1 WILLS, TRUSTS, AND ESTATE ADMINISTRATION, 6th Ed.

CHAPTER TWO
Wilhelm I. Vargas, Esq.
2 INTRODUCTION

After the owner dies, probate property can pass by will, testamentary
testamentary trust, or
inheritance according to state law.

Without property, a will is unnecessary, and a trust cannot be created.
created.

Thus, property is the essential component that establishes the need
need for and
purpose of wills and trusts.

3 PROPERTY: TERMINOLOGY AND CLASSIFICATION

Real property (also called realty or real estate) is property that
that is immovable, fixed, or
permanent. It includes:

Land

Structures affixed to land such as houses, apartment buildings, condos, and office buildings.

Objects attached to land and buildings called fixtures.

Things grown on land except those for the purpose of sale.

4 PROPERTY TERMINOLOGY AND CLASSIFICATION

A fixture is real property that may once have been personal property
property but now is
permanently attached to land or buildings.

State courts apply three tests – annexation, adaptation, and intention – to
determine if personal property has been converted into a fixture.
fixture.
5 PROPERTY: TERMINOLOGY AND CLASSIFICATION

1. Annexation means that the personal property has been affixed or annexed to the real
property.

2. Adaptation means that the personal property has been adapted to the use or purpose of
the real estate. The court asks whether the property is necessary
necessary or beneficial to the
function or enjoyment of real estate.

3. In most states, however, the intention of the person who annexed
annexed the personal property
to the real property has been the controlling test that determines
determines the existence of a fixture.

6 PROPERTY: TERMINOLOGY AND CLASSIFICATION

Tenants may remove property they have attached to real estate if the property falls under one of three
exceptions, known as tenant’
tenant’s fixtures:

1) Trade fixtures – Property placed on the land or in a building to help the tenant carry on a trade or
business. See Examples on page 26.

2) Agricultural fixtures – Property annexed by the tenant for farming purposes. See Examples
Examples on page 26

3) Domestic fixtures – Property attached by the tenant to make an apartment more comfortable
comfortable or
convenient. See Examples on page 26.

7 TRANSFERS OF REAL PROPERTY

Some of the more important terms associated with transfer of real
real property
include the following:

See terminology on page 27.

8 PERSONAL PROPERTY

Personal property is movable property.

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It is everything subject to ownership that is not real estate and
and includes such items as clothing, household
furnishings, stocks, money, contract rights, and life insurance.

Personal property can be subdivided into two categories:

1. Tangible personal property. Property that has a physical existence,
existence, i.e., it can be touched and is
movable. See Examples on page 28.

2. Intangible personal property. Property that has no physical existence, i.e., it cannot be touched. See
Examples on pages 28 and 29.

9 PROBATE PROPERTY

An estate is all the property, real and personal, owned by any living
living person, or all the assets
owned by a decedent at the time of death.

The only type of property a decedent can distribute through a will will or by intestate succession,
if there is no will, is probate property, which is also referred to as probate assets, the
probate estate, or simply the estate.

See page 30 for list of probate property.

10 NONPROBATE PROPERTY

Some of the real and personal property owned by the decedent at the time of death cannot
be transferred by will or inheritance; therefore, it is not subject
subject to probate.

See list of nonprobate property on page 31.

Each of these types of nonprobate property goes directly to the named beneficiary or to the
joint tenant(s) or partners by operation of law.
law.

If the decedent’
decedent ’s entire estate consists of nonprobate property, there is no need
need for estate
administration (probate).

11 FORMS OF PROPERTY OWNERSHIP

The most common forms of property ownership are tenancy in severalty (individual
ownership) and concurrent ownership (joint tenancy, tenancy in common, tenancy by the
entirety, and community property).

The term “tenant”
tenant” or “tenancy,”
tenancy,” which is used to describe severalty and some of the types of
concurrent ownership, is synonymous with “owner”
owner” or ownership.”
ownership.”

12 TENANCY IN SEVERALTY

Tenancy in severalty means that one person is the sole owner of real property, such as
land, or personal property, such as a car.

