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© 2009 Rockwell Institute
1
California Real Estate Law
© Copyright 2007 Rockwell Publishing, Inc.
Lesson 10:Transfer of Real Property
© Copyright 2007 Rockwell Publishing, Inc.
Introduction
This lesson will discuss:
l requirements for a valid deed
l types of deeds
l wills
l trusts
l involuntary transfers
© Copyright 2007 Rockwell Publishing, Inc.
Title
Person who owns property has title to it.
Transfer of title from one owner to another may be:
l voluntary: intentional act by owner
l involuntary: without action by owner and/or against owner’s will
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Deeds
Ownership of real property begins with government.
Title passes from government to private party through document called patent.
l U.S. government once sold patents very cheaply (or gave land away for free) to encourage settlement.
Government patents
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Deeds
Transfers between private parties occurs by deed.
Deed: legal document in which owner (grantor) transfers property interest to another (grantee)
l transfer by deed often called conveyance
Transfers after patents
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Deeds
To be valid, a deed must:
l be in writing
l contain words of conveyance
l include adequate description of the property
l be signed by competent grantor
l specify identifiable grantee
l be delivered to the grantee
l be accepted by the grantee
Requirements for a valid deed
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Requirements for a Valid Deed
Any transfer of a real property interest must be in writing.
l exception: lease for less than one year
Writing
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Requirements for a Valid Deed
Deed must contain language (called granting clause) that actually conveys property to new owner.
l examples: “convey,” “transfer,” “sell,” “grant”
l granting clause must express intent to transfer ownership of interest
Words of conveyance
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Requirements for a Valid Deed
Deed must contain legally adequate description of the property being transferred.
l description is adequate if it’s possible to identify and locate property
Property description
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Requirements for a Valid Deed
Legally competent: grantor must be of sound mind and at least 18 years old
l exception: emancipated minor can deed property
l deed signed by incompetent grantor may be void or voidable, depending on circumstances
Competent grantor
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Requirements for a Valid Deed
Grantor must sign deed.
l Illiterate or disabled grantor may use mark, if someone else witnesses and signs.
l Deed for community property must have signatures of both spouses.
Competent grantor’s signature
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Competent Grantor’s Signature
Grantee doesn’t need to sign deed.
In CA, married grantees taking title as community property with right of survivorship must sign deed.
l to make sure grantees really want that form of ownership
Grantee’s signature
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Competent Grantor’s Signature
When corporation property is transferred in ordinary course of business:
l deed must be signed by corporate officers who have been authorized by board of directors
l shareholder approval usually not required, unless all or most of corporation’s assets are transferred
Signing by business entities
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Competent Grantor’s Signature
When partnership property is transferred in ordinary course of business, any general partner has authority to sign deed.
l If transfer is not in ordinary course of business, signing partner must have authorization of other owners.
Similar rules for LLC.
Signing by business entities
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Competent Grantor’s Signature
Person may give another person the authority to sign on her behalf, using written power of attorney.
l person receiving power of attorney is called attorney in fact
l creates agency relationship
l attorney in fact doesn’t need to be lawyer
When attorney in fact signs document on behalf of principal, principal’s name must come first.
Power of attorney
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Competent Grantor’s Signature
When attorney in fact signs document on behalf of principal, principal’s name must come first.
Example:
Phillip K. Montague III
by Gary Booth, his Attorney in Fact
Power of attorney
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Competent Grantor’s Signature
Most powers of attorney are general, giving agent broad powers.
Limited power of attorney: authority to sign is limited to specific documents
Buyer/grantee should make sure power of attorney is valid at time of conveyance.
Power of attorney
© Copyright 2007 Rockwell Publishing, Inc.
Competent Grantor’s Signature
Deed or other documents can’t be recorded unless signatures are acknowledged.
Acknowledgment: signer declares to official witness that signature is voluntary
l most people use notary public, but other officials may take acknowledgments
l notary public can’t take acknowledgement if he is also grantee (conflict of interest)
Acknowledgment
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Competent Grantor’s Signature
Deed without acknowledged signature is still valid between grantor and grantee.
l but deed can’t be recorded
l third parties won’t have constructive notice of grantee’s interest in property
Acknowledgment
© Copyright 2007 Rockwell Publishing, Inc.
