What follows is information basic process of probating a North Carolina Estate, including steps to settling the estate, frequently asked questions we receive in our office, and some definitions of terms you will certainly hear as you probate your loved one’s estate.
General Steps to Estate Settlement
1. Secure the decedent’s property and get information about the decedent’s assets
- The property should be secured until someone is authorized by the Clerk of Superior Court to handle the estate. A basic inventory of the decedent’s property should be created using his or her personal records, files and mail.
2. Get in touch with the Clerk of Superior Court in whichever county the decedent is a resident in.
- The executor should give the will, if the decedent had one, to the Clerk of Superior Court. If they didn’t have a will, the surviving spouse or any other heir needs to contact the Clerk so that they may be appointed as administrator. In order to apply to be the personal representative (executor/administrator) of the estate, you have to have a preliminary inventory of the decedent’s known assets and the value of each of those assets. The Clerk of Superior Court will then appoint a personal representative (executor/administrator) by issuing the necessary documents. It will be either “Letters Testamentary”, which appoint an executor for a testate estate or “Letters of Administration,” which appoint an administrator for an intestate estate.
3. Talk about the possibility of abbreviated estate settlement
- It depends on the value of the estates assets and the people who are going to benefit from the estate, but an abbreviated estate settlement process could be available. There are three types of abbreviated estate administration; Collection of Property by Affidavit, Administration by Clerk, and Summary Administration.
4. Gain control over the decedent’s property
- Go to the decedent’s financial institutions and show them your clerk-issued documentation that appoints you as the personal representative. Then collect anything that is owed to the decedent. This includes interest payments, dividend payments, and rental income. Also collect and preserve the decedent’s property. This includes the decedent’s home, household items, and accounts that will be part of the probate assets. Finally, get an Employer Identification Number (EIN) from the IRS and open a deposit account titled in the name of the estate.
5. Publish notice to decedent’s creditors
- This is basically an advertisement tells the creditors of the decedent’s death and asks them to make their claims against the estate. The notice must state a deadline by which the creditors have to submit their claims. This deadline must be at least 3 months in the future. For certain creditors you might have to send them a letter individually.
6. See whether a year’s allowance needs to be paid
- The surviving spouse and the surviving minor children of the decedent are automatically entitled to a year’s allowance that is paid out of the estate’s probate property. The surviving spouse or someone acting on the child’s behalf must apply using the “Application and Assignment Year’s Allowance”. Note that because the year’s allowances are priority claims, they have to be paid prior to distributing money to any heirs or devisees or paying the estate’s debts.
7.File a 90 day inventory
- File a detailed inventory of the decedent’s property within 90 days from the date of your appointment as personal representative. Once you are appointed as personal representative of the estate, you have to file a detailed inventory of the decedent’s property within 90 days. It needs to include the estimated value of each item, which might require an appraisal from a professional.
8. Pay off the decedent’s debts
- You have to pay off the debts according to a specific order found in the N.C. General Statutes. To pay these debts, use the decedent’s assets. You may need to use the decedent’s real property or non-probate assets to pay off these debts. If that is the case you have to acquire the right to those assets by petitioning to the Clerk of Superior Court.
9. Whatever is left over gets distributed to the heirs or devisees
- After all the debts/claims have been paid, the remaining money needs to be distributed in accordance to the will. Of course, if there is no will, you have to distribute the property according to state law. It is smart to keep all receipts just in case.
10. Take care of the decedent’s taxes and accounting
- The personal representative is responsible for filing the estate tax return and the decedent’s individual tax return. This can be complicated so you may need to meet with a tax professional. If the estate takes longer than a year, you need to do provide the Clerk of Superior Court with annual accounting.
11. Close the estate
- The Clerk of Superior Court will ask for a final accounting before he or she closes the estate. This will include a detailed list of all estate transactions along with copies of receipts, statements, and checks. Once the clerk is satisfied, you will be relieved of your responsibility as personal representative and you’re done.
