity.

The question has also taken on an additional dimension because New York City’s non-primary-residence surcharge may apply to certain higher-value co-ops.

Why Put a Co-op in a Trust?

Some reasons a co-op owner may consider a trust as part of an estate plan:

Avoiding Probate

One common reason is to avoid probate.  Assets properly held in a revocable trust generally pass under the terms of the trust rather than through the probate process.

For a valuable NYC co-op, avoiding probate may simplify estate administration and help keep the disposition of the apartment private.

Planning for Incapacity

A trust can also provide a mechanism for managing the co-op if its owner becomes incapacitated.  Rather than requiring a court proceeding or relying solely on a power of attorney, a properly drafted trust can authorize a successor trustee to manage trust assets under the trust’s terms.

Coordinating the Co-op With the Rest of the Estate Plan

A co-op may be only one part of a broader estate plan.  A trust can establish rules for what happens to the apartment after death—for example, whether it should be sold, retained for a period of time, or distributed among children or other beneficiaries.

This can be especially helpful where multiple beneficiaries may inherit the apartment.

Long-Term Care and Medicaid Planning

For some owners, a co-op may also be an important asset to consider in long-term care planning.  A properly designed Medicaid Asset Protection Trust is generally an irrevocable trust that may, when established and funded sufficiently in advance and when the owner has given up the relevant rights to the transferred property, help protect assets from being treated as available resources for certain Medicaid eligibility purposes.

That planning must be approached carefully.  The terms of the trust matter: if trust principal can be distributed to or for the owner’s benefit, some or all of the trust property may be treated as an available resource.  Further, transferring a co-op to an irrevocable trust can trigger Medicaid transfer-of-assets rules and a period of ineligibility for certain long-term care services if the transfer is made within the applicable look-back period.

Accordingly, a Medicaid Asset Protection Trust is not a last-minute solution and does not guarantee eligibility for government benefits.  Eligibility rules, transfer penalty rules, income rules, and the treatment of trusts can vary depending on the particular Medicaid program and the services being sought, including care at home or care in an institutional setting.  The owner must also understand the trade-offs of an irrevocable transfer, including the limits on changing the trust or regaining control of the co-op.

Before transferring a co-op to an irrevocable trust for long-term care planning, the owner should obtain individualized advice that considers the co-op, the proposed trust terms, family circumstances, tax issues, and the owner’s anticipated care needs.

A Co-op Is Different From a House

There is an important distinction between owning a house or condominium and owning a cooperative apartment.

A co-op owner generally owns shares of stock in the cooperative corporation together with a proprietary lease that gives the owner the right to occupy the apartment.  As a result, transferring a co-op to a trust involves more than simply recording a deed.

The co-op’s proprietary lease, bylaws, and transfer policies must be reviewed.  The co-op board may have its own requirements for a transfer to a trust.

Depending on the circumstances, the transaction may require legal documentation, board approval, lender approval, recognition agreements, or other steps.  Those requirements should be addressed before the transfer is made.

This is particularly important for an irrevocable trust.  A transfer undertaken for Medicaid planning purposes still needs to comply with the co-op’s governing documents, financing arrangements, and approval procedures.

Are There Tax Consequences?

A transfer of a co-op to a trust should also be reviewed for potential tax consequences.

New York City imposes a real property transfer tax that can apply to transfers involving cooperative housing stock.  Whether a particular transfer to a particular trust is subject to the tax depends on the circumstances, including the structure of the trust and whether consideration is involved.

There may also be federal, New York State, and New York City estate, gift, and income tax considerations, depending on the type of trust used and the owner’s overall plan.  An irrevocable trust used for long-term care planning may have materially different tax consequences from a revocable trust.

What About NYC’s Non-Primary-Residence Surcharge?

New York City’s non-primary-residence surcharge adds another consideration for owners of higher-value co-ops.

Beginning in 2026, qualifying non-primary-residences, including certain cooperative apartments valued at $1 million or more, may be subject to an additional annual surcharge.  The rules also specifically address co-ops held in trust.

Putting a co-op into a trust does not automatically make it a primary residence or eliminate the surcharge.  The applicable rules look at the trust’s beneficiaries and whether the apartment qualifies as a primary residence under the governing requirements.

This can become particularly important after the owner’s death.

