Property Rights of the Surviving Spouse
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Collapse ▲[Farm Law editor’s note: the following piece is in draft pending academic peer review, and written as part of the series Farm Law: Owning, Managing and Transferring Farm Interests, sponsored by the North Carolina Tobacco Trust Fund Project # #583400-10363. Comments to rabrana2@ncsu.edu are welcome.]
Estate Administration
The death of a spouse is a heart-rending time for family, particularly the surviving spouse. Often, a married couple’s estate plan consists of identical wills, each naming the other as executor of the deceased spouse’s estate. In a period of mourning it is difficult to immediately undertake the tasks associated with estate settlement. In most cases, there is no urgency to open an estate (i.e. there is no short-term deadline) with the county clerk of court, and the surviving spouse should attend to more immediate matters of mourning with family and funeral arrangements. As the surviving spouse does begin to address estate matters, it is helpful that they understand their marital rights in property and inheritance. This article provides an overview.
Estate plans should address property disposition upon the death of either spouse, or both dying simultaneously or near simultaneously (as in a common accident). Knowing that one spouse will likely predecease the other, steps should have been taken beforehand to ensure that the surviving spouse has support and control over needed assets without requesting assistance from the county clerk of court who oversees estate settlement. In the event of a simultaneous death, couples should ensure that a personal representative can immediately take charge of the estate, particularly critical when there are minor children. A will is the simplest way to identify the person who will have authority to settle and dispose of your estate according to your wishes.
When a person dies with a valid will, that person has died testate. Without a will, a person has died intestate, and their property will pass according to the North Carolina’s intestate succession statute. In such event, someone in the family will have to step forward for appointment as personal representative, or a non-family member may be recruited by the clerk of court to serve as personal representative, to dispose of your estate. Sorting out matters when little or no planning has been done can be a challenge even without the burden of grief over a deceased loved one. This paper discusses steps to take to ensure property passes in an orderly and cost effective manner, with a focus on the rights of the surviving spouse.
Jointly Owned Property
In North Carolina, property owned jointly by spouses, with a right of survivorship, automatically passes to the surviving spouse upon the first spousal death. Property
held this way is called tenancy by the entirety. Property purchased together as spouses is presumed to be jointly held, though property brought to the marriage or inherited by one spouse during the marriage is not considered jointly held. The surviving spouse automatically becomes the sole owner of property held as tenancy by the entirety, and is not disposed of by a will or otherwise disposed of by the intestate succession statute if there is no will. Property that may be titled jointly includes land and its fixtures, and personal property including automobiles and investment and banking accounts. Any property may be titled by its owner to include their spouse to render the property joint property with right of survivorship.
Real property owned by one spouse can easily be titled as joint property between the spouses with a deed, whereby the spouse-owner deeds the property from “Grantor (name) to Grantee (name) and Spouse (name) to be held as tenants by the entirety.” Investment accounts can be jointly titled with a visit to the entity managing those accounts. For automobiles, a change of registration by the title owner at the Division of Motor Vehicles will create survivorship in the automobile.
The Year’s Allowance
A surviving spouse is entitled to an upfront payment of a sum of money set by statute from the deceased spouse’s personal property estate. In 2019, this allowance increased from $30,000 to $60,000. The year’s allowance is available to the surviving spouse whether or not he or she petitions for an elective share, and it is not subject to the claims against the decedent’s estate by creditors. The year’s allowance is paid from the personal property of the estate, and if there is insufficient property the unpaid portion serves as a lien on the estate to be paid as the executor if other personal property comes to the estate. The year’s allowance is not paid from real property, and insufficient personal property does not require the sale of real property.[1] The year’s allowance is deducted from bequest in the will and from an elective share claimed (see below). For children under eighteen years (and under 22 years old if in college; under 21 if incompetent) an allowance of $5000 per child is set aside.[2] If the estate does not hold enough personal property to satisfy all allowances, they are prorated to exhaust the personal property. The year’s allowances are requested by filing Form AOC-E-100.
Intestate Share of Surviving Spouse
A spouse is the one person by law that cannot be disinherited, or in other words has a right to an inheritance by the simple fact of their marriage. (Note that marriage in North Carolina is an affirmative officiated act sanctioned by the state; there is no common law marriage in North Carolina whereby a lifelong partner accrues rights to property.) Prior to the passage of the present North Carolina intestacy law in 1960, surviving spouses had the mere entitlement of dower (for widows) and curtesy (for widowers), which amounted to a life estate in property that terminated at the surviving spouse’s death.[3] The surviving spouse is guaranteed an inheritance based on the intestate succession statute or by statute in the event the other spouse makes an inadequate total devise and bequest in his or her will (in modern times, spouse is a gender neutral concept, with no sex having preference in the law).
