Application to Qualify [Application For Probate And Letters, AOC-E-201, or Application For Letters Of Administration, AOC-E-202A person who seeks to qualify as a personal representative must apply to the Clerk of Superior Court on a form provided by the clerk’s office. The form calls for a preliminary inventory of all assets of the decedent as of the date of death. Therefore, the applicant will need to have a general knowledge of the decedent’s real estate, bank accounts, stocks, bonds, motor vehicles, and other personal property, and an estimated value of these assets, to complete the application. The instructions for that form assist you in completing the form. [G.S. 28A-6-1(a)].
Qualified PersonsIf the decedent did not name an executor in the will or dies intestate (without a will), the Clerk of Superior Court will grant letters of administration to a person(s) who applies and is qualified to serve, in the following order:
No person may serve as a personal representative who:
A person qualifying as personal representative must take an oath or make an affirmation to carry out the duties faithfully and honestly. [G.S. 28A-7-1].
Generally, an executor of a will who is a North Carolina resident is not required to furnish a bond before being authorized to act as executor, unless the will expressly requires that bond be furnished. However, there are exceptions, and the Clerk of Superior Court always has the discretion to require a bond. An administrator of an estate is required to furnish a bond unless all the heirs are 18 years of age or older, of sound mind and have filed written waivers [Waivers Of Personal Representative’s Bond, AOC-E-404] of the bond requirement. However, no bond is required of an administrator if the administrator is the sole heir. If the sole purpose of the appointment is to bring a wrongful death lawsuit, a bond is not required until immediately prior to the receipt of the wrongful death funds. [G.S. 28A-8-1]. Bond is required (and cannot be waived) when an administrator is not a North Carolina resident. [See G.S. 28A-8-1(b)(6)]
A personal representative is authorized to collect assets, pay claims, and make all disbursements necessary to settle an estate and to distribute the assets in an orderly, accurate, and timely manner. Before the personal representative can sell any real property of the decedent’s estate to generate cash with which to pay debts of the estate, the personal representative must petition the Clerk of Superior Court for permission to sell such real estate. However, the clerk’s approval is not needed if the will expressly directs the executor to sell the real property. [G.S. 28A-13-3, G.S. 28A-15-1, G.S. 28A-17-1].
Except for estates opened solely for purposes of a wrongful death action, after letters are issued, a personal representative must cause a notice for creditor’s claims against the estate to be placed in a newspaper “qualified to publish legal advertisements” which is published in the county where the estate is being administered. If there is no qualified newspaper printed in the county, then:
(i) the notice must be published in a newspaper of general circulation
in the county and posted at the courthouse, or
(ii) a copy of the notice must be posted at the courthouse and in four other public places in the county.
Notices to creditors must be published once a week for four (4) consecutive weeks and should state that claims must be filed by a date certain, which date is at least three (3) months from the date of first publication of the notice. Posted notices must state that claims must be filed by a date certain, which date is at least three (3) months from the date of first posting of the notice. Within seventy-five (75) days after the granting of letters and prior to filing proof of publication and/or posting with the Clerk of Superior Court’s office, the personal representative must also personally deliver or send by first class mail a notice about how, when, and where to file claims against the estate to all creditors (including the Department of Health and Human Services, Division of Medical Assistance, if at the time of the decedent’s death the decedent was receiving Medicaid) who are actually known or can be discovered upon reasonable investigation. However, no notice need be delivered or mailed with respect to any claim that the personal representative already recognizes as valid and has or will pay the claim. Following publication, a copy of the notice, an affidavit from the newspaper attesting to publication, and, as applicable, an affidavit from the personal representative attesting that he or she has mailed or personally delivered the notice, must be filed with the Clerk of Superior Court. [G.S. 28A-14-1, G.S. 28A-14-2].
Within three (3) months from the date of qualification, the personal representative must file with the Clerk of Superior Court’s office an accurate inventory of the estate, giving descriptions and values of all real and personal property of the decedent as of the date of death. The personal representative should obtain copies of signature cards and deposit contracts associated with any joint accounts from the depository financial institution and submit them with the inventory.
Clerks may require supporting documentation for the information provided on the inventory. Property discovered after an inventory has been filed must be reported on a supplemental inventory. [G.S. 28A-20-1, G.S. 28A-20-3]. Income of the estate, property acquired by the estate after the decedent’s death, or asset conversions (e.g. sale of real estate or stock, foreclosure of deed of trust, etc.) must be reported on the next accounting. [G.S. 28A-21-1].