Requirements for a Valid Deed
Grantee must be identifiable.
l misspelled names won’t invalidate transfer as long as it’s clear who parties are
l grantee doesn’t need to be competent
l legal entities validly formed under state law can be grantees
Identifiable grantee
© Copyright 2007 Rockwell Publishing, Inc.
Requirements for a Valid Deed
After signing and acknowledging, grantor (or his agent) must physically deliver deed to grantee (or her agent).
Grantor must also have intent to transfer title (donative intent).
l physical delivery usually shows donative intent, but not always
Delivery and donative intent
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Delivery and Donative Intent
Grantor must be alive at time of delivery.
l grantor can’t create deed with instructions for delivery after death
Living grantor
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Requirements for a Valid Deed
Acceptance by grantee usually isn’t an issue.
l but sometimes it’s better to refuse acceptance (example: if property is financial burden)
l only living grantee can accept deed
Acceptance
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Optional Information
Deeds often contain optional elements:
l date
l habendum clause (“to have and to hold”) that names type of interest conveyed
l if multiple grantees, form of co-ownership (default is tenancy in common)
l recital of consideration (to help ensure property not subject to grantor’s creditors)
Deeds
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Types of Deeds
l Grant deed
l Quitclaim deed
l Deeds by officials and semi-officials
l Warranty deeds
l After-acquired title
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Types of Deeds
In grant deed, grantor warrants:
l he hasn’t previously conveyed title to another
l he hasn’t caused or allowed any encumbrances to attach to the property, other than what’s already disclosed in deed
These warranties always apply.
Grant deed is most commonly used deed in CA.
Grant deed
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Types of Deeds
Quitclaim deed: conveys whatever interest grantor has and nothing more
l no warranties
l means nothing if grantor has no interest in property
Words like “grant” or “convey” should be avoided; words like “release” or “quitclaim” should be used.
Quitclaim deed
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Types of Deeds
Quitclaim deed used:
l when making gifts
l to cure clouds on title: potential claims/problems with ownership
l to correct minor flaws in earlier conveyances, such as misspelling (called reformation deed)
Quitclaim deed
© Copyright 2007 Rockwell Publishing, Inc.
Types of Deeds
Deeds issued by officials or semi-officials also contain no warranties.
l sheriff’s deed used in execution sale
l trustee’s deed used in foreclosure sale
l personal representative deed used by executor in probate
Deeds by officials and semi-officials
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Types of Deeds
Many states use warranty deeds instead of grant deeds ? provide more protection for buyer
l grantor warrants if title fails from defects originating before or during grantor’s ownership, she’ll reimburse buyer for any losses
However, title insurance policies have made deed warranty issues moot.
Warranty deeds
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Types of Deeds
Sometimes grantor signs grant deed even though he has less than complete title.
After-acquired title: if grantor later acquires rights previously lacked, those rights are automatically owned by grantee
l after-acquired title usually doesn’t apply to quitclaim deeds
After-acquired title
Summary
© Copyright 2007 Rockwell Publishing, Inc.
DeedsÄ
l Title
l Valid deeds
l Acknowledgment
l Power of attorney
l Warranty deed
l Quitclaim deed
l Grant deed
l After-acquired title
© Copyright 2007 Rockwell Publishing, Inc.
Transfer of Property After Death
Ways to transfer property after death:
l wills
l living trusts
l community property agreements
l intestate succession
l escheat
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Transfer of Property After Death
Testator: person making a will
l bequeaths personal property in a bequestto a legatee
l devises real property in a devise to a devisee
Today, CA uses “devise” for all property distributed by will.
Wills
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Wills
Executor: carries out the will through probate
When testator dies, executor files will in court, and carries out any devises.
l this process is called probate
Executor
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Wills
A valid will must be:
l in writing
l signed by competent testator 18 years or older
l attested to by two or more competent witnesses
Requirements for a valid will
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Requirements for a Valid Will
Wills must be in writing.
Oral (nuncupative) wills invalid in CA.
Writing
© Copyright 2007 Rockwell Publishing, Inc.
