Chapter 3 - Types of Property Interests Flashcards
Define Actual Contribution Rule
The value of a decedent’s joint interest in property is based on the actual percentage of the original purchase price contributed by the decedent - not the decedent’s ownership percentage. Does not apply to married couples.
Define Ancillary Probate
Concurrent second probate process conducted in a non-domiciliary state in which the decedent owns real property, which often requires the services of an attorney from that state, and separate court fees.
Define Community Property
A regime in which married individuals own an equal undivided interest in all of the property accumulated, utilizing either spouse’s earnings, during the marriage.
Define Equitable Ownership
Possession of the economic right to property. Typically associated with use of the property.
Define Fee Simple
The complete ownership of property with all the rights associated with outright ownership.
Define Intangible Personal Property
Property that cannot truly be touched such as stocks, bonds, patents, and copyrights.
Define Joint Tenancy (with right of survivorship)
An undivided interest in property held by two or more related or unrelated persons, generally includes a right of survivorship.
Define Legal Ownership
Possession of legal title to the property. Owner possesses all rights, duties, responsibilities, and privileges associated with the property. Only someone with legal ownership can convey the property.
Define Life Estate
An interest in a property that ceases upon the death of the owner of a life interest or estate and provides a right to the income or the right to use property or both.
Define Quasi-Community Property
Property that would be community property had the married couple living in the community property state at the time of acquisition (applies to married couples who move from a common law (separate property) state to a community property state.
Define Real Property
Property that is land and buildings attached to the land.
Define Residence Domiciliary
An individual’s legal state of residence.
Define Tangible Personal Property
Property that is not realty and may be touched.
Define Tenancy by the Entirety
A JTWROS that can only occur between a husband and wife.
Define Tenancy in Common
An undivided interest in property held by two or more related or unrelated persons.
Define Term Interest
An interest in property that ceases after a defined period of time.
Define Usufruct
A Louisiana device similar to a life estate which provides the holder with the right to use property and/or the right to income from the particular property.
What are the three categories all property interests can be classified into?
- Real Property
- Tangible Personal Property
- Intangible Personal Property.
What are the common legal forms of ownership? 5
- Fee Simple
- Tenancy In Common
- Joint Tenancy
- Tenancy By The Entirety
- Community Property
When two unmarried people hold a property JTWROS, what is the exception to the Actual Contribution Rule?
Exception for gift of a joint interest in a bank account or Series H bond. In these situations, a completed gift is not made until the noncontributing owner takes a withdrawal from the account for his own personal benefit (equal to the amount of the withdrawal).
What are the four key components of Tenancy by the Entirety?
- Tenancy by the entirety applies to joint ownership only between married couples,
- Neither tenant is able to sever their interest without the consent of the other tenant (spouse).
- Property ownership interest is automatically transferred to the surviving spouse upon death, and
- It may involve the ownership interest of either real or personal property.
When does tenancy by the entirety end?
Upon death or divorce.
In a community property state, what retains its status as separate property?
- Property attained before marriage
- Property received by gift or inheritance during the marriage.
When does separate property lose its status as separate property?
When it is commingled with community property.
How can community property status be dissolved?
- Death
- Divorce
- Agreement between the spouses.
Which type of ownership allows for both portions of property to get a step up in basis upon the death of one of the owners?
Community Property
What are the three most common types of property titling that represent partial ownership?
- Life Estate
- Usufruct
- Term Interest
What benefits does someone that has equitable ownership of a property receive? 4
- The right to possess the property
- The right to enjoy the property
- The right to use the property, and
- The right to receive income from the property.
What are the five most important planning questions concerning the various property ownership forms?
- What value or % of value is included in a decedent’s gross estate?
- Is the property included in the decedent’s probate estate?
- Does the property have an automatic right of survivorship?
- Will the value of the property qualify for unlimited marital deduction?
- Can an interest in the property, if jointly held, or an interest in community property, be partitioned without the consent of the other joint or community interest?
Which property ownership types have automatic-survivorship?3
- JTWROS
- Tenancy by the Entirety
- Community Property WROS
Which property ownership types are included in the probate estate?3
- Fee Simple 100%
- Tenancy in Common %-owned
- Community Property 50% of value
How is value included in the Gross Estate for each ownership type?
- Fee Simple: 100%
- Tenancy in Common: %-owned
- JTWROS: Acutual Contribution Rule or %-owned
- Tenancy by the Entirety: 50%
- Community Property: 50%