An application for a year’s allowance for the surviving spouse and / or dependent child(ren) may be filed with the clerk at any time within one (1) year of the decedent’s death. The clerk or magistrate will hold a hearing on the application. The allowance will be entered on the application form by the clerk or magistrate. The allowance will be from cash or personal property or a combination of both, but does not include real estate. The allowance should be paid as a priority claim before any other claims against the estate are paid. The amount of the spousal allowance is $20,000 for a surviving spouse if the decedent died on or before December 31, 2013, and $30,000 for a surviving spouse if the decedent died on or after January 1, 2014. An allowance of $5,000 may also be available for each surviving child of the decedent. [G.S. 30-15, G.S. 30-17].
7A. Real Property – Rents, Expenses
Unless real property is willed directly to the estate, title to the land generally vests in the heirs and passes outside the administered estate. Accordingly, rents from those properties are not income to the estate and estate funds may not be used to pay real estate expenses, such as mortgages, taxes, insurance or utilities.
If real property not willed to the estate is needed to pay claims, it can be brought into the estate by filing a special proceeding before the Clerk. [G.S. 28A-17-2].
7B. Encumbered/Mortgaged Property
When items of real or personal property are specifically willed to an heir, that heir takes the property subject to any encumbrances thereon, and without a right to have assets of the estate discharge the secured obligation. [G.S. 28A-15-3]. This does not limit the remedies of a secured creditor against the heir or the estate if the heir or estate fails to make payment on the encumbrances.
If items of real or personal property are assets of (titled to) the administered estate and subject to encumbrances, the personal representative may pay the encumbrance, if that is in the best interests of the estate. However, payment of the encumbrance must be taken into account in calculating the division of the estate and does not increase the share of the distributee of that asset. [G.S. 28A-15-4].
All claims against the decedent’s estate which arose before the death of the decedent, other than taxes and claims covered by insurance, must be presented to the personal representative by the date specified in the notice to creditors, or forever be barred. [G.S. 28A-19-3].
In order to determine if there will be sufficient funds with which to pay claims, the personal representative should not pay any claims until after the time for filing claims has expired.
If the estate is not sufficient to pay all of the creditors in every class, the personal representative should pay in full those classes of creditors for which there is sufficient money, starting with those at the top of the priority list as listed in paragraph 8(b). Then the personal representative should distribute the remaining money proportionally among each creditor of the next highest class. [G.S. 28A-19-6].
After payment of the costs and expenses of administration, including the year’s allowance, the personal representative must pay claims against the estate in the following order: [G.S. 28A-19-6].
Depending on the value of the decedent’s gross estate combined with adjusted taxable gifts and any specific exemption, and depending on the date on which the decedent died, state and federal taxes may be due and state and federal fiduciary income tax returns may also be required. Following qualification, the personal representative should promptly contact state and federal tax offices or a tax professional to determine what tax information, if any, should be filed with those offices. Relevant tax forms used in settlement of the estate may be obtained from the North Carolina Department of Revenue at 1-877-252-3052. If estate tax returns are filed, the personal representative should obtain closing letters from the taxing authorities and file copies with the clerk.
If no State estate or inheritance taxes are due, the personal representative should provide the clerk of court with a certification that no estate or inheritance tax returns were required to be filed [Estate Tax Certification (For Decedents Dying On Or After 1/1/99), AOC-E-212, or Inheritance And Estate Tax Certification (for decedents dying prior to 1/1/99), AOC-E-207]. In the event that State estate taxes were due, the personal representative must provide the clerk of court with a certificate furnished by the North Carolina Secretary of Revenue, stating the estate tax liability has been satisfied in full.
The personal representative may receive a commission for handling the estate. If the will does not establish the amount or method of compensation, or if there is no will, the Clerk of Superior Court may, in his or her discretion, allow a commission of up to five percent (5%) of the estate receipts and disbursements. The clerk will consider the time, responsibility, trouble, and skill involved in the management of the estate. Commissions to personal representatives are accounted for as costs and expenses of administration. The personal representative should petition the clerk for approval of a commission before making distribution. [G.S. 28A-23-3].
The personal representative may choose to hire an attorney to represent the estate. However, the funds of the estate may not be used to pay the attorney’s fees unless the clerk finds that the fee is reasonable. Unless the attorney’s services are beyond the normal scope of estate administration, the attorney’s fees allowed may reduce the amount of the personal representative’s commission. Not all attorney’s fees may be approved by the clerk and if not allowed, the personal representative will be personally responsible for the attorney’s fees.
