Ric Ocasek, famed singer for The Cars, recently passed away leaving behind a will that purportedly removes his estranged wife, Paulina Porizkova, as a beneficiary of his estate. Ocasek and Porizkova were in the process of divorcing when Ocasek died; however, the divorce was not finalized, and the two were still legally married. Removing one’s spouse from an estate plan – often referred to as disinheriting a spouse – is common, particularly when spouses are separating and divorcing. States that have adopted the Uniform Probate Code, or similar statutes, create protection for a disinherited spouse in the form of the right of elective share.
What is Elective Share?
In North Carolina, the spouse of a decedent has a right to seek an elective share of the decedent’s estate. Such a right is available only to the extent the disinherited spouse does not otherwise receive the inheritance via:
- The deceased spouse’s will;
- The deceased spouse’s assets that do not become part of the estate, such as retirement accounts, life insurance policies, are transfer-on-death or payable-on-death bank or investment accounts; or
- As a joint owner with right of survivorship in the deceased spouse’s real estate and bank or investment accounts.
If the disinherited spouse does not receive the equivalent of the elective share via the above mechanisms, he or she can make a claim for elective share, as defined by statute.
How Elective Share is Calculated in North Carolina
North Carolina defines elective share as the “amount equal to (i) the applicable share of the Total Net Assets . . . , less (ii) the value of Net Property Passing to Surviving Spouse.” Three components exist within this definition.
- Defining Total Net Assets: the total assets less one year’s allowance(s) to any individual other than the surviving spouse and less claim(s). A claim a liability of the estate (e.g., if the decedent spouse is liable to a third party for a tort, such liability likely passes to the decedent spouse’s estate). A year’s allowance is a statutory right for relatives of the decedent to receive a set payout from the estate in certain circumstances.
- Determining the applicable share of Total Net Assets: the share of Total Net Assets applicable to a particular disinherited spouse is defined by the number of years of marriage. For a surviving spouse of a marriage of less than five (5) years, the spouse is entitled to fifteen percent (15%). For a surviving spouse of a marriage of at least five (5) years but less than ten (10), the spouse is entitled to twenty-five percent (25%). For a surviving spouse of a marriage of at least ten (10) years but less than fifteen (15), the spouse is entitled to thirty-three percent (33%). For a surviving spouse of a marriage of at least fifteen (15) years, the spouse is entitled to fifty percent (50%).
- Defining Net Property Passing to Surviving Spouse: the total amount of property passing to the surviving spouse, less any death taxes, such as estate tax, attributable to this property and less any claims (i.e., liabilities, as defined above) payable out of, charged against, or allocated to this property. The total amount of property passing to the surviving spouse includes property devised to the spouse, property passing to the spouse via intestate succession, property held in spousal trust, a year’s allowance if applicable, the spouse’s interest in life insurance proceeds, property transferred as a gift during the decedent spouse’s lifetime, and property awarded pursuant to equitable distribution. Importantly, property that would pass to the surviving spouse but for the surviving spouse’s renunciation of the same is also included in this total. Social security benefits are excluded.
For surviving spouses, the above calculation is used to determine (i) if the surviving spouse is already receiving property equivalent to the applicable elective share, or (ii) if the elective share is available, the amount of property it entitles the surviving spouse to claim.
If you have questions regarding a wills and estates dispute, please give us a call at (704) 457-1010 to schedule a consultation. For more information regarding our firm, attorneys, and practice areas, please visit http://www.lindleylawoffice.com/.