co ownership of real property

co ownership of real property - to household helyare never...

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Unformatted text preview: to household helyare never deductible. I lfa taxpayer's total "itemize cductions" appro t. the yearly "s' andm ‘ deduction"/to'ta|, then the taxpay can often group m e of such expense into an eve other ye r’routine. For exam e, plan to make 199 year-end contrib 'ons in Jan 2000; then make January, 01 contributionsli ecember, 2000. en itemiz d;?aétions in 2000 an ake the "standard de ction" in 1999 a 2001 to ximize tax 5 - ings. INTRODUCTION TO PROPERTY - "Property" is often referred to as a bundle of rights. - - The law defines those rights and will protect the rights of the holder of prepeny. "Real Property" - Defined as land and anything permanently affixed to the land. - Real property is immovable. "Personal Property" - Defined as all property that is not real property. ~ Personal property is movable. - There are two categories of personal property: - Tangible Property - includes cattle, machinery, household goods, etc. - Intangible Property - includes stocks, bonds, checks, notes, etc. "Fixtures" - Defined as once personal property that has become so affixed to the real property that it is regarded as part of the realty. - Courts consider: -thc owner'sintent to permanently attach something to the realty - the manner of attachment ' ' ' - Examples of fixtures : a furnace, fences, barns What about a silo unloader, a cattle headgate, or gates? Into what category of property do growing crops fit? - Seem . Stolt'zfus v. Covington County Bank (p.53) ' FACTS ' - Gillis was tenant farmer growing com and soybeans for Stoltzfiis, the owner of land. — Gillis purchased the land from Stoltzfus, but was unable to pay for it. - Bank (the Df here) foreclosed, and Bell bought the land at the foreclosure sale. - Bell sues to prevent Gillis from harvesting the corn and soybeans and to retum all corn previously harvested prior to the sale. LEGAL ISSUES - FLA court had previously ruled that crops growing spontaneously and without WWW) contractsrriax w " CO~OWNERSHIP OF REAL PROPERTY Three forms of co-o‘wners‘nip of real property are: l) Tenancy in Common 2) Joint Tenancy with Right ofSurvivorship 3) Tenancy by the Entirety and-use of all the land) .7 . ' A's heirs: ‘ x: - ies Wt out a Wlll, A's s are descends ‘6 - Each tenant may cause the land to be partitioned - May be a voluntary partition - May be an involuntary partition - KRS 381.120 allows aco~owner of real property to a fair division ofthe property. - The court may physically divide the land ifthe substantially impair the value ofthe property. - lfsuch a physical division of does substantially impair the value ofthe property, then the court may order a sale of the property and fairly divide the proceeds among the owners. (But any owner may bid on the property at the sale.) ‘ CHARACTERISTICS OF JOINT TENANCY WITH RIGHT OF SURVIVORSHIP petition the court for division does not - ‘ o obtain hi 6 at the same time (time); obtain title fromthe same source (title); own'equal fraCtional interests in the land (interest); and have an equal right to possess the whole (possession). - KY law recognizes an exception to unityof time and title, but persons who are IT. {with a right iofsurvivorship must still own coual i ntercsts and have equral'poSsession. l ' with-ant a wilt ‘- wor s of survivorship are absent, then a Tenancy in Common is created. , . dies, with the means» can’t-pass under a will-or descend in-intestaey-to heirs) ‘ Itapgously, one's interestspass as T.C. thé'dsceased's’shére dcscends to his 3.0 contractsmax - $15.51 Pkg,» 30v. surges-"1* -‘;;_- - The right of survivorship may be severed. Ex: AB, and C are J.T.'s and A conveys to X. (X is a T.‘C. with B 8:; C; B 8:: C are stiil H". w/ right ofSurvivorship) Ex: LT. may compel partition under KRS 381.120 (This is just like court partition under T.C.) CHARACTERISTICS OF TENANCY BY THE ENTIRETY Q§5¢$$i0nv Plus "1311538? _ m wifil i}??? lbl‘ survivorship by the unilateral act of one party. (This is the major difference between J.T. with right of survivorship, when a husband and wife co—own realty.) - This is created by language “to H & W by the entirety" or "to H & W with right of survivorship". — KRS 381.050 states that a H & W take as T.C. unless the instrument expressly provides ' for a right of survivorship. - T.E. can be terminafid in 3 ways: 1) Voluntary partition 2) Divorce (because the unity of marriage is destroyed) 3) If spouse kills other spouse, then KRS 381.280 controls. Since one party cannot unilaterally destroy the