How do we handle tenant rent payments when co-trustees disagree about where the money should be deposited and how it should be tracked? – North Carolina

Short Answer

In North Carolina, co-trustees generally must act together unless the trust document says otherwise, so rent-collection and banking decisions should be set up in a way both co-trustees approve and can audit. A practical solution is to use a dedicated trust bank account, written rent instructions to tenants, and a single shared bookkeeping system that preserves a clear paper trail. If co-trustees cannot agree, the safest next step is often to seek court instructions to prevent misapplied funds and fiduciary liability.

Understanding the Problem

When co-trustees manage a North Carolina trust that owns a rental property, a common conflict is whether tenants must pay rent into one specific bank account and how rent and expenses must be recorded. The decision point is narrow: can rent be collected and deposited in a way that is consistent, traceable, and authorized when co-trustees disagree. This issue often comes up alongside questions about who communicates with tenants, who signs or renews leases, and whether documents were signed in a fiduciary capacity rather than personally.

Apply the Law

Under North Carolina trust administration rules, co-trustees must follow the trust’s terms first. If the trust does not change the default rules, co-trustees typically must make decisions together (and, with two co-trustees, that usually means unanimous agreement). Trustees also have baseline duties to administer the trust in good faith, act prudently, and keep the trust’s administration organized enough to support accurate accountings to beneficiaries. For rent payments, that usually means using a dedicated trust account, keeping trust money separate from personal money, and maintaining records that show each deposit, each expense, and the reason for each transaction.

Key Requirements

Joint authority (unless the trust says otherwise): With two co-trustees, routine administration decisions like banking arrangements and rent-handling procedures generally require both co-trustees to agree, unless the trust document authorizes one trustee to act alone or allows delegation for certain tasks.
Segregated funds and a clean paper trail: Rent should flow into an account titled for the trust (not a trustee personally), with records that clearly identify the tenant, property, month covered, and any partial payments or credits.
Reliable accounting and access to records: Trustees should use a consistent ledger (software or spreadsheet) and retain supporting documents (leases, rent roll, bank statements, invoices, receipts) so both co-trustees can verify what came in and what went out.

What the Statutes Say

N.C. Gen. Stat. § 32-11 (Deposits in names of two or more trustees) – Addresses bank deposits held in the name of multiple trustees and the effect of authorizations for signing on a trust account.

Analysis

Apply the Rule to the Facts: Here, the dispute is not simply “where the money goes,” but whether rent handling is being done in a way both co-trustees authorized and can track. If one co-trustee directs tenants to pay into an account the other co-trustee cannot access or audit, that creates avoidable risk: it can look like commingling, incomplete accounting, or unilateral control. A safer structure is one trust-titled account for rent deposits, written tenant instructions signed (or at least approved in writing) by both co-trustees, and a shared bookkeeping method that both co-trustees can review in real time.

Process & Timing

Who sets the procedure: The co-trustees together (unless the trust document authorizes one to act alone). Where: At a federally insured bank or credit union using an account titled in the trust’s name. What: A dedicated trust checking account, written rent-payment instructions to tenants, and a rent ledger (rent roll) that matches bank deposits. When: As soon as the co-trustees learn there is a disagreement, before additional rent payments are misdirected or recorded inconsistently.
How to make it workable: Pick one deposit method (ACH, online portal, or check) and one “source of truth” ledger. Require that every rent deposit be labeled (tenant name/property/month). Require that every expense be paid from the same trust account with a saved invoice/receipt and a memo describing the purpose.
If agreement fails: Consider a court proceeding to request instructions about administration (including banking and recordkeeping) and/or to address whether a trustee should be limited, removed, or required to provide records. Trust proceedings are typically handled in North Carolina Superior Court, and venue often depends on the trust’s principal place of administration and other statutory factors.

Exceptions & Pitfalls

The trust document may change the default rule: Some trusts allow one co-trustee to act independently, assign one trustee control over real estate, or permit delegation of administrative tasks like maintaining bank accounts and records. The trust’s wording matters.
Commingling and “informal” handling: Allowing rent to be deposited into a personal account, using cash without receipts, or paying expenses off the books can create fiduciary exposure and make it hard to prepare a defensible accounting.
Unclear tenant communications: Mixed messages (two co-trustees giving different instructions) can cause late payments, misdirected payments, and tenant defenses. A single written notice approved by both co-trustees reduces confusion.
Lease-signing capacity problems: If a lease or renewal was signed without clearly showing it was signed as trustee (not personally), disputes can arise about who the landlord is and who has authority to enforce the lease. Cleaning up signature blocks and landlord identity going forward can prevent escalation.

Conclusion

In North Carolina, co-trustees generally must agree on trust administration decisions unless the trust document provides otherwise, and rent handling should be set up to be traceable and easy to account for. The practical best practice is one trust-titled deposit account, one shared rent ledger that matches bank activity, and one written set of tenant payment instructions approved by both co-trustees. If co-trustees cannot agree, the next step is to file a court request for instructions in the proper North Carolina forum before the next rent cycle creates more accounting disputes.

Talk to a Probate Attorney

If there is a co-trustee dispute about rent deposits, tenant communications, and trust accounting for a rental property, our firm has experienced attorneys who can help clarify authority, set up a clean paper trail, and explain court options when agreement is not possible. 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.