Short Answer

In North Carolina, the standard process is to value the whole property (usually the net sale proceeds or fair market value), then apply an actuarial “life estate factor” and a matching “remainder factor” based on the life tenant’s age and a required interest rate from IRS valuation tables. The life estate value is the total value multiplied by the life estate factor; the remainder value is the total value multiplied by the remainder factor (and the two should add up to 100%). When the numbers affect a closing distribution, the settlement statement should show the inputs used (age, date of valuation, interest rate/table, and the base amount) so the parties can confirm the math.

Understanding the Problem

In North Carolina real estate, a common question is how a life tenant and a remainderman should divide the proceeds when a house is sold while the life tenant is still living. The decision point is whether the life estate and remainder interests can be valued using standard actuarial tables (often IRS tables) so that the closing can distribute sale proceeds between the life tenant and the remainder holder in percentages tied to the life tenant’s age. Timing matters because the factor used depends on the life tenant’s age on the valuation date tied to the transaction.

Apply the Law

North Carolina recognizes that a life tenant’s interest can be valued by using mortality/actuarial tables accepted in court proceedings, and the remainder interest is the balance after that valuation. In practice, valuing the two interests usually follows a formula approach: determine the base value being divided (commonly net proceeds after payoff and normal closing costs), then apply an age-based actuarial factor to that base value to produce a dollar amount for the life estate and a dollar amount for the remainder.

Key Requirements

• Correct base amount: Start with the correct value being allocated (often the net sale proceeds available for owners after paying liens, prorations, and customary closing charges).
• Correct actuarial inputs: Use the life tenant’s age on the selected valuation date and the applicable IRS interest rate/table for that date; a different month/date can change the factor.
• Transparent calculation and proof: Keep a clear paper trail (printout/screenshot of the table, the factor used, and a worksheet showing the multiplication and the remainder “balance to 100%”).

What the Statutes Say

• N.C. Gen. Stat. a7 46A-78 (Partition sale subject to life estate) – In a partition sale setting, a life tenant who joins can receive the life tenant’s share calculated using mortality tables accepted by the court.
• N.C. Gen. Stat. a7 41-11 (Sale in cases involving remainders) – In certain court-ordered sales involving life estates and remainders, the court can have the life tenant’s share valued for payment out of proceeds.

Analysis

Apply the Rule to the Facts: The facts describe a planned sale while a parent holds a life estate and a grandchild holds the remainder, so the proceeds generally need to be split by valuing each interest. That requires (1) identifying the correct pot of money to split on the settlement statement and (2) confirming the correct factor inputs (age and valuation date, and the IRS table/interest rate used). If the life estate value was calculated off the wrong base (for example, gross price instead of net proceeds, or net proceeds but with an improper deduction), or with the wrong age/date/rate, the remainder distribution can be understated.

Process & Timing

1. Who prepares the numbers: Often a closing attorney or one of the parties (or their agent) prepares a worksheet. Where: The allocation is typically reflected on the closing disclosure/settlement statement for the North Carolina closing. What: A written life estate/remainder allocation worksheet attached to the file, showing the base amount, the life tenant’s age, the table/rate used, the factor, and the resulting dollar amounts. When: Before signing, so the parties can object and correct it before funds disburse.
2. Confirm the IRS table inputs: Identify the valuation date used for the table selection, confirm the life tenant’s age as of that date, confirm the interest rate/table version used, and confirm that the remainder factor is the complement of the life estate factor (so the percentages add up to 100%).
3. Confirm the base amount and disbursement: Confirm what the factor is applied to (sale price vs. net proceeds) and ensure the settlement statement disburses the computed amounts to the life tenant and the remainderman in the stated percentages.

Exceptions & Pitfalls

• Wrong valuation date or age: Using the wrong month’s IRS rate or the wrong age (even by one year) can change the factor and the split.
• Wrong “base” for the percentage: Applying the factor to gross price when the parties intended net proceeds (or vice versa) can materially change the dollars. The file should be consistent about what is being allocated.
• Ignoring other enforceable agreements: A written agreement between the life tenant and remainderman can override a default actuarial split for closing purposes, but it should be documented clearly and signed.
• Role confusion at closing: In North Carolina, a licensed attorney must supervise a residential closing. When one attorney is involved in a transaction with competing interests, it is important to confirm in writing who the attorney represents and whether the parties gave informed consent to any joint representation.

Conclusion

In North Carolina, the typical method to divide sale proceeds between a life tenant and a remainderman is to determine the correct base value being divided and then apply actuarial life-estate and remainder factors tied to the life tenant’s age and the applicable IRS table/interest rate for the valuation date. The factors should add up to 100%, and the settlement statement should match the worksheet math. The next step is to request the allocation worksheet and table printout and have a North Carolina real estate attorney review them before disbursement.

Talk to a Real Estate Attorney

If a closing involves a life estate and remainder interest and the distribution amounts look off, an independent review can help confirm the correct inputs, percentages, and settlement statement disbursements. 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 your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.