Even though North Carolina has neither an estate tax nor an inheritance tax, the federal estate tax still applies to North Carolinians, depending on the value of their estate. Here’s a breakdown of North Carolina’s inheritance laws, what happens if you die without a valid will and what happens to your property.
A financial advisor can help you create an estate plan for your family’s needs and goals.
Does North Carolina Have an Inheritance or Estate Tax?
North Carolina does not collect an inheritance tax or an estate tax. However, state residents should remember to take into account the federal estate tax if their estate or the estate they are inheriting is worth more than $12.06 million. Even if you are a resident of North Carolina, if you inherit property from another state, that state may have an estate tax that applies. You may also have to file some taxes on behalf of the deceased.
Other Necessary Tax Filings
When you die, there are many federal and estate tax situations that need to become a priority for those who survive you. Besides the state estate tax, you need to look out for the following:
- Final individual federal and state income tax returns: Federal and state tax returns are due by Tax Day of the year following the individual’s death.
- Federal estate/trust income tax return: Returns are due by April 15 of the year following the individual’s death.
- Federal estate tax return: The return is due nine months after the individual’s death, though an automatic six-month extension is available if asked for prior to the conclusion of the nine-month period. This is required only of individual estates that exceed a gross asset and prior taxable gift value of $12.06 million ($24.12 million for couples).
Dying With a Will in North Carolina
To make a will legitimate in North Carolina, which does not use the Uniform Probate Code, you must sign your will in front of two witnesses, and your witnesses must sign your will in front of you. You do not need a lawyer or a notary to make your will legal. However, you can make your will “self-proving” by going to go to a notary if you want to do that. Self-proving speeds up probate because the court can accept the will without contacting the witnesses who signed it.
If the will is deemed valid, the next step is the probate process, which is usually only required if the deceased owned assets in her or his name only. Other assets, also known as “non-probate” property, can generally be transferred to the other owner without probate.
North Carolina offers two ways of avoiding or speeding up probate for smaller estates. One is an affidavit process, which lets you skip probate entirely if the value of the decedent’s personal property, after liens and encumbrances, is $20,000 or less. If the surviving spouse is the sole heir, the amount goes up to $30,000. When the surviving spouse is the sole heir, spousal allowance is not counted under the $30,000 cap.
If the affidavit process is used, you don’t need the simplified probate process. If the surviving spouse is the only heir, a simplified probate procedure is available – as long as the property does not pass through a trust. If the property passes through a trust, you cannot use this option. The simplified probate process, also known as a summary probate process, may be used if the only surviving inheritor or heir is the decedent’s surviving spouse. The spouse must file a petition with the court, along with the will and supporting evidence.
Dying Without a Will in North Carolina
If you die without a valid will, you’ll lose control over what happens to your assets after your death. These assets are “intestate.” The court will follow intestate succession laws to determine who inherits your assets, and how much they get.
The court will appoint someone to serve as administrator of the estate. If there is a surviving spouse, they have first priority to be appointed as administrator. Both executors and administrators are known as “personal representatives” of the estate.
Often there are extenuating factors, but if possible, it’s best not to die intestate and put your loved ones through that kind of stress. If you’re not sure what kind of estate plan you want to make you can get the help of a financial advisor.
Spouses in North Carolina Inheritance Law
If you die intestate with a spouse, your spouse’s inheritance depends on whether or not you have living parents or descendants. Descendants include children, grandchildren, and great-grandchildren. If you have no living parents or descendants, your spouse will inherit all of your intestate property.
If you die with parents but no descendants, your spouse will inherit half of intestate real estate and the first $100,000 of personal property. If there is more than $100,000 worth of personal property, your spouse then inherits half of the remaining personal property. Your parents will inherit half of the intestate real estate and whatever personal property remains after your spouse has received their share.
Children in North Carolina Inheritance Law
If you die with one child or descendants of that child, your spouse will inherit half of intestate real estate and the first $60,000 of personal property. If there is more than $60,000 worth of personal property, your spouse then inherits half of the remaining personal property. Your child or descendants will inherit half of the intestate real estate and whatever personal property remains after your spouse has received their share.
