Understanding North Carolina Probate - Estate Administration:
Summary, Collection-by-Affidavit, and Formal
Nithin B. Reddy
It’s important to understand the different types of probate administration for those interested in estate planning and for those who are handling estate affairs due to the passing of a loved one. In some cases, the would-be executor or personal representative has their choice of two or even all three types of probate administration:
- Summary Administration is generally only applicable when a surviving spouse is the sole heir of the entire estate and is the quickest form of administration.
- Collection-by-Affidavit Administration is available for estates with small amounts of personal property and takes a moderate amount of time.
- Formal Administration is the default administration which also happens to take the more time and effort to complete.
There is also a fourth type of probate administration – administration by clerk – that will not be discussed here because it requires the estate to be no more than $5,000 and can only consist of monetary assets. It’s useful to understand the advantages and disadvantages of each of three main types and to understand when they are available so that one can make an informed decision as to both estate planning and estate administration.
Summary Administration is a streamlined administration process that is available when a married decedent leaves all assets to a sole surviving spouse. This is technically available when the decedent passes away with or without a will, but if one passes away without a will, intestate distribution governs, and this may or may not result in the surviving spouse inheriting the full estate, depending on the potential heirs. Typically, summary administration occurs more frequently through estate planning and with a will that clearly bequests all assets to a surviving spouse. Summary administration is extremely brief and may be completed in less than 60 days. The downside is that NC law explicitly states that the spouse becomes liable to decedent’s creditors, though they cannot collect more than total inheritance. The difficulty is that often not all creditors are known, and so using summary administration runs the risk of a previously unknown creditor going after decedent’s assets, well after the administration was completed. In addition, if the decedent was owed money, it can be easier to collect on behalf of the decedent’s estate in other forms of administration. Furthermore, summary administration has the fewest court fees and no fee is based on the size of the estate. Electing for summary administration should be done after careful consideration, because of the disadvantages outlined above.
Collective-by-Affidavit is an alternative available to estates with small amounts of personal property (in NC real property passes outside of probate estate administration unless specifically petitioned for by the personal representative of the estate). The test for whether an estate is eligible for collection-by-affidavit varies depending on whether a surviving spouse is the sole heir:
· Spousal Personal Property Test: if the surviving spouse is the sole heir, collection-by-affidavit administration is available for estates with a value of personal property that does not exceed $30,000, less any liens, encumbrances, or spousal allowance claims. Spousal allowance can be made for up to $30,000, so that it is possible that an estate with $60,000 of personal property - with a $30,000 spousal allowance claim and no liens or encumbrances - can still qualify for Collection-by-Affidavit. In the rare case that the decedent left a spouse with minor children, an additional $5,000 per minor child may be claimed, increasing the total allowance by 5,000 times the number of minor children.
· Personal Property Test: If the surviving spouse is not the sole heir, collection-by-affidavit administration is available for estates with a value of personal property that does not exceed $20,000, less any liens, encumbrances, or spousal allowance claims. Once, if a full $30,000 spousal allowance is made and there are no liens or encumberances, that brings up the gross number to $50,000 for passing the test.
Unlike Summary Administration, multiple court filings and visits are required and the court requires a final filing in the form of a closing affidavit. However, the overall process is expected to be quick as the court requires the final filing to be filed within 90 days, though extensions are available. Under this process, the heirs do not automatically become liable to decedent’s creditors (though known creditors must be paid before distribution), the collection-by-affidavit administration does not explicitly bar creditors from making future claims, unlike formal administration. The rationale is that since collection-by-affidavit administration occurs in situations where the estate’s personal property value is small, complications due to creditors will be rare. However, in certain cases, an estate that is otherwise eligible for collection-by-affidavit may want to go through formal administration, especially if the estate has known multiple creditors. It also has associated court fees, including a scaling court fee of $0.40 per $100 of the estate, to the maximum of $6,000. Collection-by-affidavit is a good fit for estates with few or no creditor claims and small amounts of personal property.
Formal Administration is the default administrative procedure. It is lengthy and often involves the most court visits. Nearly all formal administrations take a minimum of four months, though the default statutory date for the final accounting and the closing the administration process is 12 months. Formal administration has slight more overall court fees as collection-by-affidavit, but cap on the sliding scale is still $6,000. The main advantage of formal administration is how creditors who do not file a claim within the 3-month creditor notice and publication period are forever barred from filing claims against the estate or, later on, against the distributed assets. The main disadvantage is there are numerous deadlines and associated paperwork for the personal representative to fulfill before the estate can be closed. However, in for many estates, the formal administration is a good fit for both the decedent’s wishes and the heirs’ needs. Please see this article for an in-depth look at the various timelines involved in formal administration.
North Carolina Estate Probate Administration Eligibility Decision Tree
Here’s a diagram of the types of administration available to a would-be surviving spouse or personal representative (Please note that the personal property test is discussed above in the Collection-by-Affidavit Section):
Navigating the North Carolina Probate Administration process can be complicated whether you are planning an estate or whether you are the personal representative for a loved one. Don’t hesitate to contact us at (919) 719-3462 or at email@example.com to schedule a free consultation regarding your estate planning or administration.