Types of Property Interests Types of Property Interests

Types of Property Interests

Types of Property Interests �Types of Property �Real Estate � Land � Permanently Attached to Land � Fixtures �Tangible Property – physical characteristics determine value of property �Intangible Property – physical characteristics do not impact value, only rights to cash flow

Types of Property Interests �How is property held in title �Who has use of property �How long does one have use of property �Can one transfer title of property • Without regard to others with interest • With agreement of others with interest �What are the issues with transfer in terms of • Timing • Taxes �What are the issues, concerns, or potential problems for a financial planner?

Types of Property Interests �Sole Ownership – Fee Simple �Ability to use, consume, dispose, or transfer is the exclusive right of the owner �Property is valued at fair market value for estate purposes �FACTS: �One owner �No automatic survivorship right �Included in probate (transfer of property via court after death of owner) �Real Property �If in state of residency, part of probate �If in state other than residency, subject to ancillary probate

Types of Property Interests �Fee Simple – Example �John owns a house under fee simple… � He can sell it at anytime � He can transfer it at anytime to another � Upon death is part of estate and subject to will (if specifically mentioned) or state inheritance rules if not in will �If John is married, does wife automatically get the house? �If John has children, do they automatically qualify for ownership or part ownership of the house? �Can John use the property for any purpose he so chooses? �What are the issues, concerns, or potential problems for a financial planner?

Types of Property Interests �Tenancy in Common � Two or more individuals own the property • Each has an undivided share in the property • Interests are not required to be equal • Most common form of “dual” ownership for non-spouse parties • Property interest owned outright, that is, property can be transferred to a third party without consent of other owner(s) • Co-owners not responsible for debts of other interests �FACTS � At least two distinct owners � No automatic survivorship feature � Interest included in estate at fair market value �Property can be severed if all interests agree or by court decree