Frequently Asked Questions
1. Do I even need a lawyer?
- The answer to this depends on a number of factors. Sometimes it’s easier to have an attorney there to enforce difficult decisions that may impact family relationships. Also, if you’ve never done it before, an attorney can be very useful in guiding you through the process as there are many forms and requirements. Finally, the size of the estate can have an impact on your decision to hire a lawyer. The bigger the estate, usually the more likely you are to benefit from a lawyer.
2. What if I need to look for the will in a safe deposit box?
- Sometimes you need to look for the will in a safe deposit box, but not everyone has access to them. Only co-lessees, deputies, and people authorized by the Clerk of Superior Court can access it so if there is no co-lessee or deputy, additional action will need to be taken to access the box.
3. Where can I get copies of a death certificate?
- The easiest place to go is the funeral home. They usually have some copies of the death certificate. If this isn’t enough, you can go to the Register of Deeds in the county where the decedent died. Another option is to contact Vital Records in Raleigh.
4. Do I have to take the will to the Clerk of Superior Court?
- The answer is yes because only the clerk can determine whether or not a will is valid and only the clerk can appoint a personal representative.
5. What about assets that have named beneficiaries? Are they part of the probate estate?
- As long as at least one beneficiary survives the last account owner, these assets will not be part of the probate estate, but they may still be viable to claims against the estate.
6. What about assets held jointly with right of survivorship? Are they part of the probate estate?
- Not usually because even if one of the joint owners dies, the assets will not become part of the probate estate if at least one owner is still alive, but just like assets with named beneficiaries, they may be subject to claims against the estate.
7. If I’m a beneficiary, how do I claim property?
- You should bring a copy of the death certificate and request payment at the financial institution, custodian or insurance company.
8. What is the difference between an executor and an administrator? Which one should I apply for?
- Practically speaking, there is not much of a difference. They are both personal representatives of the estate and have to act in the estate’s best interest. If there is a will, the Clerk of Superior Court will appoint an “executor” if he or she determines the will is valid. Then the clerk will issue the executor “Letters Testamentary.” If there is no will or the clerk determines the will is invalid, the Clerk of Superior will appoint an “administrator” The clerk issues “Letters of Administration” to the administrator.
9. If I’m the personal representative, why do I need a deposit account in the name of the decedent?
- You need to be able to provide a clear record of transactions regarding the estate to the Clerk of Superior Court. An estate account facilitates this, as it allows you to keep estate funds separate from personal funds. Moreover, a personal representative is prohibited from interchanging personal and estate funds.
10. Is there anything I should be doing with the decedent’s property?
- Yes. You if you are the personal representative you should close the debit and credit cards and open an estate account. You should also change locks on the decedent’s residence, change the decedent’s mailing address and stop newspaper delivery.
11. Why does the estate need an EIN (Employer Identification Number) and what exactly is it?
- The EIN is just a number that serves as the taxpayer identification number for the estate. It is issued by the IRS and is required to file tax returns or open deposit accounts in the estates name. To obtain an EIN go to www.irs.gov.
12. What is the order for paying off debts or claims against the estate?
- The claims are grouped into classes and then paid in the following order:
1. Years allowances and reasonable estate administration expenses
2. Claims which are based on a specific lien on the decedent’s property
3. Funeral expenses up to $3,500
4. Costs for gravestone and burial plot up to $1,500
5. Federal income and estate taxes
6. NC income and estate taxes
7. Judgments which place a lien on the decedent’s property
8. Wages which the decedent owed any employees
9. All other claims
- Note that this order and the amounts given come from the NC Gen. Statutes. It would be best to look it up to ensure nothing has changed since the publication of this article.
13. What if I don’t pay them in order?
- You want to avoid this at all cost because if there aren’t enough assets in the estate, the personal representative is personally liable to the higher priority creditor if a lower priority claim is paid before a higher priority claim.
14. If the person doesn’t have a will, what do I do?
- You determine the heirs and distribute the assets of the estate using state law. This is where it’s helpful to have an attorney. Either an attorney or the Clerk of Superior Court can help you figure out how to distribute the property in the absence of a will.
15. What if the estate is closed and then I discover that there’s actually more property?
- Just reach out to the Clerk of Superior Court and he or she will reopen the estate. Then he or she will issue the appropriate documents to appoint someone to take care of the newly discovered property.
