Short Answer

In North Carolina, start with the will and trust terms. If they are silent, a trustee decides whether to sell or hold under the prudent investor rule, with a duty to diversify and to act impartially between income and remainder beneficiaries. The Uniform Principal and Income Act guides how gains, income, and expenses are allocated, and it lets trustees adjust or convert to a unitrust to balance interests. Document your reasons, consider taxes and costs, and use in‑kind transfers when that better serves beneficiaries.

Understanding the Problem

You are administering a North Carolina estate with a testamentary trust under the will and need to decide if trust assets should be sold now or held for later distributions. The brokerage and retirement accounts name the testamentary trust as beneficiary.

Apply the Law

Under North Carolina law, the trustee follows the governing instrument first. If the trust terms do not direct liquidation or retention, the trustee must invest and manage as a prudent investor, diversify unless it would be better not to, and act impartially between current and future beneficiaries. The Uniform Principal and Income Act supplies default allocation rules and tools (power to adjust, unitrust conversion) to keep distributions fair. Estate matters (like collecting refunds and filing inventories) are overseen by the Clerk of Superior Court; trustees generally are not under continuing court supervision unless the instrument or a court order requires it. A personal representative must file an inventory within three months of qualification; a trustee must review and decide whether to keep or dispose of assets within a reasonable time after receiving them.

Key Requirements

• Follow the instrument: Read the will and trust. Honor any direction to retain, sell, make in‑kind distributions, or fund sub‑trusts on stated terms.
• Prudent investor/diversification: Manage for total return; diversify concentrated positions unless purposes of the trust are better served by retention. Reassess promptly after funding.
• Impartiality: Balance the needs of income beneficiaries and remainder beneficiaries; do not favor one class without authority.
• Principal–income rules: Allocate receipts/expenses under the Uniform Principal and Income Act; use the power to adjust or convert to a unitrust if needed to keep distributions fair.
• Capacity and oversight: Estate assets are handled by the personal representative subject to Clerk oversight; assets payable directly to the testamentary trust are handled by the trustee, generally without ongoing court supervision.
• Reasonable timing: The trustee must decide within a reasonable time whether to retain or sell newly received trust assets; the personal representative must file the estate inventory within three months of qualification.

What the Statutes Say

• N.C. Gen. Stat. § 36C-9-902 (Prudent investor rule) – invest/manage as a prudent investor; consider portfolio-level risk and return.
• N.C. Gen. Stat. § 36C-9-904 (Review of assets) – within a reasonable time after accepting or receiving assets, decide whether to keep or dispose to comply with the trust’s purposes.
• N.C. Gen. Stat. § 36C-8-803 (Duty of impartiality) – act impartially among beneficiaries, giving due regard to their respective interests.
• N.C. Gen. Stat. § 37A-1-104 (Power to adjust) – allows adjustments between principal and income to achieve fairness; unitrust conversion available under related provisions.

Analysis

Apply the Rule to the Facts: Because the accounts name the testamentary trust, the trustee—not the personal representative—generally handles those assets after death; review the trust for any retention or in‑kind funding directions. For the brokerage and retirement accounts, evaluate diversification, liquidity needed for near‑term distributions, costs, and tax effects before selling; consider in‑kind transfers if they better serve beneficiaries. The refund check payable to the decedent should be endorsed into the estate account and reported on the estate inventory; it is not a trust asset. After the master trust is funded, promptly decide whether to retain or liquidate positions and document the reasoning, keeping income and remainder beneficiaries in balance.

Process & Timing

1. Who files: Personal representative. Where: Clerk of Superior Court in the county of administration. What: Open an estate account; endorse the refund check “Estate of [Decedent], by [Executor], Executor”; file the inventory (AOC-E-505 is used for accounts). When: File the estate inventory within three months of qualification.
2. Trust funding: Trustee (or personal representative if distributing probate assets to the trust) contacts each custodian’s trust/retirement department with Letters, certified will, death certificate, trust EIN, and a certification of trust. Choose in‑kind transfer or liquidation based on the prudent investor analysis; custodial processing often takes a few weeks.
3. Investment decision and documentation: Within a reasonable time after funding, adopt a written investment/funding plan addressing diversification, cash needs for sub‑trust distributions, and tax/cost considerations. If income/principal balance is an issue, consider a power‑to‑adjust or unitrust conversion (which requires notice and a short objection period) before selling solely to “make income.” Outcome: assets retitled to the trustee, sub‑trusts funded per the will, and receipts recorded for the estate’s final account.

Exceptions & Pitfalls

• Instrument controls: If the will/trust directs retention or in‑kind funding (or authorizes concentration), follow it—otherwise document why any departure serves the trust’s purposes.
• Concentration risk: Retaining a single stock or closely held asset requires a clear, written rationale; diversify if retention is not justified.
• Retirement accounts: Assets payable to the trust usually bypass probate; do not liquidate an IRA or Roth IRA for estate debts without confirming authority and tax effects. Coordinate elections with the custodian; deadlines can be short.
• Commingling: Keep estate receipts (like the refund check) in the estate account; do not mix estate and trust funds.
• Impartiality: Do not sell or hold solely to favor income beneficiaries over remaindermen; use the power to adjust or a unitrust instead of forcing tax‑inefficient trades.
• When in doubt: If beneficiaries disagree or directions are unclear, seek a nonjudicial agreement or petition the Clerk of Superior Court for instructions.

Talk to a Probate Attorney

If you’re handling a North Carolina estate with a testamentary trust and need to decide whether to sell or hold assets, 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.