If I am self financing a vacation home is it common to have the construction funds deposited with a trustee and distributed by the trustee as invoices and work is approved by the homeowner?
What you seem to be referring to is generally part of the requirements of a financial institution when disbursing a construction loan, so, no, it wouldn't be common when you are self-financing. There are various ways to control disbursment of funds via your contract with the general contractor. I recommend you talk to an attorney about any contracts you are entering into for the construction.