Jan292026
Surplus Funds Q&A Series

If someone is named in a will but isn’t a blood relative, can they still receive foreclosure surplus funds from the property? – North Carolina

Short Answer

Yes. In North Carolina, a person does not have to be a blood relative to receive money that ultimately belongs to the estate, including foreclosure surplus funds, as long as the will validly leaves them the relevant interest (or the residue) and the estate’s debts and expenses are handled first. In many cases, the surplus is paid into the Clerk of Superior Court, and a claim must be made through the clerk’s process to determine who is entitled to the funds.

Understanding the Problem

In North Carolina, when a property is foreclosed and the sale brings in more money than what is needed to pay the foreclosure costs and the debt being foreclosed, a “surplus” can exist. The decision point is whether a person who is named in a will (but is not related by blood) can be treated as a person entitled to that surplus when the foreclosed property was part of a deceased owner’s estate. This question usually comes up when the estate remains open while the personal representative waits to see whether foreclosure surplus funds will be paid out.

Apply the Law

North Carolina law allows a person to leave property by will to anyone, related or not. If foreclosure surplus funds are generated from estate property, those funds are generally treated as belonging to whoever is legally entitled to the deceased owner’s interest after the estate is administered. When there is uncertainty about who should receive the surplus (including when the owner is deceased), the surplus is often paid to the Clerk of Superior Court, and a special proceeding can be filed to have the clerk determine who is entitled to the money.

Key Requirements

  • A valid will (or other legal basis to inherit): The will must be legally effective, and the person must be a proper devisee under the will (for example, named to receive the property, the proceeds, or the residue).
  • The surplus must be tied to the deceased owner’s interest: The funds must be surplus proceeds from the foreclosure sale after required payments are made, and the deceased owner must have had an interest that would flow into the estate.
  • Proper claim through the clerk’s process: If the surplus is paid into the clerk’s office (common when the owner is deceased or there are competing claims), the claimant typically must file the appropriate special proceeding and give notice to other potential claimants.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, a relative died, one or more properties went through foreclosure, and there appear to be surplus funds. If the will leaves the relevant property interest (or the residue of the estate) to a named beneficiary who is not a blood relative, North Carolina law can still treat that person as entitled to receive the estate’s net interest in the surplus after estate administration. If the trustee or other party handling the foreclosure cannot safely determine who should receive the surplus, the money may be paid to the Clerk of Superior Court and then distributed only after the clerk’s surplus-funds process determines the proper recipient.

Process & Timing

  1. Who files: Any person claiming the surplus (often the personal representative/executor, or a beneficiary/devisee). Where: The Clerk of Superior Court in the county where the foreclosure sale occurred. What: A special proceeding to determine entitlement to surplus funds, with notice to other known claimants. When: After the surplus is paid into the clerk’s office (or when it becomes clear the holder will not pay it out without a clerk determination).
  2. Responses and disputes: Other claimants can file claims/answers. If there is a real factual dispute about who owns the funds, the matter can be moved from the clerk to Superior Court for trial under the statute’s procedure.
  3. Distribution: Once entitlement is determined, the clerk/court authorizes payment to the proper person(s) (often through the estate if administration is still required).

Exceptions & Pitfalls

  • Estate administration comes first: Even if a non-relative is named in the will, the estate typically must address valid debts, expenses, and required administration steps before beneficiaries receive distributions.
  • Will wording matters: A will may give a specific devise of the property, a gift of “proceeds,” or only a share of the residue. The correct recipient of surplus can change depending on how the will is written and whether the gift fails or shifts to the residue.
  • Competing claims and notice problems: If multiple people claim the surplus (for example, heirs, devisees, lienholders, or an estate representative), failing to name and serve the right parties in the clerk proceeding can delay distribution.

Conclusion

In North Carolina, a person named in a valid will can receive foreclosure surplus funds tied to estate property even if that person is not a blood relative. The key is whether the will actually gives that person the relevant interest (often through a specific gift or the residue) and whether the estate’s required debts and expenses are handled first. When the surplus is paid into the Clerk of Superior Court, the next step is to file a special proceeding with the clerk to have entitlement determined under the surplus-funds statutes.

Talk to a Surplus Funds Attorney

If you’re dealing with foreclosure surplus funds after a family member’s death and there is a will beneficiary who is not a blood relative, our firm has experienced attorneys who can help explain the claim process, required documents, and timelines. Call us today at 919-341-7055. For more background, see claim surplus funds as a beneficiary and file a petition to claim surplus funds.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Surplus Funds Q&A Series

Author: Pierce Law

Pierce Law Group is a North Carolina law firm focused on probate administration, real estate partition matters, and surplus funds claims across North Carolina. We know these situations often come with stress, family dynamics, and time-sensitive decisions—so we prioritize clear communication, steady guidance, and a practical plan from day one. Our goal is to make a complicated process feel manageable, while protecting what matters most to you.