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