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Joint Ownership of Real Property- Different Ways Real Property can be Titled

Title to real property can be held in three different ways; tenants by the entirety, tenants in common, and joint tenants with rights of survivorship.

Tenants by the entirety- the property is owned by a married couple.  The deed will usually state the parties as husband wife. For example the deed would say “John Doe and Jane Doe, husband and wife” or “John Doe and Jane Doe, his wife.” When one spouse passes away the property will pass automatically to the surviving spouse.

Daredevil Dan Example:

Daredevil Dan and his wife Brittany own property as tenants by the entirety in Park Slope, Brooklyn.  Daredevil Dan tried swimming from the Brooklyn Bridge to Governor’s Island.  He made it to Governor’s Island successfully but caught something swimming in the East River, and that was the end of Daredevil Dan.   The Park Slope property would pass automatically to Brittany.

 

Tenants in Common- the property is owned by more than one person in what could be various percentages. A person with a tenants in common interest can sell or transfer their interest without notifying the other owners. They can leave their interest to a person in their will or if they do not leave a will their interest would pass to their heirs at law.  A person with a tenants in common interest has the right to live in the property without paying rent.

Daredevil Dan Example:

Daredevil Dan, his brother Kenneth, and his friend Adam purchase a property in Bushwick, Brooklyn.  They each own one-third (1/3) of the property as tenants in common.  Daredevil Dan tried a stunt which involved jumping a shark, he failed, and that was the end of Daredevil Dan.  Daredevil Dan in his will left the Bushwick property to his friend, Christopher. Christopher would now be a one-third (1/3) owner of the property and would have the right to live in the property without paying rent.

 

Joint Tenants with Rights of Survivorship-  the property will pass automatically to the co-owner upon the first person to pass away. The deed must state joint tenants with rights of survivorship.  For example, the deed would say “John Doe and Mary Smith as joint tenants with rights of survivorship.”  A joint tenancy with rights of survivorship can be unilaterally severed to a tenants in common titling. The joint tenant would deed themselves their interest in the property from joint tenants with rights of survivorship to a tenants in common interest. For example the deed’s language would be “John Doe with a joint tenants with rights of survivorship interest as party in the first part to John Doe as tenant in common as party in the second part.”

Daredevil Dan Example:

Daredevil Dan and his friend Sophie own a property on the Upper East Side of Manhattan as joint tenants with rights of survivorship. Daredevil Dan was walking down the street when a piano fell on his head, and that was the end of Daredevil Dan.   Sophie would now own the property on the Upper East Side.

Do not transfer or re-title property without consulting an attorney.  For more information regarding the titling of real property, contact Ira K. Miller & Associates

 

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What is a Statutory Gifts Rider & Why is it Needed?

The Statutory Gifts Rider or SGR, is a modification to a power of attorney that allows the agent to give gifts.  Without the Statutory Gifts Rider the agent under a power of attorney is only allowed to give gifts totaling $500 for the year for personal and family maintenance. The Statutory Gifts Rider may be used by an agent for both Medicaid and Estate tax planning purposes. Your agent must act at the instruction of the principal or act in the principal’s best interest. Due to the financial impact a Statutory Gifts Rider can have, it needs to be witnessed by two disinterested witnesses.

The Different Parts of the Statutory Gifts Rider (SGR)

Part A of the Statutory Gifts Rider allows the agent to give gifts up to the federal gift tax exclusion ($14,000) to the principal’s spouse, children, more remote descendants, and parents.   Double the gift tax exclusion ($28,000) can be given as gifts if a spouse agrees to the split gift treatment.

Part B is a modifications section to the SGR.  It allows for the principal to specify if they would allow gifts to be larger or small than the gifts tax exclusion.  In the SGR that Ira K. Miller & Associates prepares, we often give the agent discretion to make gifts for the purpose of gift, estate tax, or Medicaid planning for the principal.

Part C of the SGR allows for the agent to give gifts to himself or herself and specifies what gifts may be given.

Part D is acceptance by third parties and Part E is the signature of the Principal and Acknowledgement.

Daredevil Dan Example

Daredevil Dan over the course of his daredevil career experienced many concussions. Due to this, he has become forgetful and can no longer take care of his finances. He also has begun wandering the neighborhood at night and can no longer find his way home. His son, Joseph, has lived with Daredevil Dan in his house for the last 3 years and helps his father get to doctors appointments and helps him with all aspects of daily living. Eventually it becomes too hard for Joseph and Joseph decides to put Daredevil Dan in a nursing home.

Daredevil Dan owns a home in his name alone and bank accounts less than the Medicaid limit.  Joseph is the agent under Daredevil Dan’s power of attorney. Daredevil Dan receives Medicaid while in the nursing home. What can be done to preserve Daredevil Dan’s home from a Medicaid lien being placed on it?

Example 1-  There is a Statutory Gifts Rider to the Power of Attorney

Joseph will be able to gift himself the house as caretaker child. No lien would be placed on the house and the transfer would be considered a Medicaid Exempt transfer and Daredevil Dan would continue on Medicaid.

Example 2- There is No Statutory Gifts Rider

Joseph could not gift the house to himself. He does not have authority under the power of attorney as the house is a gift of more than $500. In order to transfer the house to himself as caretaker child, a costly guardianship proceeding would need to be commenced.

Example 3- Joseph does nothing

If Joseph does nothing a Medicaid lien will be placed on the home. When the house is sold Medicaid will recover from the sale of the house the money they expended on behalf of Daredevil Dan.

To learn more powers of attorney, statutory gifts rider, or Medicaid planning contact Ira K. Miller & Associates.

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What is a Testamentary Trust?

Simply put, a testamentary trust is a trust that is written into a Last Will & Testament.  The trust does not come into existence until the Will is probated. Testamentary trusts can be created for a variety of reasons.  Here are a few reasons a person might want to set up a testamentary trust in their will:

 

  • The beneficiary receives public entitlements and receiving the funds would disqualify them from these public entitlements. This type of trust is called a supplemental or special needs trust.
  • The beneficiary is a young child and the parent does not want their child receiving a substantial sum of money at the age of 18 or 21. Instead the trust can specify that the child shall receive the money at a later age like 30 or 35 years old.
  • The beneficiary is not financially savvy. The trust would specify a trustee who would help ensure the money was not spent immediately on frivolous items.
  • The beneficiary has many creditors. The trust would prevent creditors from reaching the property or cash in the trust.  This type of trust is called a spendthrift trust.

 Daredevil Dan Example:

Daredevil Dan has a 17 year old son named Charlie.  Charlie loves luxury sports cars. All he talks about are Lamborghini’s, Ferraris, and McLaren’s.   While paragliding in Patagonia, Daredevil Dan flew right into a mountain and that was the end of Daredevil Dan.

Daredevil Dan went to Ira K. Miller & Associates for estate planning.  He decided to set up a testamentary trust in his Will for his son, Charlie, so that Charlie would receive the money from his estate when he was 30.  He named his friend, Donald, the trustee of Charlie’s trust.  Instead of Charlie inheriting the money and immediately spending it on a luxury sports car, Donald now controls Charlie’s money. According to the terms of the trust Donald can spend the money on Charlie’s health, education, maintenance, or support. Donald spent the trust money on sending Charlie to college.

 

Contact Ira K. Miller & Associates for all your questions regarding Estate Planning and trusts.