Detailed Answer
When a property titled solely in a deceased spouse’s name generates surplus proceeds after a foreclosure sale or debt recovery, California law defines who may claim those funds. Surplus proceeds constitute personal property. You must determine community versus separate property interests, then follow foreclosure-specific claim procedures.
1. Community vs. Separate Property
Under California law, property acquired during marriage is presumed community property, even if titled in one name (Probate Code § 100). Separate property includes assets owned before marriage, gifts or inheritances to one spouse (Probate Code § 660).
2. Surviving Spouse’s Community Interest
If the property is community, the surviving spouse automatically owns one half. That one-half share remains outside probate and belongs directly to the spouse.
3. Decedent’s One-Half Interest and Estate Distribution
The decedent’s half becomes part of the probate estate. Distributions follow intestate rules if there is no will. Under Probate Code § 6401, if the decedent leaves a surviving spouse and children, the spouse receives all community property and a share of separate property per the section.
4. Claiming Surplus Proceeds After Foreclosure
California’s nonjudicial foreclosure statute requires the trustee or mortgagee to deposit surplus proceeds with the court clerk (Civil Code § 2924k). Persons with an interest may file a verified claim under Code of Civil Procedure § 116.710 and following sections. Eligible claimants include:
- The surviving spouse (for community share)
- The decedent’s estate (for decedent’s separate or community share passed through probate)
- Junior lienholders or other secured creditors
5. Order of Distribution
The court clerk distributes funds in this order:
- Senior lien and deed of trust holders
- Junior lienholders
- Owner or successors in interest (surviving spouse and estate)
After the court clerk issues notice, claimants must appear at a hearing or submit declarations. The clerk then disburses funds per the court’s order (CCP § 116.730).
Helpful Hints
- Verify purchase date and title documents to determine community vs separate property.
- Gather marriage certificates, loan records and trust deeds.
- Check for a valid will or trust that directs asset distribution.
- File a verified claim for surplus under CCP § 116.710 before the deadline.
- Attend or submit written evidence if a court hearing is required.
- Consult a probate or real estate attorney to navigate claims and deadlines.