02 Real Property Ownership | Chapter 4 Trust as Ownership Vehicles

Living Trust Advantages

1.Avoiding probate 2.Having a process in place in case the trustor becomes incapacitated before their death — the backup trustee is able to step in and manage their assets

Why Use a Land Trust?

1.Avoiding probate 2.Shielding a property from liens or judgments against the trustor 3.Preventing partition of the land 4.Avoiding marital co-interest 5.Buying land anonymously

Trusts: The Three Roles

1.The creator of the trust is the trustor. 2.The person entrusted to hold and manage the assets is the trustee. 3.The individual who ultimately receives the benefits or assets of the trust is the beneficiary.

A minor is named the beneficiary of real property upon the passing of the property's owners, but with the stipulation that the property will be held by another party until certain conditions are met (i.e., the minor is no longer a minor). What is the correct term for this legal arrangement?

A trust is when an individual transfers ownership to someone who manages that ownership for a third party. The trust's creator is the trustor, the individual receiving ownership is the beneficiary, and the one managing it all is the trustee.

If a trustor of a living trust decides to name themselves as the trustee in order to maintain control of the trust while still alive, what will need to be designated in the event of death or mental incapacitation?

Backup trustees and beneficiaries will need to be designated in case of death or mental incapacitation.

Areas around a condominium such as a swimming pool and laundry room are known as _______.

Common elements

What is the primary difference between general partners and limited partners?

General partners assume unlimited personal liability, limited partners do not.

Martha has her property in a trust. Her heir is the beneficiary, and she has named a non-family trustee. She cannot access the property or remove it, and when she dies, her heirs won't pay estate tax on it, and it won't be probated. What kind of trust is this?

Irrevocable Trust cannot be changed once it's formed. It also shields properties from probate and estate tax because they are no longer part of the estate.

A property is owned by Tim, Jim, Kim, and Bim as joint tenants. Kim decides to sell her share to Jeremy. Which of these statements accurately describes Jeremy's ownership in the property?

Jeremy will take title as a tenant in common with a 25% share in the property

Jaimie is part of a business. It is a partnership where all partners are shielded from personal liability. Partners cannot be personally held liable for other partners' mistakes. What kind of business is Jaimie most likely part of?

LLP

What does the Community Interest Community Board do?

License CIC manager and regulate CIC associations

What are the Three Types of Trusts

Living trusts Testamentary trusts Land trusts

What is the main difference between living and testamentary trusts?

Living trusts are created wile the trustor is still alive and testamentary trusts are created after the death of the trustor.

Roy owns a condo that he rents to a tenant. Which describes a property held in __________?

Ownership in severalty means sole ownership, so Roy is the owner in severalty.

What is the most important difference between a syndicate and a joint venture?

Syndicates are ongoing investment group, Joint Ventures are short-term partnerships.

Who owns the property in a trust?

The Trustee

Why don't the benefactors of an irrevocable trust have to pay estate tax on the properties in the trust when they inherit them?

The properties are no longer owned by the estate once they're in the trust.

What is meant by the term "right of survivorship"?

The right of survivorship predetermines that when one co-owner dies, their ownership interest reverts to the surviving co-owners.

Conservation Land Trusts

These are pieces of land purchased by individuals or conservation groups to save from commercial development. They can be for natural preserves, habitat for endangered species, land reserved for recreation, or other ecologically focused uses.

What is an advantage REITs have over traditional real estate investing?

They are more liquid than traditional real estate investing (buying properties to hold.)

Jeremy co-owns a vacation home with a bunch of his friends. Though he only owns an 8% share of the property, he is allowed to use the entire thing, just like all of his co-owners, regardless of their ownership share. This illustrates which of the following co-ownership concepts?

Undivided Interest gives all owners equal rights to use the property, regardless of their share of the investment.

Which of the four unities states that each co-owner holds an equal share in a property?

Unity of Interest

Which of the following four unities are required for joint tenancy?

Unity of interest, time, title, and possession

Tenancy in common only requires one of the four unities. Which one is it?

Unity of possession

What is a step up?

When the trustor dies and the beneficiary inherits the property, the current market value becomes the new owner's basis, essentially erasing all of the capital gain accumulated by the trustor.

Alice, Tom, George and Brenda bought a property as joint tenants with the right of survivorship. When they bought the property, they each had:

When they bought the property they each had a 25% share of ownership interest.

Revocable Trusts

can be changed by the trustor at any time. Property can relatively easily be added or removed, beneficiaries and trustees can be changed, and the trust can even be dissolved if it is no longer of use.

What Is a Living Trust?

established when a trustor is still alive. It is sometimes called an inter vivos trust.

Trusts

is a legal entity where control of some asset or property is transferred by a grantor (trustor) to a third party (trustee) to be held for the benefit of another (beneficiary).

Community Land Trusts

is a parcel of land bought by a nonprofit with the goal of creating affordable housing. Usually, the land itself is owned by the trust, and then individual lots are exclusively leased long-term to owners who build housing on them. The goal is perpetually affordable housing.

Probate

is the court-supervised execution of a will

A condo owner has exclusive rooftop access through her condo unit. If it needs repairs, who is responsible for making those repairs?

it is a limited common area, it should be paid for by the building's co-owners' HOA fund.

Irrevocable Trusts

once you put your property in an irrevocable trust, you can't touch it. It's no longer yours, it's the trustee's, and then the beneficiary's.

Two Types of Living Trusts

revocable and irrevocable.

Revocable Trusts Tax Advantages

step up

Testamentary Trusts

this type of trust takes effect upon the passing of the trustor, the trustor will never play the roles of trustee or beneficiary.