How Can a Former Spouse or Survivor Assert Entitlement to Surplus Funds After Death or Divorce?

Detailed Answer

In South Carolina, “surplus funds” arise when a forced sale—whether a mortgage foreclosure, a tax sale, or an estate liquidation—brings in more money than necessary to cover liens, taxes, costs, and debts. A former spouse or survivor may qualify for all or part of those excess proceeds. Below are the key scenarios and steps you must follow.

1. Foreclosure Sale Surplus

When a sheriff or trustee sells real property under a power of sale in a mortgage or deed of trust, any surplus must go to junior lienholders or the former owner. If a divorce decree or separation agreement awarded you an interest in the property or its proceeds, act quickly:

1. Obtain Notice of Sale and Sale Order. Review the sheriff’s return of sale: it must report the sale price and distribution of funds.
2. File a Claim for Surplus Funds. Under South Carolina Code §29-3-650, you petition the clerk of court in the county where the sale occurred for an order directing the surplus payment.
   SC Code §29-3-650.
3. Attach Supporting Documents. Include your divorce decree or settlement agreement showing awarded interest, the deed of trust, and proof of identity.
4. Serve All Parties. Notify the mortgagee, trustee, and any junior lienholders so they can respond within 20 days.
5. Obtain a Court Order. If no one else claims the money or if you have priority, the court signs an order releasing funds to you.

2. Tax Sale Surplus

If a property is sold for unpaid taxes, South Carolina law directs the collector to distribute any excess above taxes, interest, and costs. A qualified claimant—surviving spouse or former spouse with assigned rights—can file for payment:

1. Request a Certificate of Distribution. Contact the county tax collector for the sale report and notice of surplus.
2. Submit a Claim Within Six Months. Under SC Code §12-51-190, file a verified claim with the collector and the county treasurer, stating your name, address, and interest in the property.
   SC Code §12-51-190.
3. Provide Documentation. Attach your divorce decree or estate documents proving entitlement.
4. Receive Surplus. Once validated, the collector issues payment. If two or more claim, the circuit court resolves priority disputes.

3. Probate Estate Surplus (Residual Estate)

When a decedent dies with assets left over after paying debts, costs, and specific bequests, the remainder—called the residue—goes to heirs or devisees. A surviving spouse or a former spouse with post-death allocation rights may assert a claim as follows:

1. Determine Whether the Estate Is Intestate or Testate.
   • Intestate (no will): The residuary estate passes under SC Code §62-2-603.
   • Testate (with will): Follow the will’s residuary clause.
2. File a Creditor or Heir Claim. Under SC Code §62-3-201, present any claim against the estate within six months of the probate notice or be barred.
3. Petition for Family Allowance or Elective Share.
   • Surviving spouse may elect against the will for a statutory share under SC Code §62-2-201.
   • Former spouse generally loses entitlement unless a qualified domestic relations order assigns residual assets post-divorce.
4. Obtain Court Approval. The probate court reviews claims, hears objections, and then issues an order distributing the residue.

Helpful Hints

• Act Quickly. Statutory deadlines run from the date of sale or first probate notice.
• Gather Clear Documentation. Include divorce decrees, death certificates, marriage certificates, and sale records.
• Check Priority. Senior liens and costs get paid before surplus; you must show your right ranks next.
• Work With the Clerk or Collector’s Office. They can provide forms and point you to the correct court.
• Consider Professional Help. A South Carolina attorney or paralegal familiar with foreclosure, tax sales, or probate can streamline the process.