Feb92026
Estate Planning Q&A Series

Can a trustee or family member use trust funds for their own purchase if I’m the beneficiary? – North Carolina

Short Answer

Usually no. Under North Carolina law, a trustee must manage trust property for the benefit of the beneficiaries, keep trust assets separate, and keep records and provide information when reasonably requested. Using trust money to buy a home for the trustee or a family member is commonly a red flag for self-dealing unless the trust document clearly authorizes it (or a court approves it) and the transaction is handled in a way that protects the beneficiary’s interests.

Understanding the Problem

In North Carolina estate planning disputes, the key question is whether a trustee (often a relative) can take money that is supposed to be held in trust for a beneficiary and use it to make a personal purchase, like buying a home. The decision point is whether the purchase was a proper trust expense or investment made for the trust’s benefit, or whether it was a personal benefit transaction that violates the trustee’s duties. A related issue is whether the trustee has a duty to share trust information and accountings when the beneficiary asks.

Apply the Law

North Carolina treats trustees as fiduciaries. That means the trustee must act in good faith, follow the trust terms, and administer the trust for the beneficiaries—not for the trustee’s personal benefit. A trustee also must keep trust property identifiable and maintain records so the trust’s activity can be explained. When a trustee uses trust money in a way that benefits the trustee or the trustee’s family, courts often scrutinize the transaction closely, and the trustee may have to justify it with the trust document and clear records.

Key Requirements

  • Trust-first purpose: Trust funds must be used for trust purposes (beneficiary distributions, authorized expenses, or authorized investments), not personal purchases.
  • No commingling and clear records: Trust assets should be kept separate and traceable, with records showing where money went and why.
  • Transparency to the beneficiary: Beneficiaries generally have a right to reasonable information about trust administration, including records needed to understand what happened to trust property.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, the concern is that a relative used funds meant to be held in trust to purchase a home and then provided no information or accounting for years. If the money was truly trust property, a home purchase that benefits the trustee (or someone close to the trustee) is typically not a proper trust use unless the trust document clearly permits it and the trustee can document that the transaction was fair and for the trust’s benefit. The lack of records and refusal to account is also a major warning sign because trustees are expected to keep and share enough information to show proper administration.

In many real cases, the turning point is traceability. If bank records show trust money moving into a personal closing, personal mortgage payments, or a deed titled personally rather than in a trust capacity, that pattern often supports a claim that the trustee treated trust funds as personal funds. If, instead, the deed and financing show the property was purchased and held as a trust asset (and the trust terms allow that kind of investment), the trustee may be able to justify it—especially if the trustee can produce statements, ledgers, and explanations.

Process & Timing

  1. Who files: Typically the beneficiary (or a legal representative). Where: North Carolina Superior Court in the county with proper venue (often where the trust is administered or where the trustee resides). What: A petition/complaint seeking an accounting and appropriate relief (for example, instructions to the trustee, removal, or repayment). When: As soon as the problem is suspected, especially if records are disappearing or property is being transferred.
  2. Information step: A written demand for trust information and an accounting is often the practical first move. If the trustee does not respond, court involvement may be needed to compel an accounting and preserve records.
  3. Remedies step: If the court finds misuse, potential outcomes can include an order requiring a full accounting, repayment to the trust, reversal/trace-based remedies for misapplied funds, and removal and replacement of the trustee.

Exceptions & Pitfalls

  • The trust document may authorize certain payments: Some trusts allow trustee compensation, reimbursement, or even specific purchases. The trustee still needs documentation and must follow the trust’s terms.
  • “It was a loan” without paperwork: Trustees sometimes claim the trust “loaned” money for a purchase. Without a written note, repayment terms, and proof of fairness, that explanation often creates more risk for the trustee.
  • Commingling makes proof harder: If trust funds were mixed with personal funds, tracing becomes more complicated and can increase litigation costs and time.
  • Waiting too long: Even strong claims can weaken if records are lost or if a limitations period runs. Acting promptly helps preserve bank records, closing files, and communications.

For more on gathering proof and forcing transparency, see whether the trustee is following the trust agreement and handling the trust money correctly and how to get a full accounting of trust funds and prove money is missing or being misused.

Conclusion

In North Carolina, a trustee generally cannot use trust funds for a personal purchase like a home unless the trust clearly authorizes it (or a court approves it) and the trustee can document that the transaction served the trust’s purpose and protected the beneficiary. A trustee is also expected to keep trust assets separate and provide reasonable information and records. The next step is to demand a written accounting and supporting records, and if that fails, file an action in Superior Court to compel an accounting and seek appropriate relief.

Talk to a Estate Planning Attorney

If you’re dealing with suspected misuse of trust funds or years of missing trust information, our firm has experienced attorneys who can help explain options and timelines under North Carolina law. Call us today at [CONTACT NUMBER].

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: Estate Planning 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.