Short Answer

Yes, but only with safeguards and court approval. In North Carolina, a personal representative should not make distributions that could leave the estate unable to pay a pending claim. The clerk of superior court can authorize distributions if the estate holds back enough funds (or escrows proceeds) to cover the disputed claim, or can require bonds or other protections. Without an order and proper reserves, the personal representative risks personal liability.

Understanding the Problem

The narrow question is whether a North Carolina personal representative can distribute sale proceeds while a related lawsuit is pending. Here, the personal representative petitioned to sell the decedent’s real property, relatives asserted ownership and reimbursement claims, the claims were denied and those relatives sued, and everyone is considering a joint mediation to agree on a sale and distribution of net proceeds. The issue is whether any distribution can safely occur before the lawsuit ends.

Apply the Law

Under North Carolina law, a personal representative must administer the estate prudently and keep enough assets to pay valid debts and claims. When a claim has been rejected and a lawsuit follows, distribution can occur only if the court (typically the Clerk of Superior Court in the estate file, or the Superior Court if the civil action controls) authorizes a structure that protects the claimant and the estate. State law allows several tools: holdbacks (reserves), escrow of sale proceeds, distribution subject to refund with bonds, or approved compromise. Real property sales to create assets proceed by special proceeding and are treated like judicial sales; proceeds management and bonding are part of that court’s oversight.

Key Requirements

• Protect the estate’s ability to pay: Maintain a reserve or escrow large enough to cover the disputed claim and costs until the lawsuit or compromise resolves.
• Get a court order: Seek the Clerk of Superior Court’s authorization (or a Superior Court consent order if the civil case is controlling) for any interim distribution plan.
• Use approved methods: The court may permit reserves, escrow, distribution with recipient bonds, or other protective measures; a court‑approved compromise can also resolve the claim.
• Follow sale procedure: If selling real property to create assets, proceed under the special proceeding statutes; ensure any bond for the personal representative (or commissioner) covers expected proceeds.
• Watch the claim timeline: After a written rejection, a claimant generally has three months to sue; distributions made before that window closes or without court protection are risky.

What the Statutes Say

• North Carolina Gen. Stat. § 28A-19-5 (Contingent or unliquidated claims) – Clerk may approve reserves, escrow, bonds, or other methods to provide for disputed claims.
• North Carolina Gen. Stat. § 28A-19-16 (Action after rejection of claim) – Claimant must sue within three months of written rejection or be barred.
• North Carolina Gen. Stat. § 28A-17-1 (Sale of real estate to create assets) – Personal representative may seek authority to sell real property to pay estate debts, under judicial sale procedures.
• North Carolina Gen. Stat. § 28A-2-10 (Approval of settlement agreements) – Clerk may approve good‑faith estate settlements within the clerk’s jurisdiction.

Analysis

Apply the Rule to the Facts: Because relatives sued within the required window after the personal representative’s rejection, the claim is active. The sale may proceed only under the court’s oversight, and any distribution before the lawsuit ends should come with protections. A practical path is a consent order authorizing the sale, escrowing net proceeds, and allowing limited interim distributions only after reserving enough to cover the claims and costs. The court can also require bonds from recipients if partial distributions occur.

Process & Timing

1. Who files: Personal representative. Where: Clerk of Superior Court in the county where the estate is administered (estate file) and, if a related civil action is pending, in Superior Court as needed. What: Petition to sell real property to create assets and motion for order approving an escrow/holdback or partial distribution plan (or a joint consent order from the civil case), plus any proposed settlement terms from mediation. When: After the claim is timely filed and the lawsuit is pending; do not distribute until the court signs an order authorizing the structure.
2. Obtain the sale order and, if applicable, bonding adjustments so the personal representative (or commissioner) is bonded for expected proceeds. Complete the judicial sale process, including any upset‑bid period, and deposit net proceeds per the order (estate account or escrow).
3. After the lawsuit resolves or per the court’s interim order, make distributions consistent with the order (escrow release, reserve reduction, or final distribution), then report in the accounting for approval.

Exceptions & Pitfalls

• Distributing without a reserve/escrow can expose the personal representative to personal liability if the estate later owes on the claim.
• If the court allows distribution “as if no claim exists,” recipients may still be liable up to what they received; courts can require bonds from distributees.
• Ownership disputes about the real property can force transfer to Superior Court; expect sale timing and approval to adjust accordingly.
• Ensure the personal representative’s bond covers anticipated sale proceeds if the personal representative will hold funds; increase it if needed.
• Give notice to all interested parties; service or notice defects can delay approval or invalidate interim distributions.

Talk to a Probate Attorney

If you’re dealing with a disputed estate claim and need to sell property while a lawsuit is pending, 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.