Estates Law from a Probate Clerk s Perspective

Estates Law from a Probate Clerk s Perspective Presented by: Tiffany S. Tyler, Assistant Clerk of Superior Court Buncombe County Estates Division Mariah D. McKinney, Attorney Patla, Straus, Robinson & Moore, P.A. 28 TH JUDICIAL DISTRICT BAR CLE January 23, 2015

Important Terms Personal representative: Includes both an executor and an administrator, but does not include a collector. (N.C. G.S. 28A-1-1) Collector: Any person authorized to take possession, custody, or control of the personal property of the decedent for the purpose of executing the same duties as a personal representative under direction of the Clerk as outlined in G.S. 28A-11-3. (N.C.G.S. 28A-1-1) Collector by Affidavit: A person authorized to take possession, custody, and control of the personal property of the decedent under authority granted by the Affidavit of Collection, AOC-E-203B. Executor: The person who serves as personal representative if the decedent dies testate. Administrator: The person appointed by the court to serve as personal representative if the decedent dies intestate. Administrator CTA: A person appointed by the court to serve as personal representative if the decedent dies testate but the executor is not appointed. (2012 North Carolina Clerk of Superior Court Procedures Manual, Vol. 2, 73.2) Administrator DBN: A person appointed by the court to serve as personal representative when an administrator qualified but died, resigned, or was removed before administration was complete. (2012 North Carolina Clerk of Superior Court Procedures Manual, Vol. 2, 73.3) Administrator CTA, DBN: A person appointed by the court to serve as personal representative when an executor qualified but died, resigned, or was removed before administration was complete. (2012 North Carolina Clerk of Superior Court Procedures Manual, Vol. 2, 73.2) Devisee: Any person entitled to take real or personal property under the provisions of a valid, probated will. (N.C.G.S. 28A-1-1) A Devisee may also be referred to as a beneficiary. Heir: Any person entitled to take real or personal property under intestacy. (N.C.G.S. 28A-1-1) Lineal descendants: All children of such person and successive generations of children of such children. (N.C.G.S. 29-2) Tenancy by the entirety: A form of co-ownership between husband and wife in which they hold the property with a right of survivorship. (2012 North Carolina Clerk of Superior Court Procedures Manual, Vol. 2, 78.1) See also, G.S. 39-13.3(b.) Joint tenancy: A form of co-ownership in which two or more persons each own an undivided interest in the whole property. May be held with or without a right of survivorship. (2012 North Carolina Clerk of Superior Court Procedures Manual, Vol. 2, 78.2) Tenancy in common: A form of co-ownership in which two or more persons hold equal or different interests without a right of survivorship. (2012 North Carolina Clerk of Superior Court Procedures Manual, Vol. 2, 78.3) Per stirpes: A method of dividing an intestate estate proportionally between beneficiaries according to their deceased ancestor s share. (2012 North Carolina Clerk of Superior Court Procedures Manual, Vol. 2, 81.14) Per capita: A method of dividing an intestate estate equally among all individuals in the same class. (2012 North Carolina Clerk of Superior Court Procedures Manual, Vol. 2, 81.14) 2 P age

Wills & Probate Attested Written Will G.S. 31-3.3 (a) An attested written will is a written will signed by the testator and attested by at least two competent witnesses as provided by this section. (b) The testator must, with intent to sign the will, do so by actually signing the will or by having someone else in the testator's presence and at the testator's direction sign the testator's name thereon. (c) The testator must signify to the attesting witnesses that the instrument is the testator's instrument by signing it in their presence or by acknowledging to them the testator's signature previously affixed thereto, either of which may be done before the attesting witnesses separately. (d) The attesting witnesses must sign the will in the presence of the testator but need not sign in the presence of each other. Holographic Will G.S. 31-3.4 (a) (b) A holographic will is a will (1) Written entirely in the handwriting of the testator but when all the words appearing on a paper in the handwriting of the testator are sufficient to constitute a valid holographic will, the fact that other words or printed matter appear thereon not in the handwriting of the testator, and not affecting the meaning of the words in such handwriting, shall not affect the validity of the will, and (2) Subscribed by the testator, or with the testator's name written in or on the will in the testator's own handwriting, and (3) Found after the testator's death among the testator's valuable papers or effects, or in a safe-deposit box or other safe place where it was deposited by the testator or under the testator's authority, or in the possession or custody of some person with whom, or some firm or corporation with which, it was deposited by the testator or under the testator's authority for safekeeping. No attesting witness to a holographic will is required. 3 P age

Self-Proved Wills G.S. 31-11.6 (a) How attested wills may be made self-proved. (a) Any will may be simultaneously executed, attested, and made self-proved, by acknowledgment thereof by the testator and affidavits of the witnesses, each made before an officer authorized to administer oaths under the laws of the state where execution occurs and evidenced by the officer's certificate, under official seal, in the following form, or in a similar form showing the same intent: "I,, the testator, sign my name to this instrument this day of, and being first duly sworn, do hereby declare to the undersigned authority that I sign and execute this instrument as my last will and that I sign it willingly (or willingly direct another to sign for me), that I execute it as my free and voluntary act for the purposes therein expressed, and that I am eighteen years of age or older, of sound mind, and under no constraint or undue influence. Testator We,, the witnesses, sign our names to this instrument, being first duly sworn, and do hereby declare to the undersigned authority that the testator signs and executes this instrument as his last will and that he signs it willingly (or willingly directs another to sign for him), and that each of us, in the presence and hearing of the testator, hereby signs this will as witness to the testator's signing, and to the best of our knowledge the testator is eighteen years of age or older, of sound mind, and under no constraint or undue influence. Witness Witness THE STATE OF. COUNTY OF. Subscribed, sworn to and acknowledged before me by. the testator and subscribed and sworn to before me by and, witnesses, this day of (SEAL) (SIGNED) (OFFICIAL CAPACITY OF OFFICER)" 4 P age