TB, what happens when H transfers his interest to X, in order to defeat W's interest in their jointly—held property? - X receives a contingent interest only (with no possessory n'ghts); H must' survive W. If H- does survive W, then X has full ownership. But ifW survives H, then W owns all. - This same concept applies to creditors' liens, as well as X. NEW TERMS in the Jackson case. . ~ *" ' eed of conveyance intending, to pass whatever interest the grantor may ssing that such title is valid. (This is common in divorce settlements.) _ he person by whom a grant is made. I _ é": tb whom a grant is made. 3 n re — In the affair of; in the mattcr_of;.regardi'ng. JACKSON V. O'CONNELL (p.61) FACTS - " - Nellie, Anna, and Katherine were sisters. - Each owned 1/3 as a J.T. in property located in Cook Co., Illinois '- Nellie quitelaim'ed her l/3 to Anna. - Anna died and by her will devised her interest in the Cook Co. property to 'her 4 nieces. — The nieces (Pfs) claim they own 2/3 of said property. - Katherine's heirs (Dfs) claim they own 2/3 of said property. 3.0 contractsmait l i’ ‘,I /' 2’ I. INTESTACY VlNTE STACY IN KENTUCKY Approx. 80% of people die without a will. When one dies without a will, KY‘s laws of "descent and distribution" control. 3 STEPS TO DIV IDING AN INTESTATE ESTATE l) Exemptions and allowances a) $7500 of personal property is exempt from distribution upon application by the surviving spouse or the children _ b) the costs of administration are allowed 15‘, funeral expenses are allowed 2“, debts & taxes are allowed 3rd, other claims are 4th 2) Surviving spouse's right to take from the estate (surviving spouse must choose between "Homestead" and “Dow-er") a) Homestead — Surviving spouse gets use ofSSOOO and use of residence for life. — hardly ever chosen - chosen only when estate is consumed by deb‘t b) Dower (KRS 392.020) ("'7 88. gets 1/2 of surplus real estate held by decedent at decedent's death - 88. gets 1/2 of surplus personal prepeity held by decedent at decedent's death -S.S. gets life estate in 1/3 of any real estate that decedent owned if fee at any time during the mania ge, but not released by SS. A. THE STATUTE OF DESCENT AND DISTRIBU’i‘EON 1. KRS 391.010 governs the descent of real property. It provides that the int-estate’s realty descents in common to his kindred, male and female, as follows: To the children and their descendants; if none, then To the father and mother equally, or to the survivor; if none, then To the brothers and sisters and their descendants; if none, then To husband or wife; if none surviving, then V2 maternal and 1/2 to paternal kindred as follows: 9999‘!” (1) Grandmother and grandfather equally if both are alive; if not, all to the survivor; if no grandparents, then (2) Uncles and aunts and their descendants; if none, then (3) Great—grandparents in same manner as in (1) above; if none, then (4) Brothers and sisters of grandparents and their descendants; and so on without end to the nearest lineal ancestor and their descendants. Note: (1) No member of a succeeding class takes unless all members of every preceding class are dead or nonexistent. (2) If there are no kindred at all on maternal or paternal side, entire estate passes to the other side. (3) If there are no heirs at all, the entire estate goes to kindred of decedent’s spouse, if any, as though the spouse had survived and died entitled to the estate. 2. KRS 391.030 governs the distribution of personal property. It provides that the intestate’s personalty passes in the same way as realty, except that: a. ancestral property restrictions on inheritance of realty are not applicable to personalty. b. The first $7,500 of personalty is exempt and is set aside ahead of creditors, to the surviving spouse or, if none, to children of the decedent which survive. The exemption is not treated as an offset against their shares in the estate. c. Debts of the estate are satisfied out of personalty first. 3. Whenever descendants are entitled to take under these statutes, they take per stripes and not per capita (391.040). a. Per capita means to take by head or equally; that is, when all those w to take are of an equal degree of relationship to the decedent, the estate is divided into as many shares as there are persons of that degree of relationship. b. Per stripes means to take by stock, or by representation; that is the estate is divided into as many shares as there are members of the first class of takers who have survived the decedent or who have descendants who survived the decedent. c. The term “descendants” includes any lineal relation of the person in question, even to the remotest degree. Kentucky does not cut oft~ inheritance rights after any particular degree ofrelationship. d. If a person dies intestate without heirs, his estate escheats to the state; likewise an unclaimed devise or bequest also escheats, if not claimed within 8 years by the person entitled to it. 393.020. B. RIGHTS OF SURVIVTNG SPOUSE TN INTESTACY 1. Dower (KRS 393.020) After the death of a spouse, the survivor has (1) an estate in fee of 1/2 surplus realty decedent; (2) 1/2 surplus personalty; and (3) 3) a life estate in 1/3 of any realty conveyed away during the coverture without the release of dower. Interest of widower is the same as the interest of widow (KRS 392.010). 