Dec302025
Probate Q&A Series

What steps do I need to take to deduct current property taxes from one heir’s share at closing? – North Carolina

Short Answer

In North Carolina, the cleanest way to deduct one heir’s current property taxes from that heir’s share at a probate real estate closing is to (1) document the agreement/authority for the deduction in writing, (2) have the closing attorney show the tax charge as a line-item on the settlement statement as a debit to that heir (or as a reimbursement to the estate/other co-owner if someone else is paying), and (3) keep the sale proceeds in the estate trust account until the personal representative approves a distribution schedule. Property taxes are usually prorated at closing unless the contract says otherwise, so the paperwork must clearly separate normal proration from the extra “heir-specific” tax deduction.

Understanding the Problem

In North Carolina probate administration, a common question is whether the personal representative can have a closing attorney deduct one heir’s current property taxes from that heir’s share of sale proceeds when estate real property is being sold and the net proceeds must be split equally under a settlement agreement. The decision point is whether there is clear authority to treat the taxes as that heir’s responsibility (rather than an estate expense shared equally) so the closing can reflect the deduction and the estate can distribute the remaining funds consistently with the settlement agreement and the creditor payoff.

Apply the Law

North Carolina law treats property taxes as a charge tied to the property, and closing practice typically prorates taxes between seller and buyer on a calendar-year basis unless the contract changes that rule. When co-owners are involved, North Carolina also recognizes that one co-owner can pay taxes attributable to the property and, if that payment exceeds that co-owner’s share, the paying co-owner may have a claim (and potentially a lien-type remedy) against the other co-owner’s share in an appropriate proceeding. In probate, the personal representative generally controls estate funds and should document any “equitable adjustment” or withholding from a beneficiary’s distribution so the file is clear for later accounting and approval.

Key Requirements

  • Clear authority for the deduction: The settlement agreement, a written beneficiary agreement, or written direction from the personal representative should clearly state that the identified heir’s share will be reduced by the current property taxes (or by reimbursement for taxes advanced by the estate/other co-owner).
  • Correct closing mechanics: The closing statement should separate (a) normal tax proration between seller and buyer from (b) the additional heir-specific charge that reduces only one heir’s distribution.
  • Probate accounting support: The estate should keep a paper trail showing the tax bill, what period it covers, who paid it (or will pay it), and how the deduction was calculated so the distribution can be explained in the estate’s records and any receipts/releases.

What the Statutes Say

Analysis

Apply the Rule to the Facts: The property is being sold during North Carolina probate administration, and the net proceeds must be split equally between two half-owners under a settlement agreement. Because closing customarily prorates taxes between seller and buyer, the closing statement should first handle the standard seller/buyer proration. Then, to deduct “one heir’s current property taxes” from only that heir’s share, the file needs written authority (for example, the settlement agreement or a separate signed agreement) that treats those taxes as that heir’s responsibility and directs the closing attorney to reflect the charge as a debit against that heir’s distribution while the creditor claim is paid at closing and the remaining funds are held in the estate trust account pending distribution.

Process & Timing

  1. Who directs the closing: The personal representative (often through the estate’s attorney) coordinates with the closing attorney. Where: The closing occurs through a North Carolina closing attorney’s trust account, with estate administration overseen by the Clerk of Superior Court (Estates). What: Provide the settlement agreement, the current tax bill(s), and a written instruction (or signed agreement) stating the exact tax amount (or method) to be charged solely to the identified heir’s share, separate from normal tax proration. When: Before the closing package is finalized so the settlement statement and disbursement ledger match the intended distribution.
  2. At closing: The settlement statement should (a) show the statutory/contract proration between seller and buyer and (b) include a separate line item allocating the heir-specific tax deduction as a debit to that heir (or as reimbursement to the estate/other co-owner if they advanced the taxes). The creditor claim that must be paid at closing should be shown as a payoff from the seller side consistent with the closing instructions.
  3. After closing: Deposit the net proceeds payable to the estate into the estate account and prepare a distribution schedule showing the equal split required by the settlement agreement, then the specific reduction for the heir’s taxes, and the resulting net distribution amounts. Obtain a signed receipt, release, and refunding agreement from each beneficiary at the time of distribution to document what was paid and preserve repayment rights if later claims/expenses arise.

Exceptions & Pitfalls

  • Confusing proration with an heir-specific charge: North Carolina proration rules address seller-versus-buyer allocation. They do not automatically authorize charging one heir more than another. The settlement statement should clearly separate these two concepts.
  • No written authority: If the settlement agreement does not clearly assign the taxes to one heir, the personal representative risks a dispute by unilaterally reducing that heir’s distribution. A short, signed agreement (or written consent) can prevent later objections.
  • Using the wrong payee flow: If proceeds are payable to the estate and held pending distribution, the closing attorney typically should not “distribute to heirs” at closing. Instead, the closing should pay approved closing disbursements (including the creditor payoff) and send the remainder to the estate, with the estate making distributions after documenting the allocation.
  • Tax lien and co-owner reimbursement issues: If one co-owner (or the estate) pays more than their share of taxes to protect the property from a tax lien, North Carolina law can support a reimbursement claim against the other co-owner’s share, but the documentation must show what was paid, why, and how the excess was calculated.
  • Accounting and approval problems: Probate administration requires clean records. Missing tax bills, unclear calculations, or a settlement statement that does not match the distribution schedule can delay approval of the estate’s accounting and create beneficiary conflict.

Conclusion

In North Carolina, deducting current property taxes from only one heir’s share at a probate real estate closing usually requires clear written authority and clean closing documentation. Taxes are typically prorated between seller and buyer unless the contract changes that rule, so the closing statement should handle proration first and then show a separate debit that reduces only the identified heir’s distribution. The practical next step is to deliver a written allocation instruction (with the tax bill and calculation) to the closing attorney before the settlement statement is finalized.

Talk to a Probate Attorney

If a probate closing needs to pay an estate creditor and also reduce one heir’s distribution for current property taxes, careful documentation and closing instructions can prevent disputes and protect the estate’s accounting. Our firm has experienced attorneys who can help explain options and timelines. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Probate Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.