Short Form Alternative Probate Procedures in North Carolina

Procedures Available for the Surviving Spouse

When there is a surviving spouse, there are two exclusive procedures available. The first is referred to as “Year’s Allowance,” which is codified in Chapter 30, Article 4 of the North Carolina General Statutes. Every surviving spouse is entitled to receive an allowance of $60,000 for the surviving spouse’s support. This is unless the spouse waives such right or is barred by other applicable law. The Year’s Allowance procedure does not require the appointment of a personal representative. The spouse, their agent, or guardian can apply directly. The Year’s Allowance can only assign personal property, not real estate.

The Year’s Allowance is a great tool for spouses to use for retitling vehicles that were in the name of the deceased spouse, depositing checks payable to the deceased spouse, and other instances in which property can be easily identified and valued. It involves only a single filing that sufficiently identifies the selected property and proves its value. The application is certified by the clerk of court. Once certified, it allows the surviving spouse to provide third parties with that certified document to collect the listed property. If the full amount is not used, a deficiency judgment is issued. This acts as a running tab where the spouse can assign additional property in the future by identifying the property and proving its value.

Property assigned to the Year’s Allowance is also free and clear of any claims by the deceased spouse’s creditors. The Year’s Allowance is not necessary for the surviving spouse to collect property that passes to them via rights of survivorship or beneficiary designation. Again, the Year’s Allowance is also not available for real estate in the deceased spouse’s sole name. However, it can be used to collect financial accounts, business interests, and any other personal property without survivorship or beneficiary designation. It can be tricky to collect property that fluctuates in value, such as stocks and investment portfolios.

Alternative Procedures Available for Spouses and Non-Spouses

There are four alternative probate procedures available for surviving spouses and non-spouses. The first three apply only in limited circumstances, while the final can be more universally applied.

MVR-317 – Assignment of Title:

An MVR-317 is also called “Assignment of Title” and may vary by county. An Assignment of Title can be used in the following instances:

• A single vehicle is the only probate asset.
• No last will and testament has been or will be submitted for probate.
• The funeral has been paid in full, all people who contributed to the funeral consent.
• the value of the vehicle is less than $5,000

In such cases, the heirs complete a single affidavit directing to whom the title should be assigned, and the clerk of court certifies the same. The certified document is then presented to a DMV title office to assign the title.

Administration by the Clerk

The second procedure is authorized by N.C.G.S. § 28A‑25‑6. This allows the clerk of court to administer a small estate in certain circumstances. In general, this procedure only applies when a third party pays funds that are owed to the decedent directly to the clerk of court. The aggregate amount must not exceed $5,000. In such a case, an application may be filed requesting that the funds be paid for spousal or child’s allowances and then to a priority creditor. This may be someone who has paid the funeral expenses of the decedent.

Petition for a Limited Personal Representative

Chapter 28A, Article 29, of the North Carolina General Statutes, permits the appointment of a limited personal representative solely to run the general notice to creditors. This procedure would generally only be useful in a situation where:

• No personal property is passing via probate.
• The heirs or devisees wish to sell the real property within two (2) years of the date of death without a full administration.
• All property is in a revocable trust or otherwise not subject to probate but subject to creditors and the devisees or heirs wish to bar creditors.

This procedure can also be used in conjunction with another alternative procedure. For example, a surviving spouse could use this procedure in conjunction with Summary Administration. MVR-317 or a small estate affidavit are also possibilities, as they don’t require the notice to creditors.

The procedure for a limited personal representative requires a petition to the court, publishing the notice to creditors, and then filing a final sworn affidavit reporting back as to the claims against the estate, if any. The clerk of court then has the discretion to discharge the limited personal representative or order a full administration.

The procedure can involve almost as much work as a full administration. This is true especially when combined with other procedures, and may still require a full administration. Additionally, title companies are not familiar with the procedure. They may refuse to insure title when it is used to clear title to the decedent’s real estate. Lastly, as a mechanism to bar creditors when probate is not otherwise required, it essentially opens the door to problems that would likely not arise otherwise. All in all, it is likely the least used and least beneficial alternative probate procedure.

Affidavit for Collection of Personal Property of Decedent

The final and most effective alternative probate procedure is sometimes referred to as a “small estate affidavit”. It is more formally called an affidavit for collection of personal property of the decedent. Outlined in Article 25 of Chapter 28A of the North Carolina General Statutes, a small estate affidavit is permitted when the value of the decedent’s personal property subject to probate, less any liens or encumbrances, does not exceed $20,000, or $30,000 in the case of a surviving spouse.

As the name suggests, this procedure is not effective to pass title to real property. Additionally, a collector by affidavit is not a personal representative and does not have formal authority to investigate debts or assets of the decedent. The collector by affidavit can, of course, informally investigate these matters. However, banks or other third parties are not required to speak with them regarding the decedent’s affairs. Nor are they obligated to provide the collector with documentation.

Third parties are only required to release the decedent’s personal property in their possession to the collector by affidavit. Moreover, a collector by affidavit does not have the authority to run the notice to creditors or bar creditors. Accordingly, the collector by affidavit must be willing to accept the known debts. They must also pay them in accordance with N.C.G.S. § 28A-19-6. Therefore, this procedure is generally useful in situations where the family member is already aware of and confident in the full extent of the decedent’s assets and debts.

An affidavit for collection of personal property requires two (2) filings. The first is an initial affidavit for collection of personal property. Within ninety (90) days of clerk certification, one must file a closing affidavit of collection, disbursement, and distribution. This reports back to the clerk as to the property collected, with proof of proper disbursements and distributions. The clerk certifies the initial affidavit, and this certified document gives the collector full authority to collect all personal property of the decedent and discharges third parties who release any property to the collector by affidavit. The procedure has become so common and routinely used that banks and the DMV tend to be familiar with it.

In the modern era, significant personal property such as investments can pass outside of probate via beneficiary designations. Therefore, it is common for only a few personal property assets to pass via probate. These assets include vehicles, refund checks, and small accounts. In many cases, these loose ends come in under the $20,000 threshold. While an affidavit for collection is more tedious than other alternative probate procedures and involves multiple filings and significant reporting requirements, it certainly takes less time and involves less responsibility than full probate. Conversely, it also provides less power to the person than full probate and does not bar creditors. Accordingly, an attorney must carefully analyze the situation. An affidavit for collection may not always be the best option even when the value of personal property comes in under $20,000.

In Summary…

North Carolina offers at least six (6) alternative procedures to full probate. These may be available to pass title to assets of a decedent and can be more efficient when appropriate. However, the procedures have specific and nuanced requirements and may also have detrimental legal implications. Therefore, the situation must be carefully analyzed by an astute probate attorney so the client can be made aware of the pros and cons of the alternative procedures in order to make an informed decision.

---

Andrew M. Brower is a Board Certified Specialist in Estate Planning & Probate Law at Law Firm Carolinas, which has five offices and a statewide practice. For questions about estate planning and administration, wills and trusts, guardianships, or Medicaid/long-term care and asset protection, contact Law Firm Carolinas.