An Overview of North Carolina Probate

Estate administration refers to the process of probating the estate of a decedent, which generally includes collecting, inventorying and appraising assets; gathering and paying debts; filing and paying estate taxes; and distributing any remaining assets to beneficiaries. An experienced Raleigh probate and estate administration attorney can help simplify this complicated process. If you need help in the administration of an estate, contact Evan Lohr at (919)348-9211 or at evan@lohrnc.com.

Probate

The estate is the total amount of property that is owned by the decedent at his or her death (excluding real property unless it is necessary to pay creditors) and that has not already been set up to transfer automatically (such as transfer by joint tenancy or payment to a named beneficiary of an insurance policy). If there is a will, the clerk of court will determine if the will is valid and then oversee the administration of the estate by the executor (the person appointed in the will by the decedent to oversee the estate). If there is no will or the will is determined to be invalid, the clerk of court will appoint an administrator and the decedent’s property will be distributed according to North Carolina’s intestacy statute.

Executor’s Duties

The executor is the person named by the decedent in the will to administer the estate. The executor has many important functions to complete, including:

  • Gathering and inventorying all assets of the estate
  • Appraising the assets
  • Collecting any payments or debts owed to the estate
  • Paying any valid debts owed by the estate
  • Filing and paying local, state and federal taxes
  • Distributing assets to the beneficiaries according to the will or state law

The executor owes fiduciary duties to anyone who has an interest in the estate. This means that the executor owes a duty of loyalty and must act in the best interests of the estate. For example, if the executor mismanages estate assets and causes the estate to lose value, he or she can be held liable for these actions and may have to repay the estate the amount of the lost value.

Preserving Estate Assets

An important but sometimes neglected responsibility in administering an estate is to look for opportunities to preserve assets for distribution. Reducing estate taxes is one way that an estate can retain more of its wealth for the decedent’s heirs. Some of the ways to accomplish this are:

  • Consider whether administration expenses and casualty losses should be reported on the estate tax return or on the estate’s income tax return
  • Consider whether there are income tax savings opportunities on the decedent’s final return (such as whether or not a joint income tax return should be filed with the surviving spouse)
  • Consider whether assets should be valued at the date of the decedent’s death or six months later (or, if assets have been distributed prior to six months after the decedent’s death, the date of the disposition of the assets)

Probate and Non-Probate Assets

Probate assets are subject to court administration. Probate can be an expensive and long process, and beneficiaries may have to wait anywhere from one to two years to receive the property left to them in the will. Probate assets include assets owned only by the decedent that do not have a named beneficiary.

Non-probate assets do not have to go through probate. These assets are typically distributed more quickly to the appropriate beneficiaries since a probate proceeding is not required. Non-probate assets generally include:

  • Property owned in joint tenancy  with right of survivorship or by tenancy by the entirety
  • Payment on Death (POD) bank accounts
  • Transfer on Death (TOD) securities
  • Life insurance policies that designate a beneficiary other than the decedent’s estate
  • IRAs, 401(k) accounts, and other retirement plans that name a beneficiary other than the decedent’s estate

Speak to a Probate Lawyer

Guiding an estate through the probate process and effectively administering that estate requires a thorough understanding of North Carolina probate procedure and tax laws. If you need assistance administering an estate, contact Evan Lohr at (919)348-9211 or evan@lohrnc.com.

The Dead Man’s Statute – NC Rule of Evidence 601(c)

