Dec42025
Probate Q&A Series

As named executors, can we access any buyer deposits before closing, or are those funds restricted until final distribution? – North Carolina

Short Answer

Under North Carolina law, buyer deposits tied to a house sale (such as due diligence or earnest money) are generally restricted until closing and must be handled through the closing or escrow process, not spent for temporary housing. Once the sale closes, the net proceeds belong to the estate (or trust, if the property is owned there) and the personal representative must use them first to pay valid expenses, taxes, and debts before any distribution. Using those sale-related funds early for personal or housing costs can breach fiduciary duties and create personal liability. The correct treatment depends on whether the house is owned by the probate estate or a separate trust and on what the will or trust authorizes.

Understanding the Problem

The question here is narrow: under North Carolina probate law, can named executors use a buyer’s deposit from the sale of a deceased parent’s home before closing, or are those funds locked up for the estate or trust until the administration process runs its course? The concern often arises where a family plans to sell the decedent’s residence, expects to receive an earnest money or due diligence fee, and wonders if that cash can cover short-term needs like temporary housing while waiting out the creditor notice period and final distribution. The core issue is whether that deposit is available spending money for executors or must remain restricted as part of the estate or trust until properly applied and accounted for.

Apply the Law

Under North Carolina law, an executor or other personal representative is a fiduciary and must safeguard and apply all estate assets, including proceeds from real estate sales, strictly for estate purposes and in the order the law requires. Real property can be sold by the personal representative if the will gives a power of sale or if the court authorizes a sale, and the proceeds then become part of the administration that must be reported to the clerk of superior court. A buyer’s earnest money or due diligence fee in a standard real estate transaction is usually held by a closing attorney or licensed broker in a trust or escrow account and is credited or disbursed at closing according to the contract; it is not treated as free cash for the executor to spend ahead of time. The main forum for supervising the estate is the clerk of superior court in the county where the estate is administered, and significant actions with real estate and major proceeds are reflected in inventories and annual or final accounts.

Key Requirements

  • Fiduciary control of assets: Once received, sale proceeds (including any deposit that ultimately belongs to the seller) become estate or trust property, and the personal representative or trustee must hold and use them only for authorized purposes.
  • Priority of debts and expenses: Before beneficiaries receive distributions, the law requires payment of administration costs, taxes, and valid creditor claims from available assets, including real estate sale proceeds.
  • Proper sale authority and accounting: A personal representative must have authority to sell the real property and must account to the clerk for receipts and disbursements, including what happens to any buyer deposit that becomes part of the seller’s proceeds.

What the Statutes Say

Analysis

Apply the Rule to the Facts: In the described situation, the buyer’s due diligence or earnest deposit for the parent’s home will normally be held in an attorney or broker trust account until closing, so the named executors would not receive that money directly before the sale completes. If the contract or closing produces a non-refundable amount payable to the seller before closing, that payment is still estate or trust property and must go into the appropriate estate or trust account, not toward temporary housing for family members. After closing, the net sale proceeds are applied first to liens on the property and then to estate expenses and valid creditor claims; only afterward can the personal representative consider distributions according to the will. If the home sits in a separate trust rather than the probate estate, the trustee must follow the terms of the trust, which often mirror these same fiduciary and priority rules.

Process & Timing

  1. Who files: The named executor (or administrator) qualifies as personal representative with the clerk of superior court in the North Carolina county where the decedent resided. Where: Estate file opened in the clerk’s estate division. What: Application for probate and letters, followed by an inventory that lists the house. When: The inventory is typically due within a set period after qualification, and the notice to creditors must be published and run for the statutory claim period.
  2. Once authorized and ready to sell, the personal representative (and heirs or devisees, if needed) sign a real estate contract. The buyer pays earnest money or a due diligence fee into an attorney or broker trust account, and those funds stay there until applied or refunded under the contract at or before closing.
  3. At closing, the attorney disburses funds: paying off any liens, closing costs, and then remitting net proceeds to the estate or trust account. The personal representative then uses those proceeds, along with other assets, to pay approved administration expenses and creditor claims before filing a final account with the clerk for approval and closing of the estate.

Exceptions & Pitfalls

  • In some contracts, a non-refundable due diligence fee is paid directly to the seller’s side; even then, it is still estate or trust property and must be deposited into the fiduciary account and reported, not used personally.
  • Spending anticipated sale proceeds before closing or before creditor claims are resolved can create a shortfall, force later reimbursements, and expose the personal representative to personal liability.
  • If the will or trust grants broad discretion to make certain expenses (for example, maintaining or securing housing connected to the estate), those payments still must be traceable and properly documented in the accountings filed with the clerk.

Conclusion

North Carolina law treats buyer deposits and sale proceeds from a decedent’s home as restricted fiduciary funds, not as advance cash for executors to use on temporary housing or personal needs. Until closing, deposits are usually held in a trust or escrow account, and after closing the net proceeds flow into the estate or trust and must first cover liens, administration costs, taxes, and valid creditor claims. The practical next step is to confirm how the home is titled, open or review the estate file with the clerk of superior court, and route all sale-related funds through the proper estate or trust account before any distributions are considered.

Talk to a Probate Attorney

If an estate involves selling a North Carolina home and questions about using buyer deposits or sale proceeds, our firm has experienced probate attorneys who can help explain the rules, 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 a specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If there is a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Probate Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.