North Carolina law gives surviving spouses certain statutory rights that can override, or substitute for, what a deceased spouse’s Will provides or what would otherwise occur under the Intestate Succession Act.
One such right that will not be addressed in detail here is the Spousal Year’s Allowance, which only applies to personal property. This blog instead focuses on two other major surviving spouse rights that can significantly affect real property interests:
- The Elective Share, codified in Article 1A of Chapter 30 of the North Carolina General Statutes; and
- The Election to Take a Life Estate in Lieu of an Intestate Share or Elective Share, codified in Article 8 of Chapter 29 of the North Carolina General Statutes.
These rights are not automatic gifts. Rather, they are statutory elections that generally require affirmative action and strict compliance with procedural deadlines.
Below, I will explain each election and then compare the two.
The Elective Share
The elective share is a surviving spouse’s right to claim an amount tied to a percentage of the deceased spouse’s Total Net Assets (“TNA”), reduced by the value of property already passing to the surviving spouse.
Stated differently, the elective share is designed to ensure that a surviving spouse receives at least a statutory minimum portion of the deceased spouse’s overall wealth, while avoiding a double recovery.
North Carolina uses a marriage duration schedule to determine the applicable percentage of the Total Net Assets:
- If the surviving spouse was married to the decedent for less than five years, the applicable share is 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 ten years, the applicable share is twenty-five percent (25%) of the Total Net Assets.
- If the surviving spouse was married to the decedent for at least ten years but less than fifteen years, the applicable share is thirty-three percent (33%) of the Total Net Assets.
- If the surviving spouse was married to the decedent for fifteen years or more, the applicable share is fifty percent (50%) of the Total Net Assets.
Importantly, the elective share is not limited solely to probate assets or property passing under a Will.
The Total Net Assets concept can include certain non-probate assets and transfers, including life insurance proceeds, jointly owned property, payable-on-death and transfer-on-death accounts, other beneficiary-designated assets, and certain transfers in which the decedent retained significant control or beneficial interests. In many respects, the elective share calculation resembles the concept of a gross estate for federal estate tax purposes.
This creates substantial complexity in the administration of elective share claims because the claim itself is filed within the probate estate proceeding, yet the calculation may require investigation into numerous non-probate assets.
When a surviving spouse files an elective share claim, the Personal Representative generally has two months to provide the Clerk of Superior Court with sufficient information to calculate the elective share.
Practically speaking, this can be difficult. Personal Representatives do not always have easy access to information regarding non-probate assets. Financial institutions may resist providing information, and subpoenas or court orders may sometimes become necessary.
Additionally, once the elective share is determined, the Personal Representative may need to seek contribution or recovery from third parties or recipients of non-probate assets in order to satisfy the elective share award.
The elective share can apply whether the decedent died testate or intestate.
For example, under North Carolina’s Intestate Succession Act, when a decedent is survived by a spouse and two or more children, the surviving spouse receives only a one-third interest in the decedent’s real property. Accordingly, a surviving spouse married to the decedent for fifteen years or more may still seek an elective share if the spouse’s total share of the estate does not otherwise reach fifty percent of the Total Net Assets.
Generally speaking, a claim for elective share must be filed within six months after the issuance of Letters Testamentary or Letters of Administration. It is also important to note that the right to the elective share can be waived in a written agreement between spouses, before or during marriage, or upon separation.
The Life Estate in Lieu Election
In lieu of taking an intestate share or, in some circumstances, in lieu of taking an elective share, a surviving spouse may elect to take a life estate in one-third in value of all real property in which the deceased spouse held an inheritable interest during the marriage, subject to various statutory exceptions and limitations. This election is often viewed as a modern statutory descendant of the historical concepts of dower and curtesy.
One particularly important feature of North Carolina’s life estate election is the ability of the surviving spouse to elect a life estate in the marital residence, the “usual dwelling house”, occupied at the time of death, together with associated improvements, outbuildings, easements, and land reasonably necessary for the use and enjoyment of the residence. The surviving spouse may also take fee simple ownership in the household furnishings of the usual dwelling.
Importantly, the surviving spouse may elect a life estate in the usual dwelling house even when the value of that property exceeds one-third of the deceased spouse’s total real estate holdings.
If the value of the dwelling is less than the surviving spouse’s full one-third life estate entitlement, then the surviving spouse may also receive a life estate in additional real property sufficient to bring the total life estate interest up to one-third in value of all qualifying real estate.
