Chapter 3 Discussion Questions

Question 1

What is real property?

Answer 1

Land and Buildings

Question 2

What is tangible property?

Answer 2

Property that is not realty and may be touched such as cars, clothing, jewelry, etc.

Question 3

What is intangible property?

Answer 3

Property that cannot truly be touches such as stocks, bonds, patents, and copyrights.

Question 4

What are the most common types of property ownership?

Answer 4

Fee simple, tenancy in common, joint tenancy, tenancy by the entirety, community property, life estates, usufructs, and term interests.

Question 5

Define fee simple property ownership

Answer 5

Fee simple is the complete individual ownership of property with all rights associated with outright ownership, such as the right to use, sell, gift, convey, or bequeath.

Question 6

What happens when a person dies owning a property fee simple?

Answer 6

The property passes to the decedent’s heir(s) through the probate process by direction of the will or state intestacy laws. The fair market value of the property is included in the owner’s gross estate for federal estate tax purposes.

Question 7

Define tenancy in commmon

Answer 7

Tenancy in common is a joint interest in property between two or more related or unrelated persons called tenants in common.

Question 8

What happens at death of a tenant in common?

Answer 8

The decedent’s interest will pass through the probate process for re-titling per the direction of the will or state intestacy laws. The decedent’s interest is included in his federal gross estate at the fair market value as of his date of death or the alternate valuation date, if elected.

Question 9

Can a tenant in common be partitioned? If so how?

Answer 9

Yes, a tenancy in common can be partitioned. If all of the tenants in common agree, the property can be divided according to the interest of each tenant in common. If all tenants in common do not agree to sever, a court can grant the partition.

Question 10

What are the consequences of two people owning property as a tenancy in common with equal interests, but one contributes 70% of the purchase price?

Answer 10

If two people purchase property as tenancy in common with equal interests, and one contribution 70 percent of the purchase price, the tenant in common contributing 70 percent has made a gift of 20 percent to the other tenant in common.

Question 11

Define Joint Tenancy

Answer 11

Joint tenancy is an interest in property held by two or more related or unrelated persons called joint tenants. Each person holds an undivided, equal interest in the whole property. The right of survivor ship is normally implied.

Question 12

What is right of survivorship?

Answer 12

Right of survivorship means that at the death of one joint tenant, the decedent’s interest is transferred to the other joint tenants.

Question 13

Can a joint tenancy be partitioned?

Answer 13

Yes, a joint tenancy can be partitioned with or without the consent of other joint tenants.

Question 14

What is the contribution rule and how does it affect inclusion in the decedent’s gross estate?

Answer 14

The contribution rule states that at joint tenant’s death, his executor does not necessarily include the value of his proportion of ownership, but includes the value in proportion to the joint tenant’s original and subsequent contribution.

Question 15

Define community property.

Answer 15

Community property is a regime, derived form Spanish law, in which married individuals own an equal undivided interest in all property accumulated, utilizing either spouse’s earnings, during their marriage.

Question 16

List three common ways to own separate property in a community property state?

Answer 16

Separate property may be acquired prior to marriage, acquired by gift during marriage, or acquired by inheritance during marriage.

Question 17

Which states recognize community property?

Answer 17

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin all have a community property presumption. Alaska allows individuals to elect community property status. Puerto Rica, a commonwealth, is also a community property jurisdiction.

Question 18

Discuss what happens at death of the first spouse to die when property is held as community property.

Answer 18

At the death of the first spouse to die, the decedent’s half of the community property will pass through the probate process for retitling per the direction of the will or the test intestacy laws. The decedent’s half of the community property is also included in the decedent’s gross estate and will receive a step-to-fair market value. The surviving spouse’s basis in her half of the community property also receives a step-to-fair market value at the death of the first spouse.

Question 19

How can a married couple convert community property into separate property when property is held as community property?

Answer 19

To convert community property to separate property, one spouse must gift his half interest in the property to the other spouse. After this gift, the donee spouse will own the property as separate property.

Question 20

What is the implication when a married couple moves from a community property state to a common law state?

Answer 20

When a married couple moves from a community property state to a common law state, property acquired before the move that is community property generally retains its community property status.

Question 21

What is quasi community property

Answer 21

Qasi community property is a property type recognized by a few community proeprty states relating to property owned by people who move into community property states from common law states. The quasi community property is property that would have been community property had the couple been living in the community property state at the time of acquisition. Quasi community property is treated just like community property at the death of the first spouse to die, or at the time of divorce. Before either one of these occurrences, the quasi community property is treated as separate property.

Question 22

Define life estate

Answer 22

A life estate is an interest in property that ceases upon the death of the owner of the life estate.

Question 23

Define usufruct

Answer 23

A usufruct is a Louisiana device that provides the holder with the right to use property and or right to income from a particular property.

Question 24

What is a remainderman?

Answer 24

A remainderman is the person who receives the property at the end of a life estate, a usufruct, or term interest.

Question 25

Define interest for term?

Answer 25

An interest for term is an interest for a specified number of years.