Requirements Subsequent to Attestation G.S. 31-11.6 (b) (b) An attested written will executed as provided by G.S. 31-3.3 may at any time subsequent to its execution be made self-proved, by the acknowledgment thereof by the testator and the affidavits of the attesting witnesses, each made before an officer authorized to administer oaths under the laws of this State, and evidenced by the officer's certificate, under official seal, attached or annexed to the will in form and content substantially as follows: "STATE OF NORTH CAROLINA "COUNTY/CITY OF "Before me, the undersigned authority, on this day personally appeared, and, known to me to be the testator and the witnesses, respectively, whose names are signed to the attached or foregoing instrument and, all of these persons being by me first duly sworn. The testator, declared to me and to the witnesses in my presence: That said instrument is his last will; that he had willingly signed or directed another to sign the same for him, and executed it in the presence of said witnesses as his free and voluntary act for the purposes therein expressed; or, that the testator signified that the instrument was his instrument by acknowledging to them his signature previously affixed thereto. The said witnesses stated before me that the foregoing will was executed and acknowledged by the testator as his last will in the presence of said witnesses who, in his presence and at his request, subscribed their names thereto as attesting witnesses and that the testator, at the time of the execution of said will, was over the age of 18 years and of sound and disposing mind and memory. Testator Witness Witness Witness Subscribed, sworn and acknowledged before me by, the testator, subscribed and sworn before me by, and witnesses, this day of, A.D. (SEAL) (SIGNED) (OFFICIAL CAPACITY OF OFFICER)" Additional Self-Proving Wills G.S. 31-11.6 (c) (c) The sworn statement of any such witnesses taken as herein provided shall be accepted by the court as if it had been taken before such court. (d) Any will executed in another state and shown by the propounder to have been made selfproved under the laws of that state shall be considered as self-proved. (e) A military testamentary instrument executed in accordance with the provisions of 10 U.S.C. 1044d(d) or any successor or replacement statute shall be considered as self-proved. 5 P age

Basic Self-Proving Checklist (will must substantially comply with G.S. 31-11.6 or satisfy other statutory requirements for probate) o Original Will o Signed by Testator o Signed by/witnesses by at least two competent witnesses o Testator Affidavit o Witnesses Affidavit (Testator & Witnesses Affidavits may be combined into one) o Notary Attestation Clause attests to Testator and at least two witnesses signatures Testator Affidavit declares instrument to be the last will and testament signs willingly or directs another to sign for Testator execute will as free and voluntary act at least eighteen years of age or older of sound mind not under any constraint or undue influence Witnesses Affidavit declares that the Testator signs the document as the last will and testament willingly or directs another sign for Testator each witness in the presence and hearing of the Testator signs the will as witnesses witness the Testator s signing of the will and to the best of the witnesses knowledge the Testator is at least eighteen years of age, of sound mind, and not under any constraint or undue influence The Notary Attestation State and county where notarized (where notary commissioned??) Subscribed, sworn, and acknowledged before the notary, the Testator s name Witnesses names Notary seal must be affixed with county and State where Notary is commissioned Printed name and signature of Notary Notary commission expiration date must be provided (date of notary commission expiration date must be after the date of execution of the will) 6 P age

Testate Decedent s Estate Qualification & Probate of the Last Will & Testament (LW&T) in a Formal or Full Estate Form Title Estate Action Cover Sheet Form Number AOC-E-650 Application for Letters Testamentary or Letters of Administration, cta Original Self-Proved Decedent s LW&T Certificate of Probate Oath Order Authorizing Issuance of Letters AOC-E-201 If not self-proved use Affidavit Forms AOC-E-300 and/or AOC-E-301 to probate the will as a holographic/handwritten will AOC-E-302 AOC-E-304 AOC-E-400 AOC-E-402 Letters Testamentary or Administration, cta Bond (unless bond not required by will/statute or waiver of bond is allowed and obtained) Other Forms which may be required or allowed AOC-E-403 AOC-E-401 Waiver of Personal Representative Bond (when allowed in lieu of Bond) Renunciation of Right to Qualify for Letters when required Appointment of Resident Process Agent (when the applicant for letters is an out-of-state resident) Application & Assignment of Year s Allowance (when there is a surviving spouse and/or minor or dependent children) Deficiency Judgment goes with Year s Allowance Renunciation & Waiver of Spouse s Year s Allowance (spouse wishes to waive entitlement) Probate w/out Administration Addendum to Application for Probate of Outof-State Will or Codicil Estate Procedure Pamphlet AOC-E-404 AOC-E-200 AOC-E-500 AOC-E-100 AOC-E-101 AOC-E-213 AOC-E-199 AOC-E-309 (attach to form 199 or 201) AOC-E-850 7 P age

