Estates and the Automatic Passage of Title
In North Carolina, two areas of the law that are forever intertwined are the areas of Real Estate and Decedents Estates. This relationship can often be a source of confusion for sellers, buyers, attorneys, and agents especially when it comes to how title passes when the record owner passes away. In some states title passes from the owner to their estate when they die and to transfer title to the heirs the estate is required to execute a deed to them. However, this isn’t the case in North Carolina because in North Carolina title to the property never actually goes into the title holder’s estate. Instead, title automatically passes directly from the deceased owner to the heirs at law, either through a validly probated will or through intestate succession and ownership is considered to have vested dating from the time the owner died. So, unlike in some other states there doesn’t need to be a deed from the estate to the heirs to pass title to them because in North Carolina they are already deemed to have title. This means that if the property is then sold by the heirs, they are the ones who should be paid the proceeds of the sale and not the estate. If the executor, administrator, or personal representative is required to execute the deed, it is only to account for an open estate and creditors, not for any actual title ownership. As is always the case with the law, there are a few exceptions to this rule where title will pass to the estate. If the owner had already entered into a contract to sell the property then the estate may carry out that transaction without the heirs so long as it adheres to that constract. There are times where the will actually devises the property to the estate or executor, generally with some directive to sell and split the proceeds with the heirs. In those cases title does vest in the estate and the heirs would only be entitled to the proceeds, not the actual property. There are also instances where an estate can also pull title from the heirs through an order made pursuant to a special proceeding instituted by the executor or administrator, usually done to sell the property and account for claims. Other than these instances, title passes to the heirs who have all the rights and liabilities of title ownership including the right to sell but also the attachment of judgments and marital interest.
Unfortunately, the convenience of the automatic vesting of title into the heirs of an owner at the time of death does come with a bit of a trade off when it comes to title searches. Often the GIS systems and property records, which are good starting points for abstractors, don’t reflect the death of an owner and passage of title to the heirs because they are usually based on what is recorded in the Register of Deeds. This usually means abstractor or attorney must locate the estate, pull a copy from the clerks office, and review it to determine who the true property owners are. That’s if one was opened in the county, opened in another county or state, or even opened at all. However, a pleasant surprise that has popped up from time to time is that some GIS systems have actually been considering estates in their records. Not only have they been listing the heirs as the owners of the property but also giving the estate file by putting it where the vesting deed reference would be. This is extremely helpful for abstractors, attorneys, and agents. Now, while this has only been seen in handful of counties and might not be consistent in that county, if all systems were to work that way it might alleviate some confusion and difficulty that some people have with estates.