What happens if the trustee has a conflict of interest because they are related to other beneficiaries or the executor? – North Carolina

Short Answer

In North Carolina, a trustee can be related to other beneficiaries (or to the estate’s executor) and still serve, but the trustee must administer the trust solely for the beneficiaries’ interests and act impartially. If the relationship leads to self-dealing, favoritism, or a breakdown in required communication, beneficiaries can demand information, challenge conflicted transactions, and ask the court to remove or replace the trustee. The key issue is not the family connection by itself—it is whether the trustee’s actions are affected by the conflict and harm proper trust administration.

Understanding the Problem

Under North Carolina probate and trust administration, the decision point is whether a trustee’s relationship to other beneficiaries or the estate’s executor creates a conflict that affects how the trustee administers the trust. When a beneficiary cannot get clear answers, timely information, or fair treatment, the question becomes whether the trustee is still carrying out the trustee’s duties of loyalty, impartiality, and reasonable communication required by North Carolina law.

Apply the Law

North Carolina’s trust law (the North Carolina Uniform Trust Code) requires a trustee to act in good faith, follow the trust’s terms, and administer the trust for the benefit of the beneficiaries—not for the trustee’s personal interests or the interests of favored family members. A trustee also must treat beneficiaries fairly when their interests differ and must keep qualified beneficiaries reasonably informed about trust administration. If a trustee enters a transaction that is affected by a conflict of interest (including certain transactions involving close relatives or closely connected persons), that transaction may be challengeable by a beneficiary. If the conflict or related conduct seriously harms administration—such as persistent noncommunication or favoritism—a beneficiary can seek court relief, including removal and replacement of the trustee in the appropriate North Carolina court.

Key Requirements

Duty of loyalty (no self-dealing or conflicted decision-making): The trustee must act for the beneficiaries’ interests, not to benefit the trustee, the trustee’s family, or an aligned executor.
Duty of impartiality: If there are multiple beneficiaries, the trustee must balance their interests and avoid favoritism unless the trust clearly authorizes different treatment.
Duty to inform and report: The trustee must provide reasonable information about the trust and its administration so beneficiaries can protect their interests.

What the Statutes Say

N.C. Gen. Stat. § 23-22 (Court may remove trustee and appoint successor) – Authorizes the court to remove a trustee and fill a vacancy with a successor trustee in appropriate cases.

North Carolina’s primary trust-duty and trustee-removal rules are found in Chapter 36C. Because official section-level links can be difficult to verify in a single online location, specific Chapter 36C citations can depend on the sub-issue (loyalty, reporting, removal, consent/ratification), but the controlling standards come from those trust-code provisions.

Analysis

Apply the Rule to the Facts: Here, the trustee is an attorney who is related to some beneficiaries and also related to the estate’s executor, and there is difficulty communicating with the trustee. Those relationships can create a risk of favoritism or aligned decision-making, but the legal concern becomes stronger if the trustee’s conduct shows (1) decisions that benefit related parties at the expense of other beneficiaries, (2) transactions involving the trustee or close relations, or (3) a serious breakdown in communication that prevents beneficiaries from understanding what the trustee is doing and why.

Process & Timing

Who raises the issue: A trust beneficiary (often a “qualified beneficiary”). Where: Typically the Clerk of Superior Court (and sometimes Superior Court) in the North Carolina county with proper venue for the trust. What: A written demand for information/accounting first, and if needed a petition/complaint seeking relief such as an accounting, instructions, surcharge for breach, or removal and appointment of a successor trustee. When: As soon as there are concrete red flags (non-responsiveness, missing information, or a questionable transaction), because delay can make it harder to unwind transactions or prove what happened.
Next step: If the trustee does not provide reasonable information, beneficiaries can ask the court to order disclosure and require the trustee to explain actions taken. In many cases, the court focuses on whether the trustee’s conduct is harming administration (for example, persistent failure to keep beneficiaries informed).
Final step: If the court finds a serious breach of duty or that removal best serves the beneficiaries’ interests, the court can remove the trustee and appoint a successor, and may also address remedies tied to any conflicted transactions.

Exceptions & Pitfalls

The relationship alone may not be enough: North Carolina courts generally look for conduct—self-dealing, favoritism, or impaired administration—not just the fact that the trustee is related to someone involved.
Trust terms can authorize certain conflicts: Some trusts expressly allow a trustee to act even with a conflict or to engage in certain transactions. Even then, the trustee must still act in good faith and consistent with the trust’s purposes.
Consent and waiver issues: Beneficiaries can sometimes consent to or ratify a conflicted transaction, but doing so without full information can create avoidable risk. A common mistake is signing a release or waiver without receiving complete records first.
Communication failures can support removal: A persistent failure to keep beneficiaries reasonably informed can be a serious problem because it prevents beneficiaries from protecting their interests and can conceal larger issues.
Executor vs. trustee roles get blurred: The executor administers the estate; the trustee administers the trust. If the same family group controls both sides, it is important to separate what belongs in the estate administration from what belongs in the trust administration.

For more background on fiduciary standards and how courts evaluate misconduct, see how to prove a fiduciary breach and, for trust-specific court options, challenging a trustee’s actions or seeking replacement.

Conclusion

In North Carolina, a trustee’s family relationship to other beneficiaries or to the executor does not automatically disqualify the trustee, but it raises a duty-of-loyalty and fairness issue if it affects decisions, transactions, or communication. When the relationship leads to favoritism, self-dealing, or a serious breakdown in keeping beneficiaries informed, the court can order information and, if needed, remove and replace the trustee. The most practical next step is to make a written request for trust information and records and, if the trustee does not respond reasonably, file a petition with the appropriate North Carolina court to compel reporting and seek removal if warranted.

Talk to a Probate Attorney

If a trust beneficiary is dealing with a trustee who appears conflicted or is not communicating, our firm has experienced attorneys who can help explain options, request the right records, and evaluate whether court action (including removal) makes sense. 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.