Annual Trust Accounting (North Carolina)

ANNUAL TRUSTEE'S ACCOUNTING AND REPORT TO QUALIFIED BENEFICIARIES

(Pursuant to N.C.G.S. § 36C-8-813)

STATE OF NORTH CAROLINA
COUNTY OF [________________________________]

I. TRUST AND ACCOUNTING PERIOD

II. PARTIES

A. Trustee(s)

B. Qualified Beneficiaries (N.C.G.S. § 36C-1-103(15); § 36C-1-110)

III. STATUTORY BASIS AND CONTENT OF REPORT

This Accounting is delivered pursuant to N.C.G.S. § 36C-8-813(b)(2), which provides that a trustee is considered to have discharged the duty under § 36C-8-813(a)(1) as to a qualified beneficiary "for matters disclosed by a report sent at least annually and at termination of the trust to the beneficiary that describes the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee's compensation, and lists the trust assets and their respective market values, including estimated values of assets with uncertain values."

Review the trust instrument before using this report. Under N.C.G.S. § 36C-1-105(a), most Chapter 36C rules are defaults that the trust terms may alter. Section 36C-8-813(b)(2) also states that no presumption of a breach arises merely because a trustee does not use this annual-report method.

The schedules below describe:

1. Trust assets at carrying value and fair market value (Schedule A);
2. Trust liabilities (Schedule B);
3. Receipts (Schedule C — allocated under the trust terms and N.C.G.S. § 37A-1-103);
4. Disbursements (Schedule D — allocated under the trust terms and § 37A-1-103);
5. Distributions to beneficiaries (Schedule E);
6. Trustee compensation — source and amount (Schedule F);
7. Agent compensation (Schedule G — additional disclosure concerning agents delegated functions under N.C.G.S. § 36C-8-807); and
8. Reconciliation of beginning and ending balances (Schedule H).

IV. ACCOUNTING SCHEDULES

Schedule A — Trust Assets (Beginning and Ending of Period)

Schedule B — Trust Liabilities

Schedule C — Receipts

Schedule D — Disbursements (Other Than Distributions to Beneficiaries)

Schedule E — Distributions to Beneficiaries

Schedule F — Trustee Compensation (N.C.G.S. § 36C-7-708; § 36C-8-813(b)(2))

Schedule G — Agent Compensation (N.C.G.S. § 36C-8-807)

Schedule H — Reconciliation

V. NORTH CAROLINA LIMITATIONS NOTICE

The Beneficiaries are advised of the following limitations governing claims against the Trustee under North Carolina law:

A. Five-Year Repose — N.C.G.S. § 36C-10-1005(a)

No proceeding against a trustee for breach of trust may be commenced more than five (5) years after the first to occur of: (i) the removal, resignation, or death of the trustee; (ii) the termination of the beneficiary's interest in the trust; or (iii) the termination of the trust.

B. General Limitations — N.C.G.S. § 36C-10-1005(b)

Except as provided in subsection (a), Chapter 1 of the North Carolina General Statutes governs the limitations of actions on judicial proceedings involving trusts. Under § 36C-10-1005(b)(1), when any limitation begins to run as to a person, it also begins to run as to all other persons that person would be entitled to represent under Article 3 of Chapter 36C, whether or not the person consented to serve as representative. Under § 36C-10-1005(b)(2), G.S. § 1-17 does NOT apply to toll the running of the limitation as to those represented persons.

C. Effect of Adequate Disclosure and Release

Under N.C.G.S. § 36C-10-1009, the Trustee is not liable to a Beneficiary for breach of trust if the Beneficiary consented to the conduct, released the Trustee from liability, or ratified the transaction, UNLESS (1) the consent, release, or ratification was induced by improper conduct of the Trustee, or (2) at the time of the consent, release, or ratification, the Beneficiary did not have knowledge of the Beneficiary's rights or of the material facts relating to the breach. No consideration is required for validity.

The optional Receipt, Consent, Release, and Ratification at Exhibit 1 is intended to document a beneficiary's informed action under § 36C-10-1009. Its effectiveness depends on the actual disclosures, knowledge, absence of improper conduct, signer capacity, trust terms, and other applicable law; execution does not create an automatic release.

D. Exculpation Limits — N.C.G.S. § 36C-10-1008

A term of the trust relieving a trustee of liability for breach of trust is unenforceable to the extent it relieves the trustee of liability for a breach committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries. That is the limit stated in current N.C.G.S. § 36C-10-1008.

E. Mandatory Duties Not Affected

Nothing in this Accounting, the limitations notice above, or any Receipt and Release attached hereto purports to waive or limit any mandatory provision under N.C.G.S. § 36C-1-105(b), including the Trustee's duty of good faith and the court's authority in the interests of justice.

