A probate loan is a cash advance given to heirs entitled to probated inheritance property. Factually speaking, there is no such thing as a probate loan. However, this term is often used when heirs assign inheritance rights to a funding source in exchange for lump sum cash. Cash advances are paid by the estate after all other expenses and settlement fees.
Probate loan funding sources can include private investors, investment groups, and cash advance service providers. Funding sources charge an upfront fee which is deducted from the advance. Fees can range between 10- to 50-percent of the inheritance value.
Inheritance cash providers assume substantial risk when providing funds using probated property as collateral. Probate is notorious for being a long process which can take several months or years to settle. Inheritance property can depreciate over time and funding sources rarely offer full face value. When estates cannot afford to pay estate debts a probate judge can order inheritance property sold; leaving cash for inheritance providers vulnerable for non-payment.
Probate loans are typically the last debt to be paid during estate settlement. If the estate is financially incapable of paying the debt, funding sources have little legal recourse. Even if the estate can repay the advance, funding sources must wait until the estate settles before receiving compensation.
Probate funding sources require heirs to provide information and documents regarding anticipated inheritance. Investors usually require an original copy of the decedent’s last will and death certificate, along with contact information for the estate administrator. Inheritance and estate information must be validated through the court overseeing the case.
Most probate loan funding sources conduct background and credit checks to determine if heirs have outstanding liens or judgments which could interfere with repayment. Heirs with tax or creditor liens, outstanding child support or alimony payments, or bankruptcy petitions will not be eligible for inheritance funding.
Beneficiaries must provide date-of-death values for financial accounts or life insurance proceeds owned by the decedent. If real estate is used as collateral, heirs are required to provide a current property appraisal.
Once financial records and inheritance property is verified the funding source provides heirs with a cash advance offer. Upon acceptance, probate loans are dispersed within 10 to 15 business days.
Heirs who apply for probate loans should obtain legal counsel before signing contracts. Doing so ensures cash advance loan documents are legally binding and protect all parties involved in the transaction. It is also important to engage in due diligence prior to assigning inheritance rights to a funding source.
Start by conducting research online and check with the Better Business Bureau to determine if complaints have been filed. Contact the department of state business records to ensure the funding source is licensed to conduct business in your state.
When estates are valued below $100,000 and probate can settle quickly, it is usually best to wait out the probate process. However, if heirs contest the last will, obtaining a probate loan can be a smart financial decision. Contesting a will can suspend estate settlement for months and often bankrupts small estates due to defense legal fees.
Those unfamiliar with probate cash advances should consult with an estate planning lawyer to determine if this is the best financial decision.