Feb172026
Probate Q&A Series

Can a trustee make distributions or reimbursements to themselves before the trust and estate accounting is finalized, and how should those payments be documented? – North Carolina

Short Answer

In North Carolina, a trustee can generally reimburse themselves for expenses they properly incurred or advanced to administer the trust, and the trustee can pay those expenses from trust assets without getting advance approval from the Clerk of Superior Court. However, self-payments are closely scrutinized, must be clearly tied to trust administration, and must be documented so they can be reviewed in an accounting or in a trust proceeding if a beneficiary challenges them. When there is confusion about which trust or the estate should bear an expense, the safest approach is to document the issue and consider pausing or seeking written agreement or court instructions before paying.

Understanding the Problem

In North Carolina probate and trust administration, the question is whether a trustee can pay themselves back or make a distribution to themselves while administration is still ongoing and before the trust and estate accounting is fully sorted out. The decision point is whether the payment is a proper trust administration expense (reimbursement) or a beneficiary distribution, and whether the payment can be cleanly assigned to the correct trust or the estate when there are multiple trusts, sub-trusts, and separate bank accounts. The timing trigger is that administration is still in progress and the accounting has not been finalized, which increases the risk of paying from the wrong pot of money or paying an amount that later has to be returned.

Apply the Law

North Carolina law allows trustees to be paid reasonable compensation (if the trust does not set compensation) and to be reimbursed for expenses properly incurred in administering the trust. Reimbursement is different from a distribution: reimbursement pays the trustee back for out-of-pocket trust expenses the trustee advanced; a distribution is a payment of trust property to a beneficiary under the trust’s terms. Even when a trustee has authority to reimburse themselves, the trustee still must act in good faith, keep clean records, and be prepared to justify the payment if a qualified beneficiary asks questions or brings a trust proceeding before the Clerk of Superior Court.

Key Requirements

  • Proper purpose (administration vs. personal benefit): The payment must be tied to administering, preserving, or managing trust property (for reimbursement) or must be authorized by the trust terms (for a distribution), not simply convenient for the trustee.
  • Correct “bucket” (which trust/estate pays): The trustee must charge the payment to the correct trust or sub-trust (or the estate, if it is an estate expense), especially when multiple trusts exist and real estate operations have their own accounts.
  • Documented and reviewable: The trustee must keep records that show what was paid, why it was paid, and how the amount was calculated so it can be reported and defended in an accounting and, if needed, reviewed by the Clerk of Superior Court.

What the Statutes Say

Analysis

Apply the Rule to the Facts: With a revocable trust that has become irrevocable, multiple sub-trusts (including a specific gift), and a separate older family trust holding rental/farm real estate, the biggest risk is misallocating a payment to the wrong trust or treating a beneficiary distribution like an “expense reimbursement.” If a trustee personally advanced money for a trust-owned property expense (for example, an insurance premium or an emergency repair needed to preserve a trust asset), reimbursement may be appropriate if it is properly incurred for administration and charged to the correct trust account. If the payment is really a distribution (including a distribution to a trustee who is also a beneficiary), it should be treated as a distribution with clear authority under the trust terms and should not be disguised as “reimbursement,” especially while disputes about assets, bills, and account access are unresolved.

Process & Timing

  1. Who pays/records: The acting trustee for the specific trust or sub-trust that owes the expense. Where: In the trust’s own bank account records and the trustee’s accounting file (and, if a dispute arises, in a trust proceeding before the Clerk of Superior Court in the county with proper venue). What: A reimbursement packet (invoice + proof of payment + reimbursement request + trustee approval memo) or a distribution packet (distribution memo + calculation + beneficiary receipt). When: Reimbursement is typically documented at the time of payment and then reported in the next accounting period; compensation and self-payments should be documented before or at the time funds are taken, not reconstructed later.
  2. Give transparency early when there is conflict: When family members dispute which trust owns an asset or whether a bill is a trust bill versus an estate bill, the trustee should create a written “allocation note” explaining why the trustee believes the expense belongs to a particular trust and what facts support that conclusion (title/ownership, account statements, lease/farm income deposits, prior practice). If the trust does not specify trustee compensation and compensation is being taken during administration, written notice to qualified beneficiaries can reduce later disputes and starts the statutory review window after notice.
  3. Close the loop in the accounting: Each self-payment should appear in the accounting as its own line item with a description that matches the supporting documents (date, payee, purpose, property, and which trust/sub-trust). If later review shows the wrong trust paid, the trustee should correct it by a documented inter-trust reimbursement (with matching entries in both accountings) rather than leaving it ambiguous.

Exceptions & Pitfalls

  • Mixing reimbursement with distributions: Reimbursement should match specific, documented out-of-pocket trust expenses. A “round number” payment to the trustee without invoices and proof is easy to challenge as an improper distribution or excessive compensation.
  • Paying from the wrong entity: When there is a separate older family trust with its own bank account and real estate operations, expenses tied to that property should generally be paid from that trust’s account, not from a newer revocable-trust sub-trust or from an estate account. Misallocations often trigger disputes and can require later unwinding.
  • Unclear access and missing originals: If there is confusion about who has the original will, who controls accounts, or who is authorized to act for each trust, self-payments made before authority and ownership are clear can look like self-dealing even when the underlying expense was legitimate.
  • Compensation taken without a clear method: If the trust does not set trustee fees, compensation must be reasonable and should be calculated using a consistent method (time records and task descriptions help). Beneficiaries can seek review, and the clerk can order refunds if amounts are excessive.
  • Charging the wrong “side” of the trust: Some costs are typically treated as income-side expenses and others as principal-side expenses. Misclassifying can change who bears the cost (income beneficiary vs. remainder beneficiaries) and can inflame disputes in multi-beneficiary situations.

Conclusion

In North Carolina, a trustee can generally reimburse themselves for expenses properly incurred or advanced to administer the trust, and the trustee may pay those expenses from trust assets without advance approval. The payment still must be for a proper trust purpose, charged to the correct trust or sub-trust, and supported by clear records that can be shown in an accounting and defended if reviewed by the Clerk of Superior Court. A practical next step is to assemble a written reimbursement/distribution packet for each self-payment and keep it with the trust accounting file before any funds are taken.

Talk to a Probate Attorney

If a family is dealing with trustee self-reimbursements or interim distributions while multiple trusts and an estate accounting are still being sorted out, our firm has experienced attorneys who can help clarify which entity should pay which bills, set up clean documentation, and reduce the risk of later objections. 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.