What if my Seller is an Estate?

A Primer on Probate / Estate Administration and How it Affects Title

Here at Atlas Law, one of the title hurdles we run into on a weekly basis relates to situations where there is a deceased owner in our chain of title. Some of these situations can be cleared with a simple death certificate, while other situations can involve complex estate administration work before resolution. This article is meant as an informal guide for dealing with estate sellers­­, whether you are on the seller or buyer’s side of the transaction.

Here are a few dead giveaways that you have an estate in play:

a)       If your tax card/listing says “Heirs of” somebody, you have an estate administration issue.

b)      If the Executor of an Estate has come to you and asked for you to list property for them, you have an estate administration issue.

c)       If the most recent deed in the chain of title shows somebody completely different than the actual seller, then there is a pretty decent chance you have an estate administration issue.

For the purposes of this article the word decedent, as we use it in title research, means the person who has passed that had an interest in the real estate. If we are going to be crass… decedent = dead person.

It is important to understand that, in North Carolina, real estate does not pass to a decedent’s estate. NCGS §28A-15-2(b) says that “[t]he title to real property of a decedent is vested in the decedent’s heirs as of the time of the decedent’s death….” This means that real estate passes directly to the heirs or devisees as soon as the decedent dies. So, that’s it right? Person dies, heirs take title, and we all go our merry way?

Unfortunately, no—NCGS §28A-15-1 tells us that the real property of the decedent shall be “available for the discharge of debts”, which means that the property will pass to your heir or devisee, but it is subject to claims against the estate of the decedent. If your decedent has some credit card bills or medical bills laying around, those can attach to our real property. Thus, those potential claims cloud title, even if the decedent never had a credit card or medical bill in their lives!

So, what do you do as an agent trying to figure out whether you can pass clean title to a new buyer?

Here are some questions you should ask:

1)      Did your decedent die, leaving a surviving spouse? If so, does the deed vesting title in your surviving spouse have both of them listed, and were they married at the time the deed conveyed the property to them as a married couple? In the case that you have a surviving spouse that owned the property as “tenants by the entirety”, property automatically and instantly passes to your surviving spouse (not subject to claims of creditors). Typically, all we will need from a title perspective to clear title will be a copy of the decedent’s death certificate.

2)      Did the decedent die with a Last Will and Testament? You might hear the words “testate” and “intestate”—to die with a will is to pass “testate” and without is “intestate”. The difference is significant, insofar as a valid Last Will and Testament will pass property according to the provisions of that instrument. Without a Last Will and Testament, an intestate decedent passes real property in accordance with statutory guidelines.

a.       If there was a Last Will and Testament: Has that Last Will and Testament been filed with the Clerk of Court in the county where the decedent was last domiciled? If not, does your seller have the original Last Will and Testament?

b.      If there was not a Last Will and Testament: Build a family tree for your decedent. Who are all the living and not living parents, spouse(s), children, and grandchildren of your decedent? Depending on who is alive, this will help us determine who actually has an ownership interest in the property.

3)      When did the decedent die? The magic standard here is two years from the date of death…

a.       If it has been less than two years, claims of creditors against the estate will attach to the real property. In order to pass title clear of those claims, an estate administration will have to be commenced and a “Notice to Creditors” will have to run at least once in the local newspaper.

b.      If it has been more than two years, you are in a good way with respect to claims of creditors. Since there is a two-year statute of limitation on claims against the decedent’s estate, we can usually clear title with respect to claims without any kind of formal administration of the estate. 

Who has to sign?

This can be a complicated question, but in most cases, you are going to want each one of the heirs/devisees of the estate to sign your listing agreement and Offer to Purchase and Contract. You will want your Executor/Administrator of the Estate to sign both as well, if one has already been appointed/qualified.

At the time of signing, all heirs/devisees and all of their spouses (!) will have to sign your deed and seller documentation. Depending on the answer to some of the questions above, in most cases your Executor/Administrator will have to sign your deed as well to release any estate interest. Don’t be surprised to find out that there are some other documentation requirements on the seller side, as well—in many cases there will have to be an Open Estate Affidavit and Indemnity Agreement signed. In still some other cases an Intestate Heir Affidavit will have to be signed by a non-interested third party. Let your attorney guide you on this piece, as it depends on some of the circumstances.  

I’ve got answers to these questions… now what?

As soon as you realize that you have a deceased seller in the ownership mix, the best thing to do is call your attorney! Seriously, the fastest fix here is to reach out to us and let us help you issue-spot before you list or offer on the property. In most cases, we can take a quick look at the title and give you some direction about next steps to take. If you have the above questions answered, you have a jump on the game.

We can’t wait to hear from you soon!