D. Co-Ownership & Marital Interests.docx

TYPE CREATION & CONVEYANCE REQUIREMENTS TRANSFER SURVIVORSHIP TERMINATION Tenancy In Common default estate Ownership % = can be equal or unequal Created by transferring real property to 2 or more ppl | Each TIC has the right: 1) to possess & enjoy the ENTIRE property; 2) to transfer their in...

TYPE CREATION & CONVEYANCE REQUIREMENTS TRANSFER SURVIVORSHIP TERMINATION Tenancy In Common default estate Ownership % = can be equal or unequal Created by transferring real property to 2 or more ppl | Each TIC has the right: 1) to possess & enjoy the ENTIRE property; 2) to transfer their interest in the property freely during their lifetime OR at death; 3) must be conveyed by deed or will. A has 90% & B has 10%; they both can use the entire property (no property barriers) = Each TIC has an undivided share TIC can be transferred to another by gift or sale. TIC will not terminate; it substitute a third person Gift/Sale: Won’t terminate TIC, but 3rd. NONE Survivorship passes from the tenant by will (heirs) or intestate succession. - Sever: A TIC becomes the sole owner of their share (no longer undivided share) - Part kind: Physical division, court decides % equal to each TICs share. Delfino Can’t divide? = part sale - Part sale: Court sale, split % Spiller - Ouster (possible AP): the “wrongful” dispossession/ exclusion of a TIC. Invites litigation by co-tenants for their portion of the fair value, or judicial partition. Joint Tenancy Ownership % = co-owners equally split JT is created by transferring property to 2 or more ppl through the transferor’s clearly expressed intention to create a JT, using survivorship language (Riddle) + PITT (at the time of conveyance). Possession: Each JT has an equal right to possess/enjoy the whole property. Interest: Each JT must have an equal share of the same type of interest (2 JTs each have a 50% share in fee simple). Time: Each joint tenant must receive their property interest simultaneously/vest simultaneously Title: Each joint tenant must receive property interest in the same title instrument. (The property cannot be conveyed on two separate deeds.) Transfer = NO Lease = YES A JT can lease/mortgage their property share Sampson YES, upon the death of one JT, the surviving JTs take the deceased JT’s property interest. Harms JTs interests cease at death & CANNOT pass prop interest by will or intestate A (½) & B (½) if A dies = 100% to B. If any PITT is not satisfied/conveyed to a 3rd person (gift/sale), OR intent changes, JT is unilaterally severed = TIC | Notice & consent are NOT required to terminate. - JT grants a mortgage interest to creditors - JT interest ceases at death - JT leases interest to a 3rd party, jurx dep - JT A (½) & B (½). A conveys her ½ to C = C (½) & B (½) TIC - JT A (⅓), B (⅓), C (⅓). A conveys (⅓) interest to D = B + C remain JT (survivorship) & BCD are TICs Harms Tenancy by the Entirety Craft IRS case An estate held in single ownership by a married couple. TIC is created by ALL JT requirements + valid marriage at conveyance Endo CPS = Marital property acquired during the marriage is owned by both spouses equally. NO TBE in CPS. Borelli - In CPS, anything before marriage or by gift is separate - Death of spouse = stepped-up basis for fed income tax purposes CLS = Property that one spouse acquires is considered that spouse's sole property unless the title or deed carries both spouses' names. A spouse can take up to 50% elective share of the state. In both CPS & CLS, three types of property: Specific inter vivos gifts to 1 partner A's grandma gives A $ on every bday, not married prop, a gift only to A Device gifts A’s grandma leaves $ to A in the will, not a married prop, a gift only to A Spouse is named a beneficiary in life insurance policies A is the beneficiary of uncle's life insurance property, which is just A's property and not the married property N/A Modifications = both spouses need to agree & sign N/A Divorce, death, or mutual agreement (no unilateral conveyance, like in JT) = TIC Graham At divorce, you split assets: A and B are married in a CPS. A dies w/o a will. B, as the spouse, will get 50% of the estate, which will distributed to A heirs. A could always create a will to give all property to B. Spouse wrongful behavior: If one spouse engages in wrongful behavior leading to forfeiture, only their portion of the property is affected, resulting in severance of the JT and a shift to a TIC arrangement with the innocent spouse. Modern Elective Share/Termination of Marriage by Death of One Spouse: Except for Georgia, all common law states have ES statutes: the surviving spouse can renounce the will, if any, and elect to take a statutory share, usually one-half or another fractional share. Simultaneous spouse death: The Uniform Simultaneous Death Act, the jointly owned property would be distributed one-half as if A had survived and one-half as if B had survived. Debtor Issue = Most jurisdictions hold creditors can reach the living joining account only in proportion to the debtor’s ownership of the property/fund, the burden of proof on debtor. TIC potential with creditor/former joint non-debtor. Craft: IRS can reach debtor spouse interest. Co-ownership & Waste