Property, Trusts, Estates

Property, Trusts, & Estates Real Property = Land, air rights, mineral rights, plant life/vegetation, & fixtures Fee Simple = owning & possessing land w/ right to sell it. Joint Tenency = “Right of Survivorship” (cannot be defeated by a will) • May sell interest to 3rd party w/o permission of other tenants • Must be “natural person” – i.e. no corporations can be in joint tenency • Requires: 1)Time, 2)Title, 3)Interest, 4)Possession • Example: ○ A, B, C are joint tenants ○ A sells interest to X ○ X is now “tenant in common” ○ A & B remain joint tenants Tenency in Common = Property descends to heirs Tenency by Entirety = Joint tenency between husband and wife • Cannot be defeated by a will Constructive Eviction = releases both tenant and landlord from lease obligations • Ex: Fire damage breaches the implied warranty of habitability Mortgagee (lender)-> Gets insurance proceeds first, before owners of land. Multiple Mortgagee Rules Notice: First to obtain possession of deed wins, even if failing to file it Notice-Race: First to file, in good faith, w/o knowledge of other mortgage, wins Race: First to file deed wins Insurable Interest = must be present at TIME OF LOSS, even if not at time of purchase Fire Insurance Coinsurance Rules Total Loss Recovery = Full amount of insurance if it is lowest of 1. Face value of policy 2. FMV of property @ date of loss 3. Coinsurance amount Partial Loss Recovery = (FV of insurance)/(Coinsurance % * FV of property) * Loss • Meaning (w/80% clause)… must insure 80%+ to recover fully

Property, Trusts, & Estates Real Estate Title Insurance • Warrants that purchaser has good record of title at policy date, covering losses arising from defects of title Deed = Instrument by which the grantor conveys or transfers title of property to a grantee • Deed must be in writing • No consideration required for transfer of real property • Contains name of grantee and identifies the property • Delivery (w/actual intent) required Types of Deeds 1. General Warranty = contains the usual 5 covenants of title 2. Special Warranty = limits coverage of defects to period of ownership 3. Quitclaim = Transfer of title only, making no warranties Adverse Possession • Open & Notorious • Continuous & Exclusive for entire statutory period (usually 20 years) • Adverse • Claim of Right by adverse possessor Written Residential Lease • Requires description of property, but NOT “due payment for rent” Mortgage General Rules • In writing and signed by mortgagor • May be assigned freely by mortgagee • May be used to pay antecedent debt (past consideration) • Amount & interest NEED NOT BE STATED • Description of property is REQUIRED Sale of Mortgaged Property by Mortgagor 1. Subject-to: Grantee is NOT LIABLE, Grantor remains personally liable 2. Assume: Grantee becomes PRIMARILY LIABLE. Grantor is a SURETY, unless released by the grantee. Trusts & Estates: No personal deductions allowed!!! (exemptions are, however) Trusts Simple = pay out all income during year as distribution ($300 exemption) Complex = “not simple” (accumulate income, CC’s, distribute corpus..) ($100 exemption)

Property, Trusts, & Estates Termination- If irrevocable, only by courts OR agreement by grantor & all beneficiaries Express Trust (requires)- Trust Corpus, a beneficiary, valid trust purpose Note: Does NOT require a trustee (courts will appoint if absent) Spendthrift Trust = Prohibits transfer of a beneficiary’s rights, by assignment or otherwise. Is irrevocable. Requirements:   Grantor   Trust Res   Intent to create a trust   Lawful purpose   Trustee and separate beneficiaries

Termination = Upon death of last income beneficiary Forms = inter vivos or testamentary Mortgage Interest Payments = allocate to income Mortgage Principal Payments = allocate to principal Intestate = Die without a will Estate Estimated Tax Payments • Exempt for first two tax years following creation of estate Incomplete/revocable trust transfer • Taxable to Grantor/Settlor, since still essentially own assets Distributable Net Income = All income except capital gains and losses and before the distribution deduction or personal exemption. Life Insurance payable to Executor = always included in gross estate Estate Tax- Due 9 months after decedent’s death • Medical Expenses: May claim on final income tax return subject to 7.5% floor if executor files waiver (instead of the usual estate tax reduction) • Life Insurance ○ Paid to Executor = always include in Gross Estate ○ Owned by decedent = always include in Gross Estate ○ Owned by Employer = don’t include • Marital Deduction = unlimited • Charitable Deduction = unlimited (must be married @ gift date!) • Unified Credit = $2m lifetime

Property, Trusts, & Estates • Gifts made w/in 3 years of death = don’t include unless gift is revocable • Tuition = only exclude if paid directly to university Gifts Excludable (regardless of relationship with donor) • Qualified tuition paid directly to university (books/supplies NOT included) • Medical Expenses paid on behalf of anyone • Political Campaign Contributions Present Interest Gift • Interest to be paid immediately to donee • Cash, securities, etc… (cannot be revocable) Future Interest Gift (fully includible in gift tax computation!) • Gift to be paid at specified future date • NO EXCLUSION OF GIFT TAX ALLOWED- FULLY TAXABLE • No gift which a minor will receive is considered “future interest” ○ E.g.- if distributed upon reaching 21 years old = future interest • Income interest to be paid starting in the future Non-completed Gift • Revocable gifts are considered “not transferred” Generation Skipping Tax • Grandchildren (unless all your kids are dead) • $2m lifetime exclusion • Imposed in addition to gift and estate taxes Land held Jointly w/Right of Survivorship (not with spouse) • Fully includible in Gross Estate at time of death ○ Not considered “gifted” until death (same as multiple people on a bank account, must w/d the money to consider a “gift”) Income earned before death but collected after • Include in both estate tax return and fiduciary income tax return