Probate loan refers to cash advances provided to heirs and beneficiaries entitled to inheritance property held in probate. Technically, there is no such thing as probate loans. Instead, heirs assign inheritance rights to a funding source in exchange for lump sum cash. Once probate settles, the decedent’s estate repays the funding source after all other estate expenses have settled.
Probate loan funding sources include private real estate investors, investment groups, and cash advance providers. Funding sources typically charge an upfront fee which is deducted from the cash advance. Funding fees typically range between 10- to 40-percent of the inheritance property value.
Inheritance cash advance providers assume considerable risk when probated property is used as collateral. The probate process often extends for several months which can cause assets to depreciate. When estates are financially incapable of paying decedents’ outstanding debts, probate courts can order valuable property to be sold.
Probate loans are usually the last debt to be paid. If the estate cannot afford to repay the debt, funding sources have little legal recourse. In addition to the risk of non-payment, the funding source must wait until probate settles before receiving compensation.
Before heirs can obtain probate money they must provide the funding source with specific information regarding their anticipated inheritance. Investors commonly require an original copy of the decedent’s last will and testament, death certificate, and contact information for the probate estate executor. Estate information is validated through the court.
Most cash advance providers require heirs to undergo a background and credit check. Funding sources need to know if heirs have outstanding tax or creditor liens, bankruptcy filings, child support or spousal alimony obligations which could interfere with repayment of the probate loan. These types of financial obligations generally prohibit heirs from obtaining inheritance cash advances because court ordered judgments take priority.
Heirs may also be required to provide date-of-death values for life insurance proceeds and financial accounts owned by the decedent. When real estate is used as collateral for advance funds, heirs should be prepared to provide a current property appraisal.
Once inheritance assets and financial records are verified the funding source submits a cash advance offer. When beneficiaries accept the offer, inheritance funding occurs within 10 to 15 business days.
It is strongly recommended to obtain legal counsel prior to signing probate loan contracts. Doing so ensures contracts are legally binding and both parties are protected. It is also imperative to engage in due diligence before assigning inheritance rights to a funding source.
Conduct research online to determine if complaints have been filed. Check with the Better Business Bureau and contact the department of business records to ensure the funding source is licensed to conduct business in your state.
When decedent estates are small and probate can settle in a few months it might be best to wait out the probate process. If the estate is contested by one or more heirs and could potentially be suspended for several months, probate loans might be a smart financial option.