Intestate Decedent s Estate Qualification in a Formal or Full Estate Form Title Estate Action Cover Sheet Application for Letters of Administration Oath Order Authorizing Issuance of Letters Letters of Administration Form Number AOC-E-650 AOC-E-202 AOC-E-400 AOC-E-402 AOC-E-403 Bond (unless waiver of bond is allowed and obtained) Waiver of Personal Representative Bond (when allowed in lieu of Bond) Renunciation of Right to Qualify for Letters Appointment of Resident Process Agent (when the applicant for letters is an outof-state resident) Application & Assignment of Year s Allowance (when there is a surviving spouse and/or minor or dependent children) Deficiency Judgment goes with Year s Allowance Renunciation & Waiver of Spouse s Year s Allowance (when spouse wishes to waive entitlement) Other Forms which may be required or allowed AOC-E-401 AOC-E-404 AOC-E-200 AOC-E-500 AOC-E-100 AOC-E-101 AOC-E-213 Estate Procedure Pamphlet AOC-E-850 8 P age

Priority to Qualify for Letters G.S. 28A-4-1. Order of persons qualified to serve. (a) Letters Testamentary. - Letters testamentary shall be granted to the executor or executors named or designated in the will, or if no such person qualifies, to any substitute or successor executor named or designated in the will. If no person so named or designated qualifies, letters testamentary shall be granted to some other person nominated by a person upon whom the will expressly confers the authority to make such nomination. If none of the foregoing persons qualifies, the clerk shall grant letters of administration in accordance with subsection (b) of this section. (b) Letters of Administration. - Letters of administration shall be granted to persons who are qualified to serve, in the following order, unless the clerk of superior court in the discretion of the clerk of superior court determines that the best interests of the estate otherwise require: (1) The surviving spouse of the decedent; (2) Any devisee of the testator; (3) Any heir of the decedent; (3a) Any next of kin, with a person who is of a closer kinship as computed pursuant to G.S. 104A-1 having priority; (4) Any creditor to whom the decedent became obligated prior to the decedent's death; (5) Any person of good character residing in the county who applies therefor; and (6) Any other person of good character not disqualified under G.S. 28A-4-2. When applicants are equally entitled, letters shall be granted to the applicant who, in the judgment of the clerk of superior court, is most likely to administer the estate advantageously, or they may be granted to any two or more of such applicants. (c) Any interested person may file a petition pursuant to Article 2 of this Chapter alleging that all or any of the persons described in subsection (b) of this section is disqualified in accordance with G.S. 28A-4-2. G.S. 28A-4-2. Persons disqualified to serve as personal representative. No person is qualified to serve as a personal representative who: (1) Is under 18 years of age; (2) Has been adjudged incompetent in a formal proceeding and remains under such disability; (3) Is a convicted felon, under the laws either of the United States or of any state or territory of the United States, or of the District of Columbia and whose citizenship has not been restored; (4) Is a nonresident of this State who has not appointed a resident agent to accept service of process in all actions or proceedings with respect to the estate, and caused such appointment to be filed with the court; or who is a resident of this State who has, subsequent to appointment as a personal representative, moved from this State without appointing such process agent; (5) Is a corporation not authorized to act as a personal representative in this State; (6) Repealed by Session Laws 1999-133, s. 1. (7) Has lost that person's rights as provided by Chapter 31A; (8) Is illiterate; (9) Is a person whom the clerk of superior court finds otherwise unsuitable; or (10) Is a person who has renounced either expressly or by implication as provided in G.S. 28A-5-1 and 28A-5-2 9 P age

Bond G.S. 28A-8-1. Bond required before letters issue; when bond not required. (a) Except as otherwise provided in subsection (b) of this section, every personal representative, before letters are issued, shall give bond, conditioned as provided in G.S. 28A-8-2. (b) No bond shall be required of: (1) A resident executor, unless the express terms of the will require a resident executor to give bond; (2) A nonresident executor (or a resident executor who moves from this State subsequent to that executor's appointment) who has appointed a resident agent to accept service of process as provided in G.S. 28A-4-2(a) [28A-4-2(4)], when the express terms of the will excuse a nonresident executor from giving bond; (3) A nonresident executor, when there is a resident executor named who has qualified as coexecutor unless the express terms of the will require them to give bond, or the clerk of superior court finds that such bond is necessary for the protection of the estate; or (4) A personal representative appointed solely for the purpose of bringing an action for the wrongful death of the deceased until such time as the personal representative shall receive property into the estate of the deceased; or (5) A personal representative that is a trust institution licensed under G.S. 53-159; (6) A personal representative of an intestate who resides in the State of North Carolina when all of the heirs of the decedent are over 18 years of age and file with the clerk of superior court a written waiver instrument agreeing to relieve the personal representative from the necessity of giving bond; or (7) A personal representative where the personal representative receives all the property of the decedent; (8) An administrator with the will annexed who resides in the State of North Carolina when all of the devisees of the decedent are over 18 years of age and file with the clerk of superior court a written waiver instrument agreeing to relieve the administrator with the will annexed of the necessity of giving bond. Amount of Bond G.S. 28A-8-2 1.25 (one and one-fourth) X Total Part I (value of Decedent s personal property) If the Personal Property is valued at more than $100,000, in the Clerk s discretion, 1.10 x value of Total Part I Buncombe County Minimum Bond Amount $25,000 10 P age

