What are the pros and cons of using an irrevocable trust for land and other assets if I might want to sell or refinance property later? – North Carolina

Short Answer

In North Carolina, an irrevocable trust can protect assets from certain creditor risks and can help carry out long-term estate planning goals, but it also gives up day-to-day control. If land is titled in an irrevocable trust, the trustee—not the person who created the trust—generally must sign to sell, mortgage, or refinance, and the trust terms may limit those actions. The biggest “con” is loss of flexibility: changing the plan later can be difficult, time-consuming, and sometimes requires court involvement or beneficiary consent.

Understanding the Problem

In North Carolina estate planning, the decision point is whether transferring land and other assets into an irrevocable trust makes sense when a future sale or refinance may be needed. The central issue is control: who has authority to sign a deed, approve a mortgage or deed of trust, and decide when to sell. The question also includes practical timing concerns, such as what happens when a lender or closing attorney needs a clear signer and proof of authority from the trustee, and what options exist if the trust’s terms do not allow the transaction.

Apply the Law

Under North Carolina law, an irrevocable trust is designed so the person who creates it (the “settlor”) cannot simply take the assets back at will. Instead, the trustee holds legal title and acts under the trust instrument’s terms and the trustee’s duties. For real estate, North Carolina generally treats transfers “to a trust” and transfers “by a trust” as transfers to and by the trustee(s), which matters at closings because deeds and deeds of trust must be executed by the proper party. Whether the trustee can sell, mortgage, or refinance depends on the trust’s written powers and the trustee’s authority, which can be expanded by common “incorporation by reference” powers often used in North Carolina trust drafting.

Key Requirements

Trustee authority: The trust document must give the trustee power to sell, convey, mortgage, or otherwise encumber trust property, and the trustee must act within that authority.
Proper title and signature: Real estate transactions generally need the trustee to sign and convey (or grant a security interest) in the trustee capacity, consistent with how title is held of record.
Practical lender/closing compliance: Even when the trustee has legal power, a lender and closing attorney typically require trust excerpts/certifications, clear trustee identification, and confirmation that the transaction fits the trust terms.

What the Statutes Say

N.C. Gen. Stat. 39-6.7 (Construction of conveyances to or by trusts) – Treats conveyances to a trust as conveyances to the trustee(s), and conveyances by a trust as conveyances by the trustee(s), helping clarify who signs at closing.
N.C. Gen. Stat. 32-27 (Powers which may be incorporated by reference in trust instrument) – Lists fiduciary powers that can be drafted into a trust (including selling property and managing/encumbering real estate), which often controls whether the trustee can sell or refinance.

Analysis

Apply the Rule to the Facts: With no specific facts provided, the main variables are (1) who is trustee, (2) what powers the trust grants regarding sales and borrowing, and (3) whether a lender will accept trust-held title for a refinance. If the trust names an independent trustee and limits distributions or borrowing, selling or refinancing may require trustee action and may be blocked by the trust terms. If the trust gives broad real estate powers and a clear method to replace a trustee, a later sale is often workable, but the process is still less flexible than owning property outright.

Process & Timing

Who files: No one “files” to sell or refinance solely because property is in trust; the trustee acts. Where: The deed or deed of trust is typically recorded with the Register of Deeds in the county where the land is located. What: Closing documents signed by the trustee (and often a trust certification or relevant trust excerpts requested by the title company/lender). When: Early in the refinance/sale process—often before underwriting is finalized—because the lender and title company may need time to review trustee authority.
Confirm trustee powers: The closing attorney or title company reviews the trust terms (and any amendments) to confirm power to sell or encumber, who must consent, and whether any special conditions apply. This step can add time if the trust language is unclear or if a prior trustee resigned or died and records do not clearly show the successor trustee.
Close and record: The trustee signs as trustee, the transaction closes, and the documents are recorded. If the trust does not authorize the transaction (or requires consents that cannot be obtained), planning alternatives may be needed before closing can proceed.

Exceptions & Pitfalls

Trust terms that restrict sales or borrowing: Some irrevocable trusts intentionally restrict the trustee’s ability to sell the “home place” or to mortgage property; that restriction can make refinancing impossible without changing the plan.
Settlor control can defeat the purpose: In many asset-protection-driven designs, the more control the creator keeps (directly or indirectly), the more likely a creditor, court, or agency may argue the assets are still reachable or should still be treated as available. That tension often shows up when a refinance requires the creator’s involvement.
Trustee logistics: If the trustee lives out of state, is unavailable, or does not want to sign loan documents, a refinance can stall. A well-drafted trustee succession plan helps, but changing trustees may still take time.
Lender underwriting limits: Some lenders will not refinance a primary residence held in an irrevocable trust, or they impose extra conditions. Even when the law allows trustee signing, lender policy can be the practical barrier.
Deed drafting and vesting problems: Deeds should clearly vest title in the trustee(s) and reflect trustee capacity. North Carolina’s construction statute helps, but unclear vesting can still trigger title-curing work.
Changing the plan later: “Irrevocable” does not always mean “never changeable,” but changes commonly require strict conditions, written consents, and sometimes a court process. That lack of easy edits is a major risk when future refinancing is likely.

Conclusion

In North Carolina, an irrevocable trust can be a strong tool for long-term planning, but it reduces flexibility because the trustee controls sales and refinancing and must follow the trust’s written limits. Real estate held in trust is typically conveyed and encumbered by the trustee, and the trust should grant clear power to sell and mortgage. The most important next step is to have an attorney review the proposed trust language before any deed transfer to confirm the trustee can refinance or sell when needed.

Talk to a Estate Planning Attorney

If an irrevocable trust is being considered for land or other assets but a later sale or refinance is possible, an estate planning review can prevent expensive delays and avoidable restrictions. Our firm has experienced attorneys who can help evaluate trustee powers, control issues, and practical lender concerns. 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.