When marriage equality arrived in North Carolina on Oct. 10, 2014, many couples rushed to the courthouse to marry or began planning to marry. Other couples remain circumspect and are taking a more deliberate approach by considering the ramifications of marriage on inheritance, proxy decision-making and taxes. Ending a marriage raises a host of other issues that are beyond the scope of this article.
In North Carolina, your spouse is the only family member whom you cannot disinherit. Our laws offer a variety of protections that allow a surviving spouse to inherit, even if the deceased spouse made a will leaving everything to others.
If the decedent did not leave a will, then our intestacy laws entitle a surviving spouse to certain percentages of the decedent’s assets. The percentages depend on whether the decedent was survived by any descendants or parents. Absent a will, a surviving spouse could end up jointly owning assets with in-laws if the decedent had no descendants.
The elective share entitles a surviving spouse disinherited in a will to a certain percentage of the decedent’s assets. The percentage depends on the length of the marriage and ranges from 15 percent for a couple still under the chuppah to 50 percent for a couple married more than 15 years.
Whether or not the decedent left a will, the surviving spouse can elect a life estate in the decedent’s real property instead of intestacy and the elective share. The surviving spouse can choose: 1) a life estate in one-third of all real property; or 2) a life estate in the entire home that she shared but did not jointly own with the decedent and outright ownership of household furnishings in the home.
Whether or not the decedent left a will, the year’s allowance entitles a surviving spouse to $30,000 of the decedent’s personal property free from the claims of the decedent’s creditors — even if the decedent left a mountain of debt. Watch out! If any of that debt was medical bills, then the Doctrine of Necessaries, described below, applies.
Regarding proxy decision-making, the spouse is near the top of the list of medical decision-makers for an ill person if the patient does not have a Health Care Power of Attorney. The spouse is lower in priority than a court-appointed guardian, but higher in priority than the patient’s parents, children and other family.
Spouses can waive or opt out of any or all of the above protections, as well as other protections afforded at divorce, in a marital agreement (pre-nuptial, post-nuptial or separation).
Spouses cannot waive the Doctrine of Necessaries. This is an ancient concept inherited from England whose modern interpretation holds spouses responsible for each other’s medical bills, among other things. Couples planning to marry should consider any significant age difference, one another’s potential health issues and the financial responsibility that could arise.
In North Carolina and many other states, married couples can jointly own real property as tenants by the entireties, another ancient concept inherited from England. Each spouse’s individual creditors cannot reach a home owned by tenants by the entirety, although a couple’s joint creditors can. When one spouse dies, the survivor automatically owns the real property free from the claims of the decedent’s creditors.
Married couples must file income tax returns as either married filing jointly or married filing separately. Your tax filing status could have a big impact on your tax bill because married couples are subject to different tax brackets than unmarried individuals. The two of you might pay more or less tax as a couple than both of you would if unmarried. This is referred to as the marriage penalty or bonus, respectively. A CPA can help you to determine the effect of marriage on your tax situation.
Very wealthy couples who are both U.S. citizens can realize tax benefits from marriage that reduce the burden of the federal gift and estate taxes. This is a complex area of the law, so if you find yourself in this situation, then you should seek professional advice.
Marriage is wonderful for many, but it isn’t for everyone. If you’re contemplating marriage, then talk with your fiancé or fiancée about its financial and legal impact. If you’re already married, then consider whether you should opt out of some of the protections and default rules described above. A team that includes a well-qualified CPA and an attorney practicing estate planning or family law can help you and your partner to make the best choice for you.
Copyright 2017, Justin R. Ervin, III; all rights reserved.
info: Justin R. Ervin, III is an attorney licensed in North Carolina and Florida practicing estate planning, estate administration and guardianship law with Johnson, Peddrick, and McDonald, PLLC in Greensboro, N.C. Erwin graduated from Elon University School of Law and earned a Master of Laws degree in Taxation from the University of Florida. He is open and active in his local LGBTQIA community and enjoys working with all sorts of clients, though he has a particular affinity for working with same-sex couples, alternative families and LGBTQ individuals.