Post Qualification Actions Needed Next Steps Publish Notice to Creditors in the Newspaper. Obtain a taxpayer identification number (EIN) for the Estate. Open an Estate Checking Account (ECA). Determine the tax status of the Decedent, past year s filings, if a final return is required, file a Notice of Fiduciary Relationship with the IRS if necessary, file the return when due. Cash out all appropriate accounts in Decedent s sole name and deposit into ECA. Determine all the assets owned by the Decedent at death and the values of same. Begin ascertaining the Decedent s debts, liabilities, and claims against the Estate. Sell vehicles, tangible personal property, securities, and cash in bonds if not provided in the will and as otherwise in the best interests of the Estate. Provide disclosures and information to necessary creditors, heirs/beneficiaries, and other interested persons. Within 90-Days (three months) - Inventory (still referred to as the 90-Day Inventory) Within three (3) months from the date of qualification (date of Issuance of Letter), file with the Clerk a properly completed Inventory For Decedent s Estate (Form AOC E 505). This must be a true and perfect inventory of all real and personal property owned by the Decedent at the date of death fair market value. Attach signature cards that provide the account number and joint owners signatures for all joint accounts listed on inventory proving right of survivorship. Determine Costs Due (Qualification Fee + Assessment on Inventory Total Part I-Probate Assets) File the following along with the Inventory if applicable and available must file on or before filing of final account. Affidavit of Notice to Creditors (Form AOC E 307) Estate Tax Certification (Form AOC E 212) Paid in full funeral bill/proof of payment Check the Clerk s file for Claims and the Publisher s Affidavit from the newspaper Within 1 Year - Annual/Final Account Final Account due within one year from the date of qualification or within six months after receipt of the tax closing letter, whichever is later. G.S. 28A-21-2. If a Final Account cannot be filed for good reason, a request for extension of time should be filed along with an Annual Account. The Annual Account by statute must not extend for more than twelve months, but may be for a shorter period of time. See G.S. 28A-21-1. Automatic Extensions of time for the first Annual Account in fiscal year accounting periods are available upon request to and approval by the Clerk. All claims must be released, rejected, satisfied and proof provided w/final. To the satisfaction of the Clerk, provide proof of Receipts & Disbursements (cancelled checks or third party receipts) these should include administrative expenses and debts of the decedent only. Provide proof of Distributions to Heirs/Beneficiaries in accordance with the will, intestacy, or otherwise provided by law or court order (receipts with original signatures, Form AOC E 521 may be used.) Provide proof of closed accounts for ALL Estate Accounts 11 P age

Alternatives to Formal Administration (Small Estates) 1. Year s Allowances 2. Affidavit for Collection Small Estate Affidavit 3. Assignment of Title 4. Probate without Qualification 5. Summary Administration 6. Limited Personal Representative (Notice to Creditors without Estate Administration) 7. Payments to CSC-Admin by CSC 12 P age

Year s Allowance N.C.G.S. Chapter 30 Summary A quick and simple manner in which to transfer the Decedent s personal property assets to the surviving spouse, minor children, and qualifying dependent children. Who Benefits & How Much For Decedent s dying on or after January 1, 2014, $30,000 for the Surviving Spouse ($20,0000 in 2013); and $5,000 for each minor child, each child 21 years of age and under who is a full-time student, and each disabled child 21 years of age and under. (most Clerks require proof of full-time enrollment or proof of disability for children over 18 years of age) Most Common Type of Assets Cars, trucks, mobile homes, and any other motor vehicle having a NC DMV title Checking, savings, money market accounts in the Decedent s sole name Uncashed or refund checks made payable to the Decedent or Decedent s Estate Unclaimed funds from the State Treasurer and any other money due the Decedent or Estate which does not exceed the allowance amount Cash and household furnishings Applicable Forms AOC-E-650, Estates Action Cove Sheet AOC-E-100, Application and Assignment Year s Allowance AOC-E-101, Deficiency Judgment AOC-E-212, Estate Tax Certification (some Clerks require) AOC-E-213, Renunciation and Waiver of Spousal Year s Allowance Timing & Procedure Must be properly filed and approved by the Clerk (or Magistrate) no later than one year from the Decedent s date of death Allowable in connection with both testate and intestate estates, along with Affidavits for Collection, and with Summary Administration and Probate without Qualification in the Clerk s discretion 13 P age

PAGE 1, Application for Year s Allowance, AOC-E-100 copied for training purposes from www.nccourts.org 14 P age

PAGE 2, Application for Year s Allowance, AOC-E-100 copied for training purposes from www.nccourts.org 15 P age

Deficiency Judgment, AOC-E-101 copied for training purposes from www.nccourts.org 16 P age

