Denise Knows Probate!
When we die, what will happen to our assets? This is a question many do not like or want to think about. However, be it while we live or after we die, a decision must be made and if we chose not to make a decision at all the North Carolina Intestacy Laws may possibly make the decision for us.
After death, one thing that is often left to decide on is real estate. Should the real estate owned by the decedent (the person who died) be retained by the heirs and beneficiaries, or should the real estate be sold to pay off the decedent's creditors and give any remaining funds to the decedent’s heirs and beneficiaries?
If the decision has been made to sell the real estate to help pay off creditors then you need to become familiar with the North Carolina Special Proceeding to sell real estate.
In this article we give you a break down of what the North Carolina Special Proceedings to sell real estate is and what you can expect. We will first look at what probate is and what it includes and doesn't include. Then we will explain to you what you need to know about the NC special proceeding to sell real estate.
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What Is Probate?
In North Carolina, probate is the legal process that takes place after a person passes away. It involves gathering the deceased's assets and distributing them according to state law or any instructions left in the deceased's will.
Probate also includes resolving debts and liabilities of the estate, as well as determining ownership of property if there are disputes between heirs or beneficiaries.
The probate process is overseen by a court, and can take several months to complete. The personal representative of the estate (the person responsible for carrying out the terms of the deceased's will) must adhere to all state laws and regulations in order to ensure that everything is handled properly.
When the process is completed, the remaining assets are distributed according to the will or state law. In North Carolina, probate is a complex process that can vary from case to case, so it's important to understand all of the laws and regulations involved in order to ensure a smooth transition for the deceased's estate.
Professional legal help may be necessary if any complications arise during the process.
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What things are included and left out of probate in NC?
Generally, probate covers all the assets of the deceased. This includes bank and brokerage accounts, vehicles, personal property, life insurance policies and any other assets that are owned solely by the deceased.
Assets that are jointly owned without right of survivorship or have a designated beneficiary do not go through probate; instead they pass directly to the joint owner or beneficiary without going through the probate court.
Assets held in a living trust also avoid probate, as do retirement accounts and any other assets that have been properly transferred to a trust before the owner's death.
In North Carolina, it is important to understand which assets will go through probate and which ones may be able to avoid it.
Does Real Estate Go Through Probate In North Carolina?
In North Carolina, real estate does not have to go through probate. However, if the personal representative decides that there are not enough funds to pay the decedent's creditors the personal representative can petition the court to have the house sold. The proceeds from the sale of the house will go towards paying off creditors, taxes and distributed to beneficiaries and heirs if any funds are remaining.
In the case of real estate in North Carolina, if the decision is made to sell the decedent’s real estate to aide in paying off creditors, a special legal procedure, known as “special proceedings”, may need to be followed.
Without properly following the special proceedings process, the decedent’s North Carolina real estate may not be able to be sold.
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North Carolina Special Proceedings to sell real estate
North Carolina special proceedings to sell a decedent’s real estate can be viewed as a process within a process.
The first process is probate. To recap - Probate is the judicial process by which a decedent’s estate is administered in North Carolina. Probate appoints a personal representative to administer the decedent’s estate.
The special proceedings process occurs within the probate process. The personal representative commences the special proceedings process by filing a petition to sell the decedent’s real estate with the Clerk of Superior Court in the county where the decedent’s real estate is located.
To file petition in North Carolina use form sp550
This petition shall include:
· A description of the real estate and the interest in the real estate sought to be sold;
· The names, ages and addresses, if known, of the “devisees” and “heirs” of the decedent. A devisee is a person entitled to take property under the provisions of the decedent’s valid probated Will. An heir is a person entitled to take property if the decedent died intestate (without a valid Will); and
· A statement that the personal representative has determined that it is in the best interest of the administration of the estate to sell the real estate.
Who has to be made aware of the special proceedings?
Each of the devisees and heirs of the decedent shall be notified of the special proceedings by being served with a summons and a copy of the petition.
If any devisee or heir is unable to be contacted, or has an unknown address, the court shall appoint a guardian ad litem for the devisee or heir. The guardian ad litem shall represent the interests of the devisee or heir in the special proceedings.
In addition, if there is a person who claims to have an interest in the real estate that is sought to be sold, the person making the adverse claim must also be notified of the special proceedings.
What Happens after the petition is filed?
A hearing will be held on the personal representative’s petition to sell the decedent’s real estate. If the Clerk of Superior Court approves the petition, the real estate can be sold.
The Clerk of Superior Court also can decide whether the sale of the decedent’s real estate should be by public sale or private sale.