The life estate in lieu election is typically implemented through a petition and proceeding before the Clerk of Superior Court in the county where the deceased spouse’s estate is pending and requires a summons and service on interested parties. The petition must identify interested parties, including heirs, devisees, Personal Representatives, and others with interests in the affected property. Notice must also be recorded with the register of deeds in any county where real property of the deceased spouse being claimed as part of the petition lies.
The statute further contemplates the appointment of three disinterred commissioners to allot and set apart the life estate interest. A final report describing the allotted property is then filed with the court and recorded in the appropriate county land records.
The life estate in lieu election is highly time-sensitive. Failure to timely and properly exercise the election can result in a complete waiver of the right. The applicable deadlines are somewhat unusual and can be confusing in practice.
If no estate is opened within twelve months of death of the deceased spouse, the election must be made within twelve months from the date of death. If an estate is opened, the deadline depends on whether the estate is testate or intestate. In testate estates, the deadline is tied to the deadline for filing an elective share claim. In intestate estates, the deadline is tied to the creditor claims period and is one month after the expiration of the time limit for filing claims against the estate. The deadline is the earlier of the two, so if an estate is not opened within 12 months the deadline is always 12 months from date of death of the deceased spouse.
When an estate is opened within 12 months, the deadline for testate estates effectively becomes six months after the issuance of Letters Testamentary or Administration. When an estate is opened within 12 months, the deadline in intestate estates often falls approximately four to six months after the estate is opened, but could be longer depending upon when the Personal Representatives publishes the notice to creditors and the period provided to file claims which must be at least three months.
The statute also identifies several circumstances in which a surviving spouse may be barred from asserting the life estate election, including prior waivers, joinder in conveyances, and other statutory disqualifications.
Comparing the Elective Share and the Life Estate in Lieu Election
The elective share and the life estate in lieu election serve very different purposes.
The elective share is fundamentally a value-based claim against the deceased spouse’s overall asset pool. In most situations, it results in the surviving spouse receiving property outright and in fee simple, meaning the spouse generally has unrestricted ownership and may later transfer the property or leave it to their chosen beneficiaries at death. One important exception involves certain trusts that may qualify as countable elective share trusts and which prohibit the surviving spouse’s ultimate control over the property allotted for the elective share. Certain trusts for the sole benefit of the surviving spouse and administered by a nonadverse trustee may satisfy elective share requirements without giving the spouse the ability to leave the undistributed property to their beneficiaries.
Conversely, the life estate in lieu election never provides outright ownership (except in household furnishings). Instead, it grants only a life estate interest, meaning the surviving spouse generally receives the right to use, occupy, or derive income from the property during the spouse’s lifetime, but ownership ultimately passes to the remainder beneficiaries upon the spouse’s death.
The elective share is often more advantageous where the estate contains substantial liquid assets, investments, retirement accounts, or non-real-estate wealth. By contrast, the life estate in lieu election may be more attractive where housing stability is the primary concern, particularly when the marital residence is the estate’s principal asset or where the surviving spouse’s most immediate concern is remaining in the home. Similarly, where rental properties or farmland generate income, a life estate structure may provide a surviving spouse with an ongoing lifetime income stream tied to the real estate itself.
Another important distinction is that the elective share does not necessarily entitle the surviving spouse to any specific asset. Rather, it guarantees only a minimum percentage of the Total Net Assets. The Personal Representative often retains substantial discretion regarding how the award is ultimately funded and satisfied.
In many cases, the elective share will likely be the more economically attractive option for surviving spouses. However, where the right to remain in the marital residence or an income stream from rental properties or farmland are paramount, the life estate in lieu election may be the preferable choice.
Summary
In North Carolina, both the elective share and the life estate in lieu election are powerful statutory protections for surviving spouses, but they operate in fundamentally different ways.
The elective share is primarily a value based claim tied to a broad statutory asset pool, while the life estate in lieu election is a real-estate-focused remedy designed to preserve housing rights and lifetime use of property.
Determining which election is preferable depends heavily on the composition of the estate, the nature of the assets involved, the surviving spouse’s financial circumstances, and the spouse’s long-term goals and needs.
Because these elections involve strict deadlines, procedural requirements, and complicated valuation and title issues, surviving spouses should seek legal advice promptly when these issues arise.
Andrew M. Brower is a Board Certified Specialist in Estate Planning & Probate Law at Law Firm Carolinas, which has five offices and a statewide practice. For questions about estate planning and administration, wills and trusts, guardianships, or Medicaid/long-term care and asset protection, contact Law Firm Carolinas.