The central idea is that A cannot use the property in a manner that unreasonably interferes with co-owner B's expectations. Standard for waste: what is a reasonable use of the property, and is there long-term damage to the property? Waste applies to co-owners “Problem” Resolution(s:) Severance, Partition, Disputes, Ouster and Creditors P. 404 For any kind of less-than-fee-simple conveyance, there are four possible outcomes, and you could probably find each represented in some judicial decisions – A and B are joint tenants. A conveys some interest less than a fee simple (e.g., mortgage, life estate, lease, call it “the interest”) to X. Then a court might hold that the conveyance of the interest severs the joint tenancy; X and B are tenants in common until the interest ends, and then A and B or their estates are tenants in common. the conveyance does not sever the joint tenancy; if B survives A, B takes free and clear of the interest; if A survives B, A is subject to the interest. the conveyance does not sever the joint tenancy, and if B survives A, B takes subject to the interest (becoming a tenant in common with X for the period of the interest); if B predeceases A, A is subject to the interest. the conveyance results in a partial or temporary severance: if A dies before B, proceed as in the first alternative above; if A survives B, proceed as in the second or third alternative; if X dies first, there is no severance and A and B remain joint tenants. Tenancy In Common Delfino Partition in kind F: Delfinos and Valencis were TICs. V has a trash removal business on her portion of the land. Ds wanted to sell. R: Part in kind is favored over a part sale when dividing TIC property. RS: Part by sale should occur only if part in kind is impracticable. 2 conditions must be satisfied for partition by sale: The physical characteristics of the land must make a partition in kind impractical Partition by sale must promote the owner’s interests better than partition in kind (V’s business would be ruined if the land was sold). Spiller Partition in sale F: M & S owned a building as TICs. After a tenant vacated their property, S used the space as a warehouse. M sent S a letter demanding S vacate his half of the building or pay M rent. R: TICs have an undivided right to the entire property and do not owe rent to JTs unless they agree or unless a JT ousted another JT. RS: Absent an agreement to pay rent or proof a JT was ousted, a fellow JT in possession of the land is NOT liable to other JTs to pay rent. An ouster occurs when a JT blocks other JTs' right to equal use AND enjoyment of the land. Snape: Possession by one does not bar use and enjoyment by another unless there is proof of an ouster) Here, S did not oust M. M’s letter and did not say she was denied use/enjoyment of the land. S did NOT prevent M from using the warehouse. Cohen: Exclusive possession must generally pay rent unless proof of different intent (minority view). Joint Tenancy Sampson Joint tenancy: transfer F: A couple owned a walnut orchard as JTs. The husband leased a portion of their property to Sampson for a boxing pavilion, wife objected. The wife sued her husband and Sampson to cancel the boxing lease. R: A JT can lease or license anything less or equal to his rights in the joint tenancy property. | JT can lease/mortgage share of property RS: A JT can’t bind the rights of other JTs w/o consent, but a JT can enter into a valid contract to lease part of the property to the extent of that JT’s interest. Here, the lease from the husband gave the husband the same interest in the property as Sampson. Riddle Intent requirement for a JT F: A couple owned property at JTs. Before her death, the wife intended to terminate the J; she executed a grant deed stating the purpose was to destroy the JT. The husband sued the administration of his wife’s estate. R: A joint tenant may unilaterally sever the joint tenancy and create a TIC without conveying a 3rd party and can just demonstrate “intent.” RS: A JT requires PITT. As a result, a JT can terminate the JT by conveying an interest in the property to another, thereby destroying the unity of title without the other’s knowledge or consent. People could not create a joint tenancy for themselves or another by a direct conveyance under common law. Here, a joint tenancy [in California] can be created and terminated by direct transfer. Requiring Francis to convey to a straw man first could defeat her intention in converting her joint tenancy into a tenancy in common. Francis could unilaterally sever her joint tenancy by grant deed. Harms JT survivorship F: Brothers William & John owned property in JT. Sprague purchased the property from Simon’s. John allowed the Sprague to his JT interest as collateral for the balance due on a mortgage. John died, leaving his estate to Sprague. Willed sued to quiet the title because he believed that under JT survivorship, the entire property was his. R: A lien placed on one joint tenant’s interest in jointly held property does not destroy a joint tenancy. | JT's right of survivorship is supreme over other co-ownerships. RS: A mortgage is a lien on a property and does NOT convey ownership interest. John’s mortgage gave the Simmonses