Requirements for a Valid Will
Will must be signed by testator.
l testator can use a mark if someone else witnesses and signs (must be someone other than witness to will)
l person acting for testator may sign at testator’s request and in testator’s presence; must make notation that he’s signing at testator’s request
Signed
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Requirements for a Valid Will
Testator must be at least 18 and understand:
l what the will accomplishes
l nature and extent of his property
l who the members of his family are and whose interests are affected by the terms of will
If the testator understands these things, he has testamentary capacity.
Competent testator
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Competent Testator
If testator was incompetent when will was signed, will is invalid.
Law presumes testator is competent.
l evidence of incompetence must be clear, cogent, and convincing
l feebleness, forgetfulness, eccentricity aren’t enough
Competency
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Requirements for a Valid Will
CA requires will to be signed by at least two witnesses, in testator’s presence.
Witness:
l may be any competent adult
l must be able to show she knew testator was signing a will and that testator signed or acknowledged signature as his own
Witnessed
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Witness to a Will
Beneficiary shouldn’t act as witness.
l If witness is beneficiary, he won’t receive assets as provided in will.
l Instead, he’ll receive assets as if testator had died intestate.
Intestate: when person dies without a will
Beneficiary as witness
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Witness to a Will
Holographic will: will in testator’s own handwriting, signed and dated by testator
l CA allows unwitnessed holographic wills.
l Testators with holographic wills often create provisions that are difficult to interpret.
l Probate court will ignore any typewritten/pre-printed provisions, except for statements of general testamentary intent.
Holographic wills
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Requirements for a Valid Will
If a will is made in another state and is valid under that state’s laws, CA will recognize it as valid even if it doesn’t meet CA’s requirements.
l recognition because of Constitution’s Full Faith and Credit Clause
Exception for foreign wills
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Requirements for a Valid Will
CA Probate Code provides basic will form for people without estate tax issues or other complexities.
l written in simple language, helps testator through steps of making the will
l still requires 2 competent witnesses
CA’s statutory will
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Requirements for a Valid Will
Indicators of testator’s intent to revoke a will:
l burning, tearing, or otherwise destroying it
l making newer will that revokes older one
l making newer will that is inconsistent with older one (only revokes inconsistent provisions)
Also, divorce (but not separation) automatically revokes any will provisions regarding testator’s ex-spouse.
Revoking a will
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Requirements for a Valid Will
After testator’s death, executor files will in probate court.
Court oversees distribution of property, according to terms of will.
l Executor makes distributions of real property using personal representative’s deed.
Estates under $100,000 can use simpler procedure, avoiding probate.
Probate
Summary
© Copyright 2007 Rockwell Publishing, Inc.
Wills
l Testator
l Executor
l Wills
l Holographic wills
l Beneficiaries
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Trusts
Living trusts are second most common way of distributing property after death.
When creator of living trust dies, her property is distributed by trustee, according to terms of trust.
l courts play no role—probate avoided
Living trusts
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Trusts
Trust is created when grantor or trustor signs document containing trust’s provisions.
l grantor’s signing doesn’t have to be witnessed
l if signature is notarized, document may be recorded after grantor’s death
l recording helps prove that any transfers of real property were consistent with trust’s terms
Signing
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Trusts
Grantor usually names himself as initial trustee, so that he maintains control over property during his lifetime.
Alternate trustee is also named.
l becomes trustee if original trustee dies or is incapacitated
l distributes property according to trust’s terms, like executor of will
Trustee
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Trusts
Grantor must fund trust by re-titling assets in trust’s name.
Trustee can’t distribute decedent’s property unless decedent put property into trust.
l grantor usually funds trust using quitclaim deed
l transfers to trust are exempt from CA documentary transfer tax
Funding
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Trusts
Although living trust avoids probate, setting it up requires some effort.
l may also involve recording and other legal or professional fees
Experts recommend using backup will, in case grantor forgets to transfer some property into trust.
Fees
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Trusts
Many living trusts are revocable.
Revocable trust: grantor can transfer any or all of the assets back to herself at any time
l assets in trust at time of grantor’s death are distributed according to trust’s terms
Using revocable living trust has little effect on an estate tax bill.
Revocable trust
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Trusts
Irrevocable trust: once property is transferred into trust, grantor can’t get it back
l transfer into trust is permanent transfer out of grantor’s estate
l used by wealthy to lessen estates taxes
l grantor can’t be trustee of irrevocable trust
Irrevocable trust
© Copyright 2007 Rockwell Publishing, Inc.
