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Does Death Do You Part? Wills, Intestacy, and closely held businesses. Part 2 of 3.

13062458_1042739802458603_2436945721037467362_nBy: Dana M. Horlick, Attorney, Woodruff Family Law Group

 

Now that we have the details and definitions out of the way, we can return to our Greensboro couple Rocky and Petunia and take a look at what happens to Petunia’s estate. Recall that Petunia died without a premarital agreement, without children, and without a will. Since Petunia died without a will, this means that she has died intestate, and her property will pass via intestacy, with Rocky as the administrator of her estate. Also recall that Petunia died with an interest in Home Grown Lawn Care worth $125,000.00 and a 401(k) worth $15,000.00, of which Rocky is the beneficiary. Also, Petunia died in a car accident five years into the marriage – this will be important later on.

Without a will, the share of the surviving spouse is governed by statute. There are other factors to consider, though, namely is the decedent (Petunia) survived by any children or her parents? The presence of either surviving children or parents reduces the share of the surviving spouse under the statute. In this case, there are no children, but her parents survive Petunia.

N.C.G.S. §29-14 (a)(3), provides for the surviving spouse’s share of   the real property as follows: “If the intestate is not survived by a child, children or any lineal descendant of a deceased child or children, but is survived by one or more parents, a one-half undivided interest in the real property.” Based on those facts, and the statute, Rocky gets ½ undivided interest in the real property. Under the facts of our hypothetical, there is no real property, meaning that Rocky gets ½ of nothing. If for example, Petunia owned a parcel of land, Rocky would get ½ of that parcel, and her parents would get the remaining half.

Personal property is a bit more complicated. Given that Petunia has died with no children, but she does have surviving parents, we have to use that particular rule in the statutes. Again, surviving children or parents would decrease the share of the surviving spouse.

N.C.G.S. §29-14 (b)(3), provides for the surviving spouse’s share of the personal property as follows: “If the intestate is not survived by a child, children, or any lineal descendant of a deceased child or children, but is survived by one or more parents, and the net personal property does not exceed one hundred thousand dollars ($100,000) in value, all of the personal property; if the net personal property exceeds one hundred thousand dollars ($100,000) plus one-half of the balance of the personal property.”

Therefore, if the estate did not hit the $100,000 threshold, Rocky would get 100% of Petunia’s assets and her parents would receive nothing. The first step would be to calculate the amount of Petunia’s estate. Thinking back to Petunia’s assets, she has shares in Home Grown Lawn Care worth $125,000.00, a 401(k) worth $15,000.00, and no debt. However, since Rocky is the beneficiary of the 401(k), the 401(k) balance would not be included in the calculations of the intestacy estate. The 401(k) balance would pass outside of probate, and Rocky would receive the entire balance. Thus, Petunia’s intestacy estate equals $125,000.00 – the shares in Home Grown Lawn Care.

Since Petunia’s estate is worth $125,000.00 and exceeds the $100,000.00 threshold mentioned previously, Rocky would receive $100,000.00 plus half of the remaining $25,000.00, for a total of $112,500.00 worth of Petunia’s estate, in addition to the 401(k) that he will receive outside of probate. Petunia’s parents would then receive the remaining $12,500.00. Since Petunia’s only asset passing through intestacy are her shares in Home Grown Lawn Care, Rocky would receive enough shares to equal $112,500.00 and Petunia’s parents would receive the remaining shares.

We can also take this analysis a step further and add another wrinkle. Under this fact pattern, Rocky would likely claim a $30,000.00 spousal allowance under N.C.G.S. §30-15. Under this statute, the spousal allowance, in cases of intestacy, is not charged against the share of the surviving spouse. Thus, the $30,000.00 spousal allowance will reduce the intestacy estate amount from $125,000.00 to $95,000.00, less than $100,000.00 threshold. Once you go beneath the $100,000.00 threshold, Rocky receives the entirety of the intestate amount – $95,000.00. Also, he will receive the $15,000.00 401(k) since he is the beneficiary and the $30,000.00 spousal allowance.

Therefore, without a will, the majority, if not all, of Petunia’s estate, would go to her surviving spouse, Rocky, and only once the size of her estate hits $100,000.00 do her parents receive anything. Next post, we will consider how the result changes if Petunia did, in fact, have a will.

***Thanks to Erin Bailey of Tuggle Duggins, P.A. for her review and comments on this blog posts. She does estate planning and ERISA at Tuggle Duggins, P.A.***

 

Does Death Do You Part?

Part 1 | Part 2 | Part 3