a lien on his ½ interest but did not affect the brother’s unity of title. When John died, his ½ interest disappeared and went to Harms (survivorship). Tenancy by the Entirety Common Law Marital Property System Under the common law system of separate property, the property rights of each spouse are classified according to three categories: rights during the marriage (tenancy by the entirety); rights upon divorce and rights at death Endo F: The Endos (TBEs) hit the Swandas while driving. S sued Endo (husband) after S’s wife passed away. R: A spouse's interest in a TBE is not subject to the claims of their spouse's creditors during the spouses' joint lives. Creditors can’t use TBEs to satisfy the debts of one spouse. RS: A TBE is an estate held in single ownership by spouses and can’t be dissolved except by joint actions. Liens cannot be attached to satisfy one spouse’s debts because that would convert to a JT or TIC. Here, the TBE existed before the car accident. The Sawadas had notice and could have known, as at TBE, it was not subject to attachment by creditors. Graham F: A married couple, the wife worked full-time as an airline stewardess, and the husband worked part-time, spending most of his time completing his education. The husband received an M.B.A. during the marriage. They had no kids and accumulated no marital property during their marriage. The couple got divorced. R: An educational degree earned during a marriage is not considered marital property and is therefore not subject to equitable distribution upon dissolution of the marriage. RS: A degree is not property. It cannot be transferred, exchanged, bought, or sold. It also terminates on the holder’s death and can’t be inherited. However, it can be considered in deciding alimony. Here, the couple did not acquire property, and the wife didn’t seek alimony. Borelli: The alleged contract was oral, and the majority might well have been influenced by the fact that an oral contract to devise property cannot be enforced by specific performance in California. But the wife had alleged that the defendants were estopped to plead the Statute of Frauds, an allegation taken as true on demurrer. So the court did not rest its objection to the contract. The California Supreme Court denied a hearing in this case. California is a community property state. Multi-Party Bank Accounts Multiple-party accounts with financial institutions, including banks, take one of three forms Joint accounts: “A and B,” or “A or B ” Most common & subject to litgation O deposits $5,000 in a joint bank account with O and A as JTs True joint tenancy = O may intend to make a gift to A of ½ the sum deposited in addition to survivorship rights to the whole deposit Joint convenience account = O may intend that A only has the power to draw on the account to pay O’s bills and not have survivorship. The bank card signed by O and A usually says either O or A has the right to withdraw $ during their joint lives, and balance to the survivor. Savings account trusts (“totten trusts” in some states): “A, in trust for B” Payable-on-death (P.O.D.) accounts: “A, payable on death to B ” O deposits $5,000 in a joint bank account with O and A as JTs P.O.D. account = O may intend to give a gift to A only for survivorship rights. This will likely be invalid unless there is a state statute authorizing P.O.D. accounts (many states have such statutes). Note on the IRS: The IRS can reach the interest of a debtor spouse in tenancy-by-the-entirety property. Craft (2002): SCOTUS held that a husband’s interest in land that he and his wife owned as tenants by the entirety was “property” to which a federal tax lien could attach. While state law delineates what rights a taxpayer has in the property the government seeks to reach; federal law determines whether those rights qualify as property within the meaning of the federal tax lien statute. B. Divorce/Termination of Marriage Community property states = Any income by either spouse in a community property state is married property. Common law states = Upon divorce property of the spouses remained the property of the spouse holding title. A spouse can have their bank account but at death/divorce, things equal out. Upon divorce, property held in tenancy by the entirety was converted into a tenancy in common In joint tenancy between husband and wife, forfeiture is limited to wrongful spouse portion of the property, effectuating severance of joint tenancy and, thus, tenancy in common with innocent spouse and the Feds. In a tenancy by the entirety, more strict. Compare 1500 Lincoln (gov’t gets survivor interest of bad actor) with United States v. Lee (court didn’t touch t of the e)(p.436). In both CPS & CLS, three types of property: Specific inter vivos gifts to 1 of the partners A's grandmother gives A money on every bday. This is a gift only to A. Device gifts Grandma leaves money in her will to A. this isn't married property bc gift only to A Spouse is named a beneficiary in life insurance policies If A is beneficiary of uncle's life insurance property, that is just A's property and not married property In CLS & CPS = upon divorce, the division of property is called “equitable distribution from the marriage asserts.”