Losing a loved one is an emotional whirlwind, filled with messages of condolence and kind offers of help, all clouded by grief. Yet, amid this emotionally fraught time, if you’re named as the executor of your deceased loved one’s estate, the practical matters of settling their affairs land on your lap. But how does an executor close an estate in North Carolina?
Closing an estate is a multi-step legal process that involves more than just reading a will. From gathering assets to paying off debts and distributing what’s left, an executor has a critical role to play.
In this blog, we’ll walk you through the key steps an executor should follow to close an estate in North Carolina.
Authority of an Executor (Personal Representative)
In North Carolina, the decedent generally names an executor if there is a will. However, the local probate court names an administrator if there is no last will and testament.
In either case, this court often calls the person settling the estate a “personal representative.”
As the personal representative of an estate, you have essential tasks when settling an estate. You will handle the following tasks:
- Inventory and collect assets of the deceased person
- Pay debts and taxes of the deceased person
- Disburse the remaining estate according to the law. If there’s real property to sell, the Clerk of Superior Court needs to approve the sale by the personal representative unless the Will directs the property to be sold and the property has been conveyed to the Executor. If heirs or beneficiaries are selling real estate after an estate is closed, it may not be necessary to obtain the Clerk of Court’s approval for the sale.
What You Need to Know Before Beginning
Commissions for Personal Representatives
You may receive a payment for managing the estate. If the will doesn’t specify the commission, the court can decide to pay up to amount based on a formula calculated as the sum of 5% of the personal property received and 5% of the amount used to pay debts of the estate. You must get approval from the probate court for the commission before distributing the estate’s assets to the heirs.
Attorney’s Fees in Estate Settlement
A personal representative can hire an attorney, but the Court approves the fees as costs of administration.
However, the Clerk of Superior Court in all 100 counties serves as the probate judge and cannot practice law or give legal advice. Therefore, you should not ask the Clerk of Court to prepare your accounts or advise you on the completion of forms or any legal issues.
Bringing in an experienced estate administration attorney can help you handle all aspects of the probate process.
Step 1- Locate Estate Planning Documents
Your first task is to find any estate planning documents, which may include a Will, a Trust, or both. These documents could be stored in various places like a home safe, filing cabinets, or even at the courthouse in the county where the decedent lived.
If the deceased had a go-to attorney, it’s also worth reaching out to them. Although safe deposit boxes are not advisable for document storage due to access issues after death, you might still find important papers there if you’ve exhausted other avenues.
Step 2- Determine Burial Wishes
The next crucial step is identifying the deceased’s wishes regarding their burial or cremation. Some people include this information in their Health Care Power of Attorney. Healthcare providers often have easier access to this document compared to a Will.
Whether it’s a simple declaration like a preference for burial or detailed instructions for cremation at a specific location and time, try your best to honor these wishes.
Step 3- Probate the Will and Apply as Executor
If the court approves the application for probate and appointment of an executor, the Clerk of Superior Court issues “letters” to the executor of the will. These are called the “Letters Testamentary.” They provide written authorization for the executor to carry out their responsibilities.
You’ll also need to take an oath to carry out executor duties faithfully and honestly.
Bond Requirements for Executors and Administrators in North Carolina
Suppose you’re an executor of a will that waives the need for bond and a North Carolina resident. In that case, you generally don’t need to furnish a bond. Remember that the Clerk of Superior Court retains the right to ask for a bond at their discretion.
On the other hand, if you’re an administrator of an estate, you must furnish a bond. The only exception to this rule is if all heirs are at least 18 years old, mentally sound, and have filed written waivers waiving the bond requirement. If you’re the sole heir and also serving as the administrator, you’re exempt from needing a bond. Again, the Clerk can still demand a bond even if you aren’t otherwise statutorily required to have one.
For those serving as administrators for the sole purpose of initiating a wrongful death lawsuit, you don’t have to provide a bond until you’re about to receive the wrongful death funds.
Be aware if you’re an administrator but not a resident of North Carolina, you must furnish a bond unless you have a basis for the waiver of a bond and have appointed a resident process agent in NC.
Step 4- Notice to Creditors
After becoming an authorized personal representative, you have to notify creditors. This usually means placing an announcement in a county newspaper for four weeks. The notice can be posted at the courthouse and other public places if there’s no suitable newspaper.
This notice tells creditors they have at least three months to file their claims. The personal representative also has to mail notices to known creditors.
Step 5- Filing an Inventory of the Estate Assets
The personal representative must file an inventory listing the estate’s assets. Within three months of becoming the authorized representative, you must list all the assets and their values in an inventory file. You must submit this formal accounting to the Clerk. You’ll also need to provide supporting documents like bank account signature cards for the deceased person’s assets.