Affidavit for Collection of Personal Property of Decedent Article 25 Summary An informal type of administration of the Decedent s personal property up to a maximum amount. Allowable in connection with both testate and intestate estates, with the Year s Allowances, and Limited Personal Representative. Who Benefits & How Much Refer to the applicable forms to determine the maximum amount that may be administered which largely depends on the date of the Decedent s death, the amount of the year s allowances allowed, and whether the surviving spouse is the sole heir. Who Benefits & How Much no statutory requirement of bond no statutory requirement to publish notice to creditors in the newspaper Most Common Type of Assets Same as the year s allowance, but often a larger amount may be administered by combining the year s allowance(s) and this affidavit for Decedent s dying on or after January 1, 2012. Applicable Forms AOC-E-650, Estates Action Cover Sheet AOC-E-203B, Affidavit for Collection of Personal Property of Decedent (for Decedent s dying on or after January 1, 2012) AOC-E-204, Affidavit for Collection, Disbursement and Distribution (Final Affidavit due within 90-days of filing the 203 form unless an extension is granted by the Clerk) AOC-E-212, Estate Tax Certification (most Clerks require) AOC-E-203A, Affidavit for Collection (for Decedent s dying prior to January 1, 2012) Many Clerks also require Renunciation of Right to Qualify (AOC-E-200) and Waiver of Bond for Personal Representative (AOC-E-404) Resident Process Agent (AOC-E-500), for non-state resident affiant Certificate of Probate (AOC-E-304), when a will is being probated 17 P age

Affidavit for Collection, AOC-E-203B copied for training purposes from www.nccourts.org 18 P age

Page 2, Affidavit for Collection, AOC-E-203B copied for training purposes from www.nccourts.org 19 P age

Affidavit for Collection, Disbursement, and Distribution AOC-E-204 copied for training purposes from www.nccourts.org 20 P age

Page 2, Affidavit for Collection, Disbursement, and Distribution AOC-E-204 copied for training purposes from www.nccourts.org 21 P age

Assignment of Title G.S. 20-77(b) Summary Transfer of title of low value motor vehicle(s) in the Clerk s discretion and the Clerk determines the estate does not justify the expense of probate and administration. Who Benefits & How Much Surviving Spouse, Intestate Heirs, and sometimes other entitled creditor or lienholder in the Clerk s discretion Typically only vehicles with a value of less than $3,500, $5,000, or more in the Clerk s discretion Clerk will generally only allow one vehicle to be transferred Most Common Type of Assets Mobile homes Cars, trucks, flat bed trailers Any motor vehicle having a NC-DMV title Applicable Forms DMV-MVR 317 In the Clerk s and DMV s discretion, the Probate Without Qualification Procedure and forms may also be used here in order to transfer title to one vehicle owned by the Decedent to the beneficiary(ies) under the will 22 P age

Affidavit for Authority to Assign Title (MVR-317) FORM OVERVIEW Side 1 23 P age

FORM OVERVIEW: Affidavit for Authority to Assign Title (MVR-317), continued Side 2 24 P age

Probate without Qualification Chapter 28A, Article 2A Summary Transfer of title of real estate owned by the Decedent at death to the beneficiaries who inherit the real property under the will without a formal administration. No limit on value of real property or number of properties transferred under the will. Should be no assets subject to probate and no intent for avoidance of creditors. May be used along with Year s Allowance and DMV MVR-317 in the Clerk s discretion. Applicable Forms AOC-E-650, Estates Action Cover Sheet Modified AOC-E-201, Application for Probate AOC-E-199, Probate Without Qualification AOC-E-399, Addendum AOC-E-304, Certificate of Probate Drafted Affidavit in compliance with G.S. 28A-2A-5 in Clerk s discretion Summary Administration Article 28 Summary Alternative full and complete administration of the Decedent s testate or intestate Estate for the Surviving Spouse when the spouse is the sole heir by intestacy or sole beneficiary under the probated Last Will & Testament. Unique Features Surviving Spouse only No limit to the amount of assets or type of assets administered No publication of notice to creditors required Some Clerks will also allow the spouse to file a Year s Allowance along with Spouse assumes debt, G.S. 28A-28-6 Applicable Forms AOC-E-650, Estates Action Cover Sheet AOC-E-212, Estate Tax Certification (most Clerks require) AOC-E-304, Certificate of Probate AOC-E-905M, Application for Probate & Petition for Summary Administration AOC-E-906M, Petition for Summary Administration Estate Without a Will AOC-E-904, Order of Summary Administration 25 P age

Limited Personal Representative Article 29 Summary Limited letters of authority to publish the notice to creditors for the primary purpose of clearing title to real property or property transferred to living trust prior to the Decedent s death. This is not a type of administration of assets and is not available if there are probate assets unless authorized by statute. It is available also when assets are administered by an Affidavit for Collection, Summary Administration, or Assignment of Title. The statute does not specifically authorize the spouse to do so solely by way of filing the Year s Allowance. See G.S. 28A-29-2(a)(3). Applicable Forms AOC-E-650, Estates Action Cover Sheet A non-aoc form drafted Petition AOC-E-420, Letters of Appointment as Limited Personal Representative AOC-E-308, Affidavit of Notice to Creditors by Limited PR AOC-E-212, Estate Tax Certification (some Clerks require) AOC-E-506, Final Account showing zero assets, if required by the Clerk (some Clerk s allow a final affidavit setting forth no assets where discovered) Payments to the Clerk Small Estates Administered by Clerk G.S. 28A-25-6 Summary A Clerk administered estate where the Clerk receipts into the Clerk s office $5,000.00 or less due and payable to the Decedent or Decedent s Estate. The most common uses of this type of administration by the Clerk is to close out small bank accounts, make payments towards the funeral bill, or reimburse those who paid the funeral bill. Applicable Forms AOC-E-432, Application for Administration by Clerk AOC-E-431, Authorization for Payment of Money Owed a Decedent 26 P age

