Many people have real property, such as houses and land, that they want to give to their loved ones when they die. When developing an estate plan, people need to understand how real property is transferred after death, as the rules are counter-intuitive and may cause complications for the recipients of the real property.
The North Carolina rules for a deceased person’s estate treat real property differently than personal property, which includes almost every other type of property such as vehicles, household furnishings, bank accounts, and stocks. When an estate is opened, the personal representative, such as an executor or administrator, takes control of all personal property that is part of the deceased’s estate and uses it to pay the deceased’s creditors and distribute it to the deceased’s beneficiaries either under a will or under the law if there is no will.
North Carolina law treats a deceased person’s real property differently. If a will simply gives the real property to the beneficiaries, then the will transfers title to the real property to the beneficiaries when the will is probated. If there is no will at all, then the real property owner’s death transfers the title to the deceased’s heirs under the law. In either case the real property is not formally part of the estate unless the personal representative needs to take control of it to sell and pay the deceased’s creditors because of insufficient funds in the estate.
The immediate transfer of real property title to the beneficiaries has several legal and practical consequences. As a benefit, the value of the real property is not considered when calculating probate fees, because the real property is not part of the estate. However, the immediate transfer of title may also have some undesired effects, particularly if the property is divided among multiple beneficiaries who want to sell it. Since the real property is not in the estate, the personal representative cannot use funds from the estate to pay for real estate expenses such as any remaining mortgage payments or utilities, but those payments have to be paid by the beneficiaries, which may be a burden on the beneficiaries if the property does not sell within a short period of time. Moreover, if there are multiple beneficiaries who receive real property, they will own separate shares of the property. While each beneficiary can sell his or her share individually, as a practical matter the beneficiaries will have to work together to sell the land, possibly resulting in disagreements on how to proceed.
Note that these rules only apply to real property that is part of the owner’s estate. They do not apply to real property owned as certain kinds of joint ownership, such tenants by the entirety for spouses or joint tenants by right of survivorship. In these cases, upon the death of one of the owners, the real property passes to the remaining owner or owners regardless of who the deceased owner’s heirs are or what the deceased owner’s will says.
If you know you or your loved ones want your real property to be sold after you pass away but do not want them to be burdened with the selling process, you can enable the person managing your estate to be able to sell the real property for the benefit of your loved ones and maintain it until it is sold with proper estate planning. Contact me at 252-497-2408 or info@jonrountreelaw.com to see how I can help you understand your options on real property and other estate planning needs.
The information on this website is intended for general informational and educational use only and does not constitute legal advice nor is it tailored to your specific situation. The use of this website does not create an attorney-client relationship. Attorney Jon Rountree is only licensed to practice in North Carolina, and any information provided is based on NC law.