Community Property Agreements
Third method of transferring property after death: community property agreement (CPA)
l used by spouses and registered domestic partners as substitute for will (avoids probate)
l typically provides that when one spouse dies, his interest becomes property of surviving spouse
l recorded after spouse’s death, to prove transfer of title (no deed necessary)
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Intestate Succession
When someone dies without a valid will or will substitute, decedent’s property is distributed according to intestate succession law .
Basics
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Intestate Succession
When someone dies intestate (without a will), court appoints administrator to distribute property according to statute.
l Administrator uses administrator’s deed to convey property.
Family members who receive property by intestate succession are heirs.
Probate court
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Intestate Succession
When married person dies, community property goes to surviving spouse.
Separate property goes to:
l surviving spouse if decedent had no other family
l spouse and child equally, if one child
l spouse gets ? and children share remainder, if 2+ children
l spouse gets ½ and decedent’s other family members share remaining ½, if no children
Married person
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Intestate Succession
l if no spouse, children share equally
l if no spouse and no children, decedent’s other family members share equally (parents, siblings, nieces, nephews, etc.)
Married person
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Escheat
When someone dies intestate and no heirs appear within 2 years after death, decedent’s property escheats to state.
l escheat: state takes title to unclaimed property
l CA attorney general brings court action to vest title in state
l state can sell property 5 yrs after escheat, but rightful owner can claim proceeds any time
The state
Summary
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Trusts, CPA, Intestate Succession
l Living trusts
l Trustee and trustor
l Irrevocable and revocable trusts
l Community property agreements
l Intestate succession
l Escheat
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Involuntary Transfers
Most involuntary transfers of property result from court action:
l foreclosure
l partition
l quiet title
l condemnation
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Court Action
Creditors with lien against property can force foreclosure sale of property to satisfy debt from proceeds.
l court orders sheriff to sell property at auction
l successful bidder receives sheriff’s deed
Foreclosure actions
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Court Action
Co-owners who disagree on division of their property can file for partition.
l court can order property divided, or to be sold with proceeds split between co-owners
l referee conducts sale and uses referee’s deed
Partition actions
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Court Action
Quiet title actions may result in transfer of title.
l adverse possession
l natural changes to land (accession)
Quiet title actions
23
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Quiet Title Actions
Adverse possession: someone who occupies someone else’s land for certain period of time can acquire ownership
l most AP claims involve boundary issues with fences or outbuildings on neighbor’s land
l CA law: at least 5 years possession, with property taxes paid
l once requirements are met, adverse possessor can file quiet title action and secure court order declaring self as owner
Adverse possession
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Quiet Title Actions
Accession: enlargement of land lying along river or body of water, by natural means
l includes accretion, avulsion, reliction
l owner can bring quiet title action to settle ownership of new land
Natural changes to land
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Accession
Accretion: slow, gradual enlargement of riverside or lakeside property due to waterborne sand/soil
l owner of waterside property acquires title to new land
Reliction: slow, gradual enlargement of riverside or lakeside property due to retreat of water
l owner of waterside property acquires title to new land
Accretion
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Accession
Avulsion: when moving water abruptly tears away land and deposits elsewhere
l original owner still has title to lost sand/soil if it can be claimed
l if unclaimed, it eventually becomes part of property where it was deposited
l rule applies to land exposed by abrupt change in river’s course
Avulsion
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Court Action
When government determines it needs piece of property for public use, and owner won’t sell, government files condemnation action.
Condemnation:
l court hears expert testimony on property value, determines price
l court issues condemnation order and tells government to pay price to owner
l title transfers to government
Condemnation
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Involuntary Transfer
Dedication: transfer of property to state without compensation
l may be voluntary or involuntary
l voluntary dedication: someone chooses to donate property to city/state by quitclaim deed—rare
Dedication
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Dedication
Involuntary dedication is usually statutory dedication.
