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REAL AND PERSONAL PROPERTY: In the last article - the first of the series - we drew the important distinction between probate and nonprobate property. This time we need to pursue the labeling process a little further in order to lay some more of the groundwork for the articles which follow. Real and Personal Property Distinguished Perhaps the most basic classification of property under Anglo-American Law is into the two categories of real property and personal property. The distinction between the two permeates the law of wills, trusts and estates. Roughly defined, real property is made up of interests in land and its fixtures (those items whose degree of attachment to the land is such that they are themselves deemed to constitute land, even though before they became so attached they were clearly personal property). Perhaps the simplest working definition of personal property is expressed negatively as all that property which does not constitute real property. Personal property may itself be divided into two categories: tangible personal property, and intangible personal property. Broadly speaking, all personal property which can be touched, picked up, moved from place to place and so forth is tangible; all other personal property is intangible. However, certain items which have a physical form (checks, stock certificates, certificates of deposit, etc.) are nonetheless classified as intangibles since they constitute evidence of an underlying financial obligation or interest and do not in themselves constitute the obligation or interest itself. A gift by will of all my personal property would transfer both tangible and so-called intangible items; but an uncles gift of my tangible personal property to my nephew Horace would not entitle Horace to receive the testators stock certificates which were stored in the testators safety deposit box at the time of death. Nor would it suffice to bestow the donors bank accounts upon the hapless Horace. Forms of joint ownership. Is an item of property, whether real or personal, owned by one person alone, or is it held in one or another form of co-ownership? If the latter, what are the characteristics of the joint ownership, the consequences for the co-owners? To take the commonest example, do the Smiths own their home together (i.e., jointly)? Are they both on the deed? Or is it the sole property of just one of them? If, for example, Mrs. Smith inherited the house from her mother and has not changed the form of ownership since her mothers death, the house is legally hers alone to deal with during her lifetime and will be probate property at her death, passing as she directs in her will or as the law of intestate succession provides (subject to possible interests which her husband may have the right to assert by virtue of his being a surviving spouse - more on this later). Jointly held property may be held in one of three ways: by tenancy in common; by joint tenancy with right of survivorship (often written as joint tenancy WROS); and by tenancy by the entirety (confined to a husbands and wifes co-ownership by joint tenancy WROS). The tenancy in common is a form of ownership whereby two or more people own separate but undivided interests in a piece of property, typically (but not essentially) real estate. An example may help: Tabitha, a widow, has a summer home which she, her late husband, Amos, and their four children have been using as vacation headquarters for the past 20 years. Knowing of her childrens great fondness for the place, she decides to leave it to them all equally and inserts the appropriate clause in her will: I give my vacation home on Lake Joybegon to such of my children as survive me, equally, or words to that effect. She might will have added the phrase as tenants in common, but in Vermont and most other states this omission is not damaging since such a tenancy is the presumed intention in the absence of contrary language. What exactly does each child receive at Tabithas death? If a child subsequently dies, how does that childs interest pass at his death? Under the tenancy in common rules each of Tabithas four children becomes the owner of a one-fourth undivided interest in the property. He may not point to any particular part of the property and say that is mine, but he may dispose of his interest during his lifetime without the consent of his co-owners (unless, of course, as is sometimes the case, there is a right-of-first-refusal agreement among the co-owners). When he dies his interest does not automatically pass to his siblings, the other tenants in common, but as part of his probate estate is his to dispose of by will or, if he dies intestate, to have descend to his intestate distributees. If, for example, he is married and leaves his entire estate to his wife, she will become a one-fourth tenant in common with Tabithas other three children - not necessarily a salubrious situation, some might suggest.. It should be noted that the repeated descent of tenancy in common interests down family lines can sometimes lead to an undesirable and unwieldy splintering of the property, which in turn can make for severe management problems and even become the cause of lamentable internecine strife. In a later article we will consider other approaches which may produce a smoother way of disposing of tenancy in common interests or better still perhaps a way of avoiding their creation in the first instance. Now suppose that Tabitha and Amos owned the vacation home as joint tenants WROS. At Amoss death the place would automatically become Tabithas sole property by operation of law as the saying goes.. It would not be probate property in Amoss estate, but would of course have to go through probate upon Tabithas subsequent death (there no longer being any surviving joint tenant). To state it differently, if I own property with another person jointly WROS, I am no longer free to dispose of that property by my will if I am the first to die; only if I am the survivor. There is a tendency to believe that the placement of property into joint ownership WROS is without more a sufficient estate plan, and a way of avoiding probate (on which more later). But this could only be the case if one knew that ones joint tenant would survive and had made appropriate arrangements for the disposition of the property at his death. Good sense would suggest - at least in the absence of remarkable clairvoyance - that each joint tenant structure his planning so as to provide for the possibility that he rather than his spouse is the survivor and thus becomes the propertys sole owner when the spouse dies. Finally, a husband and wife may (but need not) be tenants by the entirety, a form of joint ownership by which only two spouses may hold property. Tenancies by entirety have the same survivorship feature as joint tenancies WROS but also have some unique characteristics which set them apart. Although one joint tenant WROS or one tenant in common may unilaterally break the tenancy by which he holds his interest, one tenant by the entirety acting alone may not do so. As in the case of the tango, it takes two to do this. Another important characteristic of the tenancy by the entirety is that although a creditor of both spouses may reach the spousal property (suppose they have jointly borrowed money and have both executed a mortgage, on which they are now in default), a creditor of just one of the spouses may not do so. To that extent property held by husband and wife as tenants by the entirety may be said to be judgment-proof. To sum up, there are three forms of joint ownership: tenancy in common, joint tenancy WROS, and tenancy by the entirety. The second and third have a survivorship feature; the first does not. The first is probate property; the second and third do not go through probate at the death of the first joint tenant, only at the death of the survivor; and only tenancy in common interests are freely transferable by any single tenant acting alone. The complete list of Christopher Stoneman articles is:
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