After paying the costs of administration, taxes, and other valid claims against the estate, the personal representative must distribute the remaining assets of the estate in accordance with the will, or, if none, in accordance with the Intestate Succession Act (Chapter 29 of the General Statutes).
If general bequests of money (those not payable out of a specified fund) are set forth in the will, yet there is not enough cash or other personal property within the administered estate to pay all such bequests, the personal representative should prorate the amount available among all similarly-situated recipients of general bequests [G.S. 28A-15-5]. The personal representative should obtain receipts from all distributees. [G.S. 28A-22-1].
See page 4, paragraph 5, “Filing an Inventory.”
The personal representative may file a final accounting after the date specified in the notice to creditors if all claims have been paid or otherwise satisfied. [G.S. 28A-21-2(b)]. The personal representative must file a final accounting within one year of the date on which he or she qualified to serve, unless the Clerk of Superior Court has granted an extension of time for good cause. [G.S. 28A-21-2(a)]. If an extension has been granted, an annual accounting must be filed within one year of the date of qualification.
The personal representative must file an annual accounting no later than one year from the date on which he or she qualified to serve. If the estate is not finalized within one year, then the personal representative must file a request for the estate to remain open and file an annual account. An annual accounting must be filed every year thereafter until the final accounting is filed. [G.S. 28A-21-1].
All accountings must be accompanied by cancelled or imaged checks or other proof satisfactory to the clerk for all disbursements and distributions and for all balances held or invested. (Example: detailed bank statements showing balance held.) [G.S. 28A-21-1].
Accountings filed with the Clerk of Superior Court must be signed under oath and contain:
After the completion of a wrongful death lawsuit, the personal representative must be bonded before receiving the wrongful death proceeds and must file a separate accounting concerning the wrongful death proceeds. [In re Estate of Parish, 143 N.C. App. 244 (2001)]. Under G.S. 28A-18-2, the proceeds may only be used to pay certain designated expenses, and the balance can only be distributed to heirs of the decedent under the Intestate Succession Act (Chapter 29 of the General Statutes), regardless of whether or not there is a will.
The authorized expenses are:
When the Clerk of Superior Court approves the final account, the clerk will enter an order discharging the personal representative from further liability in the estate. [G.S. 28A-23-1].
If the personal representative fails to account as required, or if he or she renders an unsatisfactory account, the Clerk of Superior Court may issue an order for the personal representative to appear and show cause as to why he or she failed to file an inventory or account. If, within 20 days after service of such an order, he or she does not make the required filing, the clerk may have the sheriff serve the personal representative with an order of contempt and commitment, and the sheriff will place the personal representative in the county jail until he or she complies with the order. The personal representative shall be personally liable for all costs associated with such proceedings. The clerk may also remove the personal representative and appoint someone else to complete the administration of the estate. [G.S. 28A-21-4, G.S. 28A-9-1].
If no application for appointment of a personal representative is pending or has been granted, the following simplified procedure may be used after thirty (30) days from the decedent’s death:
An executor, heir, or creditor of the decedent, or the public administrator of the county, may file an affidavit with the Clerk of Superior Court on a form provided by the clerk’s office, requesting authorization to proceed with collection and administration of the estate. [G.S. 28A-25-1(a), G.S. 28A-25-1.1(a)]. NOTE: If a sale of real estate by the heirs is foreseeably necessary or desirable, a formal administration with notice to creditors may be necessary.
Upon filing the affidavit with the Clerk of Superior Court, the person making the affidavit is authorized to proceed with collection of the decedent’s personal property and with distribution of the property in the following order of priority:
After the distribution has been completed, an affidavit must be filed with the Clerk of Superior Court showing collection, disbursement and distribution of the personal property. This closing affidavit must be filed within ninety (90) days after the date of filing of the qualifying affidavit, unless the clerk has granted an extension of time. [G.S. 28A-25-3(a)(2)].
The surviving spouse of a decedent who died with or without a will may petition the Clerk of Superior Court for an order of summary administration if the spouse is the sole heir or devisee of the decedent. An order of summary administration will permit the spouse to proceed with the collection and distribution of the decedent’s property without the formality of regular administration. By obtaining the order, the surviving spouse assumes all liabilities of the decedent to the extent of the value of the property received. NOTE: Fees are collected when the petition is filed. If a sale of real estate by the surviving spouse is foreseeably necessary or desirable, a formal administration with notice to creditors may be necessary. [Article 28 of Chapter 28A of the General Statutes].