Providing Proof in Accounting
Proof such as canceled checks or bank statements is necessary for all distributions and disbursements made from the estate.
The accounting filed should include the accounting period, property value, income, and other assets received or lost, and the balance left in the estate.
Step 6- Consider the Year’s Allowance
A surviving spouse or dependent children can file for a year’s allowance within a year of the decedent’s passing. This money comes out of the estate assets before any other debts are paid.
Step 7- Consider Real Property
Rents and Expenses
In most cases, if the will doesn’t specifically bequeath real property to the estate, it automatically goes to the heirs. The estate doesn’t collect rent or cover property expenses like mortgage or taxes.
If the will bequeaths property that has debt on it, the heir receives both the asset and its debt. The estate might cover the debt, but it won’t change the heir’s share.
Step 8- Pay Claims Against the Estate
All claims that existed before the decedent passed away must come in before the deadline given in the creditor’s notice.
If there’s not enough in the estate bank account to pay all debts, the probate process provides an order of priority which can be summarized as follows:
- Legal claims secured by property
- Funeral expenses up to $3500 and Burial expenses up to $1500
- Federal taxes and claims
- State and local taxes and claims
- Court judgments and DHHS claims
- Wages and medical expenses
- Equitable distribution and farm operation costs
- All other claims, like credit card debts and the remaining amount of the funeral/burial expenses
Understanding these responsibilities and procedures will guide you through the complexities of settling an estate in North Carolina.
Step 9 – Distributing the Remaining Assets
After all administrative costs, taxes, and claims against the estate are settled, the personal representative needs to distribute the remaining assets.
If a will exists, you’ll distribute assets as the will specifies. Without a will, the assets go to the closest relatives as dictated by state law. Without a will, the estate assets go through a process called “intestate” distribution.
Step 10 – Closing the Estate: The Probate Court Discharges the Personal Representative
You must submit a final account for approval by the Clerk of Superior Court. Upon approval, the Clerk will issue an order discharging you from any further responsibility or liability related to the estate.
Final and Annual Accounting
Final accounting can happen after all claims have been paid. However, if the estate isn’t settled within a year, you’ll need to file annual accountings with the court until the final accounting is filed.
Accounting for Wrongful Death Proceeds
If there was a wrongful death lawsuit, the personal representative must file a separate accounting for the lawsuit proceeds. The money can only be used for certain expenses and the remaining balance can only be given to the deceased’s heirs as per state law.
Problems You Can Face as a Personal Representative: Removal, Contempt, and Jail Consequences
You must file the required accounts and inventories as per the probate court’s guidelines.
If you fail to file accounts and inventories when due, the Clerk of Superior Court may issue an order requiring you to explain your failure. You must comply after receiving such an order.
If you don’t make the necessary filing within that time frame, prepare for severe consequences. The sheriff may serve you with an order of contempt and commitment, and you could end up in county jail until you comply with the court’s order.
The Clerk of Superior Court has the authority to remove you as the personal representative and appoint someone else to manage the estate.
Consult a North Carolina Licensed Attorney
Consult with an estate administration and probate attorney licensed in North Carolina to help you navigate the legal intricacies of estate administration. This is particularly important because mistakes can lead to personal liability.
If you find yourself struggling with these responsibilities, seeking legal guidance can be an invaluable aid in this complex process. An attorney can help with the following:
- Disbursement of any funds
- Any questions about handling insolvent estates
- Locating professionals to assist with Federal and state taxes payable by the estate
- Help keeping accurate records and file accurate accounts.
- Help paying court costs and fees to the Clerk of Superior Court
By following these guidelines, you’ll make strides in fulfilling your duties as an executor, ensuring that you honor your loved one’s wishes while adhering to North Carolina law.
Hopler, Wilms, and Hanna Can Help
At Hopler, Wilms, and Hanna, our seasoned estate administration and probate attorneys stand ready to guide you through the complex maze of legal and financial obligations that come with managing an estate. We provide personalized, hands-on assistance to ensure you meet all state and federal requirements, including those surrounding bonds.
We offer comprehensive support, from the initial filing of documents with the Clerk of Superior Court to inventories and accounting and the final distribution of assets.
You don’t have to go through this challenging time alone; let us help you fulfill your responsibilities with confidence and peace of mind. With our team by your side, you can navigate the intricacies of estate administration more efficiently and avoid common pitfalls that could lead to legal complications.
Don’t hesitate to reach out to Hopler, Wilms, and Hanna for reliable, straightforward legal advice and representation in all matters related to estate administration and probate.