We have a lot of clients that come in and ask the question, "What is probate?" Probate is the process by which a deceased person's will is offered to the court (in North Carolina, this occurs in front of the Clerk of Superior Court) for approval and by which the estate is administered in accordance with the terms of the will. There is plenty of information out there about probate and what it is (here and here, for example), so there's no need to go over it again. What I think would be beneficial is a discussion of the most common mistakes people make in the probate process.
Common Pitfall #1: Failing to transfer all property out of the name of the decedent. When it comes time to close the estate, it's important to make sure that all items in the name of the deceased person have been closed out and/or transferred. Many times we will see executors come into our office because they failed to transfer title to a vehicle or close out a bank account. If it's something that wasn't listed on the estate's 90-day inventory, it can fall through the cracks, at which point the estate will have to be reopened in order to transfer those items.
Common Pitfall #2: Paying expenses related to a home or land owned by the deceased person out of the estate. This is any easy trap to fall into, because it seems like a no brainer that an Executor would pay things like power bills, water bills, and tax bills for a home or land that a deceased person owned. However, this is not the case. Under North Carolina law, legal title to real property is vested in the deceased person's beneficiaries on the day the person dies, and with legal title comes responsibility for all expenses related to the property. From that point on, the beneficiaries are responsible for all the bills. Some counties will allow expenses related to real property to be paid from the estate with the agreement of the beneficiaries of the estate, but it varies, and could result in the funds paid out needing to be paid back to the estate.
The best thing is for an executor to inform all the heirs of real property in writing that they are responsible for the expenses of the property going forward, and to not pay those expenses from the estate. It will just make things easier when it comes time to close the estate.
Common Pitfall #3: Paying bills along the way instead of waiting. It would seem counter to the Executor's job to wait on paying bills. Your job is to wrap things up, and paying bills is part of that job. However, North Carolina law states that if there are not enough assets in a deceased person's estate to pay all creditors fully, the claims of creditors have to be prorated. We have seen many times where an executor, in an attempt to keep bills paid and avoid ongoing billing, will pay things along the way, and then when it comes time to settle the big bills, there isn't enough money. This is a problem because the estate cannot be closed until the bills of the decedent are satisfied in accordance with the law, and if there isn't enough money in the estate because bills have been paid incorrectly, the Executor may be put in a situation where they have to reimburse the estate for those incorrect payments.
In North Carolina, following a person's appointment as Executor, the Executor is to run what's called a "Notice to Creditors". This notice, run in a newspaper in the county where the person died, lets everyone know that the person has died, and tells them that if the deceased person owed them money, they have 90 days in which to make a claim with the Clerk of Court, or their claim will be forever barred. (Note: There are exceptions to this rule as it relates to "known" creditors, so if there's a debt you, as Executor, know about, and they do not file a claim, you can't say they are barred. If you run into a situation where you aren't sure about a claim's validity, contact an attorney).
You should always wait until this 90-day period has run before you start paying estate bills. This will ensure that you're paying things correctly, and will ensure that if there isn't enough money in the estate, that claims are properly prorated and satisfied as fully as possible.
There are certainly other areas that can cause problems for Executors, but these are the ones we see in our office most often. If you're considering navigating the probate process on your own, keep these points in mind -- they may save you a lot of extra work down the road.
No comments:
Post a Comment