Detailed Answer
When a foreclosure sale or tax sale generates more revenue than the amount owed on a property, Alabama law classifies the excess as surplus proceeds. If the property stood solely in a deceased spouse’s name, the estate—and ultimately the heirs or beneficiaries—becomes entitled to that surplus. Below is a breakdown of how Alabama law allocates these funds.
1. Identifying Surplus Proceeds
Surplus proceeds arise in two common contexts:
- Mortgage or deed-of-trust foreclosure: After the secured debt and foreclosure costs are paid, any amount left over is surplus proceeds. See Ala. Code §6-5-549.
- Delinquent property tax sale: If a tax sale produces funds above the unpaid taxes, penalties, and costs, the former owner (or heirs) may claim the balance. See Ala. Code §40-10A-12.
2. Title Held Solely in the Deceased Spouse’s Name
If a foreclosure or tax sale involves property titled only in the name of the deceased spouse, no joint-tenant right of survivorship applies. As a result:
- The personal representative (executor or administrator) of the decedent’s estate must file a claim with the clerk of court or county sheriff to recover any surplus proceeds.
- Once received, those proceeds become part of the probate estate.
- The clerk or personal representative distributes funds according to the decedent’s will (testate) or, if no will exists (intestate), under Alabama’s intestacy rules in Ala. Code §43-8-42:
- If the decedent left no children or parents, the surviving spouse takes the entire estate.
- If the decedent left children by the surviving spouse, the spouse receives one-half and the children split one-half.
- If the decedent left children not of the surviving spouse, the spouse receives one-third and the children split two-thirds.
3. Surviving Spouse’s Special Claims
The surviving spouse may pursue additional allowances before distribution:
- Elective share: A spouse can elect to take 30% of an augmented estate rather than the share under the will or intestacy. See Ala. Code §43-8-90. The election must occur within six months after probate opens.
- Homestead allowance: The family may claim up to $30,000 in lieu of homestead rights. See Ala. Code §43-8-71.
- Family allowance: The court may award a reasonable allowance for support during administration (up to $10,000). See Ala. Code §43-2-220.
Helpful Hints
- File a written claim for surplus proceeds promptly with the county sheriff or clerk—statutes often impose strict deadlines.
- Obtain Letters Testamentary or Letters of Administration from the probate court before requesting funds.
- Verify beneficiary designations and heirs at law early to avoid disputes in probate court.
- Keep all foreclosure or tax sale notices and receipts organized for the claim process.
- Consult a probate attorney if creditors challenge distribution or if you plan to exercise an elective share.