What Type of Estate if...? Scenario I Decedent died intestate this year with a Surviving Spouse, and owning a $23.00 refund check from utility company, 2012 car worth approx. $15,000.00 with a loan still owing in the amount of $5,000.00 owned ½ by decedent and ½ SS. The Decedent owned all bank accounts joint with right of survivorship, all real property by tenants by the entireties, and all life insurance and retirement benefits are payable to designated beneficiaries. Questions 1. What type(s) of alternate or small estate(s) are best? 2. What if the Decedent died also leaving $35,000 in life insurance payable to the estate and the SS is the sole heir? 3. What if instead the Decedent died also leaving $35,000 in life insurance payable to the estate and the SS is not the sole heir and the Decedent was also survived by 2 minor children? 4. What if the Decedent was survived by 2 adult children? Scenario II What type of estate is required if the same Scenario 1 Decedent, but he also died owning a ¼ undivided interest in real property inherited from his mother. Scenario III Decedent died owning one vehicle as the sole probate asset. Everything else transferred to the Surviving Spouse by joint with right of survivorship, tenancy by entireties, and beneficiary designation. If the spouse seeks to transfer the vehicle within a year from the Decedent s death, which type of alternative administration should the spouse file? 27 P age

Questions 1. What if the value of the vehicle is $35,000? 2. What if one year has already elapsed from the date of the Deceased Spouse s death? 3. What if five years have passed since the first spouse to die s death and the surviving spouse has now passed away and the vehicle was in both spouse s names and the surviving spouse never made any attempts to transfer the vehicle out of the first spouse to die s name? (stress timing of death and who survived the decedent and was living at the decedent s death at that time in the past) Scenario 4 What if the Decedent died survived by two adult children and one minor child and no spouse in late 2014 owning a home and land in Black Mountain, North Carolina and in a small town in Kentucky along with $10,000 in life insurance payable to the Estate, a couple of vehicles, a small amount of securities investments and a small amount of money in checking and savings accounts? 28 P age

INVENTORIES & ACCOUNTINGS Used with permission from the NC Administrative Office of the Courts Organizational Development Division for educational purposes only. 29 P age

AOC-E-505 Inventory For Decedent s Estate (Side 2) Used with permission from the NC Administrative Office of the Courts Organizational Development Division for educational purposes only. 30 P age

Used with permission from the NC Administrative Office of the Courts Organizational Development Division for educational purposes only. 31 P age

AOC-E-506 Account Annual / Final (Side 2) Used with permission from the NC Administrative Office of the Courts Organizational Development Division for educational purposes only. 32 P age

Order of Payment of Claims under N.C.G.S. 28A-19-6(a) Year s Allowances are typically considered to be a class of super-priority Costs and expenses of administration are paid prior to debts of the decedent, creditor claims, and inheritance to heirs First Class Claims with specific lien on property not exceeding the value of such property Second Class Funeral expenses up to $3,500 (as of 2013) Third Class Costs associated with gravestones and purchase of burial place up to $1,500 (as of 2013) Fourth Class All dues, taxes, and other claims with preference under laws of U.S. Fifth Class All dues, taxes, and other claims with preference under laws of State of NC and its subdivisions Sixth Class 1. Judgments of any court of competent jurisdiction within NC, docketed and in force, to the extent to which they are a lien on the property of the decedent at the decedent s death 2. Department of Health and Human Services claims Seventh Class 1. Wages due to decedent s employee 2. Claims for medical services within the 12 months preceding the decedent s death 3. Claims for drugs and all other medical supplies necessary for treatment during the decedent s last illness Eighth Class Equitable distribution claims Ninth Class All other claims and unsecured debts 33 P age

Insolvent Estates: Pro-rata calculation among classes of claims required Step 1: Add up all debts within class Creditor Amt Owed 1 $9,203.62 2 $11,953.47 3 $372.25 4 $5,532.00 5 $13,784.97 6 $736.06 7 $15,496.66 8 $231.14 9 $805.74 10 $7,078.61 $65,194.52 34 P age

Step 2: Divide amount owed to each creditor by total debt Creditor Amt Owed Percentage 1 $9,203.62 14.12% 2 $11,953.47 18.33 3 $372.25 0.57% 4 $5,532.00 8.49% 5 $13,784.97 21.14% 6 $736.06 1.13% 7 $15,496.66 23.77% 8 $231.14 0.35% 9 $805.74 1.24% 10 $7,078.61 10.86% $65,194.52 100.00% 35 P age

Step 3: Multiply creditor s percentage by remaining assets ($8,402.78) Creditor Amt Owed Percentage Pro Rata Share 1 $9,203.62 14.12% $1,186.47 2 $11,953.47 18.33 $1,540.23 3 $372.25 0.57% $47.90 4 $5,532.00 8.49% $713.40 5 $13,784.97 21.14% $1,776.35 6 $736.06 1.13% $94.95 7 $15,496.66 23.77% $1,997.34 8 $231.14 0.35% $29.41 9 $805.74 1.24% $104.19 10 $7,078.61 10.86% $912.54 $65,194.52 100.00% $8,402.78 36 P age

