Feb172026
Probate Q&A Series

How can co-trustees set up a transparent system for paying trust expenses and tracking reimbursements so everyone can see what’s being paid and why? – North Carolina

Short Answer

In North Carolina, co-trustees can create transparency by (1) separating money and records by trust/sub-trust, (2) adopting a written approval-and-payment workflow, and (3) issuing regular reports that show receipts, disbursements, and supporting documentation. North Carolina law expects trustees to keep trust records, keep trust property separate, and provide complete and accurate information to qualified beneficiaries at reasonable intervals. A clear reimbursement policy matters because trustees may reimburse properly incurred expenses from trust assets, and beneficiaries can ask the clerk of superior court to review whether reimbursements were reasonable.

Understanding the Problem

In North Carolina trust administration, co-trustees often face one core decision: how to pay ongoing bills and reimburse family members while keeping each trust’s money and obligations separate and understandable. The issue typically arises after a revocable trust becomes irrevocable at death and there are multiple sub-trusts, plus an older family trust with its own bank account and real estate operations. The goal is a system where co-trustees can show what was paid, which trust paid it, the reason for the payment, and whether the payment was a trust expense, an estate expense, or a reimbursable advance.

Apply the Law

North Carolina trustees must administer the trust in good faith and with reasonable care, keep adequate records, and keep trust property separate from a trustee’s personal funds. Trustees also have a duty to inform and report to qualified beneficiaries by providing complete and accurate information about the trust property at reasonable intervals, and by providing reports that summarize receipts and disbursements. Co-trustees must also follow the trust’s terms and North Carolina’s default co-trustee decision rules, which can require unanimous action when there are two co-trustees unless the trust says otherwise.

Key Requirements

  • Separate the buckets: Each trust and sub-trust should have clearly identified assets, liabilities, and a ledger so expenses do not get mixed across the revocable-now-irrevocable trust, any sub-trusts for specific gifts, and any separate older family trust.
  • Document the “why” and the “which trust”: Every payment and reimbursement should be tied to a written purpose (for example, insurance on a trust-owned property) and assigned to the correct trust or sub-trust.
  • Regular reporting with backup: Co-trustees should provide periodic summaries showing receipts, disbursements, and current values, and be able to produce invoices, receipts, and bank statements that support each entry.

What the Statutes Say

Analysis

Apply the Rule to the Facts: With multiple trusts/sub-trusts and a separate older family trust holding rental/farm real estate, the first transparency problem is “bucket confusion” (which account should pay which bill). North Carolina recordkeeping and separation rules point toward separate ledgers (and often separate bank accounts) for each trust, even if some administration is coordinated. The second problem is “reimbursement confusion” (whether a family member’s out-of-pocket payments were proper trust expenses), which is best handled by a written reimbursement request process that ties each request to a specific trust purpose and supporting documents. The third problem is “access and oversight,” which is addressed by co-trustee decision rules and a shared reporting cadence so the same information goes to all co-trustees and qualified beneficiaries.

Process & Timing

  1. Who sets it up: The acting co-trustees. Where: In the trust administration records maintained in North Carolina (and, if needed, through the Clerk of Superior Court in a trust proceeding). What: A written “Trust Expense & Reimbursement Policy,” a chart of accounts by trust/sub-trust, and a shared document repository containing bank statements, invoices, receipts, and approvals. When: As soon as practical after death, and before paying large or disputed items.
  2. Run all payments through a single intake and coding step: Every bill or reimbursement request gets logged with (a) payee, (b) amount, (c) date incurred, (d) which trust/sub-trust is responsible, (e) category (taxes/insurance/repairs/legal/accounting/property management), and (f) a short written purpose. If an item could belong to the estate instead of a trust, the log should flag it as “classification pending” rather than forcing payment from the wrong bucket.
  3. Approve, pay, and report on a fixed schedule: Co-trustees adopt a routine (for example, weekly or twice monthly) where they review the log, approve items consistent with the co-trustee voting rule and the trust terms, pay from the correct account, and then issue a monthly or quarterly report showing (1) opening balance, (2) receipts, (3) disbursements with descriptions, (4) reimbursements with backup, and (5) closing balance for each trust/sub-trust.

Exceptions & Pitfalls

  • Mixing trust funds across “separate” trusts: Even when the same people serve as trustees, the older family trust with its own bank account and the newer trust/sub-trusts should not casually pay each other’s bills without clear authority and documentation.
  • Paying “gray area” items without a hold-and-classify step: When it is unclear whether a cost is an estate administration expense, a trust expense, or a property-operation expense, paying it immediately from a convenient account can create later surcharge and repayment disputes.
  • Reimbursements without receipts and a written purpose: North Carolina permits reimbursement for expenses properly incurred in administration, but undocumented reimbursements are a common trigger for beneficiary challenges and clerk review.
  • Co-trustee deadlock: With two co-trustees, the default rule can require unanimous decisions unless the trust says otherwise. A written policy should state what happens when co-trustees disagree (for example, temporary pause on non-urgent items, escalation to counsel, or seeking instructions through a trust proceeding).
  • Unequal information flow: Transparency breaks down when one co-trustee controls the checkbook and the other controls the records. A shared repository and standardized monthly reporting reduces suspicion and helps meet the duty to inform and report.

Conclusion

In North Carolina, co-trustees can build transparency by separating records by trust/sub-trust, documenting the purpose and trust “bucket” for every payment, and issuing regular reports that list receipts, disbursements, and reimbursements with supporting documents. Trustees generally may reimburse properly incurred administration expenses from trust assets, but reimbursements can be reviewed for reasonableness if challenged. The most practical next step is to adopt a written expense-and-reimbursement policy and start a monthly reporting cycle that shows each trust’s opening balance, payments, and closing balance.

Talk to a Probate Attorney

If co-trustees are dealing with confusion about which trust should pay which bills, how reimbursements should work, or how to create a clear accounting that reduces disputes, our firm has experienced attorneys who can help explain options and timelines under North Carolina law. 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.

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.