How money from a sold home is handled in an estate under New York law

Short answer: If the home was an asset of your father’s probate estate and someone (usually the executor) sells it and pays off mortgages and other valid debts, the leftover cash generally becomes part of the estate and is distributed according to your father’s will (after paying estate expenses and any required claims). However, that outcome depends on how title was held, whether the house passed outside probate (for example, by joint tenancy or a trust), and whether a surviving spouse or other claims have legal priority.

Detailed answer — step by step

To understand what happens to leftover money when a parent’s home is sold, you must sort out three key things: 1) who legally owned the home at the time of death, 2) whether the sale was part of estate administration, and 3) what claims have priority under New York law.

1. Who owned the home matters

If your father owned the home solely in his name when he died, the property is normally an estate asset. The executor (named in the will) or the administrator (if there is no will) can sell the house during probate or after getting court authority. The sale proceeds are estate funds and are used to pay debts, taxes, and administration costs; any leftover balance is distributed according to the will.

If, instead, the house was owned jointly with right of survivorship (for example, joint tenants or tenancy by the entirety for married couples), or the house was owned by a trust, then the property usually passes outside of probate to the surviving owner or the trust beneficiaries. In that case the sale proceeds do not become part of your father’s probate estate and are not distributed under the will.

2. How sale proceeds are treated during estate administration

• The executor deposits sale proceeds into the estate account.
• From that account the executor pays secured debts tied to the property (mortgage, mechanic liens) at closing or afterward.
• Next come funeral expenses, estate administration costs (executor fees where permitted, attorney fees, appraisal and sale costs), and taxes.
• Creditors with valid claims must be paid before the remainder is distributed. The probate process provides a mechanism for creditor claims and priority of payment.
• After debts and costs are paid, the executor distributes the remaining funds according to the terms of the will: specific bequests first (if the will directs), then the residuary clause. If there is no will, distribution follows New York intestacy rules under the Estates, Powers and Trusts Law (EPTL).

This general order — secured debts, funeral and administration costs, taxes, creditor claims, and then distributions under the will or by intestacy — follows New York probate practice and EPTL distribution principles. For more on estate law in New York, see the New York Consolidated Laws, Estates, Powers and Trusts Law: https://www.nysenate.gov/legislation/laws/EPTL

3. Special claims and exceptions that can change distribution

• Surviving spouse protections. New York law provides some protections for a surviving spouse (for example, family allowance and elective share concepts). Those rights can reduce the amount available to other beneficiaries under a will.
• Property passing outside probate. As noted, jointly held property, property in a trust, or assets with beneficiary designations (payable-on-death deeds or accounts) pass outside the will and are not distributed by the executor.
• Improper sale or lack of authority. If the property was sold by someone without proper authority (no letters testamentary, no authorization in the will, and no court approval when required), beneficiaries may have grounds to challenge the sale in Surrogate’s Court.

For general information on Surrogate’s Court procedures and estate administration in New York, see the Surrogate’s Court Procedure Act and court resources: https://www.nysenate.gov/legislation/laws/SCPA and https://www.nycourts.gov/courthelp/estate/probate.shtml

Common hypothetical examples

Example A. Dad owned the house alone. The executor sells it for 300,000, pays off a 150,000 mortgage and 20,000 in funeral/administration expenses, and pays 10,000 in taxes and creditor claims. The remaining 120,000 becomes estate cash and is distributed by the executor according to Dad’s will (specific gifts first, then residuary).

Example B. Dad and Mom owned the house as joint tenants. Dad dies; title passes automatically to Mom. If Mom later sells the house, the sale proceeds belong to Mom and are not distributed pursuant to Dad’s will.

Example C. The home was placed in a revocable trust with Dad as grantor. On Dad’s death the successor trustee follows the trust terms. Those proceeds will not be distributed under the will unless the will specifically incorporates the trust or directs otherwise.

What you can do right now

• Ask to see the deed or title to learn how the home was owned.
• Request a copy of the will (if you do not already have one) and any letters testamentary or letters of administration from the Surrogate’s Court. Those letters show who has authority to act for the estate.
• Ask the executor for an accounting of sale proceeds, debts paid, and distributions. Executors generally must keep records and provide information to beneficiaries.
• If you suspect the sale was improper, or if you are unsure whether the sale proceeds were handled correctly, consult a New York estate or probate attorney promptly to explore options to review or challenge the administration.

Helpful hints

• Confirm title before assuming the sale proceeds are estate property. Joint ownership and trust ownership change everything.
• Get copies of closing documents for the sale. The settlement statement shows payoff of mortgages and distribution of net proceeds.
• Keep copies of the will, letters testamentary, inventories, and any accountings the executor provides.
• Remember that some claims (creditors, spousal rights) may reduce what the will leaves to beneficiaries; talk to an attorney about these potential claims.
• If the executor refuses to provide records or you suspect mismanagement, you can petition Surrogate’s Court for an accounting or removal of the executor. A lawyer can explain deadlines and court procedures.

Where to get official information

• New York Consolidated Laws, Estates, Powers & Trusts Law (EPTL): https://www.nysenate.gov/legislation/laws/EPTL
• Surrogate’s Court Procedure Act (SCPA) information: https://www.nysenate.gov/legislation/laws/SCPA
• New York State Courts guide to probate and estate administration: https://www.nycourts.gov/courthelp/estate/probate.shtml

Disclaimer: I am not a lawyer and this is not legal advice. This article explains general principles under New York law and gives examples to illustrate common outcomes. For advice about a specific situation, contact a licensed New York attorney who handles estates and probate.