Glossary of Terms
- Administrator– Someone appointed by the Clerk of Superior Court to settle the estate of a person who left no will. Administrators are issued “Letters of Administration” by the Clerk of Superior Court.
- Clerk of Superior Court– One who has jurisdiction over the probate of wills and the administration and settlement of estates. He or she is an office of the court and one exists in each county.
- Creditor– The person or entity that is owed a debt.
- Decedent– An individual who has died. A decedent’s estate is the real and Personal Property that an individual owned at his or her death.
- Devisee– a person who receives a gift of real property by a will.
- Estate Tax– generally a federal tax on the transfer of a dead person’s assets to his heirs and beneficiaries.
- Executor– Someone appointed by the Clerk of Superior Court to settle the estate of a person according to his or her will. Executors are issued “Letters Testamentary” by the Clerk of Superior Court.
- Gross Estate– All the real and personal property owned by a decedent at the time of his or her death. This includes household furnishings, deposit accounts, life insurance, and real estate.
- Heir– An individual who receives an interest in, or ownership of, land, tenements, or hereditaments from an ancestor who has died intestate, through the laws of intestate succession.
- Intestate– A person who dies without making a valid will or the reference made to this condition.
- Non-Probate Assets- These are assets that aren’t subject to administration by the personal representative. They are assets in which the title has already been transferred within a decedent’s lifetime, or assets in which the transfer of title is controlled by some sort of survivorship mechanism or named beneficiaries. These assets are not probated, meaning that they are not distributed according to the decedent’s will in probate court.
- Personal Representative– The executor or administrator is the personal representative. This is the person appointed by the Clerk of Superior Court to represent the decedent and settle his or her estate.
- Probate– The court process by which a will is proved valid or invalid and the legal process wherein the estate of a decedent is administered. The clerk also appoints a personal representative of the estate during this process.
- Probate Assets– Assets that are subject to administration by the personal representative. These are assets that an individual owns at his death in his sole name. Probate assets do not have a survivorship feature that will control the disposition at death, so disposition of probate assets are determined by probate court and are usually divided as directed by the decedent’s will. These also exclude assets with named beneficiaries.
- Testate– To die with a valid will.
In North Carolina, there are several laws in place intended to prevent you from effectively disinheriting your spouse. These laws include the Year’s Allowance and the Elective Share. Both of these laws are under Chapter 30 (Surviving Spouses) of the North Carolina General Statutes. These laws allow the surviving spouse to get as much or a little more from his or her inheritance as they would have if the deceased spouse had died without a will or intestate. Why is this important? Because the deceased spouse’s will could leave everything that doesn’t pass automatically to the surviving spouse to his or her children, family, a charity, or anyone else besides the surviving spouse – a possibility that is common with second marriages where the spouse has children from a previous marriage or relationship that he or she wants to make sure benefit from the deceased person’s estate.
The Year’s Allowance allows the surviving spouse, within the first year of the deceased spouse’s death, to claim as much as $30,000 of the deceased spouse’s estate (from what hasn’t already passed automatically by law). This is intended to give the surviving spouse enough resources to manage his or her affairs during that first year after his or her spouse’s death (the time period by which the affairs of the estate are being administrated). The statute contains a provision for minor children as well.
In comparison, the Elective Share allows for the surviving spouse, within six months after the estate is opened (letters have been issued) to claim a larger portion of the deceased spouse’s estate. The couple’s length of marriage determines how much of a percentage to which the surviving spouse is so entitled. If the couple were married for less than five years, 15%. If the couple were married for less than 10 years, 25%. If the couple were married for less than 15 years, 33%, and if the couple were married 15 years or more, then 50%.
Of course, with both of these provisions, there is a laundry list of qualifying and disqualifying stipulations. These statutes are in place to essentially circumvent a decedent’s last will and testament to allow a surviving spouse to take more than perhaps what was intentionally left to him or her. Because there may be facts that change the surviving spouse’s situation and circumstances, it is extremely important to consult an estate planning attorney before pushing the will aside and deciding to take either one or both of these elections and allowances.