Short Answer

Generally, no. In North Carolina, a settlement agent should not disburse real estate closing funds from a trust/escrow account until the deed (and any deed of trust) is recorded and funds are collected. This protects title and ensures all liens and costs are paid. For estate or trust sales, fiduciaries should wait until recording and closing confirmations are complete before releasing proceeds to beneficiaries.

How North Carolina Law Applies

North Carolina’s Good Funds Settlement Act requires settlement agents (usually closing attorneys) to hold closing funds in a trust account and disburse only after the deed and any related instruments are recorded and the funds are considered collected. Recording establishes the buyer’s title and sets lien priority. Releasing funds early risks title defects, unpaid liens, and fiduciary liability.

If a personal representative (PR) is selling estate real property or a trustee is selling trust property, they must act prudently. That means confirming the deed is recorded, payoffs and costs are satisfied, and the funds have cleared before releasing any proceeds. In estate sales handled through the court (judicial sales), additional steps like an upset-bid period and a confirmation order can apply before the deed is recorded and funds are safely disbursed. When unsure whether the estate will need the cash to pay claims, the PR should escrow proceeds rather than distribute them immediately.

Key Requirements

• Recording first, then disbursement: A settlement agent should not release closing funds held in trust until the deed (and any deed of trust) is recorded and funds are collected. This timing protects all parties and prevents post-closing title or payoff issues.

• Estate sales: If the estate sells real property to raise funds or for administration efficiency, the PR must ensure liens and costs tied to the property are paid from the proceeds before any distribution. If proceeds are not needed to pay estate debts, they may be distributed to the proper recipients—but escrowing funds is prudent if there’s any doubt.

• Judicial sales and confirmations: For court-authorized sales, a 10-day upset bid period and an order of confirmation can apply. Disbursement typically follows confirmation, recording, and collection of funds.

• Fiduciary duty: PRs and trustees must act with care and prudence. Early or improper disbursement that causes loss can lead to personal liability.

Process & Timing

1. At closing, the settlement agent receives funds into a trust (IOLTA) account and prepares documents.

2. The deed (and any deed of trust) is recorded with the register of deeds. Recording secures title and lien priorities.

3. Once recording is confirmed and funds are collected under the Good Funds rules, the settlement agent disburses payoffs, costs, and net proceeds.

4. Estate sale specifics: If selling under court order, wait for any upset-bid period to expire and for the order of confirmation before recording the deed and disbursing proceeds. Ensure adequate bond coverage if the PR handles sale proceeds and escrow if there’s any doubt about estate claims.

5. Distribution decisions: If the estate does not need the funds for debts or administration costs, the PR can distribute proceeds to the correct beneficiaries; if unsure, keep funds in escrow until creditor periods and accounting milestones make distribution safe.

What the Statutes Say

• North Carolina Good Funds Settlement Act — G.S. 45A-4: Establishes when a settlement agent may disburse settlement proceeds, requiring recording of instruments and collected funds before disbursement.
• G.S. 47-18: Provides that unrecorded deeds are not effective against certain parties; recording protects priority and marketable title.
• G.S. 28A-13-3: Describes a personal representative’s powers and duties, including prudently managing estate assets and paying valid claims before distribution.
• G.S. 28A-17-8: Allows a PR with authority under a will to sell real property on terms advantageous to the estate, subject to prudent administration.
• G.S. 28A-17-10: Addresses sales when title is devised to the PR but no power of sale is granted—sales proceed under judicial sale statutes.
• G.S. 1-339.36: Sets out the upset-bid procedure for private sales in judicial sales, which affects when a sale is final and proceeds can be safely disbursed.

Exceptions & Pitfalls

• Disbursing before recording: Releasing funds from trust before recording and collection can violate statute, jeopardize title insurance coverage, and expose the fiduciary and settlement agent to claims.

• Estate needs vs. beneficiary distribution: If the estate may need funds to pay debts or costs, do not distribute net proceeds to heirs or devisees yet. Use escrow agreements until creditor windows close and you confirm the estate’s liquidity.

• Judicial sale timing: Do not disburse until the upset-bid period ends, the court enters a confirmation order, and the deed is recorded.

• Bond and liability: If a PR receives and disburses sale proceeds, ensure bond coverage is sufficient. Early or improper disbursement can be a breach of fiduciary duty and lead to personal liability.

• Payoffs and liens: Proceeds must first satisfy property liens in order of priority before any distribution. Confirm payoff figures and receipt of lien cancellations/releases.

Helpful Hints

• Ask your closing attorney to confirm when the deed is recorded and funds are “collected” before you plan on any disbursements.
• If the estate might need cash for debts, sign a short escrow agreement keeping proceeds in trust until creditor periods and payoffs are resolved.
• For court-approved sales, calendar the upset-bid window and wait for the confirmation order before expecting disbursement.
• Provide accurate wiring instructions early; verify account details verbally with the law firm before any transfer.
• PRs and trustees: document your decision-making on when and why you released funds to show prudent administration.

Talk to a Probate Attorney

If you’re dealing with sale proceeds in a trust account and aren’t sure when they can be released, our firm has experienced attorneys who can help you understand your options and timelines. 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.