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Co-ownership

One piece of property can also have two or more present owners, rather than being owned by just one individual. Co-ownership can be for real property as well as personal property. In legal language, it is owned “in undivided interests.” There are three types of such co-ownership: tenancy-in-common, joint tenancy with the rights of survivorship, and tenancy by the entirety. The type of co-ownership affects:
1. Who will inherit property
2. How it will be taxed for estate tax purposes
•     Tenancy-in-Common. Tenants-in-common have undivided interests in the same land. Two or more persons may be owners in undivided interests as tenants-in-common. Tenancies-in-common are frequently created by the laws of inheritance. For example, if a widow with two children owns a farm and dies without a will, the two children will each own an undivided one-half interest as tenants-in-common.
There is no right of survivorship between tenants-in-common. Each tenant-in-common can sell or devise (will) his share. For example, if two married brothers own 320 acres as tenants-in-common and one brother dies, his one-half interest would pass to his heirs and be included in his estate for estate tax purposes. It would only pass to the surviving brother if he were an heir designated to receive the property.
If two or more persons own property jointly, it is normally presumed that they own as tenants-in-common unless the deed or title documents clearly indicate that a right of survivorship was intended.
•     Joint    Tenancy. The owners are called “joint tenants.” The joint tenants do not have to be husband and wife. When one joint tenant dies, his or her undivided interest is distributed equally among the surviving joint tenants. This is the characteristic peculiar to joint tenancy, and is referred to as “right of survivorship.”
Under Oklahoma law3 a joint tenancy can be created by the present owner deeding property to himself or herself and another as joint tenants or by a third party transferring property to two or more persons in a deed that specifies they will own as joint tenants. Use of words “and/or” alone is insufficient to create joint tenancy. Since some institutions or firms do not rigidly follow the law in this respect, it is best to review and decide with your legal counsel how titles should be held for bank accounts, savings and loans, bonds, stocks, insurance policies, and automobiles. Inadequate or improper wording may result in unnecessary litigation or additional estate taxes. A common abbreviation designating joint tenancy, as used here, is “J.T.W.R.O.S.,” meaning joint tenancy with rights of survivorship.
A joint tenant can sell or mortgage their interest, but cannot dispose of it by will. If a husband and wife own real property as joint tenants and the husband dies, the wife takes full ownership to the exclusion of the children. It is possible for the joint tenancy to be broken by one joint tenant conveying his or her interest outside the existing joint ownership.
For estate tax purposes, generally the entire value of joint tenancy property is included in the estate of the first joint tenant to die, but it may be reduced by the proportionate value contributed by the survivors.4 There is an exception for gifts of joint tenancy property to a spouse which occurred after December 31, 1976. See post “Taxing Joint Tenancy Property.”
•     Tenancy    by    the    Entirety. Tenancy by the entirety is a type of joint tenancy between husband and wife that is characterized by the fact that neither party can sever it without the consent of the other. Upon the death of one, the survivor acquires title to the property. This type of ownership is similar in nature to joint tenancy. Therefore, it is recommended that the deed or contract specifically refer to tenancy by the entirety if this type of co-ownership is desired.

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PREVAILING RISK ATTITUDES

An efficient mental risk-return calculus is a critical component for business success under uncertainty.
. . . the overall risk perception held by the public is often worse than reality. Risk management can assist you in making more profits in areas where over-conservative investors stay out. The upside is that, if risk is really low, your rivals will be over-valuing the risk. The downside is that, if risk is really higher than you think, you will stand to pay the price of the risk hazard or damage.
The efficient portfolio theory and mainstream mathematical models only set a basic foundation for analysis; they do not represent the risk management goal itself. Thus, they can become inclined to set a level of return that is not proportionate to an acceptable level of risk. We have seen that investors and managers often inadvertently end up being risk-seeking.
Sophisticated financial modelling can lead companies into a false sense of security where theory has not been adequately back-tested to check if it conforms to reality. Thus:

• they have lower assessment of the risk probability and impact;
• the impact of worst-case scenario is less dramatic than imagined;
• the maximum return is potentially higher than thought;
• such phenomena of risk misperceptions are often observed in practice, but not always admitted.

Weak banks and companies that are more prone to failure have inherent shortcomings such as a CEO and board that are likely to embark on unsuitable strategic missions. Reputation and prestige of the guilty party, as we have seen in the Credit Lyonnais case, may be enough to stop adequate risk management exercises taking off in the first place.
Furthermore, the internal checks and balances offered by the oversight board may have been overidden, so defects in the company’s structure are prevalent.
At the lower organisational level, there will be risk management weaknesses that allow major errors to occur. The Leeson or Rusnak cases are examples of a failure to incorporate suitable control elements. Financial modelling errors are examples of less glaring unintentional mistakes in risk management.
Setting up a departmental risk management function will monitor a risk hazard, and train staff. Under the trend of short-termisim in career and instant gratification, there are limits to how much passive personnel watching can achieve.
It is traditionally incumbent upon the industry watchers and regulators to monitor the operations and losses on a “watch list”, then to sound alarm bells. Yet, this corporate warning is too late for many shareholders. The auditors are meant to perform a regular financial health-check, as is done before a merger or acquisition.

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