Sunday, December 15, 2013
I hope you all had a good Thanksgiving holiday. I enjoyed a little break from blogging over the last few weeks, so I hope we are all back freshly revived from turkey comas and ready to think about Estate Planning. Even so, we are still in the midst of the holiday season. A time for family and friends. As I noted in my pre-Thanksgiving blog, I hope you can look around at others over the holiday season and be thankful for those there. I hope you can understand and appreciate those not able to be with you this year, and the roll that you still play in each others lives. It is just this role that links into Estate Planning. When last we discussed specific topics, we were talking about gifts under wills. This blog will focus on gift of Real Property, or land, under your will.
As previously discussed, under California law, all property is either real or personal. Civil Code §657. Further, the Code defines “Real Property” as land, that which is affixed to land, that which is incidental or appurtenant to land, and that which is immovable by law. Civil Code §658. And for those who want to get picky, Land is the material of Earth. Civil Code §659. Generally speaking, most of us understand Real Property to be synonymous to land, real estate, buildings, and anything erected on, affixed to or growing on the land.
In California, as well as many other places, real property represents a significant aspect of personal wealth and thus is a major element of concern in any Estate Plan. A family residence may be the single largest asset and source of value a family may have. Similarly, a major area for investment for some individuals or families may be in commercial property. This is real property where businesses are operated. Whether this be a store, a warehouse, an office building or even a farm, land is a huge source of value and an integral element of the Estate Plan.
As part of the Estate Planning process, we must determine what is to be done with property upon death. Is there a spouse and if so, will the spouse be able to take over the use, control, benefit and operation of the property? Obviously, continued use of the family residence by family members may be dictated. If so, if the property to be given to that spouse or relative, or should some other arrangement be made? Sometimes, occupancy and ownership are not the same. Maybe larger more complex models will shift us into a Trust scenario, but for the time being, we will focus on the transfer of land by Wills.
When we talk about a gift or devise of real property, since all real property is unique, it will be classified as a specific devise. We discussed these specific gifts, when we talked about “types” of gifts in my October 27, 2013 blog. This classification of “specific gift” means that the unique item of property will be specifically identified and should not be adversely affected by other gifts or rights. This is important as we discussed with regard to ademption and abatement and related rights. It is possible to make your Estate Plan, and make this specific gift of this parcel to my son and this parcel to my daughter. However, between the time you make the Estate Plan and the time you pass, what happens if you sell one of those parcels? As such, the take away here is that whenever you make a significant change in your holdings, you should revisit and maybe revise your Estate Plan to avoid forcing issues of ademption or abatement.
On the other hand, there can be a general gift of real property, but that usually takes the form of a gift of “all real property I have, equally to my children”, such that specific parcels or buildings, and the specific or singular heir may not be identified expressly. This gives your greater flexibility and freedom to manage your Estate as you please, and less of a reason to revise your Estate Plan, but if specific gifts are important, this method is not as effective, though you avoid the likelihood of undesirable or harsh results of ademption or abatement.
Finally, in addition to the specific or general gift, you could have a residuary devise of real property, such that you give certain properties to certain recipients, but have all remaining real property going to the “catch all” recipient. Typically, we see residual recipients as a surviving spouse, the favored child, or even a certain charity.
As ownership of real property offer particular and unique benefits and obligations, the gifting of such property under a Will is something routinely done, but that requires special attention to determine and accomplish the desires of the gifter in the Estate Plan. Next time we will talk about a few special features of such gifting, including giving use versus ownership, in a discussion of Life Estate or gifts of Fee Interests, and the gifting of single properties to multiple owners, and the creation of joint ownership.
After we finish talking about Real Estate, we will wrap up Wills by talking about giving the family business and lastly, we will go over residuary gifts. We will also have a specific discussion about gifts to minors. We will wrap up wills with some other discussions including charitable gifts. After that, I hope to have special discussions on taxes. In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process. Stay tuned for future blogs. However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at firstname.lastname@example.org, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.