The purpose of this article is to present issues that arise when real property of a non-resident decedent is being conveyed during the pendancy of the estate administration. We will discuss some statutory provisions that present methods of dealing with these issues in ways that may be helpful in moving toward closing in as expeditious a manner as possible.

The ancillary estate administration procedures set forth in G. S. 28A-26-1 through 28A-26-9 can be very helpful in providing a measure of certainty in the transfer of the North Carolina property of a non-resident decedent. G. S. 28A-26-1 controls jurisdiction for a resident decedent with property outside the state. The ancillary proceedings referred to in this section are those occurring outside of North Carolina and generally are outside the concerns of this article.

G. S. 28A-26-2 is a fairly straight forward provision authorizing a resident obligor to satisfy the obligation, with some limitations, by remitting directly to the out-of-state (domiciliary) personal representative (P.R.) without requiring an ancillary administration in North Carolina. This may be done at least 60 days after the date of death, and upon" being presented with a certified or exemplified copy of his letters of appointment and an affidavit made by or on behalf of the domiciliary personal representative stating:

(1) The date of the death of the nonresident decedent;

(2) That to the best of his knowledge no administration, or application or petition therefor, is pending in this State;

(3) That the domiciliary personal representative is entitled to payment or delivery."

If the limitations set forth in the statute do not apply, then delivery in this manner is treated the same as if an ancillary administration had occurred and payment made to the ancillary P.R.. Presumably this provision would allow the payoff of a mortgage and payment of sales proceeds in situations where administration is not required in order to effectuate a conveyance.

Ancillary administration is governed by 28A-26-3 (a). "Any domiciliary personal representative of a nonresident decedent upon the filing of a certified or exemplified copy of letters of appointment with the clerk of superior court who has venue under G.S. 28A-3-1 may be granted ancillary letters in this State notwithstanding that the domiciliary personal representative is a nonresident of this State or is a foreign corporation. If the domiciliary personal representative is a foreign corporation, it need not qualify under any other law of this State to authorize it to act as ancillary personal representative in the particular estate. If application is made for the issuance of ancillary letters to the domiciliary personal representative, the clerk of superior court shall give preference in appointment to the domiciliary personal representative unless the decedent shall have otherwise directed in a will." When an out-of-state decedent dies testate and the will contains a clear power of sale, it is usually easiest for the domiciliary P.R. to qualify and exercise the power when it is desirable to convey an interest in real property. There may be some question as to the authority of the P.R. to exercise a power of sale through an agent such as a resident ancillary administrator. G.S.28A-13-3(19) authorizes a P.R. to "employ persons, including attorneys, auditors, investment advisors, appraisers or agents to advise or assist him in the performance of his administrative duties." There is some question as to whether the power to sell real property, often being a discretionary power, is delegable as an "administrative" duty. It should be noted, however, that G.S. 28A-13-7 provides that unless a contrary intent clearly appears from the will, a successor personal representative has all the powers and duties, discretionary or otherwise, of the original personal representative.

If the domiciliary P.R. is unable or unwilling to assist the decedent’s heirs in conveying North Carolina real estate 28A-26-3(b) provides as follows:

"If, within 90 days after the death of the nonresident, or within 60 days after issue of domiciliary letters, should that be a shorter period, no application for ancillary letters has been made by a domiciliary personal representative, any person who could apply for issue of letters had the decedent been a resident may apply for issue of ancillary letters.

If it is known that there is a duly qualified domiciliary personal representative, the clerk of superior court shall send notice of such application, by registered mail, to that personal representative and to the appointing court. Such notice shall include a statement that, within 14 days after its mailing, the domiciliary personal representative may apply for the issue of ancillary letters with the preference specified in subsection (a) of this section; and that his failure to do so will be deemed a waiver, with the result that letters will be issued to another. Upon such failure, the clerk of superior court may issue ancillary letters in accordance with the provisions of Article 4 of this Chapter..."

If there is no will, or no clear power of sale where a will has been probated, G.S. 28A-17-1 through G.S. 28A-17-7 provide that the personal representative may, at any time, apply to the clerk of superior court, by petition, to sell real property for the payment of debts and other claims against the decedent's estate pursuant to authority contained in G.S. 28A-15-1. The petition to sell real property must include a description of the real property and interest to be sold, the names, ages and addresses of the devisees and heirs of the decedent and a statement that the personal representative has determined that it is in the best interest of the administration of the estate to sell the real property. There are additional procedural requirements that must be reviewed when utilizing this proceeding but space does not permit further analysis at this time. These provisions do not appear to be limited to resident decedents but it would seem that an ancillary administration would be needed in order for the P.R. to be authorized to act.

