4. Characteristics and Consequences of Property Titling Flashcards
Personal property
Rights and interests associated with ownership in non-real property. May be tangible or intangible.
- Right to possession and enjoyment
- Right to dispose by will, gift, sale, or conveyance (will or trust)
Real property
Nature of real property: land, water, attachments Fixtures: Included in sale, unless specified otherwise. Determined by intent of person who placed the item
Present Property interests: Fee simple
Sole ownerhip. Passes through probate
Present Property interests: Life estate
- Measured by the life of the person to whom the estate is given or the life of another person
- Life tenant has the right to possess and use the property during the specified life
- Life tenant also has an obligation to pay taxes, make repairs, and not commit waste.
- May be created by voluntary acts of the parties or by operation of law.
- Holder of a life estate does not choose who will receive the property at the conclusion of the life estate (the remainderman) if the remainder-man was named by the original grantor of the life estate. In some cases, the original grantor may grant the holder of the life estate a POA to name the remainderman
Present Property Interests: Interest for Term
Similar to Life Estate, except only for a specified term
Future Interests
Remainder v Reversion
Reversion reverts back to grantor
Remainder goes to someone else. May be conveyed and inherited
Forms of Joint Ownership
- Tenancy in common
- Joint Tenancy with Rights of Survivorship (equal shares)
- Nonspousal JTWROS
- Tenance by the Entirety (JTWROS between spouses)
- Community property
Nonspousal JTWROS
Gift tax ramifications
- Gift contributing largest percentage made a gift to the other tenants
- No gift if equal contributions
- Gift = 1/n - actual percentage contributed
- Joint bank account doesn’t create gift until noncontrib. party withdraws
Nonspousal JTWROS
Estate tax ramifications
- Avoids probate
- Percentage of contribution determines amount of gift in deceden’t estate
Nonspousal JTWROS
Income tax ramifications
- A tenant may sever or sell his share
- Taxed on excess of basis, per holding period and type of assets
- When a tenant dies, the portion included in deceden’t estate receives Step-up in basis
Spousal JTWROS
Tenancy by the Entirety
- One spouse cannot sever interest without consent of the other
- This form of ownership recognized only in a few states, and is protected from creditors
Community property
Treatment at death of first-to-die
- Both halves receive step-up on death of first to die
Community property
Exceptions
- Property acquired before marriage and held separately
- Property received by gift and held separately
- Property inherited and held separately
- Property acquired by court award during marriage compensating for physical injury and held separately
Community property
Create separate property out of community property
Created by donating one spouse’s interest to the other spouse.
Individuals in community property states can usually opt out of the community property scheme by filing a declaration with the state (partition of community property)
Migratory couples
Move from community to common-law state
- Character of property unchanged, so remains community property
- Spouses may choose to divide upon arrival
