A few facts are missing. How was title held? It sounds like either title was in the wife's name alone or as tenants in common. Please specify.
The general advice above does not constitute an attorney-client relationship: you haven't hired me or my firm or given me confidential information by posting on this public forum, and my answer on this public forum does not constitute attorney-client advice. IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. While I am licensed to practice in New York and California, I do not actively practice in New York. Regardless, nothing said should be deemed an opinion of law of any state. All readers need to do their own research or pay an attorney for a legal opinion if one is necessary or desired.
If the deceased person had no Will then the next of kin is determined by statute. Assuming she was a resident of Illinois then 50% of her estate would go to her spouse and the balance to her children. If the decedent had a Will then she can state who gets what subject to some exceptions (spousal rights).
If the house was owned as joint owners by the neighbors then the above doesn't apply as a surviving joint tenant automatically owns the house without probate.
Hope that answers your question.
Legal Disclaimer: Paul A. Smolinski is licensed to practice law in the State of Illinois only, and as such, his answers to AVVO inquiries are based on his understanding of Illinois law only. His answers are for general information about perceived legal issues within this question only and no response to any posted inquiry should be deemed to extend any right of confidentiality between you and Mr. Smolinski, to constitute legal advice, or create an attorney/client or other contractual relationship. An attorney/client relationship is formed only by specific agreement including an evaluation of the specific legal problem and review of all the facts and documents at issue. We try to insure the accuracy of this information, but we cannot guarantee its accuracy. The reader should never assume that this information applies to his or her specific situation or constitutes legal advice. Therefore, please consult competent counsel that practices in the subject area in your jurisdiction and who is familiar with your specific facts and all of the circumstances.
Mr. Smolinski's answer is spot on. Additionally, there is not really a need to remove a deceased title holder from a deed. When the property is sold or otherwise transferred, this issue is easily handled by affidavit. Whether there is a will and how title was held to your neighbor;s property are important facts to consider when determining how property passes. Your situation may have been different from your neighbor's.
The first question is how title was held. There are different ways of holding title with different implications upon the passing of an owner. From the wording of your question and the response your neighbor was given, it sounds like they were both in title, but that it was not in a form of ownership that automatically leaves title to the survivor. That said, your neighbor should take the documents he has (deeds, title insurance policy and any closing documents) to a real estate or probate attorney for an opinion. If he received his advice from a non-attorney, such as an employee of the county or even a title company employee, he may not be getting an accurate analysis.
Assuming for argument that the property did not pass to him through the form of ownership, then the next question would be whether there was a will. Through a will, your neighbor's wife could have designated how her property is to be distributed. She could have done anything she chose, like given the property to a complete stranger, subject to a few protections for spouses and minor or disabled children.
Next, assuming there is not a will, then Illinois law provides half the estate to the spouse and the other half to be divided among the decedent's children (or descendants of a deceased child). So, how the estate is distributed would depend on the availability of other assets in the estate. Concerning the home, it may very well be that your neighbor owns his own half interest in the property, so then it would be his late wife's half interest that would fall under the rules for division of the estate.
While the late wife's name does not need to be removed and the issue can be addressed later, in the circumstances you describe, where there does not appear to be ownership that automatically passed title to the survivor, it would be much easier to have this addressed now as future developments could mean more and more interests to address (for example, if one of the children with whom he shares title passes prematurely) or one of the new "co-owners" could assert rights to the use or benefit of the property.
Take the information to an attorney knowledgeable in real estate and probate law. The doubt here exists because this was not done in the past. It is possible that the lack of a will or other estate plan may have defeated the intentions and created costs and complications substantially more than addressing this would originally have cost.
The scope of this space does not afford an opportunity to adequately advise you. The response provided is intended to be informative, but not final. You are advised to arrange a consultation at which all facts and documents can be explored and terms for representation agreed. An attorney-client relationship must be formally established.