Understanding the Problem
The decision turns on how the North Carolina deed identifies the owners and whether both spouses will participate in the estate plan. The central issue is whether the current ownership must change so that a revocable trust can control who receives the home after death. Timing matters because the trust must receive valid title while the owners have authority to sign the necessary documents.
Apply the Law
North Carolina generally treats real property conveyed to two married people as tenancy by the entirety unless the deed expresses a different intent. Each spouse has an equal right to control and possess entireties property. Subject to limited statutory exceptions, neither spouse acting alone can sell, transfer, mortgage, or otherwise encumber it.
Tenancy by the entirety also includes survivorship. When one spouse dies, the surviving spouse ordinarily owns the entire home by operation of law. The deceased spouse has no separate ownership interest that can pass under a will or an individually created trust. A similar problem can arise when a deed creates another form of ownership with an express right of survivorship.
Key Requirements
- Confirm the deed: Review the recorded deed rather than relying on assumptions about joint ownership. The deed may create tenancy by the entirety, a joint tenancy with survivorship, or a tenancy in common.
- Obtain both spouses' participation: If the home is held by the entirety, both spouses ordinarily must sign the deed that transfers it to a trust.
- Fund the trust: Signing a revocable trust does not change the home's title. A properly executed deed must transfer the property to the trustee and be recorded with the Register of Deeds in the county where the home is located.
- Coordinate the trust terms: The trust should clearly address both spouses' rights to occupy, manage, sell, or use the home and state when the adult grandchild becomes entitled to receive it.
- Account for spousal protections: A trust does not automatically eliminate a surviving spouse's statutory rights. North Carolina's elective-share rules may affect transfers to nonspousal beneficiaries.
What the Statutes Say
- N.C. Gen. Stat. § 41-56 (Creation of tenancy by the entirety) - A conveyance to two people who are married to each other generally creates tenancy by the entirety unless the deed states otherwise.
- N.C. Gen. Stat. § 41-58 (Control of entireties property) - Neither spouse may transfer or encumber entireties property without the other spouse's written joinder, subject to limited statutory exceptions.
- N.C. Gen. Stat. § 41-64 (Survivorship at a spouse's death) - Except under the statutory slayer rule, the surviving spouse becomes the owner of entireties property, and the deceased spouse has no interest that passes through the estate.
- N.C. Gen. Stat. § 41-65 (Entireties property conveyed to trusts) - Former entireties protections may continue when spouses transfer property to a qualifying joint trust or in equal shares to qualifying separate trusts and meet the statute's conditions.
- N.C. Gen. Stat. § 30-3.1 (Surviving spouse's elective share) - Depending on the marriage's length, a surviving spouse may claim between 15% and 50% of total net assets after crediting qualifying property received by that spouse.
Analysis
Apply the Rule to the Facts: Because the individual and spouse jointly own the home, the recorded deed must first be reviewed to identify the ownership form. If the deed creates tenancy by the entirety, the spouse must participate in any transfer to a revocable trust, and leaving the home to the adult grandchild in a separate will or trust would not defeat the spouse's survivorship rights. A coordinated trust can provide flexibility, but it must be funded and must clearly address when the grandchild receives the property.
A joint revocable trust may allow both spouses to retain control during life while establishing what happens after one or both spouses die. North Carolina law can preserve important characteristics of former entireties property when the home goes into a qualifying joint trust, or into equal shares of qualifying separate trusts, while the spouses remain married and are current beneficiaries. The trust document should also specify each spouse's authority to amend or revoke provisions affecting that spouse's contribution.
If the deed instead creates a tenancy in common, each spouse generally owns a separate fractional interest without survivorship. One spouse may be able to place that spouse's interest in a trust, but doing so would not transfer the other spouse's interest. That structure could leave the surviving spouse and grandchild as co-owners, which may create the very conflict the plan seeks to reduce.
Process & Timing
- Who acts: Both spouses and the proposed trustee. Where: The Register of Deeds in the North Carolina county where the home lies. What: Review the current deed, sign the revocable trust, and prepare and record a new deed transferring title to the trustee. When: Complete the transfer before either owner dies or loses the legal ability to authorize it.
- Coordinate the documents: Align the trust, deed, pour-over wills, and related ownership records. The plan should state who may live in or manage the home, whether it may be sold, and whether the grandchild receives it after the first or second spouse's death.
- Confirm funding: Obtain the recorded deed and verify that the county land records show the intended trustee as owner. The resulting documents should establish a funded trust rather than an unfunded trust that owns no interest in the home.
Exceptions & Pitfalls
- Signing only the trust: A trust agreement does not move real estate into the trust. Failing to record the deed can leave survivorship or probate rules in control.
- Assuming all joint ownership works alike: Tenancy by the entirety, joint tenancy with survivorship, and tenancy in common produce different results at death.
- Using a one-spouse plan for an entireties home: One spouse cannot use a separate will or trust to defeat the other spouse's ownership and survivorship rights.
- Overlooking trust conditions: Preserving protections associated with tenancy by the entirety requires compliance with the conditions in N.C. Gen. Stat. § 41-65. An incorrectly structured transfer may change those protections.
- Creating unwanted co-ownership: Giving only one spouse's fractional interest to the grandchild may make the grandchild and surviving spouse co-owners.
- Ignoring elective-share rights: A surviving spouse may petition the Clerk of Superior Court for an elective share. Under N.C. Gen. Stat. § 30-3.4, the petition generally must be filed within six months after the court issues letters testamentary or letters of administration.
- Expecting the trust to prevent every dispute: A carefully drafted and funded trust can reduce uncertainty, but it cannot guarantee that children or other interested parties will not raise a challenge.
Additional discussion of funding appears in this guide to using a trust to leave a North Carolina home to a grandchild.
Conclusion
A spouse should be involved when a jointly owned North Carolina home is intended to pass to a grandchild. If the home is held as tenants by the entirety, both spouses must ordinarily join in the transfer, and survivorship will otherwise ordinarily leave the home solely to the surviving spouse. The key next step is to have the current deed reviewed and, if appropriate, record a coordinated trust deed with the county Register of Deeds before either spouse dies or loses capacity.
Talk to an Estate Planning Attorney
If jointly owned property needs to pass to a grandchild while protecting both spouses' rights, our firm has experienced attorneys who can help explain the available trust and deed options. Call us today at 919-341-7055.
Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for a specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If there is a deadline, act promptly and speak with a licensed North Carolina attorney.
