How Illinois handles leftover sale proceeds when the owner dies intestate

Short answer: In Illinois, money that represents proceeds from the sale of a deceased person’s property becomes part of their estate unless the funds passed outside probate (for example, by joint ownership or a named beneficiary). The personal representative (administrator appointed by the court if there is no will) must use those funds to pay funeral costs, taxes, and creditor claims, and then distribute any remaining balance according to Illinois’s intestacy rules.

Detailed Answer

This section explains how sale proceeds are treated under Illinois law when the decedent left no will (died intestate). It covers different factual scenarios, how probate administration works, creditor priority, and how remaining funds are distributed to heirs.

1. Is the money part of the probate estate?

Yes—generally. If a decedent owned property in their sole name and the sale closed (or funds were placed in escrow for the decedent) before distribution, those proceeds are an asset of the decedent’s estate and typically must pass through probate or another court-approved process before distribution to heirs.

Exceptions where proceeds do NOT become part of probate estate include situations where the asset or proceeds passed automatically outside probate, such as:

• Joint tenancy with right of survivorship (surviving joint owner takes ownership automatically);
• Transfer-on-death (TOD) designation or a named beneficiary that directs sale proceeds or accounts to a specific person;
• Insurance proceeds or retirement accounts payable to a named beneficiary;
• Trust assets held in trust for beneficiaries.

2. Who controls the money when there is no will?

The court appoints an administrator (often called a personal representative) under Illinois probate law to collect estate assets, pay claims and taxes, and distribute the remainder. If someone has custody of sale proceeds (for example a title company, escrow agent, or bank account in the decedent’s name), those funds usually must be turned over to the administrator or paid out following court instruction.

3. Paying debts and expenses

Before heirs receive anything, the administrator must use estate assets—including sale proceeds—to pay valid claims, funeral and medical bills, administrative expenses, and taxes. Illinois law establishes procedures and timelines for presenting and resolving creditor claims during probate. Only after lawful claims and expenses are satisfied does any remainder become distributable to heirs under intestacy rules.

4. How are leftover proceeds distributed under intestacy?

Illinois distributes remaining estate property according to the Probate Act’s intestacy sections (see 755 ILCS 5). Distribution depends on who survives the decedent:

• If there is a surviving spouse but no descendants (children or their descendants), the spouse typically inherits everything.
• If a surviving spouse and descendants exist, the spouse and descendants share according to statutory rules (for example, spouse may receive a certain share, remainder to children).
• If there is no spouse or descendants, property passes to parents, then siblings, and continues through statutory next-of-kin order.

See the Illinois Probate Act for the exact order and formula: 755 ILCS 5 (Probate Act of 1975). You can review the statute here: https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2106&ChapterID=60

5. Practical escrow and closing scenarios

• If the decedent completed a sale and the closing transferred title and funds to the decedent before they died, the proceeds likely sat in a bank account and are subject to probate distribution.
• If the decedent signed a contract but died before closing, escrow/closing agents commonly hold funds and will require instructions—often the buyer’s and seller’s closing agent will insist on court direction or an administrator’s release before disbursing funds.
• If funds are disputed or the title/escrow company is unsure how to proceed, the company can deposit funds into court registry or seek an interpleader so the court can decide distribution.

6. Small estate alternatives and shortcuts

Illinois provides simplified procedures for small estates in some circumstances (avoiding full probate), such as affidavits for collection of small balances in bank accounts or simplified probate for smaller estate values. Whether those shortcuts apply depends on current statutory thresholds and the types of assets involved. See the Probate Act and local court rules for small-estate procedures.

Example (hypothetical)

Mary, an Illinois resident, owned a house in her name. She sold the house and the buyer’s funds were held in escrow. Mary died before closing, and the escrow company still held the buyer’s checks. Because the seller died intestate, the escrow company must not release funds to a third party except as allowed by law. The escrow funds are an asset of Mary’s estate. The court will appoint an administrator, the administrator will open probate, pay valid claims, then distribute any leftover sale proceeds to Mary’s heirs under Illinois intestacy rules.

Steps someone should take if they are involved

1. Identify whether the proceeds are in an account, escrow, or otherwise titled in a way that passes outside probate (joint account, beneficiary designation, trust).
2. Notify the title/escrow company and any financial institutions of the death and ask how they are holding the funds.
3. If you expect to receive proceeds, consult the county probate court to learn whether an administrator must be appointed or whether a small-estate procedure applies.
4. Gather documentation: death certificate, sale/closing documents, account statements, and any contracts related to the sale.
5. Consider seeking legal advice early if there are disputes among family members or creditors, or if the amount at issue is significant.

Helpful Hints

• Keep clear records of closing documents, escrow communications, and bank statements—these document whether sale proceeds are estate property.
• Check whether the asset had a beneficiary designation or joint owner—these usually avoid probate and go directly to the survivor or beneficiary.
• Act quickly to locate the original will, if any, and to contact the county probate court to open an estate or start a small-estate process if eligible.
• Expect valid creditor claims to have priority over heirs; unsecured heirs may have to wait while claims are resolved.
• If a title/escrow agent refuses to disburse funds, they may be willing to deposit funds with the court or require an administrator’s letter of authority.
• When in doubt, consult an attorney experienced in Illinois probate and real estate closings—especially for contested or complex situations.

Relevant statute and resources

Key statutory authority is the Illinois Probate Act (755 ILCS 5), which sets out intestate succession, appointment of administrators, and probate procedures. See the statute collection here: https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2106&ChapterID=60

Disclaimer

This article is for general informational purposes only and does not provide legal advice. I am not a lawyer. For advice tailored to your situation, contact a licensed Illinois attorney or the local probate court.