Chapter 3

There are several factors that affect ownership of property. One is the location of the property, or where the property is kept. All personal property (real and tangible) is subject to the tax laws of the state or jurisdiction in which the property is located. The place where the property is located is called the Situs.

The permanent residence of the person who dies is called the Domicile. Since a person may have several residences, it is possible to have what appears to be more than one domicile. A domicile is established by several factors:

Bank accounts and safe deposit boxes

Living in a residence for more than six months out of a year

The automobile registration

Their voter registration

Memberships established in social clubs or religious groups

The location of all the property which is considered to be the principle residence.

Taxation of property can also take several avenues. Real estate is taxed by the state in which it is located. This is true regardless of the deceased person's domicile.

Tangible personal property is taxed according to where the property is kept. In some cases, it may also be taxed by the state of the domicile.

Intangible personal property is taxed by the state where permanent residence is kept regardless of where the property is actually located. For instance, a bond may be kept in a safe deposit box in another state. However, the state of residence would collect any tax owing on it.

Intangible personal property is taxed by the state where permanent

residence is kept, regardless of where the property is actually located.

Multiple taxation can sometimes occur. Say, for example, that a person's permanent residence is in Oregon state, but they own real property in California, as well. In addition, tangible personal property is located in Nevada and intangible personal property is in Montana. At death, Oregon could tax all property, except real estate in California. Real estate is always taxed in the state in which it is located. Montana may also tax the tangible personal property unless Montana exempts personal property of a nonresident. With such scattered assets, it would be wise to investigate the use of a living trust.

What happens when the person who dies is a co-owner of property? This is also called Concurrent Ownership. There are four types of co-ownership of property. Tenancy In-common means co-ownership between two or more people who are not necessarily related to each other. Each person's share is an Undivided Interest in the property. The people involved may have unequal or equal shares. Each person may do with their share as they chose. They may sell it, gift it or direct it to their heirs. It does not require the consent or knowledge of the other tenants. For tax purposes, a co-tenant is treated as a separate owner. Of course, any income generated is divided among the co-owners according to their share of property. Each co-owner would also pay their share of the maintenance and operation expenses. When a co-tenant sells or gifts their interests, the gain or loss may be realized on the transaction. The new owner becomes a co-owner with the other tenants.

The most common form of co-ownership is Joint Tenancy With Right of Survivorship (JTWRS). This means that the tenant's share cannot be transferred by will. When a joint tenant dies, that tenant's share goes to the surviving tenants.

Under Joint Tenancy With Right of Survivorship (JTWRS),

the tenant's share cannot be transferred by a will.

When a joint tenancy is created, the person giving the most money to buy the property has made a gift to the other joint tenants. Should a co-tenant wish to sell his or her interest and the property cannot be divided, the entire property must be sold and the sale proceeds then distributed among the co-tenants. This is called a Partition Sale.

Each tenant may sell their interest in their property only during their lifetime, without consent of any of the other tenants. The new owner would become a Tenant-In-Common with the other tenants. As each tenant dies, the last surviving tenant becomes the sole owner. He or she may then dispose of the property as they wish.

There is a legal relationship between the joint tenants. Interest on bank accounts is reported in a proportionate amount to the amount of money they put into the account. If immediate vesting is given to the co-owners, then each tenant is also entitled to an equal share of any interest earned. They would, of course, also be taxed on that interest earnings, in most cases.

Tenancy by the Entirety is similar to a JTWRS, but it is limited to the co-ownership of property by a husband and wife only. The tenancy would automatically terminate should a divorce occur. The death of either spouse would put sole ownership with the remaining spouse. Neither the husband nor the wife could sell their share without the consent of the other.

There are some distinct advantages of Joint Tenancy With the Right of Survivorship and also of Tenancy by the Entirety. One of these advantages is that it puts the property outside the reach of a tenant's creditors. Another definite advantage is the fact that there are no probate delays at death. Depending upon the state laws where the property is held, it may be exempt from state death taxes. During the death of a tenant, the passing of ownership is also private. All of this gives the tenants great security.

As with all things, there are also some disadvantages. One may be the possibility of gift taxes. There is also the possibility of double federal estate taxation. If the property gets down to a lone surviving tenant, then his or her creditors CAN attach the property.

Washington state is a Community Property state. This means that all property acquired during the marriage is owned equally by both husband and wife. At death, neither one can will more than half of the joint property to another person.

Property acquired prior to marriage is generally considered to be Separate Property. Gifts, inheritances and property bought with individual funds are also generally considered Separate Property.

If a couple moves out of a community property state to a common-law state, those properties acquired in the community property state will still be considered community property. Therefore, the reverse is also true. If a couple moves from a common-law state to a community property state, the property comes under the laws of the original state where purchased.

A Joint Will is one where the same document is made the will of two or more people and is jointly signed by them. Typically, joint wills are used where jointly owned property needs to be willed.

When two or more people make separate wills containing mutual provisions in favor of each other, they are called Mutual Wills. A will may contain provisions which make a single will both joint and mutual.

When two or more people make separate wills containing

mutual provisions in favor of each other, they are called Mutual Wills.