When a decedent has left an enforceable written contract to sell any real property, 28A-17-9 provides that his personal representative may execute and deliver a deed to the real property and "such deed shall convey the title as fully as if it had been executed and delivered by the decedent." If the contract for conveyance requires a warranty deed, "the deed given by the personal representative shall contain such warranties as required by the contract and the warranties shall be binding on the estate and not on the personal representative personally." This provision also does not appear to be limited to resident decedents but it would seem that, arguably, an ancillary administration would again be needed in order for the P.R. to be able to act since the letters testamentary or letters of administration consist of the actual grant of power.

This is the final article taken from the lecture materials presented by Asset Preservation and Statewide Title concerning like-kind exchanges.

(e) SPECIAL RULES FOR IDENTIFICATION AND RECEIPT OF REPLACEMENT PROPERTY TO BE PRODUCED—

1. IN GENERAL. A transfer of relinquished property in a deferred exchange will not fail to qualify for nonrecognition of gain or loss under section 1031 merely because the replacement property is not in existence or is being produced at the time the property is identified as replacement property. For purposes of this paragraph (e), the terms "produced" and "production" have the same meanings as provided in section 263A(g)(1) and the regulations thereunder.
2. IDENTIFICATION OF REPLACEMENT PROPERTY TO BE PRODUCED.

1. 1. In the case of replacement property that is to be produced, the replacement property must be identified as provided in paragraph (c) of this section (relating to identification of replacement property). For example, if the identified replacement property consists of improved real property where the improvements are to be constructed, the description of the replacement property satisfies the requirements of paragraph (c)(3) of this section (relating to description of replacement property) if a legal description is provided for the underlying land and as much detail is provided regarding construction of the improvements as is practicable at the time the identification is made.
   2. For purposes of paragraphs (c)(4)(i)(B) and (c)(5) of this section (relating to the 200-percent rule and incidental property), the fair market value of replacement property that is to be produced is its estimated fair market value as of the date it is expected to be received by the taxpayer.

1. RECEIPT OF REPLACEMENT PROPERTY TO BE PRODUCED.

1. 1. For purposes of paragraph (d)(1)(ii) of this section (relating to receipt of the identified replacement property), in determining whether the replacement property received by the taxpayer is substantially the same property as identified where the identified replacement property is property to be produced, variations due to usual or typical production changes are not taken into account. However, if substantial changes are made in the property to be produced, the replacement property received will not be considered to be substantially the same property as identified.
   2. If the identified replacement property is personal property to be produced, the replacement property received will not be considered to be substantially the same property as identified unless production of the replacement property received is completed on or before the date the property is received by the taxpayer.
   3. If the identified replacement property is real property to be produced and the production of the property is not completed on or before the date the taxpayer receives the property, the property received will be considered to be substantially the same property as identified only if, had production been completed on or before the date the taxpayer receives the replacement property, the property received would have been considered to be substantially the same property as identified. Even so, the property received is considered to be substantially the same property as identified only to the extent the property received constitutes real property under local law.

1. ADDITIONAL RULES. The transfer of relinquished property is not within the provisions of section 1031(a) if the relinquished property is transferred in exchange for services (including production services). Thus, any additional production occurring with respect to the replacement property after the property is received by the taxpayer will not be treated as the receipt of property of a like kind.
2. EXAMPLE.

1. 1. B, a calendar year taxpayer, and C agree to enter into a deferred exchange. Pursuant to their agreement, B transfers improved property X and personal property Y to C on May 17, 1991. On or before November 13, 1991 (the end of the exchange period), C is required to transfer to B real property M, on which C is constructing improvements, and personal property N, which C is producing. C is obligated to complete the improvements and production regardless of when properties M and N are transferred to B. Properties M and N are identified in a manner that satisfies paragraphs (c) (relating to identification of replacement property) and (e)(2) of this section. In addition, properties M and N are of a like kind, respectively, to real property X and personal property Y (determined without regard to section 1031(a)(3) and this section). On November 13, 1991, when construction of the improvements to property M is 20 percent completed and the production of property N is 90 percent completed, C transfers to B property M and property N. If construction of the improvements had been completed, property M would have been considered to be substantially the same property as identified. Under local law, property M constitutes real property to the extent of the underlying land and the 20 percent of the construction that is completed.
   2. Because property N is personal property to be produced and production of property N is not completed before the date the property is received by B, property N is not considered to be substantially the same property as identified and is treated as property which is not of a like kind to property Y.
   3. Property M is considered to be substantially the same property as identified to the extent of the underlying land and the 20 percent of the construction that is completed when property M is received by B. However, any additional construction performed by C with respect to property M after November 13, 1991, is not treated as the receipt of property of a like kind.