NC Judicial Sale
In North Carolina, a public sale is known as a “judicial sale”. A judicial sale is a form of public auction, subject to strict procedures under North Carolina law.
These include:
The Clerk of Superior Court shall issue an order of sale. The order of sale designates the person authorized to hold the sale (most commonly, the personal representative), directs that the property be sold at public auction to the highest bidder, and prescribes the terms of sale, specifying the amount of cash deposit, if any, to be made by the highest bidder at the sale;
A notice of the public sale shall be posted in an area designated by the Clerk of Superior Court for at least 20 days immediately preceding the sale and be published once a week for at least two successive weeks in a newspaper qualified for legal advertising published in the applicable county or, if there is no such newspaper, a newspaper having general circulation in the applicable county;
At the public auction, the property generally is sold to the highest bidder, subject to the “upset bid” process (as described below);
The person holding the public sale is required, within five days after the date of the sale by auction, to file a report concerning the sale;
An upset bid is made after the public auction and is an increased bid exceeding the reported sale price from the public auction by a minimum amount of the greater of five percent or $750.00. An upset bid is made by delivering to the Clerk of Superior Court a deposit in an amount of at least the greater of five percent of the upset bid or $750.00, by the 10th day after the filing of the report of sale; and
Whether the public sale is made to the highest bidder at a public auction or pursuant to an upset bid, it must be confirmed by the Clerk of Superior Court. Upon confirmation of the public sale, and compliance by the purchaser with the terms of sale, the personal representative can deliver a deed for the decedent’s real estate to the purchaser.
Minimum Upset Bid Calculation
Each upset bid received must raise the advertised bid ten percent (10%) of the first one thousand dollars and five percent (5%) of the remainder (Re:NCGS 160A-269) An example of this calculation follows:
Advertised Bid = $100,000
To Calculate Increase
10% of $1,000 = $100
5% of $99,000 = $4,950
Increase = $5,050
Add Increase to Advertised Bid
$100,000 + $5,050 = $105,050
Minimum Upset Bid = Amount + $105,050
Upset bidder must bid a minimum of $105,050 or higher
Upset bids are considered sealed bids and will be opened after the deadline time and date. Contact with bidders will be made within ten working days after the bid deadline to inform bid results and to return bid deposits as necessary.
Traditional Sale of the house
If the decedent’s real estate is not sold by a public sale, it can be sold by a private sale also known as a traditional sale (if so authorized by the Clerk of Superior Court). A private sale generally is how real estate is more commonly sold.
The personal representative would meet with a real estate agent
the real estate agent would do a comparative market analysis on the house
the personal representative and the agent would discuss pricing
the house would be placed on the market
the personal representative have total control whether to accept an offer or not
if the offer is accepted an escrow attorney would handle closing
deed would be transfer
the personal representative would still be held responsible for appropriately distributing funds and giving an account of the distribution to the clerk of superior court.
How to avoid probate and the NC special proceedings to sell real estate
The above discussion explains how the North Carolina special proceedings process can be used to sell a decedent’s real estate. However, if the decedent takes certain actions before death, it may not be necessary to rely on special proceedings for a post-death real estate sale.
Specifically:
1. The decedent can provide in the decedent’s Will that the personal representative has the authority to sell the decedent’s real estate without any special proceedings. If such authority is expressly stated with proper legal language, the Clerk of Superior Court, as part of the decedent’s probate, may allow a sale to occur without special proceedings.
2. The decedent can establish ownership of the decedent’s real estate in a “non-probate” manner, such as through joint tenancy with rights of survivorship or a Living Trust. Under this approach, the decedent’s real estate can be sold after the decedent’s death without probate or special proceedings.
How North Carolina Probate Solutions Can Help You?
If you need help or have any questions with issue involving a decedent’s real estate, including special proceedings, or any other issue in the probate process in North Carolina, -please call North Carolina Probate Solutions at 252-902-9006. We will listen to you questions and concerns and do our best to get you the answers and help you need.
[Need help with probate? Join our Private Facebook group where you can ask questions and get answers, learn from others or share what you learned about the probate process. Be the first to join our new group! Join Here.]
Denise Harper Davis
Certified Probate Real Estate Specialist
Licensed Realtor
252-902-9006
* NOTE: North Carolina Probate Solutions and the author of this article is not a licensed attorney or CPA. This post should not be considered legal or tax advice. Always consult an estate attorney or tax professional when needing legal answers and legal advice.
Learn More About The Probate Process