For example, consider a parent who lives in a Manhattan co-op and owns it through a revocable trust.  During the parent’s lifetime, the apartment may qualify for an applicable primary residence exemption.  But what happens after the parent’s death if the trust continues for three children, none of whom lives in the apartment?

The estate plan may still accomplish important goals, but the family’s tax situation may change.  The beneficiaries may need to decide whether to sell the apartment, retain it, or have one beneficiary occupy it.  The estate plan and the consequences of the NYC tax should be considered together.

Owners of qualifying properties should also be aware that the City has established filing requirements and deadlines for claiming any applicable exemption.

Note:  The extended deadline to submit an exemption application for New York City’s non-primary-residence property surcharge (the “pied-à-terre tax”) is October 6, 2026.

What Happens to the Co-op When You Die?

One advantage of incorporating a co-op into a trust is the ability to plan for what happens next.

Suppose three children inherit a valuable NYC co-op.  Do all three want to own it?  Can one child live there?  Should that child buy out the others?  Should the apartment be sold immediately?

These questions can become difficult when an estate plan simply provides that three children inherit an apartment equally.

A well-designed estate plan can address these issues in advance.  The trust might give a trustee authority to sell the apartment, establish rules for its use, or provide a mechanism for one beneficiary to acquire the interests of the others.

The objective is not necessarily to keep the co-op in the family.  It is to make sure that the estate plan reflects the family’s actual goals and provides a workable way to administer the property.

When Might a Trust Not Be Necessary?

A trust is not automatically appropriate for every co-op owner.

For someone with a relatively simple estate, limited assets, and no particular concerns about probate, incapacity, long-term care planning, or the future management of the co-op, the additional work and expense of transferring the apartment to a trust may not be justified.

There may also be situations in which a married couple’s ownership structure, beneficiary designations, powers of attorney, and other estate planning documents already accomplish much of what the clients need.

A trust can involve additional considerations, including co-op board requirements, legal fees, lender requirements, tax consequences, and the need to keep the trust and the co-op’s records properly coordinated.  An irrevocable trust can also require the owner to give up flexibility and control that the owner may wish to retain.

The right question is therefore not simply: Can I put my co-op in a trust?

It is: What problem am I trying to solve, and is a trust the best way to solve it?

Before You Transfer Your Co-op

Before transferring an NYC co-op to a trust, consider the entire picture:

• What is the purpose of the trust?

• Is a revocable trust or an irrevocable trust appropriate for that purpose?

• Who will be the beneficiaries and trustees?

• What happens if the owner becomes incapacitated?

• What happens when the owner dies?

• If long-term care planning is a goal, what rights will the owner retain, and how will the transfer affect Medicaid eligibility and transfer penalty rules?

• Will the co-op board approve the proposed transfer?

• Are there mortgage, lender, or recognition agreement requirements?

• Are there transfer taxes or other costs?

• How will the transfer affect the owner’s estate, gift, and income tax planning?

• Could the NYC non-primary-residence surcharge apply?

• What happens if beneficiaries disagree about whether to sell or retain the apartment?

A NYC co-op can be both a home and a significant financial asset.  For that reason, its ownership should not be considered separately from the rest of the owner’s estate plan.

Before transferring a co-op to a trust, it is important to understand not only what the trust may accomplish, but also what the transfer may change.  A careful review of the co-op documents, the proposed trust, and the owner’s overall estate, tax, and long-term care plan can help ensure that the ownership structure serves the owner’s goals during life and after death.

Out in the Community

Michael will be presenting:

Estate Planning & Elder Law Overview: What Social Workers Need to Know

Tuesday, October 6th, 5:00 PM

The Club at Briarcliff Manor, Briarcliff Manor, NY

2 CEU Credits for Social Workers

RSVP HERE 

Additional Appearances by Michael During October:

October 21  Roslyn, NY School District Continuing Adult Education Program

                    Estate Planning & Elder Law: Protecting Your Assets

          In-person from 7:00 PM – 8:30 PM

October 30  Dorot, In-person panel at a Manhattan Location from 12:00 PM - 2:00 PM

                    “A Panel of Experts: Moving Forward with Support”

Michael J. Greenberg, P.C. helps families protect and pass on their legacies.  Our attorneys assist clients with estate planning, trusts, elder law, and related matters in New York, New Jersey, Connecticut, and Florida.

This article is for general informational purposes only and is not legal, tax, or Medicaid-eligibility advice.  Trust and Medicaid planning are highly fact-specific.