What Authorization Forms Must an Heir Sign to Direct Distribution of Real Property Sale Proceeds?

Detailed Answer

Under New York law, heirs rarely sign a single, standardized “distribution form.” Instead, the closing attorney or title company typically collects several key authorizations to ensure clear title and proper routing of sale funds. If the property belongs to a decedent’s estate, you also must comply with Surrogate’s Court procedures before closing.

1. Court Approval and Heir Consent (If the Property Is in Probate)

• Order Authorizing Sale (SCPA §1416): A personal representative or administrator must petition the Surrogate’s Court for permission to sell estate real property. Once the court signs the order, it authorizes the fiduciary to execute a sale contract. You can read the statute at SCPA §1416.
• Heir Consent to Sale: While SCPA §1416 does not mandate written consent from every heir, most Surrogates recommend collecting signed consents from beneficiaries. These cover the court record and streamline any objections. A simple one-page form titled “Consent to Sale” often lists the estate caption, the property address, and heir signatures.

2. Escrow Closing Instructions and Settlement Statement

• Escrow Closing Instructions: Title companies or attorneys use these to gather all seller directives in one document. Each heir (if selling jointly) or the personal representative (if the estate sells) signs to:
  • Confirm the sale price and expenses.
  • Direct the escrow agent how to disburse net proceeds (for example, to pay mortgages, liens, taxes, or heir distributions).
• Seller’s Settlement Statement (HUD-1 or ALTA Closing Statement): This itemizes gross sales proceeds and deductions. Each signer confirms their share of net proceeds.

3. Affidavits and Tax Forms

• Affidavit of Heirship or Affidavit of Entitlement: If the property passed outside probate (e.g., joint tenancy or transfer-on-death deed), title insurers often require an Affidavit of Heirship to verify that all rightful heirs join in the sale.
• NYS Real Estate Transfer Tax Return (Form TP-584): The seller (or personal representative) signs to report the sale to the Department of Taxation and Finance. See NYS TP-584 instructions.
• IRS Form W-9: Payees (heirs or estate) provide taxpayer identification for reporting purposes.

4. Small Estate Affidavit (Limited to Personal Property)

Please note: You cannot use the Small Estate Affidavit under SCPA §1001 et seq. to transfer real estate or sale proceeds from real property. That process applies only when the decedent’s personal property does not exceed $50,000. See SCPA §1001.

Helpful Hints

• Begin by determining whether the property is in a full probate estate or held outside probate.
• If the estate is open, file for Letters Testamentary or Letters of Administration promptly.
• Prepare an Order Authorizing Sale (SCPA §1416) before marketing the property.
• Collect signed consents from heirs or beneficiaries to prevent last-minute objections.
• Use the title company’s standard Escrow Closing Instructions to consolidate distribution directives.
• Verify which transfer tax returns and affidavits apply—errors can delay your closing by weeks.
• Consult a Surrogate’s Court clerk or a probate attorney if you face unusual heirship issues.