Estate litigation poses significant challenges to parties and practitioners, not the least of which is that the person whose wishes should dictate the distribution of the property at issue in a dispute is dead. In many cases, parties seek to introduce purported statements of the deceased as evidence to support their claims. Rule 601(c) of the North Carolina Rules of Evidence applies in these circumstances and serves to render a witness incompetent “when it appears (1) that such a witness is a party, or interested in the event, (2) that his testimony relates to … a communication with the deceased person, (3) that the action is against the personal representative of the deceased or a person deriving title or interest from, through or under the deceased, and (4) that the witness is testifying in his own behalf or interest.” In re Will of Lamparter, 348 N.C. 45, 51, 497 S.E.2d 692, 695 (1998)(quoting Godwin v. Wachovia Bank & Trust Co., 259 N.C. 520, 528, 131 S.E.2d 456, 462 (1963)). The text of the rule is as follows: “Upon the trial of an action, or the hearing upon the merits of a special proceeding, a party or a person interested in the event . . . shall not be examined as a witness in his or her own behalf . . . concerning any oral communication between the witness and the deceased person . . . .” N.C.G.S. § 8C-1, Rule 601(c).

Both propounders (the person submitting the will for probate) and caveators (the person challenging the validity of the will) may be considered interested persons. In re Will of Hester, 84 N.C. App. 585, 595, rev’d on other grounds, 320 N.C. 738 (1987). However, the named executor is not. Id. at 595–96. The effect of the rule is to prohibit testimony by interested persons regarding oral communications between themselves and the decedent about the will, the decedent’s intent to make a new will or to change the beneficiaries of his will, or about the desired disposition of his property.

In conducting discovery and examining witnesses, practitioners asserting the protection of the rule must be careful to avoid waiving it. In a long line of cases, including Wilkie v. Wilkie, 58 N.C.App. 624, 294 S.E.2d 230, disc. rev. denied, 306 N.C. 752, 295 S.E.2d 764 (1982), the appellate courts have held that when a party elicits incompetent evidence under the Dead Man’s Statute, the party then waives any protection afforded by the Statute.  Id. at 627, 294 S.E.2d at 231.   In that case, the plaintiff answered interrogatories implicating the Dead Man’s Statute and there were no objections made by either party to the interrogatories themselves or the answers given.  Id. at 626, 294 S.E.2d at 231. Counsel may avoid a situation such as the one in Wilkie by not asking questions that elicit evidence of oral communications between the deceased and the opposing party and by promptly objecting to, and moving to strike, answers given that concern such communications.

Evan Lohr is a trust and estate attorney with Lohr and Lohr PLLC. He can be reached at (919)348-9211 and evan@lohrnc.com.

Applying for Probate in North Carolina

Any executor named in a will may, at any time after the death of the testator, apply to the clerk of the superior court to have the will admitted to probate. If no named executor applies to have the will proved within 60 days after the death of the testator, any beneficiary named in the will, or any other person interested in the estate, may apply upon 10 days’ notice thereof to the executor. For good cause shown, the clerk of superior court may shorten the initial 60-day period during which the executor may apply to have the will proved.

The clerks of the superior court in North Carolina are required to notify by mail, all beneficiaries whose addresses are known, designated in wills filed for probate in their respective counties. The expenses associated with such notification are chargeable to the estate.

In the event that a party has the will and will not file it with the clerk of court, every clerk, on application by affidavit setting forth the facts, will, by summons, compel any person in the State, who has possession of the will to present the will for probate. If the person refuses or refuses to inform the court where the will is located, he may be held in contempt of the court or be committed to the jail of the county until the will is accounted for or produced.

On application for probate to the clerk of the superior court, he must ascertain by affidavit of the applicant –

(1)        That such applicant is the executor or devisee named in the will, or is some other person interested in the estate, and how so interested.

(2)        The value and nature of the testator’s property, as near as can be ascertained.

(3)        The names and residences of all parties entitled to the testator’s property, if known, or that the same on diligent inquiry cannot be discovered; which of the parties in interest are minors, and whether with or without guardians, and the names and residences of such guardians, if known.

The affidavit shall be recorded with the will and the certificate of probate thereof, if the same is admitted to probate.  Once the will is admitted to probate, the named executor or person presenting the will for probate may be appointed personal representative of the estate by the clerk and issued letters testamentary, allowing them to act on behalf of the estate.

Evan Lohr is an estate attorney with Lohr and Lohr PLLC in Raleigh. He can be contacted at (919) 348-9211 or at evan@lohrnc.com.