Statutory dedication: subdivision developer required to dedicate land for streets, sidewalks, etc. in exchange for development approval
l federal Constitution: dedication can be required only to mitigate negative impact from project
l no deed necessary; plat map or approvals specify that dedicated land is for public use
Statutory dedication
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Dedication
If property owners allow regular public access to their property for at least 5 years, court may find implied dedication has occurred.
l also called common law dedication
l variant of adverse possession
l owners can protect themselves from inadvertent dedication by posting signs regularly along boundary
Common law dedication
Summary
© Copyright 2007 Rockwell Publishing, Inc.
Involuntary Transfers
l Foreclosure
l Partition
l Adverse possession
l Accession
l Condemnation
l Dedication
Legal Aspects of Real Estate Lesson 10 Cumulative Quiz
1. What is the name of the document the government uses to transfer property to a private party?
A. Grant deed B. Living trust C. Patent D. Quitclaim deed
2. All of the following are requirements of a valid deed except:
A. it must be in writing B. it must be signed by a competent grantee C. it must be signed by a competent grantor D. it must include words of conveyance
3. What is the name of the document that gives a person the authority to sign a deed (or other document) on another person's behalf?
A. Attorney at law B. Attorney in fact C. Irrevocable trust D. Power of attorney
4. A grantor must declare before a public official that her signing of a document is voluntary. This is known as:
A. acceptance B. acknowledgment C. delivery D. recording
5. In regards to a deed, which of the following would not be a valid form of delivery?
A. Giving the deed to the escrow agent B. Giving the deed to the grantee's guardian C. Giving the deed to the grantee's real estate agent D. Issuing instructions that the deed is to be delivered upon the grantor's death
6. A valid deed requires:
A. the signature date B. a habendum clause C. an adequate description of the property D. a statement of consideration
© 2009 Rockwell Publishing 1
7. Which type of deed is most commonly used to convey real property in California?
A. Grant deed B. Quitclaim deed C. Sheriff's deed D. Warranty deed
8. Which type of deed is most likely to be used to correct an existing deed after one of the co-owners changed her name after getting married?
A. Grant deed B. Quitclaim deed C. Sheriff's deed D. Warranty deed
9. Alice sold the mineral rights to her property. She later sold the property to Bill, using a grant deed. Alice then reacquired the mineral rights to that property, through a court order. The mineral rights automatically passed to Bill. This is an example of:
A. a cloud on title B. after-acquired title C. dedication D. equitable title
10. A person who receives real property through a will is known as a/an:
A. devisee B. executor C. legatee D. testator
11. Which of the following is not a requirement for a valid will in California?
A. A competent testator of at least 18 years old B. In writing C. A legal description of the property devised in the will D. Two or more witnesses
12. A will that is handwritten, signed, and dated by the testator, but not witnessed, is a:
A. holographic will, which is not valid in California B. holographic will, which is valid in California C. nuncupative will, which is not valid in California D. nuncupative will, which is valid in California
© 2009 Rockwell Publishing 2
13. A will is filed by the executor in a superior court after the testator's death. What process does this begin?
A. Accession B. Escheat C. Intestate succession D. Probate
14. A living trust is:
A. always irrevocable and created in a will B. always irrevocable but never created in a will C. always revocable and created in a will D. sometimes revocable, but not created in a will
15. In California, a spouse may provide that his or her one-half interest in all community property will automatically transfer to the other spouse upon her death by using a:
A. community property agreement B. joint tenancy agreement C. living trust D. will
16. Someone other than the owner openly resides on a property for five years. She may be able to take title to the property through:
A. accession B. adverse possession C. condemnation D. dedication
17. New dry land next to a lake is exposed by the gradual retreat of the water line. The owner takes title to this land through:
A. accretion B. alluvium C. avulsion D. reliction
18. A married person with two children dies without a valid will. What happens to his community property?
A. It escheats to the state B. The spouse receives all of it C. The spouse receives half and each child receives one-quarter D. The spouse receives one-third and each child receives one-third
© 2009 Rockwell Publishing 3
19. A government takes title to a portion of a private citizen's property, in order to widen a road. In return, the government pays the owner the fair market value of the land that was taken. This occurs through what type of legal action?
A. Condemnation B. Dedication C. Eminent domain D. Escheat
20. A developer must give land that he owns to the government as part of the subdivision permitting process. The land will be used for streets and sidewalks. This is known as:
A. adverse possession B. condemnation C. statutory dedication D. voluntary dedication
© 2009 Rockwell Publishing 4