Persons with no rights of inheritance are everyone else: children, parents, grandparents and siblings and their children (and anyone else), and the law does not require judicial discernment of decisions to deny certain individuals inheritance (unless other factors are present).
In the event a spouse dies intestate (without a will), North Carolina’s Intestate Succession Act[4]provides for spousal inheritance based on variables of number of children of the deceased and whether the property is real or personal. First and foremost, the surviving spouse (like any heir under the Act) must survive the decedent by 120 hours to secure rights to property under the statute.[5] Below is a summary of how a surviving spouse inherits under the Intestate Succession Act.
- If the decedent spouse is not survived by any lineal descendants or a parent, the surviving spouse gets title to 100% of the real property, and 100% of the personal property. Note that the lineal descendants do not have to be the issue (offspring) of the decedent spouse and the surviving spouse; the children can be from a previous marriage or out of wedlock. Legally adopted children are lineal descendants.
- If the decedent spouse is not survived by any lineal descendants, but is survived by at least one parent, the surviving spouse receives one-half of the real property (held in co-tenancy with the deceased spouse’s parent), and $100,000 plus one-half of any personal property value over $100,000. In other words, if the total personal property of the estate is $100,000 or less, the surviving spouse all of it.
Consider this illustrative scenario:
Leopold, a bachelor with no children, owns an apartment in New York City and has personal property holdings. Leopold marries Molly, and they have no children. Leopold dies without deeding a spousal entireties interest to Molly, nor does he execute a will. At his death, Leopold has pre-marriage financial and art investments valued at $500,000. Leopold is survived by his parents, Rudolph and Ellen. Molly now owns a ½ undivided co-tenancy interest in the apartment with Leopold and Ellen, who each own a ¼ co-tenancy interest. Molly gets $350,000 in personal property ($100,000 + (.5 x $500,000). Leopold and Ellen each get $175,000.
- If the decedent spouse is survived by only one child (or the lineal descendant of that child if deceased), the surviving spouse gets ½ undivided co-tenancy interest in the real property, and $60,000 plus one-half of the personal property above $60,000. (Note: lineal descendants generally cut off intestate inheritance rights of the decedent’s parent.)
- If the decedent spouse is survived by two or more children (or the lineal descendant of one of the two children if deceased), the surviving spouse gets one-third of the real property, and $60,000 plus one-third of the personal property above $60,000.
The dollar figures ascribed to personal property value are irrespective of the liquidity of the property. In other words, the Intestate Succession Act does not imply that the surviving spouse gets to choose to receive the available cash if such is above the threshold value, nor does the surviving spouse get to choose which items of personal property will satisfy her share. He or she simply owns the property as a co-tenant with the lineal descendants in whatever fraction their number imposes upon the situation.
Consider this altered scenario:
Leopold and Molly had two children. Leopold dies with the same assets without a will. Rudolph and Ellen’s right of inheritance is cut off by virtue of the children. Molly receives one half undivided co-tenancy interest in the apartment, which she shares with her children who each own a one-fourth undivided co-tenancy interest in the apartment. Molly now only gets $60,000 plus $146,670 (one-third of $440,000 [i.e. $500,000 – $60,000]). The children each get $146,670 in personal property value. In this scenario, Molly and her children must make decisions about the apartment, and decide how to divide up the personal property.
Testate Share of Surviving Spouse
As noted above, you can devise and bequeath to your spouse all of your real and personal property (or rather that which is not jointly titled) to your spouse, even if you have children. The decision to leave all or however much of your real and personal property to your spouse is a right you possess as owner of the property. However, as with all such estate matters, numerous factors go into this decision, including the nature of the property and its legacy value to your family heritage, concerns about your children losing inheritance in the event your surviving spouse remarries, concerns about the spouse losing property to a future estranged spouse in a divorce, etc. Depending on the extent of your estate, there may also be estate tax consequences to the eventual estate of your surviving spouse.
