Tell me about Probate
Probate is a court-supervised legal process that gives someone, usually the surviving spouse or other close family member, authority to gather the deceased person’s assets, pay debts and taxes, and eventually transfer assets to the people who inherit them. Probate isn’t always required after a death; it depends on what the deceased person owned, as explained below.
Will Probate Be Necessary?
Probate court proceedings are required only if the deceased person owned assets in his or her name alone. Other assets can usually be transferred to their new owners without probate.
Examples of common assets that do not need to go through probate include:
- assets the deceased person owned in joint tenancy, which pass automatically to the surviving owner
- real estate the deceased person owned with his or her spouse in “tenancy by the entirety”
- assets for which a beneficiary has been named outside of the will—for example, retirement accounts for which the deceased person named a beneficiary, or payable-on-death bank accounts
- life insurance proceeds or pension benefits that are payable to a named beneficiary
- assets held in a revocable living trust
Claiming Personal Property With an Affidavit
If the value of the estate isn’t too large, North Carolina offers an unusual procedure, which lets you get approval from the local probate (superior) court to wind up the estate without formal probate. All you need to do is to file one simple form with the court.
You can get a fill-in-the-blanks form, called an Affidavit For Collection Of Personal Property Of Decedent, from the court clerk’s office or the North Carolina courts website. On the form, you state that the value of the estate’s personal property (everything but real estate) is less than $20,000 (or less than $30,000 if the surviving spouse inherits everything under state law) and that at least 30 days have passed since the person’s death. You must provide other information about the deceased person’s assets as well.
You file a copy of the completed affidavit with the clerk of the superior court in the county where the deceased person lived. Once you’ve filed the form, you may present a certified copy to institutions that have custody of property you’re inheriting (a bank, for example) or control the paperwork you need to get the asset into your name (the department of motor vehicles, for example). The institution will turn the property over to you or issue a new title document showing you as the owner.
If no one has initiated a probate proceeding, the person who files the affidavit collects the personal property, pays debts of the estate, and distributes what’s left to the people who inherit it. That person then files another affidavit with the court (within 90 days of the first one), stating how the assets were distributed.
Executors and Administrators
The court appoints an executor (if someone was named in the will) or an administrator (if there is no will or the person named in the will isn’t available or willing to serve) to take charge of the estate. The surviving spouse, if any, has first priority to be appointed as administrator. Both executors and administrators are known as “personal representatives” of the estate.
If you want to serve as executor or administrator, you must apply to the clerk of the court in the county where the deceased person was a resident at the time of death. You can use a form provided by the clerk’s office. With it you’ll need to supply a preliminary inventory of the deceased person’s assets, listing what the person owned (real estate, bank accounts, vehicles, and so on) and their estimated value as of the date of death. There is a $120 fee to open an estate.
If you’re appointed executor, the court will issue a document called “Letters Testamentary,” which gives you authority to handle the assets. If you’re appointed as administrator, you’ll receive “Letters of Administration.” You must take an oath of office, promising to faithfully carry out your duties.
If you’re not a North Carolina resident, you must appoint a resident as your “agent”—someone who is in the state and can receive official court documents on your behalf. You may also be required to post a bond, which is a kind of insurance policy that protects the estate if you cause it loss because of incompetence or dishonesty. (State residents generally don’t have to furnish a bond.)
You may, however, have to post a bond if you are an administrator and there are young (under 18) heirs. But if all the heirs are adults and sign a waiver, or if you are the sole heir, you won’t have to furnish a bond.
The personal representative is entitled to reimbursement for out-of-pocket costs (for example, postage) and to compensation, called a commission, for the work involved in settling an estate. Unless the will establishes the amount of compensation (most don’t), the court clerk can allow a fee of up to five percent of the value of the money that the estate receives and gives out. In approving compensation clerk is required to take into account the actual work done in settling the estate—how much time it took and how difficult it was. The court clerk must also approve the fees of an attorney, if the PR hired one to help with the estate.
The Probate Process in North Carolina
Probate in North Carolina is a fairly straightforward process. The state court system provides many fill-in-the-blanks forms online, and the process is relatively informal. The superior court clerk, an elected county official, acts as the probate judge. (Clerks are often referred to as “ex officio” probate judges, which just means that they are judges because they hold the office of clerk).
The personal representative must:
- collect and inventory the deceased person's assets, and keep them safe
- have assets professionally appraised, if necessary
- sell some assets, if necessary
- pay valid debts and taxes, and
- give out the remaining property as the will (or if there's no will, state law) directs.
The personal representative has authority over all assets of the deceased person that go through probate; these assets make up the “probate estate.” Probate assets typically include vehicles, real estate, bank and brokerage accounts, and personal belongings such as jewelry, furniture, art, and collections.
Usually, the personal representative opens a bank account for the estate, and deposits money from existing cash accounts into the estate account. Amounts paid to the estate (for example, wages owed to the deceased person, refunds, and other miscellaneous payments) also go into the estate account, and its funds are used to pay estate expenses.
A personal representative who wants to sell any real estate in the estate—for example, if it’s necessary to raise cash to pay debts—must first get permission from the court clerk unless the will directs the executor to sell the property.
Paying Debts and Taxes
One of the first jobs of the personal representative is to publish a notice of the probate proceeding in a local newspaper, once a week for four weeks. (If there isn’t a printed newspaper in the county, the notice can be posted at the courthouse and other public places; the clerk’s office will have information on what to do.) This alerts creditors that they should come forward with any claims against the estate within three months after the date of first publication of the notice.
The personal representative must also deliver or mail a notice to creditors about how, when, and where they can file claims against the estate. Notice must be sent to all creditors the PR knows about or can discover with a reasonable amount of investigation. If the PR has already paid a claim, or will pay it, a mailed notice isn’t necessary.
If there isn’t enough money in the estate to pay all the debts, state law sets a priority. Assets that have liens (legal claims) attached to them have first priority; after that come funeral and burial expense (up to $5,000), taxes, and then other expenses.
The executor must file final state and federal income tax returns for the deceased person. These returns are generally due by April 15 of the year following the year of death. Income tax returns may also be required for the estate itself, if it receives income.
State and federal estate tax returns will be required only if the taxable estate is very large—for deaths in 2015, more than $5.43 million. The vast majority of estates—more than 99.7%--do not owe federal estate tax. North Carolina repealed its state estate tax in 2013.
Distributing Assets and Closing the Estate
When debts and taxes have been paid, the personal representative can distribute the property to the people who inherit it. The personal representative must follow the directions in the will, or if there is no will, give property to the closest surviving relatives, as state law directs.
Before the estate can be closed, the personal representative must file a final accounting with the court. The accounting is a statement showing all the transactions the personal representative entered into on behalf of the estate. (If the estate stays open more than a year, an accounting must be filed annually). The accounting must be accompanied by evidence of all transactions, such as cancelled checks, receipts, and bank statements.