Estate Planning Question: Will my North Carolina real estate pass through probate?

Short Answer: Generally, no. In North Carolina, title to real estate generally passes directly to heirs or devisees at death. However, there are circumstances where probate-related filings become necessary.

Overview

Real estate in North Carolina is unique in that it is not automatically considered a “probate” asset. Rather, under North Carolina law, title to real estate generally vests immediately at death to a decedent's heirs or devisees, subject to the rights of creditors and other potential estate administration requirements. As a result, real estate is often described as a “non-probate” asset.

For example, if a North Carolina resident dies owning a home in his or her sole name without a Last Will and Testament, ownership will generally vest in the heirs determined under North Carolina's intestate succession laws.

Nevertheless, probate is not always avoided. The manner in which title is held, the existence of creditor claims, and the heirs' or devisees' plans for the property could all affect whether court involvement may be necessary.

Ownership Structure and Deeds

The ownership structure on a deed may determine who receives the property at the owner's death. Certain ownership structures include survivorship rights – meaning, when one owner dies, the deceased owner's interest will automatically pass to the surviving owner(s) as set forth in the deed, rather than under North Carolina intestate succession laws or the terms of an individual's Last Will and Testament. Examples of ownership structures with built-in survivorship rights include:

• Joint Tenancy with Rights of Survivorship
• Tenancy by the Entirety
• Life Estate

Conversely, other ownership structures do NOT include survivorship rights and, therefore, do not determine who receives the real estate interest at the owner's death. Examples of these ownership structures include:

• Tenants in Common
• Sole Ownership

When this occurs, ownership vests in either the decedent's heirs under North Carolina's intestate succession laws or the devisees named in the decedent's Last Will and Testament. If a Last Will and Testament governs the disposition of the property, certain probate filings may be required to establish the devisee's ownership and provide a clear chain of title. 

Creditor Claims

North Carolina law offers protections for creditors, which gives them the opportunity to be paid from the estate of a debtor. Since certain types of assets can pass outside of the probate process (such as through beneficiary designations, survivorship titling, etc.) there are instances when an individual may die with more debt than there are probate assets. In such a case, the real estate interest may be brought into the probate estate to satisfy outstanding debts and obligations.

Intent to Sell Real Estate

Relatedly, if the heirs or devisees of a property wish to sell the inherited real estate within two years of the death of the owner, it is often necessary to open the estate in order to publish a Notice to Creditors and ensure the sale is not void as to any potential creditors. This allows potential creditors of the decedent to receive notice of the death and establishes a deadline by which claims should be asserted. Once the creditor claims period has ended and all applicable requirements have been satisfied, the sale will be valid as to creditors - providing greater assurance to title insurers and purchasers.

Contact Us

In sum, although real estate in North Carolina is often considered a “non-probate” asset, the manner in which title is held, the existence of creditor claims, and the intentions of the heirs or devisees may create circumstances in which probate-related filings may be required. Understanding these rules can help families best coordinate their real estate ownership with their estate planning goals.

We welcome the opportunity to discuss how your real estate interest may impact your estate plan. Contact our office for more information or to schedule a conference to review assets and any related probate implications.