Feb32026
Probate Q&A Series

Can a co-trustee use trust or rental-property funds to pay for repairs that benefit their personal home or personal expenses? – North Carolina

Short Answer

Usually no. Under North Carolina trust law, a co-trustee must use trust money only for proper trust purposes and must act solely in the beneficiaries’ interests, not for personal benefit. Paying for repairs to a co-trustee’s personal home or covering personal expenses with trust or rental-property funds is typically self-dealing and can be treated as a breach of trust unless the trust terms clearly authorize it or a court approves it.

Understanding the Problem

In North Carolina, the key question is whether a co-trustee can treat trust-owned rental income (or other trust funds) as a personal checkbook when managing a deceased parent’s trust and rental property. The decision point is whether the payment is a legitimate trust expense tied to trust property and trust purposes, or whether it benefits the co-trustee personally (such as repairs to the co-trustee’s own home or non-trust bills). This issue often comes up alongside disagreements about rental-property management, tenant communications, and whether leases and vendor contracts were signed clearly in a fiduciary capacity.

Apply the Law

North Carolina’s Uniform Trust Code requires trustees to administer a trust in good faith, in accordance with the trust’s terms and purposes, and in the beneficiaries’ interests. A trustee also has a duty of loyalty, meaning trust decisions and spending must be made for the beneficiaries—not to create a personal benefit for the trustee. When a trustee uses trust funds for personal expenses, beneficiaries can ask the Clerk of Superior Court (in a trust proceeding) for relief such as an accounting, repayment to the trust, reduction/denial of compensation or reimbursements, or removal of the trustee in serious cases.

Key Requirements

  • Proper trust purpose: The expense must be connected to administering, preserving, or operating trust property (for example, repairs to a trust-owned rental house), not the co-trustee’s personal property.
  • Loyalty and no self-dealing: The co-trustee must act solely for the beneficiaries’ interests. Transactions that personally benefit the trustee or involve a conflict of interest are commonly challengeable by beneficiaries.
  • Reasonable, documented expenses: Even legitimate trust expenses should be reasonable and supported by invoices, receipts, and clear records showing what was paid, to whom, and why.

What the Statutes Say

Analysis

Apply the Rule to the Facts: The dispute described involves trust/estate administration and rental-property management, with concerns about whether actions were taken in a fiduciary capacity and whether money was spent appropriately. If rental income or trust funds were used to repair a co-trustee’s personal home or pay personal bills, that spending likely fails the “proper trust purpose” requirement and raises a loyalty/self-dealing problem. If the spending was for repairs to a trust-owned rental property (and was reasonable, documented, and tied to maintaining the rental), it is more likely to be a proper trust expense—though co-trustee approval and clear records still matter.

Process & Timing

  1. Who files: A qualified trust beneficiary (and sometimes a co-trustee) can start the process. Where: Typically with the Clerk of Superior Court in the county where the trust matter is being administered or where the trust proceeding is filed. What: A petition/motion seeking relief such as an accounting, instructions to the trustee, repayment to the trust (often called a surcharge), or removal of a trustee. When: As soon as there is a concrete concern about misuse of funds or missing records; waiting can make tracing money harder.
  2. Next step: The court process usually focuses on records—bank statements, invoices, leases, property-management communications, and proof that contracts were signed “as trustee.” If records are incomplete, the court can order an accounting and production of documents.
  3. Final step: If the court finds improper personal benefit or unreasonable reimbursements, it can order repayment to the trust, adjust compensation/reimbursements, and in serious situations consider removal or other protective orders to safeguard trust assets.

Exceptions & Pitfalls

  • Trust terms can change the default rules: Some trusts authorize certain transactions that would otherwise look like conflicts, but the authorization should be clear and should still be handled with full disclosure and careful documentation.
  • “Reimbursement” is not a blank check: Trustees can often be reimbursed for expenses properly incurred for the trust, but personal expenses (or repairs to property the trust does not own) are usually not proper trust expenses.
  • Blurry property lines: Problems often arise when a trustee pays for work that partly benefits trust property and partly benefits personal property (for example, shared driveways, fences, or improvements that increase the trustee’s personal home value). Without a clear allocation and support, the payment can be challenged.
  • Signing and communications in the wrong capacity: If leases or vendor contracts were signed without clearly indicating “as trustee,” disputes can arise about who is responsible and whether the trust was properly bound. That can also complicate whether an expense was truly a trust obligation.
  • Missing records: Poor bookkeeping, commingling funds, or paying vendors in cash can create a presumption problem in court. Clean bank trails and invoices matter in fiduciary disputes.

Conclusion

Under North Carolina law, a co-trustee generally cannot use trust or rental-property funds to pay for repairs to the co-trustee’s personal home or other personal expenses, because trustees must act in good faith and in the beneficiaries’ interests and avoid self-dealing. Proper trust expenses are typically limited to reasonable, documented costs tied to trust property and trust purposes. A practical next step is to file a petition with the Clerk of Superior Court seeking an accounting and appropriate relief if questionable payments appear in the trust records.

Talk to a Probate Attorney

If there are concerns about a co-trustee using rental income or trust funds for personal benefit, our firm has experienced attorneys who can help evaluate the records, explain the fiduciary rules, and outline options to protect trust assets and enforce accountability. 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.

Category: Probate Q&A Series

Author: Pierce Law

Pierce Law Group is a North Carolina law firm focused on probate administration, real estate partition matters, and surplus funds claims across North Carolina. We know these situations often come with stress, family dynamics, and time-sensitive decisions—so we prioritize clear communication, steady guidance, and a practical plan from day one. Our goal is to make a complicated process feel manageable, while protecting what matters most to you.