Generally, when someone passes away and leaves you land, you can do whatever you want with the land, including selling it. However, sometimes the owner can choose to leave you with lifetime rights to the land -- a so-called life estate -- instead of giving you outright ownership, whether the goal is to keep creditors at bay or to control the way the land is transferred after you pass away. Like other states, North Carolina permits landowners to give life estates, but special rules apply to this type of transfer.
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Life estates can be especially beneficial when the land is the family home. For example, a husband might write in his will that he leaves his wife a life estate in their home and the remaining ownership rights to his son. When the husband dies, his wife becomes a “life tenant” and continues to live in their home. When she passes away, the son inherits the property in full. At that time, once he has full ownership rights, the son can transfer or keep the property. Like other interests in real estate, life estates are conveyed, or given, by a recorded deed. However, unlike other interests, life estates terminate automatically when the holder of the life estate dies. There is no requirement to create a new deed once the owner of the life estate dies because the deed granting the life estate also identifies who receives the land when that life tenant dies.
Life Tenant Responsibilities
Since life tenants don’t own full rights to the property, they cannot treat it in any manner they please. In contrast, they have certain duties and responsibilities under North Carolina law. For example, life tenants must pay taxes on the property; the person to receive the land when the life tenant dies can sue the life tenant if she fails to pay such taxes. Similarly, the life tenant must avoid waste, which includes failing to keep the property in good repair, harming the property or otherwise decreasing its value.
Elective Life Estate
When someone dies without a will, or dies with a will disinheriting his spouse or leaving her very little, North Carolina allows the surviving spouse to choose an “elective share” of the estate instead. This amounts to a certain percentage of the decedent's net assets -- a percentage that varies, for example, depending on how many children he had. Alternatively, the surviving spouse can take her elective share in the form of an "elective life estate," which consists of a life estate in one third of the deceased spouse’s real estate, plus a full life estate in the marital home. This option might be attractive when a deceased spouse leaves more debts than assets. The decedent’s creditors cannot take the surviving spouse’s elective share to pay the decedent’s debts, so she can remain in her home.
When more than one person owns an interest in real estate, it can be difficult for the owners to agree on whether to sell the property, so North Carolina law allows such persons to file a partition action to force a sale of the property. North Carolina law does not allow a life tenant to be forced off the property as part of a partition sale. Only the remainder can be sold, with the life tenant retaining her interest or voluntarily joining in the partition sale. When the land is sold, the proceeds are distributed according to the shares owned by each person; life tenants have the right to receive payment for the value of their ownership interest in the sold land. Under North Carolina law, the value of the life tenant’s share must be paid to him annually or in a lump sum based on what the value is projected to be based on his life expectancy.
References & Resources
- Poyner Spruill LLP: Recent Developments in Estate and Trust Administration; Craig G. Dalton Jr.
- Investors Title Company: Newsletter: North Carolina’s “Statutory Dower”
- North Carolina General Assembly: North Carolina General Statutes, Chapter 29
- Onecle: North Carolina General Statutes, Section 46-24
- The Triad Lawyer: Life Estate Value of Real Property
- North Carolina General Assembly: North Carolina General Statutes, Chapter 105
- North Carolina General Assembly: North Carolina General Statutes, Chapter 1, Article 42
- De Ondarza Simmons, PLLC: Partition Action - Forcing the Sale of Shared Real Property
- Onecle: North Carolina General Statutes, Section 46-23