As an individual, the owner in severalty has absolute ownership of the real or personal
property with exclusive rights, privileges, and interests.

The owner may voluntarily dispose of the property while living, either by gift or sale, or may
dispose of it at death through a will.

See Examples on page 34.

13 CONCURRENT OWNERSHIP

Concurrent ownership is a right in real or personal property shared
shared by two or
more persons.

The most common forms of such multiple ownership are joint tenancy,
tenancy, tenancy
in common, tenancy by the entirety, and community property.

14 JOINT TENANCY

The unique and distinguishing characteristic of a joint tenancy is the right of survivorship.
survivorship.

On the death of one joint tenant, the right of survivorship passes
passes the decedent’
decedent’s interest in
the property automatically to the surviving joint tenants by operation
operation of law, without the need
for probate and with the last surviving joint tenant entitled to the whole property in severalty.

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See Example on page 35.

15 JOINT TENANCY

In order for a joint tenancy to be created, common law requires “four unities”
unities”: unity of time,
unity of title, unity of interest, and unity of possession.

Unity of Time. For unity of time to exist, joint tenant owners must receive or take their
interests in the property together, i.e., at the same time. See Example on page 35.

Unity of Title. For unity of title to exist, the tenancy must be
be created and tenants must
receive their title (ownership rights) from a single source, e.g.,
e.g., the same will or deed. See
Example on page 36.

16 JOINT TENANCY

Unity of Interest. For the unity of interest to exist, each tenant
tenant must have an interest in the
property identical with that of the other tenants; the interests must be of the same quantity
and duration. See Example on page 36.

Unity of Possession. For unity of possession to exist, each joint
joint tenant must own and hold
the same undivided possession of the whole property held in joint joint tenancy. See Example
on page 37.

17 SEVERANCE

While alive, each joint tenant has the right of severance, i.e., an act of severing,
separating, or partitioning real property.

Severance occurs when a joint tenant owner conveys his equal interest
interest in the
property during his lifetime, thereby destroying one of the four essential unities
and terminating the joint tenancy.

See Exhibit 2.4 on page 42.

18 TENANCY IN COMMON

Tenancy in common is a form of concurrent ownership of real or personal
personal property by two or
more persons called tenants in common.

The tenant’
tenant’s interest may be equal or unequal.

Property held in tenancy in common is probate property.

There is no right of survivorship in a tenancy in common.

When a tenant in common dies, the decedent’
decedent’s interest goes to an heir, or as directed in a
will.

19 TENANCY BY THE ENTIRETY

Tenancy by the entirety is an estate available only to a husband and wife, which must be be created in
writing and is nonprobate property.

It is essentially a special form of “joint tenancy”
tenancy” modified by the common law theory that husband and wife
are one person.

Therefore, in addition to the four unities required for joint tenancy,
tenancy, tenancy by the entirety requires a fifth
unity – the unity of person, i.e., a husband and wife are one.

Tenancy by the entirety has most of the same advantages and disadvantages
disadvantages of joint tenancy.

20 COMMUNITY PROPERTY

The theory behind community property ownership is that a husband and wife should share
equally in the property acquired by their joint efforts during marriage.
marriage.

Therefore, each spouse is considered to own and undivided half interest
interest in all property
acquired during their marriage even though one spouse may have earned earned considerably less
than the other or even nothing at all.

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Community property states recognize two kinds of property: separate property and
community property.

21 ESTATES IN REAL PROPERTY

The law divides estates in real property into two categories: freehold estates and
nonfreehold or leasehold estates.

The categories are distinguished by the extent and duration of the
the individual’
individual’s interest.

In other words, freeholds and leaseholds in real property are classified
classified according to how
long and how much an interest a person has in realty.

See Exhibit 2.7 on page 57.

22 FREEHOLD ESTATES

FEE SIMPLE ESTATE OR FEE SIMPLE ABSOLUTE

The vast majority of all real property, including houses, apartment
apartment and office buildings, and farms, is owned
as a fee simple estate.

