What is Probate?
Probate is the judicial process of overseeing the distribution of assets belonging to a deceased person (or decedent). This process begins when one or more individuals file an application with the clerk of court asking them to open an estate and appoint them as the personal representative.
Who has the authority to make funeral arrangements?
Typically the family’s first concern is making funeral arrangements. The executor/executrix named in a will may carry out written instructions contained in the will pertaining to the decedent’s body, funeral and burial arrangements before being appointed as the personal representative of the estate. However, if the decedent appointed someone else as their Healthcare Agent in a Healthcare Power of Attorney and gave them the power to make the arrangements, then the Executor/Executrix should let the Healthcare Agent make the arrangements. If the decedent has not left written instructions regarding their remains, then the surviving spouse, children, parents or siblings can make the arrangements – in that order.
How Should the Finances of the Estate be Handled?
The estate should open a bank account. After someone has qualified and been appointed as the personal representative of the estate by the Clerk of Court, the personal representative of the estate should consider opening a bank account in the name of the decedent’s estate. The personal representative should open the account in the name of the estate, not in the name of the personal representative. If the estate has cash or other liquid assets that can be deposited into a bank account, then the personal representative should use the account to collect and preserve those assets prior to using them to pay debts, taxes or creditors. In addition, the personal representative should avoid mixing estate funds with their personal funds. This is referred to as “commingling funds” and is a problem that must be corrected prior to the closing of the estate. It can also lead to the personal representative’s removal as the personal representative of the estate.
What are the Financial Duties and Responsibilities of the Personal Representative?
The personal representative should not use their money to pay debts of the estate. The right of creditors to be paid from the funds of the estate is governed by the North Carolina General Statutes and requires the creditor to respond to a notice from the estate to preserve their right to be paid. Most creditors pursuing unsecured consumer debt will be last in line to be paid after funeral expenses, spousal allowances, taxes and even commissions for the personal representative. The personal representative does not have a duty to pay these claims out of their own pocket, but can loan money to the estate by making such payments. Doing so may make sense in certain limited situations.
The personal representative is not always an heir. Yes it is true that the majority of wills probably name one or more heirs as the executor/executrix, but that is not always the case. In addition, sometimes other documents separate from the will have an effect on how the assets are distributed, but there is a strict rule requiring such documents to be clearly identified in the will. In addition, the creation of a document purporting to dispose of the deceased’s assets after the will is executed will generally not be given effect. A thorough understanding of North Carolina law is necessary to interpreting who the heirs are under a will, especially when the will refers to another document. The personal representative should not start distributing assets to heirs without first being certain as to who those heirs were.
The personal representative must document the transfer of any property before the Clerk of Court. This means cancelled checks, written confirmation of wire transfers, deposit slips and receipts. Whether the personal representative is liquidating an asset, paying an expense associated with administering the estate or distributing an asset to an heir, the personal representative should be careful to document the transaction and obtain receipts – signed when possible. In addition, there are points in the process when the personal representative has top provide the Clerk of Court with an accounting of the assets in the estate. For example, the personal representative generally discloses a brief list of assets of which they are aware when they apply to the Court for appointment as personal representative. Furthermore, the personal representative needs to provide a more detailed accounting of the assets in the estate 90 days after they are appointed personal representative. Finally, the personal representative must file an annual or final account one year after they are appointed and every year after that if the estate remains open.
Where should the Estate File be Opened?
You should open the estate in the county and state in which the deceased lived when they passed away. If the deceased did not have a residence, then the estate should be opened in the county in which the deceased left assets or property. In addition, since attorneys and some other professionals may be licensed by state, you should hire those professionals that are licensed in the same state in which you should open the estate.
Administering an estate is a large and sometimes complicated responsibility. The personal representative has a duty to settle the decedent’s estate without unreasonably sacrificing the value of the estate’s assets and can be held personally liable for any wrongful actions that result in losses to the estate that the personal representative could have prevented through the exercise of ordinary care. Unless you have experience in this area of the law, it makes sense to consult with a qualified attorney prior to making major decisions in administering an estate.