The Spousal Year’s Allowance: A Powerful Tool for Administering the First-to-Die’s Estate
The loss of any loved one is difficult, but the loss of a spouse can be particularly devastating. In addition to losing a spouse, the survivor has lost their partner in the management of the household and the shared finances. On top of that, they now have to worry about administering the deceased spouse’s estate. Thankfully, North Carolina law offers a tool that can help surviving spouses ease some of the administrative burden that follows this kind of loss. That tool is the Spousal Year’s Allowance (the “SYA”), and it is available to surviving spouses regardless of whether the deceased spouse left a valid will.
The SYA first appeared in North Carolina law in 1796. Its purpose was to make sure that a widow could continue to receive support from her deceased husband’s assets while waiting for the estate to be administered. The widow could petition the court to allot her enough of the “crop, stock, and provisions then on hand” to support the widow and her family for a year.
Today the, SYA works a bit differently, and it can be utilized by any surviving spouse regardless of gender to receive quick and easy access to up to $60,000 worth of the deceased spouse’s cash and property other than real property. If an estate administration has already begun, the estate’s personal representative will assign up to $60,000 in property to the surviving spouse. If no estate administration has begun, the surviving spouse can apply directly to the clerk of court for assignment of property without any estate needing to be opened. If no estate has been opened and the SYA is sufficient to give the surviving spouse 100% of the property that would otherwise make up the deceased spouse’s estate, then there is often no need to move forward with more formal methods of estate administration.
It is not unheard of for the SYA to successfully transfer 100% of the deceased spouse’s assets as described above. In fact, this happens more often than some may expect. Many married couples own most of their assets jointly with right of survivorship, which keeps those jointly owned assets out of the deceased spouse’s estate. Other assets such as life insurance or retirement accounts may pass to the surviving spouse via beneficiary designation, meaning those assets also stay out of the deceased spouse’s estate. After removing those assets from the calculation, there may be little more than a vehicle left in the deceased spouse’s estate. The SYA can be a great tool for cleaning up these sorts of estates.
Assets transferred using the SYA are not subject to the claims of the deceased spouse’s creditors unless the transferred assets were used as security for a debt that remains outstanding after the death of the deceased spouse. Assets that secure a debt can still be transferred using the SYA, though, and for purposes of counting towards the $60,000 limit, the asset’s value will be reduced by the amount of debt secured by the asset. The secured debt will remain attached to the transferred asset. To illustrate all of this, let’s imagine a scenario where the deceased spouse had a car worth $30,000 that secured a loan in the amount of $10,000. Let’s also imagine that the deceased spouse had a bank account with $35,000 in it and that the deceased spouse also had some unsecured debt totaling $10,000. How would the SYA work in this example? Let’s see:
The deceased spouse had assets in his/her sole name (a car and a bank account) worth a total of $65,000. This may seem like a problem since the SYA can only transfer assets worth up to $60,000. However…
The car was security for a loan, so for purposes of the SYA the car’s total value is reduced by the amount of the loan. The car is therefore worth just $20,000 for purposes of the SYA. Now the deceased spouse’s assets are worth a total of $55,000, meaning everything can be transferred using the SYA.
When the surviving spouse takes title to the car, the $10,000 loan secured by the car will still be attached to the car. The surviving spouse will need to continue paying on the loan if she plans to keep the car.
The unsecured creditors are out of luck. North Carolina law says that property transferred via the SYA is exempt from the claims of creditors of the deceased spouse’s estate. Unfortunately for them, the surviving spouse was able to claim the entirety of the deceased spouse’s estate’s assets, and so there is nothing left to repay those unsecured creditors.
The surviving spouse will not be required to take any additional action to administer the deceased spouse’s estate as there are no assets left to administer.
In the example above, the surviving spouse claimed $55,000 worth of property. What happens to the $5,000 worth of SYA that went unused? The clerk of court will make note of the deficiency, and if any new assets of the deceased spouse are discovered, the surviving spouse can use that remaining $5,000 of SYA to easily transfer those assets, too.
But what if the deceased spouse left assets totaling more than $60,000? In that case, the surviving spouse can still use the SYA to take up to $60,000 quickly, easily, and free of the claims of unsecured creditors. Any amounts above $60,000 can either be transferred via full estate administration or, in some cases, via less burdensome processes such as summary administration or small estate administration. The combination of SYA and small estate administration is a particularly fun one to take advantage of. When there is a surviving spouse, small estate administration is an available method of administration provided the estate is worth less than $30,000. Imagine a scenario where the deceased spouse’s estate is worth a total of $85,000. The SYA can be used first to transfer $60,000 to the surviving spouse. That then leaves just $25,000 in the estate, meaning small estate administration is now possible when it wouldn’t have been possible before.
The SYA is one of the most common filings in estates, and it is easy to see why. It can allow surviving spouses to make quick work of their loved one’s estate, and it can shield some assets from creditors in the process. In those cases where the SYA doesn’t transfer 100% of the deceased spouse’s assets, it can still make easier administration possible. At the very least, the SYA can provide the surviving spouse with a quick cash infusion to make it easier to wait out whatever administrative work remains to be done.
Administering a loved one’s estate can be difficult, but you do not have to do it alone. If you are a surviving spouse and want to discuss the SYA and other options for administering an estate, please call or email The Law Office of Ryan A. Layton, PLLC to schedule a free consultation. Together, we can identify the most effective and efficient way forward.
The information contained in this blog post is intended only as general legal information and should not be construed as formal legal advice on any matter, nor should its presentation be construed as intent on the part of The Law Office of Ryan A. Layton, PLLC to form an attorney-client relationship with any user of this website. For more information, please see this disclaimer.