Original in Asheboro Courier-Tribune, May 5, 2017
It happens a few times a year. The son of the departed comes in about a month after the funeral and says, “I’m glad I have Mom’s power of attorney because I have been able to keep on paying the bills.”
Dude, you don’t. Have Mom’s power of attorney, that is. It terminated the moment she died. In fact, by handling things the way you have you might be creating some legal difficulties for yourself.
Until an executor (if Mom had a will) or an administrator (if she didn’t) has been appointed, no one has clear authority to deal with Mom’s assets.
You may think joint accounts will completely avoid the necessity of appointing an executor, but think again.
True, joint accounts can pass free of much of the probate process, those, too, have some drawbacks. There are a number of statutes that govern joint bank accounts, and depending upon which statute the bank relied on, some of the account funds can be held until an executor has been appointed. True, the other joint account holders “own” the account, but the executor can look to Mom’s share to pay creditors if her other assets were insufficient.
Once an executor or administrator has been appointed (let’s say it is Son), he must determine what creditors there are and insure they are paid properly. If he doesn’t, he is personally on the hook. This can be particularly tricky if the estate owes more to creditors than it is worth.
Not all creditors are created equal. Some have higher priority than others. If lower priority creditors are paid before higher creditors, or if creditors of equal rank do not share proportionately, Son is on the hook. There are even limits on funeral costs.
That is why state law allows costs of administration (which includes legal fees to cover legal advice to Son) before other creditors are paid. You don’t have to have an attorney to help you settle an estate, but often what you save by skipping the attorney can be skimpy compared to the costs of messing up something expensive.
Another reason for Son to make sure creditors are handled correctly is that North Carolina law provides an open and shut way of quickly identifying creditors, forcing them to file a final claim or bill, and getting them paid. If Son handles the process correctly, late filing creditors lose out.
The executor (or administrator) must make a good faith and reasonable effort to identify all creditors. This means Son cannot decide to ignore looking through Mom’s top desk drawer where she kept all bills and important papers.
Once creditors have been identified, if they are given notice in proper format to file a final bill with the estate within 90 days they must do so – or lose out.
Finally, Son must run the little postage-stamp-sized ad to notify any unknown and undiscovered creditors to do the same.
If he does all that, he should be in good shape.
Are revocable trusts better? Somewhat. Sometimes. You can avoid much of the hassle of estate administration, but creditors of Mom can still reach the assets in the trust. Fortunately, there are streamlined ways to put the creditor issue to bed without a full estate administration.
The trustee of the trust can file with the clerk of court to be appointed a limited personal representative for purposes of taking advantage of the creditor notice provisions without having to comply with the myriad other requirements that apply to a normal estate administration.
Is a lawyer essential? It depends. If you use a trust, you’ll need a lawyer to set it up. If you rely on a will only, you can buy a cheap form (but that little form may turn out to be extremely expensive if something gets overlooked). If you don’t use a trust and it is time for probate, you may not be required to have a lawyer, but you may quickly wish you had one. A good lawyer can keep you sane and out of trouble.
Bob Mason is owner of Mason Law, PC, a statewide law practice based in Asheboro devoted exclusively to solving problems for elders, the disabled and their families. A Board Certified Specialist in Elder Law, he is a two-term past chair of the Elder Law Section of the North Carolina Bar Association and vice chair of the N.C. Board of Legal Specialization. Contact: Follow Mason Law, PC on Facebook at facebook.com/masonlawpc or at masonlawpc.com.