VI. REQUEST FOR QUESTIONS OR OBJECTIONS

The Trustee requests that a Beneficiary who questions or objects to a disclosed matter send a written response to the address in Section II.A by [REQUESTED RESPONSE DATE]. A response should:

1. Identify the specific schedule, entry, or matter to which the Beneficiary objects;
2. State the factual and/or legal basis for the objection; and
3. Specify the relief or correction requested.

The requested response date is administrative only. Silence does not itself waive a claim, release the Trustee, ratify a transaction, shorten a limitations period, or create a presumption of approval. Any consent, release, or ratification is governed by N.C.G.S. § 36C-10-1009, and limitations remain governed by § 36C-10-1005 and Chapter 1.

VII. TRUSTEE VERIFICATION

I, the undersigned Trustee, certify:

1. I am the duly appointed and acting Trustee of the Trust identified in Section I;
2. I have prepared this Accounting from the books, records, and accounts maintained for the Trust;
3. To the best of my knowledge and belief, this Accounting is true, complete, and correct in all material respects and fairly presents the receipts, disbursements, distributions, assets, liabilities, and trustee and agent compensation of the Trust for the accounting period stated;
4. Estimated values for assets with uncertain values reflect my good-faith estimate based on the methodology disclosed in Schedule A; and
5. I have administered the Trust during the accounting period in accordance with my duties under N.C.G.S. Chapter 36C, including the duties of loyalty (§ 36C-8-802), impartiality (§ 36C-8-803), prudent administration (§ 36C-8-804), and good faith (§ 36C-1-105(b)(2)).

Optional North Carolina Acknowledgment

STATE OF NORTH CAROLINA
COUNTY OF [________________________________]

I certify that [TRUSTEE NAME] personally appeared before me this day and acknowledged signing the foregoing Accounting.

Date: [________________]

____________________________________
Official Signature of Notary

Printed or Typed Name: [________________________________], Notary Public

[OFFICIAL SEAL]

My Commission Expires: [__/__/____]

EXHIBIT 1 — OPTIONAL BENEFICIARY RECEIPT, CONSENT, RELEASE, AND RATIFICATION

(Pursuant to N.C.G.S. § 36C-10-1009)

The undersigned Qualified Beneficiary, having received and reviewed the foregoing Annual Trustee's Accounting and Report for the accounting period [__/__/____] through [__/__/____] (the "Accounting"), and having had a reasonable opportunity to inspect underlying records and to consult independent counsel, ACKNOWLEDGES, AGREES, AND CERTIFIES as follows:

A. Receipt

The Beneficiary has received the Accounting, together with all schedules and any underlying documentation reasonably requested.

B. Knowledge

The Beneficiary has knowledge of the Beneficiary's rights under N.C.G.S. Chapter 36C and of the material facts relating to the administration of the Trust as disclosed in the Accounting. The Beneficiary has not been induced to execute this Agreement by any improper conduct of the Trustee.

C. Approval

The Beneficiary approves the acts of the Trustee as disclosed in the Accounting, including all receipts, disbursements, distributions, valuations, trustee compensation, and agent compensation set forth in Schedules A through H.

D. Release and Ratification (§ 36C-10-1009)

The Beneficiary, solely for the Beneficiary unless the signer is separately identified below as a representative with authority under N.C.G.S. § 36C-3-303, hereby:

1. Consents to all acts of the Trustee disclosed in the Accounting;
2. Releases the Trustee from any and all liability for breach of trust as to all matters disclosed in the Accounting, except as otherwise provided in § 36C-10-1009(a)(1)–(2); and
3. Ratifies all transactions of the Trustee disclosed in the Accounting.

E. No Waiver of Mandatory Duties

Nothing in this Agreement waives any mandatory provision under N.C.G.S. § 36C-1-105(b).

Representative authority, if applicable: [STATUTORY CAPACITY, PERSON REPRESENTED, NO-CONFLICT REVIEW, AND SUPPORTING DOCUMENT: __________________________________]

Optional acknowledgment: [INSERT THE CURRENT CERTIFICATE REQUIRED WHERE THE ACKNOWLEDGMENT IS PERFORMED, IF COUNSEL REQUIRES NOTARIZATION.]

SOURCES AND REFERENCES

• N.C.G.S. § 36C-8-813 (Duty to inform and report): https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_36C/GS_36C-8-813.html
• N.C.G.S. § 36C-10-1005 (Limitation of action against trustee): https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_36C/GS_36C-10-1005.html
• N.C.G.S. § 36C-10-1008 (Exculpation): https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_36C/GS_36C-10-1008.html
• N.C.G.S. § 36C-10-1009 (Beneficiary's consent, release, or ratification): https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_36C/GS_36C-10-1009.html
• N.C.G.S. § 37A-1-103 (Principal-and-income allocation order): https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_37A/GS_37A-1-103.html
• N.C.G.S. § 10B-41 (North Carolina acknowledgment form): https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_10B/GS_10B-41.html