Will creditors of the deceased have any claim against the sale proceeds if the property passed to the surviving owner by the entirety? – North Carolina

Short Answer

Usually, no. In North Carolina, when a spouse dies owning a home as tenants by the entirety, the surviving spouse becomes the sole owner by survivorship, and the deceased spouse’s interest does not pass through the estate. That generally means the deceased spouse’s creditors do not have a claim to the property or the sale proceeds solely because of the death, although valid liens and joint debts can change the analysis.

Understanding the Problem

In North Carolina, when a married couple holds a home as tenants by the entirety and one spouse dies, can the deceased spouse’s creditors claim part of the sale proceeds when the surviving spouse later sells the home? The practical concern is whether a closing attorney or title insurer will require probate paperwork, creditor releases, or other proof before allowing the deed to be signed and the sale to close.

Apply the Law

North Carolina treats tenancy by the entirety as a form of ownership between spouses with a right of survivorship. When one spouse dies, the surviving spouse owns the property outright, and the deceased spouse has no separate share that becomes part of the probate estate. As a result, most creditor claims against the deceased spouse are handled (if at all) in the estate administration process and do not attach to the survivorship property. A key exception is when a debt is a joint obligation of both spouses, or when a lien is already properly attached to the property under North Carolina law.

Key Requirements

Tenancy by the entirety ownership at death: The home must have been titled to the spouses as tenants by the entirety at the time of the spouse’s death.
Survivorship transfer (not a probate transfer): The surviving spouse takes full title automatically at death, so the deceased spouse’s interest does not become a probate asset.
No enforceable property lien securing only the deceased spouse’s individual debt: Entireties property is generally not liable for one spouse’s separate debts, but it can be liable for joint obligations or existing enforceable liens.

What the Statutes Say

N.C. Gen. Stat. § 41-64 (Termination of tenancy by the entirety upon death) – On a spouse’s death, entireties property belongs to the surviving spouse by survivorship, and the deceased spouse has no descendable estate interest (with a narrow slayer-law exception).
N.C. Gen. Stat. § 41-60 (Liability of entireties property for debts of spouses) – Entireties property is not liable for one spouse’s individual debts; it is liable for joint obligations, and certain judgment liens may attach upon termination events (including death as to the surviving spouse’s interest).

Analysis

Apply the Rule to the Facts: Here, the parent and step-parent held the home as tenants by the entirety, and the step-parent died. Under North Carolina’s survivorship rules, the parent became the sole owner at death, so the home (and later the sale proceeds) generally is not part of the step-parent’s probate estate for creditor payment. That means ordinary unsecured creditors of the deceased step-parent usually cannot demand payment from the closing proceeds solely because the step-parent had debts.

Process & Timing

Who signs the deed: The surviving spouse (the current sole owner). Where: the closing is handled through the closing attorney and recorded with the Register of Deeds in the county where the property is located. What: the closing attorney typically requires a certified death certificate and may require evidence that title passed by survivorship (often shown by the prior deed and the manner of title). When: before closing, so underwriting and deed preparation can be completed.
Title and lien check: The closing attorney will run a title search and lien search to confirm there is no enforceable lien affecting the property (for example, a judgment against both spouses, an IRS lien, or a deed of trust).
Closing and disbursement: If the only owner is the surviving spouse and the title search is clear (or any liens are paid/released at closing), the deed records and proceeds disburse in the normal way.

Exceptions & Pitfalls

Joint debts and joint judgments: If both spouses were liable on a debt, a creditor may have stronger rights against the property than if the debt was only in the deceased spouse’s name.
Existing liens recorded in the chain of title: A deed of trust, judgment lien against both spouses, or other recorded lien can still need payoff or release at closing, even if the property passed by survivorship.
Confusing “estate creditors” with “property liens”: A creditor claim filed in an estate is different from a lien that attaches to real property. Entireties survivorship usually blocks estate-creditor reach, but it does not erase valid liens already enforceable against the property.
Title documentation delays: Closings often get delayed when the prior deed is unclear about how the spouses held title or when the death certificate is not available in certified form.

Conclusion

In North Carolina, when a home passes to a surviving spouse by tenancy by the entirety, the deceased spouse’s interest does not become part of the probate estate, and the deceased spouse’s creditors generally do not have a claim to the home or the sale proceeds solely because of the death. The main exceptions involve joint obligations or enforceable liens. A practical next step is to provide the closing attorney a certified death certificate and the prior deed as soon as possible so title can be cleared before closing.

Talk to a Probate Attorney

If a closing is coming up after a spouse’s death and there are concerns about creditor claims, liens, or title clearance, our firm has experienced attorneys who can help explain the rules and coordinate with the closing attorney on required documents 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.