Per Stirpes v. Per Capita Methods of Distribution T has three children: A, B, and C. A has two children, D and E. C has one child, F. A and C predecease T. T dies. Who gets what share? 37 P age

Per Stirpes NC Per Capita (at each generation) 38 P age

ETHICAL CONSIDERATIONS FOR ESTATE ATTORNEYS Scenario I: You provided estate planning services to the Decedent prior to death for which an outstanding bill is still due to your firm. The Last Will and Testament you prepared for the Decedent a few months prior to death is being questioned by a couple of the Decedent s children. The two children who were left out of the Will argue the Decedent was suffering from a terminal disease and was not thinking clearly. Additionally, they say the Decedent was unduly influenced by the fundraising director of the non-profit organization which received their inheritance in the Will. The Decedent s prior Will, which was revoked by the one you prepared, divided the Estate among the four children equally. The last Will gives half of the Estate to two children, half to a local non-profit organization, and leaves out the other two children. Since you prepared the Will, you are convinced that the Decedent had good reason to leave out the two children and that the Decedent was of sound mind in executing the Will. You are currently holding the original Will in your safe at your law firm. One of the children who was left out of the Will has contacted you demanding information relating to the preparation of the Will, the Decedent s capacity at the time of making the will, and that you immediately turn over the Will to the child. You knew the Decedent very well as the Decedent was a longtime client of yours. The Decedent was adamant that you be the attorney who handles the Estate administration. Discussion Questions for Scenario I: 1. To whom may you deliver the Last Will and Testament? 2. What, if any, information may you divulge and to whom? 3. Should you take on the administration of the Estate as the Attorney for the Estate? 4. What considerations are relevant with regard to the outstanding bill for legal services rendered on behalf of the Decedent prior to death? 39 P age

Applicable NC State Bar Rules of Professional Conduct to Consider Client-Lawyer Relationship Rule 1.6 Confidentiality of Information (a) A lawyer shall not reveal information acquired during the professional relationship with a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b). (b) A lawyer may reveal information protected from disclosure by paragraph (a) to the extent the lawyer reasonably believes necessary: (1) to comply with the Rules of Professional Conduct, the law or court order; (2) to prevent the commission of a crime by the client; (3) to prevent reasonably certain death or bodily harm; (4) to prevent, mitigate, or rectify the consequences of a client's criminal or fraudulent act in the commission of which the lawyer's services were used; (5) to secure legal advice about the lawyer's compliance with these Rules; (6) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client; to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved; or to respond to allegations in any proceeding concerning the lawyer's representation of the client; (7) to comply with the rules of a lawyers' or judges' assistance program approved by the North Carolina State Bar or the North Carolina Supreme Court; or (8) to detect and resolve conflicts of interest arising from the lawyer s change of employment or from changes in the composition or ownership of a firm, but only if the revealed information would not compromise the attorney-client privilege or otherwise prejudice the client. (c) A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client. (d) The duty of confidentiality described in this Rule encompasses information received by a lawyer then acting as an agent of a lawyers' or judges' assistance program approved by the North Carolina State Bar or the North Carolina Supreme Court regarding another lawyer or judge seeking assistance or to whom assistance is being offered. For the purposes of this Rule, "client" refers to lawyers seeking assistance from lawyers' or judges' assistance programs approved by the North Carolina State Bar or the North Carolina Supreme Court. Rule 1.7 Conflict of Interest: Current Clients (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) the representation of one or more clients may be materially limited by the lawyer's responsibilities to another client, a former client, or a third person, or by a personal interest of the lawyer. 40 P age

(Rule 1.7 continued from prior page) (b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing. Rule 1.9 Duties to Former Clients (a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing. (b) A lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client (1) whose interests are materially adverse to that person; and (2) about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(c) that is material to the matter; unless the former client gives informed consent, confirmed in writing. (c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter: (1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or (2) reveal information relating to the representation except as these Rules would permit or require with respect to a client. Advocate Rule 3.7 Lawyer as Witness (a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness unless: (1) the testimony relates to an uncontested issue; (2) the testimony relates to the nature and value of legal services rendered in the case; or (3) disqualification of the lawyer would work substantial hardship on the client. (b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by Rule 1.7 or Rule 1.9. RPC 142 a lawyer may not represent an estate in litigation against a claimant where the lawyer s testimony may be necessary to resolve the validity of the claim. 41 P age

