Guide to North Carolina Transfer on Death Deeds

If you reside in Wilmington or elsewhere in North Carolina, and are curious about the viability of a Transfer on Death deed, this blog is intended for you. North Carolina law is unique and quirky when it comes to the transfer of real estate upon an owner’s death. Notably, North Carolina does not recognize transfer-on-death (TOD) deeds. North Carolina law allows individuals to make Transfer on Death designations for certain types of assets (e.g., bank accounts and securities) but not real estate. Generally speaking, real estate in North Carolina needs to go through the probate process, unless it is held in a trust or owned jointly with rights of survivorship.

If you have any questions about estate planning in Wilmington, NC, or if you need help with wills and trusts anywhere in the coastal Carolinas, send us a note. We would be happy to speak with you.

How Transfer on Death Works in North Carolina

As mentioned, a Transfer on Death Deed is generally prohibited for the transfer of real estate in North Carolina. Nevertheless, it is permissible to execute a Transfer on Death Agreement for the transfer of other types of assets. This type of transfer agreement enables an asset owner to name, or designate, a beneficiary who will inherit the asset upon the owner’s death. Such agreements are attractive since it provides peace of mind to the owner that the asset will be transferred without having to go through the cost-intensive and lengthy probate process.

Assets that can be transferred via a Transfer on Death Agreement include financial accounts (e.g., bank account, stock options, etc.) and even tangible assets (e.g., an automobile, boat, etc.). Under North Carolina law, a Transfer on Death Agreement for financial assets can be established by filling out a form provided by the financial institution that maintains your assets.

Transfer on Death Restrictions in North Carolina

If you are considering a Transfer on Death Agreement for certain assets, it is important to be mindful of certain restrictions and limitations. For example, a Transfer on Death Agreement is typically not allowed for complex asset dispositions nor do these types of agreements include detailed instructions (particularly compared to the directives that are usually included with a trust). It is also important to note that if the designated beneficiary passes away before the asset owner, then the asset will typically need to go through probate, unless the owner also made sure to name a contingent beneficiary.

Revoking a Transfer on Death Agreement

Generally speaking, a Transfer on Death Agreement is revocable and modifiable at any time during the life of the asset owner. In North Carolina, amending or revoking a Transfer on Death Agreement typically involves filling out a form provided by a financial institution.

Difference Between Transfer on Death Agreements and Joint Ownership

When it comes to transferring assets, the use of Transfer on Death Agreements and joint ownership are relatively common, but it is important to note the fact that they operate quite differently in North Carolina. For example, in North Carolina, assets owned jointly (which may include real estate) typically pass directly to the surviving joint tenant upon the death of the other, bypassing probate. In contrast, a Transfer on Death Agreement allows an asset owner to designate a beneficiary who will receive the asset upon their death, but the designated beneficiary does not hold any ownership interest in the asset until the owner’s passing.

North Carolina Recognizes “Lady Bird” Deeds

Another quirk in North Carolina law is the recognition of a modified life estate deed (also known as a “Lady Bird” deed) that allows an owner to retain full control over a piece of property. North Carolina is actually one of only a handful of states that recognizes this type of deed.

Under a “Lady Bird” deed, the property owner retains ownership over the property along with the power of appointment over the property. The retained power means the life tenant retains the right to name a remainder beneficiary, or even transfer title to the property to someone else without the consent of the designated remainder beneficiary. If the life tenant opts not to use this appointment power, the property would then transfer to the beneficiary upon the owner’s passing.

Transferring Real Estate Ownership Via Trusts

If you are interested in transferring ownership of real estate to a beneficiary without having to go through probate, an option to consider is holding title through a revocable living trust. North Carolina trust law allows two or more people to be the co-trustees and/or co-beneficiaries of a trust. As a result, the revocable trust affords the co-trustees a level of control and continued benefit from the real estate while the trust itself retains legal title. If a co-trustee passes away, there is no requirement to go through probate since title to the property remains with the trust.

For more information about the taxation of trusts in North Carolina, read here.

Contact Bespoke Law for Help Navigating Probate

As you can see, the laws governing Transfer on Death in North Carolina are unique and complex. A deep understanding of these rules and regulations is critically important when planning your estate. This is where Bespoke Estate Law can help. We are an established law firm specializing in comprehensive estate planning, business law, contract law, and probate & trust administration services. We proudly serve clients residing in Myrtle Beach, Surfside Beach, and surrounding localities.