Dec202025
Probate Q&A Series

How can I force a relative with power of attorney to return funds that belonged to the trust if they were withdrawn before death and put into a personal account? – North Carolina

Short Answer

In North Carolina, a person acting under a power of attorney (the “agent”) owes fiduciary duties to the person who signed it (the “principal”) and can be held liable for taking the principal’s money for the agent’s own benefit. For money withdrawn before death and diverted into a personal account, the usual path is to demand records and repayment and, if necessary, file a superior court action seeking remedies such as return of the funds, tracing, and a constructive trust. If the money should have been in the trust but was not titled to the trust at death, the claim may also need to be pursued through the estate administration opened with the Clerk of Superior Court.

Understanding the Problem

In North Carolina, can a trustee of a decedent’s trust require a relative who acted under the decedent’s power of attorney to return money that was withdrawn before death and moved into the relative’s personal account? The key issue is whether the withdrawal was an authorized use of the principal’s money for the principal’s benefit or an improper self-dealing transfer. A second decision point is whether the claim must be brought by the trustee, by the personal representative of the decedent’s estate, or both, depending on whether the asset was actually owned by the trust versus owned individually by the decedent at the time of death.

Apply the Law

Under North Carolina law, an agent under a power of attorney is a fiduciary and must act loyally for the principal’s benefit, keep suitable records, and avoid using the principal’s property for the agent’s own benefit unless the power of attorney clearly authorizes that type of transaction. When an agent breaches those duties, a court can order relief aimed at putting the principal (or the principal’s successor fiduciary after death) back in the position that would have existed without the misuse. Common remedies include ordering an accounting, requiring restoration of the property, and imposing a constructive trust or tracing the funds into other property if the money was moved or spent.

Key Requirements

  • Standing (who has the right to sue): The proper plaintiff is usually the decedent’s personal representative (estate) for pre-death misuse of the decedent’s individually owned property; the trustee may have standing if the property was trust-owned or a trust proceeding is needed to protect trust property.
  • Breach of fiduciary duty by the agent: Proof that the agent used the power of attorney to make a transfer or withdrawal that benefitted the agent (or was not for the principal’s benefit) and was not properly authorized.
  • Tracing/identifying the property or its proceeds: Bank statements, signature cards, and transaction records tying the withdrawn funds to a personal account (or to later purchases) so the court can order return, tracing, or a constructive trust.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, the trustee is dealing with a pour-over plan where some assets were not titled to the trust at death, and money was withdrawn before death and placed into a relative’s personal account under a power of attorney. That pattern typically raises (1) an agent-fiduciary-duty problem (was the agent authorized to move the principal’s money to themselves?) and (2) a “who owns the claim” problem (if the money was individually owned by the decedent, the estate’s personal representative usually pursues recovery; if it was titled to the trust, the trustee more directly pursues trust remedies). The practical goal is to obtain records, trace the transfers, and seek a court order restoring the funds and, if needed, imposing a constructive trust on any identifiable proceeds.

Process & Timing

  1. Who files: Often the personal representative of the estate; sometimes the trustee (or trustee and personal representative together). Where: A civil action is typically filed in North Carolina Superior Court; estate administration (if needed) is opened before the Clerk of Superior Court in the county where venue is proper under North Carolina probate practice. What: A written demand for records and repayment, followed by a civil complaint seeking an accounting and restoration/tracing/constructive trust relief if the demand is not met. When: Act promptly; practical recovery often becomes harder as accounts change and funds are spent, even when the legal claim is still timely.
  2. Build the paper trail: Gather the trust instrument, pour-over will, the power of attorney, and bank records showing (a) the pre-death balance, (b) the withdrawals, and (c) where the money went. In many disputes, signature cards, account agreements, and statements are key because they show whether the agent had authority to transact but did not gain ownership.
  3. Seek court-ordered relief: Depending on the forum and claim type, the court can order an accounting and can order restoration of the funds, tracing into other accounts or assets, and a constructive trust when identifiable property or proceeds exist. If complete relief is not available in a clerk trust proceeding, the damages and recovery portion is commonly pursued in superior court.

Exceptions & Pitfalls

  • “It was a gift” defenses: A relative may claim the decedent intended to gift the funds. Clear gifting authority in the power of attorney (and clear evidence of intent) can change the analysis, and courts look closely at self-dealing transactions by fiduciaries.
  • Wrong plaintiff / wrong forum: Pre-death misuse of individually owned funds is commonly an estate claim, not a “trust administration” problem. If the trustee sues alone when the estate should sue (or vice versa), the case can stall or be dismissed.
  • Tracing problems: If the funds were commingled or quickly spent, proving what happened becomes harder. Fast action to obtain statements and transaction history can materially affect available remedies like tracing and constructive trust.
  • Bank-account form issues: Joint accounts and survivorship designations can complicate ownership. The account paperwork and timing of changes often matters as much as the withdrawals.

Conclusion

In North Carolina, a power-of-attorney agent must act as a fiduciary for the principal and can be required to restore money taken for the agent’s personal benefit. When funds were withdrawn before death and diverted into a personal account, recovery usually starts with appointing the correct party (often the estate’s personal representative if the funds were individually owned), demanding records, and then filing a superior court action seeking an accounting and restoration/tracing remedies, including a constructive trust when appropriate. The next step is to open any needed estate administration with the Clerk of Superior Court so an authorized fiduciary can pursue the claim.

Talk to a Probate Attorney

If a relative used a power of attorney to move money out of a trust plan and into a personal account, our firm has experienced attorneys who can help evaluate who has standing to sue, what records to demand, and what timelines to follow in North Carolina courts. 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: 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.