Detailed Answer
When a property titled solely in a deceased spouse’s name sells at foreclosure, any sale price in excess of outstanding liens and costs becomes surplus proceeds. In Kentucky, those funds do not automatically go to a surviving spouse. Instead, Kentucky law treats surplus proceeds as part of the deceased’s estate and requires the estate’s representative or heirs to claim them.
1. Statutory Disposition of Surplus Proceeds
KRS 426.542 governs the distribution of surplus money after a foreclosure sale. It directs the clerk who conducted the sale to hold surplus funds and make disbursements only after proper claims are filed. Creditors with higher liens (judgment creditors, second mortgagees, tax liens) are paid first. Any remaining balance becomes the property of the decedent’s estate.
See KRS 426.542.
2. Claiming Surplus Proceeds Through Probate
To access these funds, someone must open a probate in the county where the decedent lived or where the foreclosure sale took place. That person—typically named in a will as executor or, if intestate, appointed by the court as administrator—files a claim with the clerk of the foreclosure court.
3. Small Estate Affidavit Option
If the total value of the decedent’s personal property (including surplus proceeds) does not exceed $30,000 and there is no real estate other than the foreclosed property, a qualifying heir can use a small estate affidavit in lieu of formal probate under KRS 393.020. This streamlined process lets the surviving spouse or next of kin claim the funds more quickly.
See KRS 393.020.
4. Distribution Under Intestate Succession
Once surplus proceeds are collected into the estate, Kentucky’s intestate succession statutes determine who ultimately receives the money if there is no will. Under KRS 391.020:
- If the decedent is survived by a spouse and one or more descendants, the spouse inherits one-half of the estate; the descendants share the other half.
- If there are no descendants but a surviving spouse and surviving parent(s), the spouse inherits two-thirds; the parent(s) share one-third.
- If no spouse, descendants, or parents survive, the estate passes to more remote heirs or escheats to the Commonwealth.
Helpful Hints
- Open probate or file a small estate affidavit promptly to beat deadlines for claiming surplus proceeds.
- Gather the death certificate, foreclosure sale documents and lien records before filing a claim.
- Check for a valid will naming an executor—this can speed up the claims process.
- Keep detailed records of all court filings, receipts and disbursements.
- Consult a local probate attorney if the estate exceeds the small estate threshold or if multiple heirs contest distribution.