How can co-beneficiaries handle rental income, repairs, and contractor payments during administration without creating liability or accusations of misuse of funds? – North Carolina

Short Answer

In North Carolina, co-beneficiaries (and especially co-fiduciaries like co-trustees or co-executors) can reduce liability and conflict by (1) confirming who has legal authority over each rental property, (2) keeping rent and expenses in the correct “bucket” (trust vs. probate estate vs. individual owners), and (3) using a documented, two-signature approval and accounting process for repairs and contractor payments. The goal is to show that every dollar collected and spent was authorized, traceable, and used for the property’s benefit—not for personal advantage.

Understanding the Problem

In North Carolina probate and trust administration, the key question is who has the legal right to collect rent and pay for repairs while administration is ongoing when multiple rental properties and multiple “administration tracks” exist (a revocable trust, a separate family trust, and a probate estate). The decision point is whether the person collecting rent and paying contractors is acting with proper fiduciary authority for that specific property and account, and whether the money flow matches that authority. When co-beneficiaries or co-fiduciaries disagree about management, the same repair or rent deposit can be viewed either as routine preservation of an asset or as misuse of funds.

Apply the Law

North Carolina treats trustees and personal representatives as fiduciaries. That means the person with authority must act in good faith, manage property prudently, protect and collect the property and its income, keep clear records, and keep fiduciary money separate from personal money. For rental properties, the practical legal risk usually comes from (1) collecting rent into the wrong account, (2) paying property expenses from the wrong account, (3) paying a contractor without clear approval and documentation, or (4) making decisions that look like self-dealing or favoritism between beneficiaries.

Key Requirements

Correct authority for the asset: Rent collection and repair decisions should be made by the person(s) who legally control that specific property at that time (trustee for trust property; personal representative only for probate assets; or the titled owners/heirs for property that is not a probate asset).
Segregated, traceable money flow: Rental income and repair payments should run through dedicated fiduciary accounts (not personal accounts), with a clear paper trail tying each deposit and payment to a specific property and purpose.
Prudent management and documentation: Repairs and contractor payments should follow a repeatable process (scope, bids if appropriate, written approval, invoice, proof of payment, and a ledger entry) so later accountings can show the expense was reasonable and for the property’s benefit.

What the Statutes Say

N.C. Gen. Stat. § 42-5 (Rent apportioned when lease ends by death) – Allows recovery of rent that was “growing due” when a lease ends because of death, which matters when allocating rent around the date of death.
N.C. Gen. Stat. § 33B-7 (Fiduciary duties: prudent management, segregation, records) – Illustrates core fiduciary themes: prudent care, keeping fiduciary property separate, and maintaining records available to the beneficiary.
N.C. Gen. Stat. § 33B-8 (Fiduciary powers over property) – Recognizes broad management powers over fiduciary property, but only in a fiduciary capacity (not for personal benefit).

Analysis

Apply the Rule to the Facts: Here, multiple rental properties exist alongside a revocable trust, a separate family trust, and a probate estate, and two beneficiaries/co-fiduciaries disagree about rent, repairs, and contractor payments. The first liability trigger is “wrong bucket” handling—collecting rent into an account that does not match the property’s legal owner/controller, or paying repairs from funds that belong to a different trust/estate or to other beneficiaries. The second trigger is weak documentation—payments to contractors without written scope, invoices, approvals, and a ledger that ties the expense to the property’s preservation. A third trigger is unilateral action by one co-fiduciary without the other’s consent when joint action is required, which can later be framed as misuse even if the repair was necessary.

Process & Timing

Who acts: The acting fiduciary for each property (trustee for trust-owned rentals; personal representative for probate-owned assets; or the titled owners/heirs if the property is not an estate asset). Where: For probate administration issues, the Clerk of Superior Court in the county where the estate is administered; for many trust administration issues, trust disputes may be filed in the appropriate North Carolina court depending on the relief sought. What: Create a written “property administration protocol” covering rent collection, approvals, and payments, and open dedicated accounts for each administration track (separate trust account(s) and an estate account as applicable). When: Put the protocol in place immediately after identifying the rental properties and confirming title/authority, before the next rent cycle and before authorizing non-emergency work.
Run rent and expenses through a controlled workflow: (a) tenants receive written instructions on where to pay rent; (b) rent is deposited into the correct fiduciary account; (c) each property has a simple ledger showing rent received, expenses paid, and the reason for each expense; (d) supporting documents (leases, invoices, photos, inspection notes) are saved in a shared folder accessible to both co-fiduciaries.
Pay contractors with guardrails: Use written bids or written estimates when feasible; require W-9s and proof of insurance when appropriate; pay only against an invoice that matches the approved scope; and use a two-step approval (one approves the scope/amount, the other approves the payment) or dual signatures if the bank allows it. The final “product” should be a clean file that can be produced in an accounting without gaps.

Exceptions & Pitfalls

Mixing funds between the trust(s), the probate estate, and individuals: A common mistake is treating “family money” as one pool. In North Carolina practice, real-property-related income and expenses can raise allocation problems if deposited into or paid from the wrong account, especially when different beneficiaries inherit different properties or interests.
Unilateral decisions by one co-fiduciary: If co-trustees or co-personal representatives must act together under the governing document or appointment, one person hiring contractors and paying invoices alone can create accusations of self-dealing or waste even when the work was needed.
Paying for improvements instead of preservation without agreement: Repairs that preserve value (fixing a leak, addressing safety issues) are easier to justify than discretionary upgrades (remodeling, luxury finishes). Without written agreement, upgrades can look like favoritism toward the beneficiary who expects to keep that property.
No shared visibility: Refusing to share statements, invoices, and ledgers often escalates disputes. A routine monthly “rent/repairs packet” (bank statement + ledger + invoices) can prevent later claims that money disappeared.
Tenant communications and liability exposure: If tenants receive conflicting instructions from co-beneficiaries, rent may be misdirected and late fees or eviction steps may be mishandled. One written notice identifying the authorized manager and payment method reduces confusion.
Using cash or informal payments: Cash payments to contractors, payments to friends/family, or missing invoices are common flashpoints in fiduciary litigation because they are hard to prove as reasonable and necessary.

When conflict is already high, it often helps to narrow the dispute to a single operational question: who is authorized to act for each property and what documentation will be created for each rent deposit and each contractor payment. If the dispute persists, options can include using a neutral third-party property manager paid from the correct fiduciary account, or seeking court guidance to avoid later surcharge claims. For related concerns about enforcement and accountability, see mishandled assets or incomplete information and when a trust dispute needs court involvement.

Conclusion

Co-beneficiaries can reduce liability and accusations of misuse during North Carolina administration by matching each rental property to the correct decision-maker (trustee, personal representative, or titled owners), keeping rent and expenses in the correct account, and documenting every repair and contractor payment with a consistent approval-and-recordkeeping process. The most important practical step is to implement written rent instructions and a shared ledger/invoice system before the next rent cycle and before authorizing non-emergency work.

Talk to a Probate Attorney

If there is conflict over rental income, repairs, or contractor payments during an estate or trust administration, our firm has experienced attorneys who can help clarify who has authority, set up a clean accounting process, and reduce the risk of later claims. 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.