Can I use the estate bank or checking account to pay property taxes on land I inherited in another state? – North Carolina

Short Answer

Usually, a North Carolina personal representative should only use an estate bank account to pay estate expenses, valid claims, and taxes tied to property the estate still owns or controls. If the out-of-state land has already passed to an heir (and is no longer an estate asset), paying that property’s taxes from the estate account can be improper unless the will, a court order, or a clear estate purpose supports it. When the estate still has an interest in the property (or needs to protect it during administration), paying property taxes can be appropriate to prevent penalties or a tax sale.

Understanding the Problem

In North Carolina probate, the decision point is whether the property tax bill belongs to the estate administration or belongs to the new owner after the inheritance. A personal representative may have signing authority on an estate bank account, but that authority is limited to paying proper estate expenses and handling estate property while the estate is being administered. The key trigger is whether the real property in another state is still being handled as part of the estate’s administration (including protecting or selling it) or whether title has already shifted so the tax bill is now the owner’s responsibility.

Apply the Law

North Carolina law expects a personal representative to preserve and manage estate property and to pay proper charges and taxes when the estate has funds available. At the same time, a personal representative must avoid using estate funds for expenses that are really personal expenses of an heir or beneficiary. When the inherited property is located in another state, the practical question often becomes whether a separate proceeding in that state is needed to administer, transfer, or sell that real estate (often called an “ancillary” estate process in the state where the land sits).

Key Requirements

Estate purpose: The payment must protect or administer an estate asset (or be a proper estate charge), not simply pay an heir’s personal bill.
Control or responsibility: The personal representative generally pays taxes on property in the estate’s care or control when estate funds are available.
Proper timing and accounting: The payment should be documented, categorized correctly in the estate accounting, and made at a time that does not violate claim-payment priorities or other required steps before closing.

What the Statutes Say

N.C. Gen. Stat. § 105-383 (Fiduciaries to pay taxes) – Requires fiduciaries with care or control of property to pay property taxes from funds in hand when available, and can impose personal liability for failing to pay.
N.C. Gen. Stat. § 105-240 (Tax upon settlement of fiduciary’s account) – Limits approval of a fiduciary’s final account unless certain state tax obligations are paid or secured.

Analysis

Apply the Rule to the Facts: The personal representative is waiting on a response after submitting tax-related forms before paying claims and closing the North Carolina estate. If the out-of-state land is still being handled as part of the estate’s administration (for example, the estate needs to preserve it while paperwork is pending), paying property taxes from the estate account may fit the duty to protect property under the fiduciary’s control. If the client has already become the owner and the estate no longer has a role with that land, using estate funds to pay that owner’s property taxes can create an accounting problem and potential objections from other heirs or creditors.

Process & Timing

Who files: The personal representative. Where: The Clerk of Superior Court (Estates) in the North Carolina county where the estate is administered. What: Estate accountings and supporting documentation showing each disbursement’s purpose. When: Before approval of the final account and estate closing, and consistent with required claim-handling steps.
Confirm the property’s status: Determine whether the out-of-state land is still an estate asset being administered (including whether an out-of-state proceeding is required to transfer or sell it) or whether it has already passed to the heir so the tax bill is now the heir’s responsibility.
Pay and document correctly: If payment is proper, pay the taxing authority directly from the estate account, keep the bill and proof of payment, and label it clearly in the estate accounting (for example, as a tax or administration expense tied to estate property). If payment is not clearly proper, consider seeking written direction (including court guidance) before using estate funds.

Exceptions & Pitfalls

Paying an heir’s personal obligation: If title has already transferred and the estate no longer controls the land, paying the owner’s property taxes from the estate account may be treated as an improper distribution or a misuse of estate funds.
Out-of-state administration issues: Real estate is usually governed by the law of the state where it is located. The estate may need an out-of-state procedure before the personal representative can sell, transfer, or otherwise act with respect to that land, even if a North Carolina estate is open.
Priority and timing problems: Even when a payment is legitimate, the personal representative should avoid making payments that conflict with required claim-payment priorities or that complicate the final accounting while waiting on tax clearances or other required filings.

Conclusion

Under North Carolina probate practice, an estate checking account should be used for proper estate expenses and taxes tied to property the estate still owns or controls. If the out-of-state land has already become the heir’s property and the estate no longer has a role with it, paying that property’s taxes from the estate account can be improper. The next step is to confirm whether the land is still being administered as an estate asset (including any required out-of-state process) before paying the tax bill from estate funds.

Talk to a Probate Attorney

If an estate is open in North Carolina and there is inherited real property in another state, it can be hard to tell which bills are proper estate expenses and which bills belong to the new owner. Our firm has experienced attorneys who can help clarify the estate’s duties, the accounting, and the timing for closing. 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.