2. The surviving spouse has no rights in: a. Land sold but not conveyed before marriage; b. Land sold after marriage to satisfy a premarriage encumbrance; ix.) c. Land sold where surviving spouse joined in deed; d. Land subject to purchase money security interest (KRS 392.090); e. Land held in remainder by the decedent, where the life tenant is still living. ‘1 .1 3. After the surviving spouse’s share is determined, the remaining net estate passes to the heirs as described above. For example, consider the following cases: a. X dies intestate leaving $27,500.00 in personalty and $10,000 in realty. His debts are 3 10,000. He is survived by his wife and two children. His estate is divided as follows: Personalty $27,500.00 Less exemption to wife — 7,500.00 Balance $20,000.00 Less debts — 10.00000 Surplus personalty $10,000.00 Dower (1/‘2 surplus personalty) $300.00 To heirs 55,000.00 i.e. 32,500.00 apiece. Realty is owned 1/2 by wife, 1/4 by each child. b. Same facts, except X has no Children, his parents predeceased him, and he has no brothers, sisters or descendants of brothers or sisters. The $5,000.00 remaining after payment ofdower goes to his spouse as an heir. Note that wife takes in 3 different capacities. Realty is owned 100% by wife, inherited in 2 capacities. 0. Same facts as a., except that X is unmarried, has no issue and his only heir is a nephew. Pcrsonalty $27,500.00 Debts (No exemption applied) — 10.000.00 Net Estate to nephew $17,500.00 C. SPECIAL CASES 1. Posthumous Children (KRS 391.070) a. A child born within 10 months after the death of the decedent inherits from him in the same manner as if it were in being at the time of decedent's death. b. This section also applies where a potential heir predeceases the decedent leaving no issue, but where issue are bom in 10 months of dead heir's death. 2. Adopted Children (KRS 199.510) a. I An adopted child is treated as the natural born child of the adopting parents, thereby allowing inheritances by, from and through them. (See Question 29.) b. The adopted child cannot inherit by, from or through the natural parents. 0. Adult adoptions are permitted with consent ofthe adoptee (KRS 405.390). However, the adoption of an adult with the purpose of qualifying the adoptee as beneficiary under a pre—existing instrument is ineffective. Minary v. Citizens Fidelity Bank & Trust Co., 419 SW. 2d 340 (Ky, 1967). However, the adoption of such person with the View of making the adoptee an heir, so as to take by intestacy, is valid. Harper V. Martin, 552 S.W. 2d 690 (Ky. Ct. oprp., 1977). (See Bar Exam Questions 22 and 23. 3. Illegitimate Children See KRS 391.105. An illegitimate child. is always a legal heir of the natural mother. However, the child is considered an heir of the natural father only if: a. The parents participated in a marriage ceremony, either before or after the child was born, (even if the marriage was void), or b. There has been an adjudication of paternity But note that if the adjudication takes place after the father's death, the standard of proof is clear and convincing evidence. For the father (or his kindred) to inherit flour a deceased illegitimate, there must be either: a. An inter vivos adjudication of paternity; or b. A post mortem adjudication of paternity based on clear and convincing evidence, in. which it is also proven that the father openly acknowledged the child as his and, did nor refuse support on the grounds of non-paternity. -bloods (KRS 391.050) a Ha - . ds take only 1/2 as much as full blood collateral's. To mine the proper Fractions where ' 11 and half-bloods take, utilize the foll g formula: "1 ” or every half—blood, and “2” for every ( 1) Determine a fraction, the erator of which is full blood; (2) The denominator of the fraction ' b. If only half—bloo against full blood ' a lower priority class. c. ‘ ivision into maternal and paternal moieties, a single half—blood on one ntire share of that side even though full—bloods exist on the other side. ' e takes 5. Advancerncnts (KRS 391 . 