Inheritance loans aren’t actually loans. Instead they are cash advances provided to heirs entitled to assets and personal property held in probate. Probate is the legal process used to validate the decedent’s Last Will and Testament. In cases where decedents die without a Will (intestate), probate is used to determine rightful heirs and ensure asset distribution is handled according to probate laws.
Inheritance loans are generally reserved for heirs entitled to 15,000 or more. Two primary funding sources provide cash for inheritance advances — inheritance lending companies and private investors. In some instances, private investors will provide cash advances when inheritance assets are valued under 15,000.
Funding sources generally charge a fee which is deducted at the time of disbursement. Fees can range between 10- and 40-percent of the borrowed amount. The recipient is not responsible for repayment to the funding source. Instead, restitution is made to the lender when the estate settles out of probate.
It is important to realize funding sources carry substantial risk when providing inheritance loans. If the estate lacks sufficient funds to repay the cash advance, the funding source has no legal recourse. The exception to this rule is if the funding source can provide sufficient evidence proving the recipient provided false information regarding the estate.
Due to the high risk-factor, reputable funding sources require substantial documentation regarding available assets of the estate. The recipient will be required to provide a copy of the decedent’s Will and death certificate, along with pertinent information of the estate.
Funding sources typically require contact information for the Estate Administrator and probate attorney. These individuals will validate the recipient’s identification and entitlement to estate assets.
Other forms which may be required when obtaining inheritance loans include: Petition for Probate, and Inventory and Appraisement Statement. If real estate is being used as collateral, the funding source typically requires a copy of the sales contract or listing agreement.
Recipients of inheritance loans will also need to provide personal information. Most funding sources require a current credit report to determine if the recipient has any outstanding tax or creditor liens, past due child support, pending bankruptcy or legal matters which could obstruct repayment of the cash advance.
Beneficiaries are required to assign their inheritance rights to the funding source in exchange for a lump sum cash payment. Therefore, it is imperative to thoroughly investigate the funding source before signing a contract. Check with the Better Business Bureau, conduct research online, and contact referrals provided by the funding source.
While it can be painful to wait for inheritance funds suspended in probate, it is important to weigh the pros and cons of this type of transaction. Contact a minimum of three or four funding sources to determine the true cost of obtaining a probate cash advance. If you are entitled to 100,000 and the lender charges 40-percent, that amounts to 40,000. Do you really want to give forty grand to someone just to have your cash now?
There is no doubt inheritance loans can be a saving grace. Just be certain to carefully weigh your options and make the best financial decision for your situation.