Regardless of whether or not a will was drafted, the estate of a person who has passed must be settled. If the person’s estate consisted only of “non-probate” assets, such as life insurance, joint accounts with rights of survivorship, or retirement accounts with named beneficiaries, it may not be necessary to administer the estate. Real property generally vests in the heirs and passes outside the administered estate (if necessary, real property can be brought into the estate to pay claims). However, in most cases, some level of administration will be needed to collect assets, pay claims, and disburse the remainder.
Formal Estate Administration
If the person died testate (with a will), the will normally names an executor whose responsibility it is to settle the estate. If the person died without a will (intestate), the North Carolina statutes specifies that the administrator will be qualified in the following order:
(1) The surviving spouse of the decedent;
(2) Anyone who is to receive property as indicated by the will of the
(3) Anyone who is entitled to receive property of the decedent by law
in the absence of a will;
(4) Any next of kin;
(5) Any creditor to whom the decedent became obligated prior to death;
(6) Any person of good character residing in the county who applies
with the Clerk of Superior Court.
Both the executor and administrator are also referred to as a personal representative. The personal representative must file an application with the Clerk of Superior Court to begin the process of administering the estate.
One of the first tasks for the personal representative is to publish a notice to creditors. Publication of the notice to creditors establishes a deadline for which creditors have to submit claims to be paid by the estate. Claims must be filed by a specific date at least three months from the date of first publication of the notice. If the personal representative knows of creditors (or could discover with reasonable investigation), a notice must be personally delivered or mailed first class to them about how, when, and where to file claims against the estate. If the personal representative already knows of and recognizes a claim as valid, no notice need be delivered or mailed.
Within three months of qualifying, the personal representative must file an initial inventory of the estate, providing values of all real and personal property as of the date of death. It is important that this inventory is as accurate as possible, and keeping records and supporting documentation related to this property during administration is critical.
The personal representative must also determine if it will be necessary to file tax returns for the decedent or estate. Oftentimes, the overall timeline for settling the estate can be impacted by the need to file a return, so it is important to determine early whether or not a return will be required.
After paying the costs and expenses of administration, funeral expenses, taxes, and valid claims against the estate, the remaining assets are distributed either pursuant to the will, or with the Intestate Succession Act (if there was no will).
Within one year of qualifying, the personal representative must file an accounting. Unless an extension is granted for good cause, this should be the final accounting – once the final accounting is approved by the Clerk, the estate will be closed and the personal representative will be discharged. Again, detailed documentation is critical – copies of checks, statements, etc. are necessary to support all transactions.
Alternatives to Formal Estate Administration
Collection By Affidavit or Administration By Affidavit
If the value of a decedent’s personal property (less liens, encumbrances, and family allowances) does not exceed $20,000 ($30,000 if the spouse is the only heir or devisee) an heir, creditor, executor, or devisee may be able to administer by affidavit (these figures are effective for a person dying on or after 1/1/12). The affidavit is filed with the Clerk, and the affiant obtains certified copies of the affidavit from the Clerk in order to transfer personal property owned by the decedent, such as bank accounts, vehicles, investments, etc. Property must be distributed within 90 days of filing of the affidavit, and a final affidavit filed stating that property was collected and disbursed and distributed. Real estate can not be sold by an affiant. In addition, if the heirs or devisees plan to sell, lease, or mortgage real property within two years after the decedent’s death, this process should not be used due to uncertainty of the ability of creditors to void the transaction.
If the statutory family allowances equal or exceed the value of the decedent’s personal property, formal administration may be avoided. The allowance amount is $30,000 for a surviving spouse, and $5,000 for each dependent child of the decedent. This is accomplished by filing forms for the year’s allowance. Certified copies of the Application and Assignment of Year’s Allowance are issued by the court, and certified copies can be used to transfer property owned by the decedent.
When a spouse is the sole heir or devisee of the decedent, the law provides a summary procedure for collecting and distributing the decedent’s property. If the clerk grants summary administration, the surviving spouse assumes all liabilities of the decedent to the extent of the value of the property received. Certified copies of the order granting summary administration can be used to transfer property owned by the decedent.
Contact our firm today if you have questions about estate administration or need guidance you through the process of settling an estate.