Professional Documents
Culture Documents
Week 2
Spring 2015
Thomas Jefferson
The earth belongs in usufruct to the living:
the dead have neither powers nor rights
over it. The portion occupied by any
individual ceases to be his when he
himself ceases to be, and reverts to
society. (Letter to James Madison dated
Sept. 6, 1789)
Healthcare directives
Succession or sale of a family business
Sample Question
John is a financial planner in the state of
Tennessee. Although he attended law
school, he never passed the bar exam.
What is John NOT allowed to do?
a) Explain the probate process
b) Draft a will
c) Direct a client to seek legal advice
d) Act as a trustee for a clients trust
Confidentiality
Encourage accurate exchange of information
Cell phones and other medians of communication
Compensation
Fee for service; Commission on products sold; Packaged billing
Referral fees
Conflicts of Interest
Multiple representation (husband and wife) define the relationship in the
beginning
Competence
Utilize the appropriate experts
Dont give legal advice
Compliance
Company, industry and legal rules
Communication
Full and honest disclosure, integrity, patience
Cooperation
Property
Ownership Interests
Fee Simple Absolute
Life Estate
Estate for Term of Years
Future Interests
Tenancy in Common
Joint Tenancy with Right of Survivorship
Tenancy by the Entirety
Fee Simple
The most expansive property interest allowed by
law.
Holder has the right to sell, gift, or devise their
interest without seeking anyone else's consent.
Fair Market Value (FMV) of the whole Fee
Simple is included in the Gross Estate, but if
transferred to ones spouse then its FMV is
eligible for the unlimited marital deduction
Included in the Probate Estate
Fee Simple Absolute: To A and As heirs.
Life Estate
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.
Holder of Life Estate has a duty to the Remainderman (whoever takes after
the Life Estate) to not create waste:
Fails to pay property taxes
Fails to insure the property against foreseeable losses
Destruction of the propertys income-providing source
To A for life.
A has a Life Estate; Grantor has an indefeasible vested interest since at As
death the property interest reverts back to Grantor
If A sells the property for which they have a Life Estate, such property interest will
revert back to the Grantor once A dies
Answer to Example 1
Adam can live in the house until he dies,
allow others to live in it, or rent it.
Adam can sell his life estate interest to
another, but the buyers interest in the
house terminates upon Adams death.
Future Interests
Is a present right to possess or enjoy
property in the future.
Remainder Interests
Reversionary Interests
Remainder Interests
Is a present right (property interest) to future enjoyment
of property.
The remainder interest must take effect immediately
upon the expiration of another estate. (Ex. expiration of
Adams 10 years)
2 types of Remainder Interests:
Vested Remainder
Contingent Remainder
Vested Remainders
The right to receive the property in the
future is presently fixed and absolute;
receiving the property is inevitable by the
remainderperson and cannot be taken
away by anyone
Indefeasibly vested
Presently vested property interest!
Contingent Remainders
May or may not come into effect (possessory
interest) at some future date, depending on the
occurrence or nonoccurrence of an event or
condition.
Defeasible property interest/defeasible estate
Fee Simple Determinable
Fee Simple subject to a Condition
Subsequent
Fee Simple subject to an Executive Limitation
Reversionary Interests
Owner/grantor of an estate transfers a lesser estate to
another.
Reversionary interest gives the owner Grantor the right to
have all or part of the property that he or she originally
owned returned to the Grantor or the Grantors estate.
In other words: a present retained right to future
enjoyment.
Reversions are always vested.
Occurs when less than the estate interest owned is then
conveyed (owner A has a Fee Simple Life Estate to B
with no named remainderman)
In a Trust, the trustee holds legal title and must invest and manage
the trust property (fiduciary relationship with beneficiaries). The
income generated by the trustees efforts is then distributed to or
held for the benefit of the beneficiaries who hold equitable title.
Concurrent Ownership
Property can be owned entirely by one
person. A person can also hold a portion
of property in conjunction with others
Tenancy in Common
Joint Tenancy with Right of Survivorship
Tenancy by the Entirety
Tax Concerns of TC
TC Example
John and Allison owned a tract of land as
Tenants in Common. John contributed
$75K and Allison contributed $25K.
Assuming Allison died today, what
percentage would she include in her Gross
Estate for Federal Estate Tax purposes?
25% of the FMV of the property would be
included in Allisons Gross Estate for
Federal Estate Tax calculations.
Tax Concerns of JT
Ex. John purchased a piece of real estate and titled the property as
a JT with his son Bubba. Bubba contributed no money to the
purchase of the property. John has made a gift of 50% of the value
of the property to Bubba. When John dies, 100% of the value of the
property will be included in Johns Gross Estate because of the
Actual Contribution Rule. If Bubba died first, Bubba would include
0% in his Gross Estate.
There may be Gift Tax consequences here. This can also occur
where one Joint Tennant pays MORE than his share of either
mortgage payments or the cost of maintenance and operation of the
property.