140) a. any property given or devised by a parent or grandparent to a descendant shall be charged to the descendant or those claiming through him in the division and distribution of the undevised estate of the parent or grandparent. Note: that the law of advancements applies if the donor dies partially intestate. b. the maintenance and education or giving of money is not an advancement. c. One to whom an advancement is given is put to election either: (1) To return the advancement to the estate, (sometimes referred to as bringing into hotchpot and thereby become entitled to share in the estate, including the value of the advancements, as if no advancement were made; or (2) To retain the advancement, in which case, the recipient of the advancement has no further right in the estate until other heirs have received proportionally a similar amount from the estate. 6. Renunciation of Intestate Share (KRS 394.610 & 391.035). a. Kentucky has adopted the Uniform Disclaimer of Transfers by Will, Intestacy or Appointment Act. b. A person may disclaim in whole or in part the right of succession to any prOpeity or interest in writing within 9 months after decedent’s death. This right survives the death of the one having it, and it may be exercised by his personal representative. c. The effect of such a disclaimer is that, unless provided otherwise, the propeity disclaimed devolves as if the disclaimant had predeceased the decedent. Thus, the disclaimer dos not constitute an assignment or gift of the disclaimed interest, for purposes oftarzation or creditor’s 1i ghts. "I /. Disqualification from Receiving Dower or lntestate Share 3. Of surviving spouse: dower is barred by divorce or adultery (KRS 392.090); by bigamy (KRS 392.100). b. One convicted of a felony for taking the decedent’s life cannot take any interest in his estate, wither by inheritance, joint survivorship, etc. (KRS 381.280). (See Bar Exam question 21.) A recent application of this statute is found in First Ky. Tr. Co. v. US. 737F.2d557 (6“ Cir. 1984). c. Where the wrongdoer kills the decedent but is never convicted, as required by the statute, other civil remedies may be employed, e. g. constructive trust, action for wrongful death. ( 8. Ancestral Property Restrictions (KRS $391020) a. Real estate of intestate dying without issue who acquired the real estate from one of his parents reverts to that parent if living at lntestate’s death. b. Real estate of an infant dying without issue which was acquired from a parent reverts to that'parent or that parent’s kindred unless the kindred are more remote than grandparents, uncles and aunts and descentants, in which case it descends normally, i.e. to both sides. c. This statute only affects the portion of the estate not subject to dower, if any, as neither section of the statute requires the descendant to be unmarried. See Francis v. Justice, Ky. App.,67 S.W.2d 868 (1985). 9. Aliens may inherit personalty without restriction; real estate, however, will escheat in 8 years except in case of a resident alien who uses the property as business or residence. He may then hold it for 21 years. These limitations do not apply to aliens whose spouse or parent is a US. citizens. 10. An heir cannot assign his expectancy before the intestate’s death. Any such assignment is void, and vests no interest in the estate in the assignee. II. “7 ILLS NEW TERMS i5 Decedent — A person who dies Heir - One who is entitled to take part of an estate under intestacy Testamentary - Pertaining to a will Testator — One who makes or has made a will Testatrix — A woman who makes or has made a will >l§ Testamentary capacity - Ability of one to know: \l\\(/ a) who are the natural objects of his bounty b) the character and kind of his property c) how to make disposition of his property according to some plan in his mind \’ Executor - A person appointed by a testator to carry out the directions in his will 'Administrator - A person appointed by the court to administer the assets and liabilities of a decedent. Testate - To die with a will lntestate - To die without a will Bequeath - To give personal property by will Legatee — One who takes personal property under a will Devise - A testamentary disposition of real property Devisee — One to whom real property is devised under a will Residuary bequest — All of a testator's estate not otherwise disposed of Codicil - A supplement or an addition to a will Validitv and form of will (A) Capacity to make will (1) A person of sound mind and 18 years of age or over may dispose ofpropeity by will. KRS 394.020. 6 ...
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