How does a family allowance priority work against creditor claims in probate? – North Carolina

Short Answer

In North Carolina, a spouse’s and eligible child’s “year’s allowance” comes off the top of the decedent’s personal property before most creditor claims are paid. The allowance is generally exempt from general debts and judgment liens, though it remains subject to specific liens attached to particular items. If personal property is insufficient, the Clerk can enter a deficiency judgment to be satisfied if more personal assets come in later; real estate is not used to fund the allowance absent limited consent-based situations. Creditor claims are then paid by statutory priority.

Understanding the Problem

In North Carolina probate, can a personal representative pay a proposed family (year’s) allowance ahead of creditor claims, and how does that priority work? Here, the personal representative has multiple creditor claims pending and must correct an inaccurate inventory before filing the annual account.

Apply the Law

North Carolina provides a year’s allowance to a surviving spouse and to eligible children, payable from the decedent’s personal property. The Clerk of Superior Court assigns the allowance on application. These allowances are set aside before most claims and are exempt from general debts and judgment liens, but they do not wipe out a specific lien on a particular item. If the estate’s personal property cannot fully fund the allowance, the Clerk may enter a deficiency judgment against the personal representative to be satisfied when sufficient personal assets later come into the estate. Claims from creditors are then paid in the statutory order of priority. For decedents dying on or after March 1, 2024, procedures and timing for applying have been updated; if letters have issued, an allowance application must be filed within six months of the letters. Earlier decedents generally followed a one-year-from-death application window.

Key Requirements

• Allowance first from personal property: The year’s allowance to spouse and eligible children is allocated from the decedent’s money and other personal property before most creditor claims.
• Exempt from general claims, but not specific liens: Property assigned under the allowance is free of general debts and judgment liens; however, it remains subject to a valid security interest or other specific lien on that item.
• Deficiency handling: If personal property is insufficient, the Clerk may enter a deficiency judgment to be paid when additional personal assets come in; real property is not used to fund the deficiency absent limited, consent-based scenarios after other debts are addressed.
• Order of paying creditor claims: After setting aside the allowances, creditor claims are paid by statutory priority (administration costs, secured claims to the extent of collateral, capped funeral/burial items, taxes, judgments, wages, etc.).
• Deadlines matter: For decedents dying on or after March 1, 2024, if a personal representative has qualified, the spouse/child must apply for the allowance within six months after letters issue; creditors whose claims are rejected must sue timely or be barred.

What the Statutes Say

• North Carolina Gen. Stat. § 30-15 (Spousal year’s allowance) – Establishes the spouse’s allowance from personal property and its exemption from general debts.
• North Carolina Gen. Stat. § 30-17 (Child’s year’s allowance) – Provides the child’s allowance and payment mechanics.
• North Carolina Gen. Stat. § 28A-19-6 (Order of payment of claims) – Sets the priority for paying estate creditors after setting aside allowances.
• North Carolina Gen. Stat. § 28A-19-16 (Action on rejected claim) – Requires a creditor to timely sue after rejection or be barred.

Analysis

Apply the Rule to the Facts: Because the inventory listed a generic estate account and misstated amounts, the personal representative should first amend the inventory with accurate, account-specific balances. With multiple creditor claims pending, the proposed family allowance (spousal and, if applicable, child) is set aside from personal property before most claims. If the estate lacks sufficient personal property to fund the allowances, the Clerk may enter a deficiency judgment to be satisfied if more personal assets later come in. After allowances are set aside, the personal representative may reject any unpaid or improper claims and, if a creditor does not timely sue after rejection, that claim is barred before final distribution.

Process & Timing

1. Who files: The surviving spouse or eligible child (or the personal representative if requested). Where: Clerk of Superior Court in the county where estate administration is pending in North Carolina. What: Application and Assignment of Year’s Allowance (AOC‑E‑100); supporting documentation showing personal property values; if insufficient, the Clerk may also issue a Deficiency Judgment (AOC‑E‑101). When: For decedents dying on or after March 1, 2024, if letters have issued, file within six months after letters; otherwise, timing depends on date of death and local practice.
2. Amend the inventory before the annual account to list specific bank and brokerage accounts with accurate date‑of‑death balances. The Clerk may delay or reject the annual account if inventory errors remain.
3. Address creditor claims: allow valid claims; serve written notice of disallowance on rejected claims; if a creditor does not sue within the statutory period after rejection, the claim is barred. After the claims window closes and barred claims are removed, complete the final account and distribute remaining assets.

Exceptions & Pitfalls

• Secured liens survive: An allowance does not eliminate a valid security interest on a specific item; the recipient takes subject to that lien.
• Real estate limits: The allowance is funded from personal property, not real property; do not plan to use real estate sale proceeds to cover an allowance deficiency unless limited, consent-based options apply after other debts.
• Competing allowances: If personal property is limited and both spouse and children qualify, the Clerk may prorate among them.
• Service traps on rejected claims: Improper service of a disallowance can extend or prevent the three‑month lawsuit deadline for creditors; follow statutory service methods.
• Inventory accuracy: Listing a generic “estate account” or inconsistent asset values can trigger Clerk scrutiny and delay annual or final accounts; correct with an amended filing promptly.

Talk to a Probate Attorney

If you’re dealing with competing creditor claims and a proposed family allowance, our firm has experienced attorneys who can help you understand your 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.