A fee simple estate,
estate, also known as a fee simple absolute, an estate in fee, or simply
simply as a fee, is the
largest, best, and most extensive estate possible.

An individual holding a fee estate has an absolute, unqualified, and unlimited interest in the real property.

23 FREEHOLD ESTATES

This means the fee estate is not subject to any restrictions, and
and the owner is entitled to all
rights and privileges associated with the property, i.e., there is no limit on the estate’
estate’s
duration or on the owner’
owner’s method of disposition.

The owner has the unconditional power to dispose (sell or make a gift) of the property
during his lifetime by deed and after death by will; if the owner
owner dies intestate, the property
descends (passes) to his heirs.

See Examples on pages 57- 57-59.

24 FREEHOLD ESTATES

LIFE ESTATE

A life estate in real property is another type of freehold estate in which an individual, called
the life tenant,
tenant, holds an interest in the property that lasts either for the lifetime
lifetime of that
individual or for the life of another person.

If the life estate is created for the life of a person other than
than the life tenant, then it is known
as an estate pur autre vie.
vie.

See Examples on pages 60- 60-61.

25 FREEHOLD ESTATES

FUTURE INTERESTS – REVERSION AND REMAINDER

Whenever a grantor, who owns a fee simple estate in real property,
property, creates a life estate, one of two results
occurs:

1. At the time of the creation of the life estate, the grantor retains
retains a reversion or reversionary interest.

2. Alternatively, at the time of the creation of the life estate,
estate, a future remainder interest can also be created
within the same conveyance. The person who receives the future remainder is called the remainderman.

26 FREEHOLD ESTATES

REVERSION

A reversion or reversionary interest is the interest or right a granter alone has to the return of real
real
property, at present in the possession of another (the grantee), on the termination of the grantee’
grantee’s
preceding estate.

A reversion exists only when the grantor holding a fee simple estate
estate conveys an interest in property by
deed or will that is less than the entire fee simple estate.

When a life estate is created and a reversion is retained, the following
following rules apply:

See pages 61-
61-62.

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See Example on page 62 and Exhibit 2.8 on page 63.

27 FREEHOLD ESTATES

REMAINDER

A remainder is a future estate in real property that will take effect
effect on the termination of a prior estate
created by the same instrument at the same time.

A grantor who owns a fee simple estate in real property can create
create a life estate for one person and, in the
same conveyance and at the same time, transfer the future fee simplesimple estate to another person by deed.

When the life tenant dies, the property passes to the future fee owner who is called the remainderman.
remainderman.

This term is used for any person (man or woman) who receives the future estate.

See Example on page 63 and Exhibit 2.9 on page 64.

28 FREEHOLD ESTATES

SPOUSE’
SPOUSE’S RIGHT TO ELECTION

Most states, except community property states, give a surviving husband or wife the statutory right to avoid
being disinherited by the will of the decedent spouse.

The right is established by a statute that allows the surviving spouse to choose between the provisions
made by the deceased spouse’
spouse’s will or the prescribed share set by statute.

The elective (forced) share statute is only applicable to cases in which the decedent spouse dies with a will.

29 FREEHOLD ESTATES

WASTE

While in possession of real property, a life tenant has the absolute
absolute right to possess and use the property.

However, due to the future reversion and remainder interests of grantors and remaindermen, the life tenant is under a duty to
exercise reasonable and prudent care to protect and preserve the property and is required by law not to cause or commit
“waste.
waste.”

Waste is a legal term which refers to “any act or omission that does permanent damage to the real property
property or unreasonably
changes it character or value.”
value.”

If guilty of waste, the life tenant may be subject to a lawsuit for damages, an injunction, or forfeiture of the tenant’
tenant’s life estate.

30 LEASEHOLD ESTATES

TENANCY FOR YEARS

A tenancy or estate for years creates an interest in real property
property that will last for a fixed
period of time, e.g., a tenancy for 10 years.

Such a tenancy is created and terminates according to its own terms.
terms.

No notice to terminate is required.

See Example on page 66.

Leaseholds, such as a tenancy for years, also include the standard
standard landlord-
landlord-tenant
relationships.