The Surviving Spouse’s Elective Share
If you decide to devise and bequeath your real and personal property to other individuals in addition to your spouse, you must ensure he or she receives a minimum amount set by statute according to the length of marriage. If you’ve been married 15 years under current law, it’s half your estate. Under prior law (before 2013), the share had to be at least the share he or she would have been entitled under the Intestate Succession Act (i.e. according to the inheritance take scenarios in the statute). This amount of property is known as the spouse’s elective share. If the deceased spouse did not leave at least the statutory intestate share to the surviving spouse, the latter has a right under state statute to request and collect that amount as inheritance.[6]
As noted above, modern law is gender neutral and no presumptions are made based on sex of spouse, unlike older law where the elective share was an estate allocation reserved exclusively to the female spouse. To claim an elective share, the surviving spouse must – within six (6) months of the date of the issuance of testamentary letters (the opening of the probate estate) – petition the Clerk of Court for the county where the deceased spouse’s will has been submitted for probate. This limited period is not tolled due to incapacity of the surviving spouse, and is only available to a living surviving spouse (i.e. not claimable by his or her estate). An attorney-in-fact under a power of attorney may file the petition on the surviving spouse’s behalf.[7] An enforceable prenuptial agreement presented by the executor of the estate will likely negate the surviving spouse’s elective share right.
The value of the elective share is 1) the “total net assets” less 2) the value of “property passing to the spouse.” In other words, the elective share takes into account property that passes to the spouse outside of the will, such as insurance and joint interests in property. Prior to 2013, the elective share was calculated like criteria of the intestacy statute, where “total net assets” was determined according to other survivors of the testate decedent, whether named in the will or not, with additional weight placed on whether this was a first or successive marriage of the decedent. However, for testate decedent’s dying after October 1, 2013, the elective share is determined according to length of marriage, and lineal descendants are no longer a factor. Thus the total net assets are calculated as follows:
If the surviving spouse was married to the decedent for less than five years, fifteen percent (15%) of the Total Net Assets.
- If the surviving spouse was married to the decedent for at least five years but less than 10 years, twenty-five percent (25%) of the Total Net Assets.
- If the surviving spouse was married to the decedent for at least 10 years but less than 15 years, thirty-three percent (33%) of the Total Net Assets.
- If the surviving spouse was married to the decedent for 15 years or more, fifty percent (50%) of the Total Net Assets.[8]
“Total Assets” means the value of the decedent’s total assets less any claims and liabilities against the estate (other than the elective share claim). The value is generally measured as the amount of property that would have passed by intestacy, as well as property that has been placed in a revocable trust. For property held as tenants by the entirety, only one half the value of the property (i.e. the deceased spouse’s interest) is included in the total net assets valuation.[9] (For any property owned by the deceased spouse as a joint tenant with right of survivorship with others, total assets includes a presumptive fractional share equal to the other joint owners, unless a smaller or greater contribution to ownership can be proven.)[10] The resulting figure is reduced to “total net assets” with the deduction claims against the estate from creditors, including survivor allowances to anyone other than the surviving spouse.
“Property passing to the spouse” is defined as property that includes: the amount of a “year’s allowance (see above), the value of any appointments of property from the will, the value of any property transferring by Trust or intestacy, the value of any life insurance payout on the death of the spouse, and one half of the value of any property that was made joint property during the marriage (i.e. property brought to the marriage or inherited during marriage and subsequently retitled as joint/tenancy by entireties property). Property passing to the spouse also includes pension payments and monies from joint investment accounts, but does not include surviving social security benefits.[11]
The valuation of assets for the above calculations is managed by the Clerk, and generally set at the date of death, though some real property interests may have an earlier valuation. The valuation and disposition of property comprising the elective share may be referred to mediation at the discretion of the Clerk of Court.[12] After October 1, 2020, the fee for filing an elective share is $200.[13]
Spouse’s Election to Take a Life Estate
In lieu of taking an intestate share, or of taking an elective share against a will, the surviving spouse may elect to take a life estate in one-third of the value of all the real property owned by the deceased spouse at any time during the marriage. This includes any property sold by the deceased spouse in which the surviving spouse did not join as grantor. This life estate election maneuver benefits the surviving spouse who did not share title to the house in which he or she lived, and otherwise wishes to protect the house against being sold to satisfy claims against the estate. The property subject to the life estate election is free from liquidation to satisfy debts of the estate (except for a purchase money mortgage lien on real property of the estate), which would be useful in the event an decedent spouse leaves behind large debts with little cash or personal property available to satisfy creditors.
If the deceased spouse owned the home in his or her name, the life estate may include the home regardless of its value. The surviving spouse must elect to include the home, and he or she must occupy it at the death of the deceased spouse. The election includes the land upon which the house is situated, plus outbuildings, improvements, and easements, and removes the real property as an available asset to pay claims not otherwise secured against the property by a deed of trust. This election also conveys complete ownership of the household goods and furnishings (i.e. personal property) to the electing surviving spouse, and this personal property also may not be used to satisfy claims against the estate.
