quiz 7 notes

Inter Vivos Trust

created during lifetime

What is the Inter Vivos Trust used for?

avoid probate and manage assets early

When does a Inter Vivos Trust go into effect?

immediately

Testamentary Trust

created through a will

When does a Testamentary Trust go into effect?

after death; goes through probate

Land Trust

owner = truster + beneficiary

Who holds the legal title in a Land Trust?

trustee

Why is a Land Trust used?

• privacy (name not public)

• easier transfer of ownership

• can convert real property → personal property

T/F the owner in a land trust still controls property

True

REIT (Real Estate Investment Trust)

investors pool money and invest in large real estate (apartments, malls, etc)

What do you get in REIT?

• dividends

• liquidity (if public)

What is the key to REIT?

you do NOT own the property directly

General Partnership

all partners share profits, have unlimited liability, help manage business

Limited Partnership

compromised of at least one general partner and one limited partner

Limited Partnership - General Partners

run business

Who has full liability in a limited partnership?

general partners

Who has limited liability in a limited partnership?

limited partners

Limited Partnership - Limited Partners

invest money and have no management power

Limited Liability Partnership (LLP)

protects partners from other partners’ mistakes

In a Limited Liability Partnership, what are they still personally liable for?

their own actions

LLC

owners = members

What are the key features of an LLC?

limited liability (like corporation) and pass-through taxation (like partnership)

Members in an LLC?

are not personally liable for debts

Which is the strongest liability protection out of the ones discussed?

LLC

Joint Venture

temporary partnership

What is a Joint Venture used for?

one specific project

When does a Joint Venture end?

after the project is done

Corporations

owned by shareholders

Advantages of a Corporation?

limited liability and easy to transfer ownership

Disadvantage of Corporation?

double taxation

Tenancy by the Entirety

form of joint property ownership for married couples that treats spouses as a single legal entity

What happens if one spouse dies in a Tenancy by the Entirety?

the other gets 100% automatically

What makes a Tenancy by the Entirety different from a Joint Tenancy?

in a TBTE, marriage = one unit

In a Tenancy by the Entirety, can one spouse sell or mortgage the property alone?

NO, both spouses must agree and sign for any sale or mortgage

How does creditor protection work in a Tenancy by the Entirety?

a creditor of only one spouse cannot force the sale of the property; both spouses use owe debt

PITT[S]

4 requirements for joint tenancy

P in PITT[S[

possession - all owners have equal rights to use the entire property

I - PITT[S]

interest - each owner has equal ownership share

first T - PITT[S]

time - all owners get ownership at the same time

second T - PITT[S]

title - all owners get ownership through the same deed/document

S - PITT[S]

survivorship - when one owner dies, the other gets full ownership

Basis

what you paid for the property / og purchase $$

What is a basis used for?

to calculate gain

Formula for Basis

Gain = Sale Price - Basis

How many types of concurrent estates are there?

3

What are the 3 types of concurrent estates?

1. tenancy in common

2. joint tenancy

3. tenancy by the entirety

Concurrent Estate

ownership of property by 2 or more people at the same time

Which type of concurrent estate is the default if nothing is specified?

Tenancy in Common

Which concurrent estate allows unequal ownership shares?

Tenancy in Common

Which concurrent estate does NOT include right of survivorship?

Tenancy in Common

In Tenancy in Common, what happens to an owner’s share when they die?

goes to their heirs (not the other owners)

Which concurrent estate includes the right of survivorship?

Joint Tenancy

What happens to Tenancy by the Entirety after divorce?

it becomes Tenancy in Common

Which concurrent estate is often called the “poor man’s will”?

Joint Tenancy

Severalty

ownership by ONE person

Is severalty part of concurrent ownership?

NO

What is the capital gains exclusion for a single homeowner?

$250,000

What is the capital gains exclusion for a married couple filing jointly?

$500,000

What does capital gains exclusion mean?

the amount of profit from selling a home that is not taxed

Capital Gain

profit from selling a property

What 2 main tax deductions do homeowners get?

1. mortgage interest

2. property taxes

Is mortgage interest tax deductibles?

yes

Are property taxes tax deductible?

yes, up to $10,000

What is the maximum amount of property taxes that can be deducted?

$10,000

What does homeowners insurance typically cover?

the house, other structures, personal property, liability, and living expenses if displaced

Does homeowners insurance cover the physical house?

yes

Does homeowners insurance cover other structures like garages?

yes

Does homeowners insurance cover personal belongings?

yes

What is liability coverage in homeowners insurance?

protection if someone is injured on your property

Does homeowners insurance cover living expenses if you must move out temporarily?

yes

Does homeowners insurance cover business property?

no

Are all valuables fully covered under homeowners insurance?

no, some valuables have limited or no coverage

Liability Coverage

protects if someone gets injured on your property

Endorsements

add extra coverage (flood, valuables, etc.)

What does “no right of survivorship” mean in Tenancy in Common?

when an owner dies, their share goes to their heirs, not the other owners