Paul Jamison and Brad Maxwell, of Costner Law, discuss various facets of real estate law, including inheritance, probate, wills, and trusts.
It could be said that one of the most misunderstood elements of real estate law is regarding the laws that dictate the inheritance of real estate. The untimely passing of someone, who does not have a will or trust in place, can add much confusion in an already difficult situation. What happens when real estate is not willed to beneficiaries? What is the difference in a will and a trust? Do you need one?
What is probate?
Probate is essentially the lawful carrying out of a will. The probate period differs from North Carolina to South Carolina in a few ways, including the allotted timeline and what is accessible to creditors. In both states, creditors drive the timeline. Creditors have 90 days in North Carolina, to make claims against assets, which do not include real estate unless no other assets are available to pay off the debt. In South Carolina, creditors have access to all assets, including real estate, in order to settle debt, and have eight months to make those claims.
What is the difference in a will and a trust?
Trusts have three parties – beneficiary, grantor, and trustee, and by design can help heirs avoid probate court costs and time after a death occurs. In a trust, you own the assets only as a trustee – assets are titled in the name of the trust, and are the property of the trust. Wills do not allow your beneficiaries to cut out the probate process, so they will be responsible to see it through, and to pay associated court costs. Wills are also not designed to limit access by creditors to assets after your death. Trusts are also more expensive to obtain, and there are two different types of trusts.
Revocable trust vs. irrevocable trust
A revocable trust (a.k.a. living revocable trust) is the most common type of trust. This trust makes you both the beneficiary and the lifetime trustee. Your heirs are future beneficiaries. A revocable trust can be amended at any time. You can take assets out of the trust if necessary.
Irrevocable trusts not only protect your beneficiaries from the probate process but also protect your assets from creditors. In this scenario, you are the beneficiary, and a third party (named by you) is the trustee. This trustee may have access to the assets in the trust, but you will not. It is important to appoint someone, who will properly manage the trust on your behalf, and not abuse the power appointed to them. If your trustee is improperly managing your trust, you will have to prove it in a court of law in order to regain control of the assets. If you want to make changes to an irrevocable trust, you will have to go through litigation.
What if no will or trust exists?
State codes dictate who inherits un-willed assets. This also varies slightly between North and South Carolina.
- Real Estate Assets North Carolina – If the person has a spouse and children, 50% goes to the spouse and 50% to the children.
- Real Estate Assets North Carolina – If the person has a spouse and no children, 50% goes to the spouse and 50% goes to the parents.
- Other Assets North Carolina – If the person has a spouse and children, 30% goes to the spouse, and 70% goes to the children.
- Personal Property North Carolina – If the person has a spouse and children, 50% goes to the spouse, and 50% goes to the children.
- Personal property, real estate, and other assets all fall under one definition in South Carolina, and are divided between spouses and children on a 50/50 basis.
As a rule, assets will be dispersed the following way, in the event that a person has no spouse, or no children, or neither:
- Spouse — Children — Parents — Grandparents — Siblings — Siblings’ Children
If no heirs are found to exist, the state will accept ownership of any assets left behind.
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