If you die with two or more children, or descendants of those children, your spouse will inherit a third of intestate real estate and the first $100,000 of personal property. If there is more than $100,000 worth of personal property, your spouse then inherits a third of the remaining personal property. Your child or descendants will inherit two thirds of the intestate real estate and whatever personal property remains after your spouse has received their share.
|Intestate Succession: Spouses and Children|
|Inheritance Situation||Who Inherits Your Property|
|Children but no spouse||– Children inherit everything|
|Spouse but no descendants or parents||– Spouse inherits everything|
|Spouse and one child or descendants of one child||– Spouse inherits half of intestate real estate and $60,000 of personal property. If there is more than $60,000 of personal property, spouse inherits half of remaining personal property |
– Child or descendants inherit half of intestate real estate and half of any remaining personal property
|Spouse and two or more children or descendants of those children||– Spouse inherits 1/3 of intestate real estate and $60,000 of personal property. If there is more than $60,000 of personal property, spouse inherits 1/3 of remaining personal property |
– Children or descendants inherit 2/3 of intestate real estate and 2/3 of any remaining personal property
|Spouse and parents||– Spouse inherits half of intestate real estate and $100,000 of personal property. If there is more than $100,000 of personal property, spouse inherits half of remaining personal property |
– Parents inherit half of intestate real estate and half of any remaining personal property
If you die intestate, each of your children will receive an “intestate share” of your property. Legally adopted children have just as much right to their intestate share as biological children do. In addition, if the decedent placed their child up for adoption and that child was adopted by another family – other than your spouse – they are not legally eligible to receive intestate inheritance from the decedent. However, foster children and stepchildren that were never legally adopted by the decedent are not eligible to receive a share as the decedent’s child.
Children born outside of marriage still receive their share as long as they have been legally legitimated under North Carolina law, the decedent acknowledged paternity, or the child was born within one year of the decedent’s death and paternity was established through DNA testing. Children conceived by the decedent can still receive their share if they are born within 10 months of the decedent’s death. Grandchildren will receive a share only if their parent is not alive to inherit.
Unmarried Individuals Without Children
Intestate succession in North Carolina if there is no surviving child or spouse is arranged as in the chart below:
|Intestate Succession: Extended Family|
|Inheritance Situation||Who Inherits Your Property|
|– Parents||– Parents inherit everything|
|– Siblings, but no parents||– Siblings inherit everything|
The intestate process is designed to protect your property and make sure it stays in the hands of your family. However, it is usually best to write your own will to ensure that all your property goes where you want it to.
Non-Probate North Carolina Inheritances
The probate process can be difficult and expensive. However, you have some options when it comes to avoiding probate in North Carolina. Some of the assets that do not have to go through probate and instead go directly to the beneficiaries are listed below.
- Any property in a living trust
- Life insurance policies
- 401(k)s, IRAs, other retirement accounts
- Securities in transfer-on-death accounts
- Pay-on-death bank accounts
- Joint tenancy real property
- Property owned in tenancy by the entirety
Other Situations in North Carolina Inheritance Law
Heirs must survive the decedent by at least 120 hours to receive their inheritance. Relatives conceived before you die but born after the decedent’s death are eligible to inherit as if they had been born while the decedent was alive. However, posthumous relatives must be born within 10 months of your death to be eligible to inherit.
Immigration status is irrelevant when it comes to inheritance. If a relative of yours is entitled to a share of your assets, they can inherit no matter what their citizenship status is. Half-relatives inherit as much as “whole” relatives.
If you give an heir property during your lifetime, the value of that gift can be subtracted from their share, but only if it is shown that the gift was an advancement, rather than a gift.
North Carolina doesn’t collect inheritance or estate taxes. However, state residents should keep federal estate taxes in mind if their estate or the estate they are inheriting is worth more than $12.06 million in 2022. Note that even if you’re a resident of North Carolina, if you inherit property from another state, that state may have an estate tax that applies. You may also have to file some taxes on behalf of the deceased.
Tips for Estate Planning
- A financial advisor could help you create an estate plan for your family. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Doing estate planning entails using terms that may be unfamiliar to you. Here is a list of 10 key terms that will help you sort through your options and also be useful as you make personal financial decisions in other areas. If you decide to set up a living trust in North Carolina here is a helpful guide to what you need to do.
Photo credit: ©iStock.com/tonda, ©iStock.com/NikonShutterman, ©iStock.com/Fertnig, ©iStock.com/Sean Pavone