An important update on the new elective share rules in NC –
Guest Post by Lauren T. Millovitsch, Esq. (learn more about Lauren at the end of this post)
As many of you know, you have a lot of freedom regarding how to structure your estate plan – you can leave assets outright or in trust to family members, friends, or charities. If your kids are irresponsible or you don’t have a relationship with them, you can completely cut them out. However, in North Carolina there is one person that you cannot disinherit – your spouse.
Unless you and your spouse have a written agreement that provides otherwise, such as a premarital agreement, under North Carolina law you must leave your spouse a certain percentage of your assets when you pass away, whether outright or in qualifying trust. If you fail to do so, your spouse has the right to file a claim against your estate to obtain her required share (called the “elective share”) under North Carolina law.
Recently, the North Carolina legislature updated how the spouse’s share should be calculated. Previously, it was a fraction of your total net assets. The fraction was tied, to some degree, to North Carolina’s intestacy statute, which provides how your assets should be distributed if you die without a Will. There was an additional reduction of the spouses share if the surviving spouse was a second or successive spouse, the decedent had children from a prior relationship, and the decedent and the surviving spouse had no children together.
Effective October 1, 2014, the elective share calculation changes so that the surviving spouse is entitled to receive a percentage of your net assets, which percentage is based upon years of marriage. Below is a chart showing the applicable percentage based on the length of marriage.
|Length of Marriage||Applicable Share Percentage|
|Less than 5 years||15%|
|At least 5 but less than 10 years||25%|
|At least 10 but less than 15 years||33%|
|15 years or more||50%|
So, assuming you don’t have an agreement that provides otherwise, if you’ve been married 15 or more years, you must leave your spouse 50% of your total net assets. Total net assets includes all of your assets – real estate, bank accounts, retirement accounts, life insurance, and even assets you inherited from your family, just to name a few. If you only leave your spouse 30% of your assets, your spouse can file a claim against your estate to obtain the difference. This claim process is lengthy and costly to your estate.
Thus, if you wish to leave most of your assets to kids from a prior marriage or wish to leave only a small percentage of your estate to your spouse, you should contact an estate planning attorney to help you craft an estate plan that does not run afoul of the elective share rules. This is very important for good financial planning outcomes and is another smart Financial Strategy for Life!
Lauren T. Millovitsch, Esq. is an estate planning attorney with Blanco Tackabery & Matamoros, P.A. In addition to preparing general estate planning documents, she advises clients in the areas of estate, gift, and generation-skipping transfer taxes, as well as charitable and business succession planning. Lauren was recently named by Business North Carolina magazine as a member of the 2013 Legal Elite, in the category of Young Guns (Best Attorneys under Age 40). This prestigious honor, awarded to less than 4% of the state’s attorneys, distinguishes her as one of North Carolina’s top lawyers.