Dec292025
Estate Planning Q&A Series

Should we use a revocable trust or an irrevocable trust if our main goal is to avoid probate and manage multiple rental properties? – North Carolina

Short Answer

In North Carolina, a properly funded revocable living trust is usually the better fit when the main goals are avoiding probate and smoothly managing multiple rental properties during life and after death. A revocable trust can hold real estate, let a successor trustee step in without a court process, and include strong management powers for rentals. An irrevocable trust can make sense for specific goals like long-term asset protection or certain benefit planning, but it comes with loss of control and added complexity and is not required just to avoid probate.

Understanding the Problem

In North Carolina estate planning, the decision is whether a married couple who owns multiple residences and rental properties should place those properties into a revocable trust or an irrevocable trust when the main goal is to avoid probate and create a clear system for ongoing management of rental real estate. The key trigger is what happens if an owner dies or becomes unable to manage the properties, and whether a trustee can step in to collect rents, pay expenses, sign leases, and sell or refinance property without a court-supervised estate administration.

Apply the Law

Under North Carolina law, a trust is a legal arrangement where a trustee holds and manages property for the benefit of one or more beneficiaries. A revocable trust generally allows the person who created it (the settlor) to change it or cancel it during life, and it is commonly used to keep titled assets (like real estate) out of the probate estate if the trust is properly funded. An irrevocable trust generally cannot be changed easily and often requires giving up meaningful control or access, which is why it is typically used for narrower planning goals beyond probate avoidance.

For rental properties, the practical legal issue is whether the trust document gives the trustee clear authority to operate and manage real estate (leasing, collecting rent, paying expenses, hiring property managers, insuring, selling, and handling environmental issues). North Carolina statutes allow trust instruments to incorporate broad fiduciary powers that support real estate operations, which is especially important when multiple rentals are involved. If spouses own real estate as tenants by the entirety, North Carolina also has specific rules for conveying that type of property into a joint trust or separate trusts and how creditor protections can continue if statutory conditions are met.

Key Requirements

  • Probate-avoidance depends on funding: The trust must actually own the rental properties (and other assets where appropriate). A signed trust that never receives title to the real estate will not avoid probate for that real estate.
  • Trustee management authority must match rental operations: The trust should clearly authorize the trustee to lease, collect rents, pay expenses, insure, hire agents, borrow, and sell or encumber property so management does not stall at incapacity or death.
  • Spousal title and creditor rules matter for real estate: If spouses transfer property held as tenants by the entirety into a trust, the deed and trust structure should be set up to fit North Carolina’s rules for how that property is treated in trust and when certain protections can continue.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, the stated goals are probate avoidance and practical management of multiple rental properties, with reliance on insurance for rental liability exposure. A revocable trust directly matches those goals because it can hold title to the rental properties so they are not part of the probate estate, and it can name successor trustees to manage leases, rents, repairs, and sales if an owner dies or becomes incapacitated. An irrevocable trust is not required to avoid probate and would usually add complexity and reduce flexibility for buying, selling, refinancing, or changing beneficiaries while the owners are alive.

Process & Timing

  1. Who files: No court filing is required to create a living trust. Where: The key work happens through the trust signing and then recording deeds with the Register of Deeds in the county where each property is located. What: A signed trust agreement, plus new deeds transferring each rental property into the trust (and any lender-required paperwork if a property is mortgaged). When: Funding should happen as soon as the trust is signed; probate avoidance depends on the trust owning the property before death.
  2. Align the trust’s powers with rental operations: The trust should include (or incorporate) powers that allow the trustee to lease property, collect rents, pay expenses, insure, hire property managers, and sell or mortgage property when needed. This step reduces delays when a successor trustee takes over.
  3. Coordinate the “full package” documents: A typical plan pairs the trust with a pour-over will (to catch assets left outside the trust), plus financial and medical powers of attorney so someone can handle non-trust matters during incapacity and make health decisions. Beneficiary designations (like retirement accounts and life insurance) should be reviewed so they work with the trust plan.

Exceptions & Pitfalls

  • “Trust created” but not funded: The most common failure is signing a revocable trust but leaving rentals titled in individual names. That usually defeats the probate-avoidance goal for those properties.
  • Tenants-by-the-entirety transfers done incorrectly: When spouses own property as tenants by the entirety, transferring it into a trust can change how the property is held. North Carolina law provides a framework for entireties property conveyed to certain trusts, but the deed language and trust structure must match the statutory conditions to preserve intended protections.
  • Assuming an irrevocable trust is “better” for liability: An irrevocable trust is not a substitute for proper insurance and entity planning. Depending on how it is drafted and administered, it can also create administration burdens and reduce flexibility for refinancing, selling, or reallocating properties.
  • Trustee powers too narrow for rentals: If the trust does not clearly authorize leasing, repairs, hiring agents, borrowing, and insurance, a successor trustee may face practical roadblocks. North Carolina allows broad powers to be incorporated, and rental-heavy plans usually benefit from that approach.
  • Not coordinating non-real-estate assets: Vehicles, bank accounts, and beneficiary-designated assets often need separate steps (retitling, payable-on-death designations, or beneficiary updates). A pour-over will helps, but it may still require probate for assets left outside the trust.

Conclusion

For North Carolina couples whose main goals are to avoid probate and keep multiple rental properties running smoothly, a properly funded revocable living trust is usually the most direct tool. The trust should hold title to the real estate and give the trustee clear authority to manage, lease, insure, and sell property. The most important next step is to sign the trust package and then record deeds transferring each rental property into the trust with the Register of Deeds in the county where the property is located.

Talk to a Estate Planning Attorney

If dealing with probate avoidance and the day-to-day management of multiple rental properties is the main concern, our firm has experienced attorneys who can help explain options, prepare a coordinated trust package, and map out the funding steps. 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: Estate Planning Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.