The election of a life estate is made by filing a petition with the Clerk of Court. If electing to take a life estate instead of an elective share against a will, the petition election must be filed within 12 months of the date of death if the will is not probated (i.e. letters testamentary are not issued); if the will is probated and letters issued, the life estate election must be filed within one month after the termination of the period to file an elective share, or 7 months from the date the letters are issued and executor appointed (6 months + 1 month).[14] In the case of a life estate election in lieu of an intestacy share, the election must be made 12 months following appointment of an estate administrator, or roughly 120 days after the administrator has first published the required public notice for parties to make claims against the estate.[15] If the share of the surviving spouse is tied up in litigation (such as a will caveat by an heir), the Clerk has a reasonable time to issue an order entering the life estate.
Consider this scenario:
Leopold inherited several tracts of land from his father Rudolph, including the house that he now lives in with his new spouse, Molly. During their marriage, Leopold sold most of his farmland to his pal Paddy, but neither Paddy nor Leopold thought to have Molly sign the deed of conveyance. Following Leopold’s death, Molly elects to take a life estate in Leopold’s real property that he owned during their marriage. Depending on the values of property, Molly is likely entitled to life estate interest in some of the land that Leopold sold Paddy. As such, she could have rights to farm rent, a share in production, and otherwise becomes a required signatory to any loan documents pledging land as collateral. (This is one reason spouses are always required to sign deeds to convey property of their spouse: it extinguishes [“quits”] all future claims to that property.)
Effective October 2020, the statute authorizing the surviving spouse’s life estate election was modified to provide that a spouse can waive her inchoate life estate interest by a written waiver (other than signature on a deed of conveyance) or a written declaration allowing the property to be sold or encumbered without his/her signature.[16] Further, real property that has been disposed in a partition proceeding may not be subject to a surviving spouse’s life estate election.[17]
Summary Probate Proceeding for Surviving Spouse
If the surviving spouse is the sole beneficiary under the will, or the sole heir if there is no will, he or she may file a Petition for Summary Administration with the Clerk of Court (using Form AOC-E-905).[18] If the Clerk determines that summary administration is appropriate, the Clerk enters an order to that effect and no further estate administration is necessary, and no personal representative is appointed (e.g., the spouse does not serve as executor to dispose of debts and assets). If the surviving spouse is granted summary administration, the spouse will remain liable for any debts of the deceased spouse which may be brought against the estate. This liability extends only to the value of the inherited property.[19]
Conclusion
The North Carolina Administrative Office of the Courts (NCAOC) has published a handy pamphlet summarizing the probate process, which can be found at their nccourts.gov website. Additional pieces in this fact sheet series will explore matters of joint titling and estate administration.
Endnotes
[1] N.C.G.S. §29-18. See Denton v. Tyson, 118 N.C. 542 (1896)
[2] N.C.G.S. § 30-17
[3] Prior to the 1960 law, widows received a life interest in ⅓ of the real property, whereas widowers received a life interest in all of the real property if a child was produced by the marriage.
[4] N.C.G.S. §29-1 et seq.
[5] N.C.G.S. § 29-13
[6] See generally N.C.G.S. §30-3.1
[7] N.C.G.S. § 30-3.4(b)
[8] N.C.G.S. § 30-3.1(a)
[9] N.C.G.S. § 30-3.2(3f)
[10] S.L. 2020-60 (2020). This change became effective October 1, 2020.
[11] N.C.G.S. § 30-3.2(3c)(a)
[12] N.C.G.S. § 30-3.4(d1)
[13] S.L. 2020-60 (2020).
[14] N.C.G.S. § 29-30(c)(1)
[15] N.C.G.S. § 29-30(c)(2)
[16] N.C.G.S. § G.S. 29-30(a)(1a) and (3a)
[17] N.C.G.S. § G.S. 29-30(a)(3b)
[18] N.C.G.S. § 28A-28-1 et seq.
[19] N.C.G.S. § 28A-28-6
Acknowledgments
Previous publications addressing this topic were prepared by Theodore A. Feitshans, J.D., Mark Megalos, Ph.D., and Carolyn L. Bird, Ph.D., Carol A. Schwab, Nathan M. Garren, and Barrie Balzli Stokes, NC State University.
The current author is solely responsible for any errors or omissions in this current.
Content loaded to Agricultural and Natural Resource Law portal, including this narrative, is support
ed by The North Carolina Tobacco Trust Fund Commission (TTFC) (Grant award 2019-001-16), titled “So You’ve Inherited a Farm: An Heirs Guide”).