Inheritance Loans: What Are They and Should You Get One?

Inheritance loans are not actually loans. Instead, they are cash advances provided to heirs entitled to property and personal property held by the estate. Probate is the legal process used to validate the Last Will and Testament of the deceased. In cases where decedents die without a will (intestate), probate is used to determine rightful heirs and ensure that the distribution of property is handled in accordance with probate laws.

 

Estate loans are generally reserved for heirs entitled to $15,000 or more. Two main sources of financing provide cash for estate advances: estate loan companies and private investors. In some cases, private investors will provide cash advances when inherited assets are worth less than $15,000.

 

Financing sources usually charge a fee that is deducted at the time of disbursement. Fees can range from 10 to 40 percent of the amount borrowed. The recipient is not responsible for reimbursement to the funding source. Instead, restitution is made to the lender when the estate is settled out of probate.

 

It is important to realize that funding sources carry substantial risk when providing inheritance loans. If the estate lacks sufficient funds to pay the cash advance, the funding source has no legal recourse. The exception to this rule is if the funding source can provide sufficient evidence to show that the beneficiary provided false information about the estate.

 

Due to the high risk factor, reputable funding sources require substantial documentation of the estate’s available assets. The beneficiary will need to provide a copy of the decedent’s will and death certificate, along with relevant estate information.

 

Funding sources generally require contact information for the estate administrator and probate attorney. These people will validate the identification of the beneficiary and the right to patrimonial assets.

 

Other forms that may be required to obtain estate loans include: Petition of Probate and Declaration of Inventory and Appraisal. If real property is used as collateral, the financing source typically requires a copy of the sales contract or listing agreement.

 

Inheritance loan recipients will also need to provide personal information. Most funding sources require a current credit report to determine if the beneficiary has any outstanding taxes or liens from creditors, past-due child support, pending bankruptcy, or legal issues that could obstruct payment of the cash advance.

 

Beneficiaries are required to relinquish their inheritance rights to the funding source in exchange for a lump sum cash payment. Therefore, it is imperative to thoroughly research the funding source before signing a contract. Check with the Better Business Bureau, do research online, and contact the references provided by the funding source.

 

While it can be painful to wait for the estate funds to be put on hold in the probate, it’s important to weigh the pros and cons of this type of transaction. Contact a minimum of three to four funding sources to determine the true cost of obtaining a cash advance. If you’re entitled to $100,000 and the lender collects 40 percent, that works out to $40,000. Do you really want to give someone forty grand just to have your cash now?

 

There is no doubt that inheritance loans can be a saving grace. Just be sure to carefully weigh your options and make the best financial decision for your situation.