Chapter 3 - Ownership Flashcards
Real Property
Real property is land and anything on the land that has been permanently attached or
affixed to it. Land refers to the ground and everything attached or growing on it, or otherwise
intended to be regarded as going with the ground, such as trees, shrubs, and growing crops.
In short, real property is all property other than personal property
Personal Property
All property other than land or any interest in land is personal property. Personal property is
further characterized as either tangible or intangible.
2 broad types of property ownership?
Real and Personal
Tangible Personal Property
Tangible personal property is anything that can be touched, seen, and felt. The property actually represents itself and is the actual object. For example, a chair has the look, feel, substance, and function of a chair. Tangible personal property has intrinsic value.
Intangible Personal Property
Intangible personal property has no intrinsic value in itself. The real value of intangibles exceeds the value of the physical object that represents the property. The representation can be touched and felt, but it is not the thing itself. Some examples are stock certificates, leases, mortgages, bonds, digital property and other such representations of property ownership.
Fee Simple Estate
It is an interest that belongs absolutely to an individual. It is potentially infinite in time. Most individually owned property falls into this category.
Someone who owns land, a farm, or a house outright possesses a fee simple estate in that property. The owner has the absolute right to keep it during his or her lifetime and pass it on to his or her heirs (or anyone else) at the owner’s death. If the owner wishes, he or she can sell the property or give it away while alive.
Life Estate
A life estate can be measured by the life tenant’s life or by the term of someone else’s life, if another person’s life has been designated as the measuring life. A life estate gives the owner the absolute right to possess, enjoy, or derive income from the property for the span of the measuring life, at which time the interest terminates.
Estate for Term of Years
Another type of estate that may or may not outlast a life estate is one created for a definite, limited period of time. An interest in property established for a specific duration is called an estate for a term of years. The period of time involved may be as short as one month or last for many years. It may extend beyond the lifetime of the tenant. The important thing to remember is that it is a right to possess and enjoy property as an owner for a definite period of time.
Remainder Interests
A remainder interest in property is a present right to future enjoyment.
Don is given property for his life. After that, it passes to Tom absolutely. Don possesses a life estate and Tom is the remainder person. Tom’s right to the use and possession of the property begins when Don’s interest expires. In this situation, Tom has a present absolute right to take possession of the property at Don’s death.
Reversionary Interests
James owns Blackacre in fee simple absolute. He conveys Blackacre to Ellen for her life. Ellen has a life estate in Blackacre. But because James conveyed less than his total interest, he retained a reversionary interest in Blackacre. Because of the reversionary
interest, at Ellen’s death Blackacre reverts to James, if he is living, or to his estate.
Legal Owner Definition
The legal owner is the one who holds legal title to the property. As a rule, the legal owner is the absolute owner and has all the rights and obligations connected with property ownership. The person with legal title is generally the one in possession. He or she has the full rights of use, enjoyment, and control over the property. Technically, an absolute owner holds both legal and
equitable title.
Situs
Situs refers to the place where property is located or kept.
Domicile
Another important factor to consider when developing an estate plan is the domicile of an individual. Domicile is the place individuals consider to be their permanent residence and to which they intend to return if they have temporarily left.
Three different types of joint property?
In most common-law states, there are generally three possible ways to own property in conjunction with others. They are (1) tenancies in common, (2) joint tenancies with right of survivorship, and (3) tenancies by the entirety.
Tenancies in Common
- Ownership is by two or more related or unrelated parties.
- Ownership interests may be unequal.
- Property can be real or personal.
- Each ownership portion is an undivided part of the whole property.
- The owner has the freedom to sell, dispose, exchange, gift, or will his or her interest.
Joint Tenancy with Right of
Survivorship
- Ownership is by two or more related or unrelated parties.
- Property can be real or personal.
- Ownership interests must be equal.
- At death, interest passes to surviving tenant(s).
- Ownership can be severed.
Tenancies by the Entirety
- Ownership can be only by married couples.
- Property can be real or personal property.
- At death, interest passes to the surviving spouse.
- Ownership cannot be severed without the consent of both spouses.
Community Property
In community-property states, property interests acquired during marriage are presumed to be owned equally by spouses. The community-property principle recognizes the existence of community ownership of property by husband and wife. In essence, each spouse is deemed to own a one-half interest in property acquired during the marriage regardless of which spouse actually acquired, earned, gained, or is otherwise responsible for ownership of the property.
Property owned prior to marriage, inherited by or gifted to an individual spouse during marriage retains separate property characterization.
Transmutation
The legal term for voluntarily changing the nature
of property is transmutation (in Wisconsin, classification or reclassification).
There are two important transmutation restrictions, however. First, federal law obligations cannot be circumvented by transmuting property; and, second, a
transmutation that is effective between spouses may not be effective against third parties like
creditors.
Seperate Property in Marriage
- property acquired prior to marriage
- property acquired by gift
- property acquired by inheritance, bequest, or devise
- property acquired in a court award
- property transmuted into separate property
Time-of-Acquisition or Inception-of-Title Rule
The general classification rule is known as the time-of-acquisition rule or the inception of-title rule. This rule provides that the character of an asset, separate or community, is established at the time the asset is acquired, and once established, the character is not altered by later events.
Generally, moving from a community-property state to a common-law state does not change the character of marital property acquired in the community jurisdiction unless the parties take steps to expressly change the property to a character other than its community identity?
True
In community-property states, all property the spouses own (as community or separate property) is subject to claims by creditors of either spouse?
False
In most community property states, a spouse’s creditor obligations are treated similarly: (1) a spouse’s separate property is usually subject to the claims of the spouse’s creditors for the spouse’s separate debts; (2) generally, one spouse’s separate property cannot be reached by the creditors of the other spouse’s separately created debts; and (3) the separate property of both spouses may be available if both partners contracted for the liability.
The owner of a life estate in property has no interest remaining at death to leave to heirs?
True
A reversionary interest exists upon the disposition of property only if no rights in the property have been retained.
False
A reversionary interest is an interest in property that was retained by the original owner at the time of disposition of the property because the owner conveyed less than total ownership.
All community-property states recognize the tenancy-by-the-entireties form of ownership?
False
None of the community-property states recognize the tenancy-by-the-entireties form of ownership but some community property states recognize similar survivorship property interests called Community Property with Right of Survivorship.
A future interest in property is always contingent?
False
It is possible for a future interest in property to be fixed and absolute when it is created, although it will not take effect until some future time.
A person who has legal ownership of property automatically also has equitable ownership of the property?
False
It is possible for the legal and equitable ownership of property to be split between different parties, such as in a trust.
An estate is generally probated and distributed according to the laws of the decedent’s state of domicile?
True
When a tenancy in common exists, neither cotenant may sell his or her interest in the property without the other cotenants permission?
False
When a tenancy in common exists, cotenants can sell their particular interest in the property to whomever they wish.
For federal gift tax purposes, when a person uses his or her own funds to open a joint bank account with someone else, the contributing party has made a completed gift to the noncontributing party at the time the funds are deposited in the account?
False
There is no gift upon the creation of a joint bank account. A gift is made only when the other joint tenant removes funds in excess of his or her own contributions.
