Real property poses unique set of considerations in the context of estate or trust administration. Inherited real estate or an inherited interest in real property could cause probate delays if debts or title issues are involved. To understand more about how a personal representative oversees the management and distribution of real property during estate and/or trust administration, take a closer look at some variables that affect property distribution:
Will or no will. If the decedent had a will and explicitly named an individual who they wished to receive the property, then the property vests in the named beneficiary(ies) as of the decedent’s death. In the event the decedent did not have a will, the property passes to the decedent’s heirs pursuant to North Carolina’s intestacy statute. See below ‘title’ section to learn more about this. If the estate’s debts exceed the remaining estate assets, the executor may petition the court to request permission to bring the real property into the estate to sell and use the sales proceeds to help satisfy debts of the estate. Executors are exempt from requesting permission if the decedent includes language in their will explicitly conveying the property to the executor and granting the executor permission to sell.
Trust or no trust. Holding one’s home in trust may be beneficial throughout one’s lifetime as well as during estate administration. Before death, real property held in an irrevocable trust may be exempt from creditor claims and judgments; property held in a revocable trust provides for ease of management or disposition of the property by a successor Trustee if the grantor becomes incapacitated. Post-death, property in trust remains shielded from creditors and transfers to the beneficiaries according to the terms of the trust document. The trustee oversees trust administration in this instance and trust terms remain confidential. Trust assets generally are not subject to probate.
Title held. Title to real property owned in the sole name of the decedent, or a decedent’s interest in real property owned as a tenant in common, generally passes to beneficiaries or heirs pursuant to the terms of the decedent’s will or North Carolina intestacy law; however, the property may be subject to being brought back into the estate by the executor if other estate assets are insufficient to satisfy claims against the estate. Even if title is held jointly between the decedent and another individual, a portion of the property interest could be subject to estate debts. For example, if the decedent and a friend owned property as tenants in common or joint tenants with right of survivorship, the decedent’s interest in the property may be subject to being brought into the estate to satisfy creditor claims. In this case, the friend who co-owns the property might need to pay the estate in order to retain the property; otherwise the property might be sold. . Married couples in North Carolina enjoy extra asset protections by holding title as Tenants by the Entirety. Learn more about North Carolina real estate titles and the asset protections.
- Debts. The executor must pay all debts prior to distributing assets to heirs. North Carolina law provides that the executor has the authority to decide if “it is in the best interest of the administration of the estate to sell, lease, or mortgage any real estate or interest therein to obtain money for the payment of debts and other claims against the decedent's estate.” However, as indicated above, the executor may need to petition the court to bring the real property into the estate if he or she determines that it is needed to satisfy estate debts.
If the decedent was a North Carolina resident but owned property elsewhere, learn more about inheriting an out-of-state home.