How are estate debts prioritized during a co-owned property sale in North Carolina probate cases?

Understanding Debt Priority in Probate

When a decedent owned real estate jointly with another person, the surviving co-owner often retains ownership or receives full title by right of survivorship. If the property must be sold through probate—either because the decedent held a tenant in common interest or because the estate lacks liquid assets—the sale proceeds become part of the estate’s assets. North Carolina law directs the personal representative to apply those funds to outstanding obligations in a prescribed order.

Under N.C. Gen. Stat. § 28A-13-3, the priority of payment is as follows:

1. Administration Expenses: Court costs, attorney fees, and fees for the personal representative.
2. Family Allowance: A statutory allowance for the surviving spouse and minor children.
3. Funeral and Burial Costs: Reasonable funeral expenses not to exceed $10,000.
4. Expenses of Last Illness: Medical costs incurred within 30 days before death, up to $10,000.
5. Federal and State Taxes: Taxes due at the time of death and any estate tax.
6. Other Debts and Claims: All other creditor claims not covered above, including mortgages and liens on the decedent’s share.
7. Residuary Distributions: Any remaining balance passes to heirs or beneficiaries under the will or intestacy rules.

Applying the Statute to a Co-Owned Sale

When the court orders a sale of co-owned property, the personal representative will:

1. Determine the decedent’s fractional interest and allocate net sale proceeds accordingly.
2. Deduct closing costs, realtor commissions, and other sale expenses.
3. Deposit the net proceeds into the estate’s bank account.
4. Pay claims in the statutory order under N.C. Gen. Stat. § 28A-13-3.

Key Points to Remember

• Surviving co-owners may own property outside probate if held as joint tenants with right of survivorship or tenants by the entirety.
• Only the decedent’s share of the sale goes through probate.
• Sale-related costs rank ahead of unsecured debts.
• Creditors must file a claim within three months of the affidavit publication.
• Disputes over claim amounts or priorities may require court approval.

Next Steps

If you face a co-owned property sale in probate, you need a clear plan to satisfy debts in the right order and protect your rights as a co-owner or heir. The attorneys at Pierce Law Group have guided countless families through North Carolina probate and can help you navigate statutes, court filings, and creditor negotiations.

Contact Pierce Law Group today for personalized guidance. Email us at intake@piercelaw.com or call (919) 341-7055 to schedule a consultation.