Probate Q&A Series

How are legal fees and trust funds managed separately during North Carolina probate administration?

Detailed Answer

During probate administration in North Carolina, an executor or administrator handles two distinct pools of money: assets belonging to the estate and assets held in trust. The law requires that fiduciaries keep these pools separate at all times to protect beneficiaries and creditors.

The executor opens a dedicated estate bank account to collect probate assets—such as cash, bank balances, and sale proceeds—and to pay estate debts and legal fees. North Carolina law sets a process for approving probate attorney fees. The executor files a petition with the clerk of superior court under N.C. Gen. Stat. § 28A-26-1. The clerk reviews the request and approves fees that meet statutory standards. See N.C. Gen. Stat. § 28A-26-1.

Trust assets—whether arising under a will or a separate trust instrument—remain in a separate trust account. The trustee follows the compensation rules in N.C. Gen. Stat. § 36C-7-808. The trustee documents fees, expenses, and all trust transactions. If beneficiaries or the court request an accounting, the trustee provides detailed records. See N.C. Gen. Stat. § 36C-7-808.

Separating estate and trust funds prevents accidental misuse. The executor may only use estate assets to pay probate costs and court-approved fees. The trustee must draw compensation and expenses solely from trust principal or income, as allowed by the trust terms and state law.

Both executors and trustees maintain ledgers, bank statements, and receipts organized by account. They file periodic accountings with the clerk of superior court. The court reviews these records for completeness and compliance. If a fiduciary mixes estate and trust funds, the court can impose surcharges, reduce fee awards, or take other corrective action.

Key Takeaways

  • Open a separate estate account to handle probate assets and pay legal fees.
  • File a fee petition under N.C. Gen. Stat. § 28A-26-1 for court approval of attorney fees.
  • Maintain a distinct trust account for all trust assets and transactions.
  • Charge trustee compensation under N.C. Gen. Stat. § 36C-7-808.
  • Provide detailed accountings to beneficiaries and the clerk of superior court.
  • Keep clear, organized records to avoid disputes and court sanctions.

Managing legal fees and trust funds separately ensures transparency and compliance with North Carolina law. If you face complexities during probate or trust administration, turn to Pierce Law Group. Pierce Law Group has experienced attorneys who guide executors and trustees through every step. Contact us by email at intake@piercelaw.com or call us at (919) 341-7055 for a consultation today.