Detailed Answer
Keeping the lights on while a loved one’s estate moves through North Carolina probate can feel overwhelming. The good news is that state law provides clear rules — and several practical tools — for paying funeral costs, debts, and day-to-day bills without putting the personal representative at risk.
1. Get Legal Authority First
The clerk of court issues Letters Testamentary (for an executor) or Letters of Administration (for an administrator). Until you have those letters, you have no power to spend estate money or sign checks in the decedent’s name. See N.C. Gen. Stat. § 28A-6-2.
2. Open an Estate Checking Account
Use the letters and the estate’s EIN from the IRS to open a dedicated bank account. Deposit all incoming funds — paychecks, refunds, rent, insurance proceeds — into this account and never mix personal money with estate money. Good records protect you from personal liability.
3. Know the Order of Priority for Paying Expenses
North Carolina ranks claims in strict order under § 28A-19-3. Pay each class in full before moving to the next:
- Class 1 – Costs of estate administration (court costs, reasonable attorney fees, accounting, bond premiums).
- Class 2 – Up to $5,000 in funeral expenses.
- Class 3 – Debts and taxes with preference under federal law.
- Class 4 – Final medical and healthcare costs for the last 12 months of life.
- Class 5 – Public assistance claims.
- Class 6 – All other valid debts.
If assets are insufficient, pay pro rata within the affected class and do not jump ahead in line.
4. Handling Ongoing Bills
- Mortgage or Rent — Keep payments current to avoid foreclosure or eviction. If the estate lacks cash, petition the clerk under § 28A-13-3(c) for authority to sell or lease property to generate funds.
- Utilities & Insurance — Maintain electricity, water, and homeowners insurance to protect the property. These expenses typically fall under Class 1 as “costs of preserving estate assets.”
- Property Taxes — Unpaid taxes create liens. Budget for upcoming tax bills and claim them as Class 1 preservation costs.
- Vehicles — Keep insurance active and pay registration fees if the estate will use or later sell the car.
- Business Operations — If the decedent owned a sole proprietorship, the personal representative may temporarily operate the business with court approval (see § 28A-13-3(a)(2)).
5. Short-Term Cash Solutions
Spouse’s Year’s Allowance (§ 30-15) and Child’s Allowance (§ 30-17) provide up to $60,000 for a surviving spouse and $5,000 per minor child before creditors. File Form AOC-E-100 within one year of death.
When liquid funds are low, you may also:
- Sell personal property under § 28A-17-3 without prior court order if the will authorizes it, or with the clerk’s approval if it does not.
- Request an advance from heirs willing to front costs in exchange for later reimbursement.
6. Creditor Notice and Cut-Off
Publish a “Notice to Creditors” once a week for four weeks in a local newspaper and mail notice to known creditors (§ 28A-14-1). Creditors that miss the 90-day claim window lose their right to payment, freeing more funds for timely debts and beneficiaries.
7. Always Keep Documentation
Use accounting software or a simple spreadsheet. Keep invoices, receipts, and bank statements. You must file an annual or final accounting with the clerk (§ 28A-21-1), and good records prevent surcharges or personal liability.
8. Reimbursement for Out-of-Pocket Payments
Family members who advance money before the estate account is open may apply for reimbursement. File a verified claim with supporting receipts so the clerk can classify and approve it.
9. Finish by Distributing Remaining Assets
After all approved Class 1–6 claims are paid and the accounting is filed, you may distribute what is left to heirs or devisees. Obtain signed receipts to close the estate confidently.
Helpful Hints
- Create a calendar of due dates for mortgages, utilities, and tax installments.
- Set up automatic payments from the estate account to avoid late fees.
- Confirm that homeowner’s and auto policies list the estate as the insured party.
- Store at least three months of expense funds before making heir distributions.
- Consult a probate attorney if the estate is insolvent; paying the wrong claim first can create personal liability.
Need Guidance? Probate moves quickly, and missteps are costly. Our North Carolina probate team has years of experience helping personal representatives keep estates solvent and on schedule. Call us today at (919) 341-7055 to protect yourself and honor your loved one’s wishes.