North Carolina General Statute Section 28A-19-6 Order of payment of claims. (a) After payment of costs and expenses of administration, the claims against the estate of a decedent must be paid in the following order: First class. Claims which by law have a specific lien on property to an amount not exceeding the value of such property. Second class. Funeral expenses to the extent of three thousand five hundred dollars ($3,500). This limitation shall not include burial place or gravestone. The preferential limitation herein granted shall be construed to be only a limit with respect to preference of payment and shall not be construed to be a limitation on reasonable funeral expenses which may be incurred; nor shall the preferential limitation of payment in the amount of three thousand five hundred dollars ($3,500) be diminished by any Veterans Administration, social security or other federal governmental benefits awarded to the estate of the decedent or to the decedent's beneficiaries. Third class. Costs associated with gravestones and reasonable costs for the purchase of a suitable burial place as provided in G.S. 28A-19-9 to the extent of one thousand five hundred dollars ($1,500). The preferential limitation herein granted shall be construed to be only a limit with respect to preference of payment and shall not be construed to be a limitation on reasonable gravestone or burial place expenses which may be incurred; nor shall the preferential limitation of payment in the amount of one thousand five hundred dollars ($1,500) be diminished by any Veterans Administration, social security or other federal governmental benefits awarded to the estate of the decedent or to the decedent's beneficiaries. Fourth class. All dues, taxes, and other claims with preference under the laws of the United States. Fifth class. All dues, taxes, and other claims with preference under the laws of the State of North Carolina and its subdivisions. Sixth class. Judgments of any court of competent jurisdiction within the State, docketed and in force, to the extent to which they are a lien on the property of the decedent at the decedent's death. The Department of Health and Human Services is a sixth-class creditor for purposes of determining the order of claims against the estate; provided, however, that judgments in favor of other sixth-class creditors docketed and in force before the Department seeks recovery for medical assistance shall be paid prior to recovery by the Department. Seventh class. Wages due to any employee employed by the decedent, which claim for wages shall not extend to a period of more than 12 months next preceding the death; or if such employee was employed for the year current at the decease, then from the time of such employment; for medical services within the 12 months preceding the decease; for drugs and all other medical supplies necessary for the treatment of such decedent during the last illness of such decedent, said period of last illness not to exceed 12 months. Eighth class. A claim for equitable distribution. Ninth class. All other claims. (b) Notwithstanding subsection (a) of this section, if payment of the commissions of the personal representative under G.S. 28A-23-3(g) would cause the estate to be unable to pay all claims against the estate of a decedent, then the commissions shall be limited to the amount allowed under G.S. 28A-23-3(a). 42 P age

Scenario II: You are the Attorney for a solvent estate where the beneficiaries of the Estate are three charitable organizations. The Executor has received over two million dollars of personal property assets and was directed by the will to sell the real property, convert the net proceeds to the residuary estate, and distribute the residuary estate in equal shares as set forth in the Will to the three charitable organizations. Because of some complex tax and litigation issues, some of which were in existence prior to the Decedent s death, your attorney fees are in excess of $40,000. You have received approval from the Clerk for your attorney fees. The Executor now would like for you to prepare a Petition for Reimbursement of Expenses and a Petition for Payment of Commissions. The Executor has informal documentation of a loan to the Decedent in the amount of $50,000 prior to death for which the Executor wishes you to prepare a Petition for Reimbursement. Additionally, the Executor wishes to be reimbursed for several nights of overnight travel expenses which includes lodging, airfare, and meals which total the approximate sum of $10,000. The Executor also desires a maximum five percent (5%) commission. Such commission would be in excess of $150,000 as the Receipts and Disbursements exceed three million dollars. After all expenses, debts, claims, and all of the above each beneficiary will still receive approximately $800,000 each. Discussion Questions for Scenario II: 1. Who is your client? 2. In general, what are your ethical perimeters as the Attorney for the Estate? 3. What are the ethical considerations regarding you preparing the Petitions for Reimbursement on behalf of the Executor? 4. What are the ethical considerations regarding you preparing the Petition for Commission on behalf of the Executor? 5. What are the ethical considerations relating to the amount of attorney fees billed to the Estate? 6. What potential disclosure or consent options might be available or necessary in this case? 43 P age

Applicable NC State Bar Rules of Professional Conduct to Consider Rule 1.3 Diligence A lawyer shall act with reasonable diligence and promptness in representing a client. Comment [4] Unless the relationship is terminated as provided in Rule 1.16, a lawyer should carry through to conclusion all matters undertaken for a client. If a lawyer's employment is limited to a specific matter, the relationship terminates when the matter has been resolved. If a lawyer has served a client over a substantial period in a variety of matters, the client sometimes may assume that the lawyer will continue to serve on a continuing basis unless the lawyer gives notice of withdrawal. Doubt about whether a client-lawyer relationship still exists should be clarified by the lawyer, preferably in writing, so that the client will not mistakenly suppose the lawyer is looking after the client's affairs when the lawyer has ceased to do so. For example, if a lawyer has handled a judicial or administrative proceeding that produced a result adverse to the client and the lawyer and the client have not agreed that the lawyer will handle the matter on appeal, the lawyer must consult with the client about the possibility of appeal before relinquishing responsibility for the matter. See Rule 1.4(a)(2). Whether the lawyer is obligated to prosecute the appeal for the client depends on the scope of the representation the lawyer has agreed to provide to the client. See Rule 1.2. Rule 1.4 Communication (a) A lawyer shall: (1) promptly inform the client of any decision or circumstance with respect to which the client's informed consent, as defined in Rule 1.0(f), is required by these Rules; (2) reasonably consult with the client about the means by which the client's objectives are to be accomplished; (3) keep the client reasonably informed about the status of the matter; (4) promptly comply with reasonable requests for information; and (5) consult with the client about any relevant limitation on the lawyer's conduct when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law. (b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. Rule 1.5 Fees (a) A lawyer shall not make an agreement for, charge, or collect an illegal or clearly excessive fee or charge or collect a clearly excessive amount for expenses. The factors to be considered in determining whether a fee is clearly excessive include the following: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; 44 P age