Probate loan: should the heirs sell the inherited property or wait for the probate process?

A testamentary loan is a cash advance given to heirs entitled to the property of the estate. Speaking of fact, there is no such thing as an estate loan. However, this term is often used when heirs assign inheritance rights to a funding source in exchange for a lump sum of cash. Cash advances are paid by the estate after all other expenses and settlement fees.

Funding sources for probate loans can include private investors, investment groups, and cash advance service providers. Funding sources charge an up-front fee that is deducted from the advance. Fees can range from 10 to 50 percent of the value of the estate.

Inheritance cash providers assume substantial risk when they provide funds using probate property as collateral. Probate is known to be a lengthy process that can take several months or years to resolve. Inherited property can depreciate over time, and financing sources rarely offer full face value. When estates are unable to pay estate debts, a probate judge can order the sale of inherited property; leaving cash for inheritance providers vulnerable to non-payment.

Probate loans are usually the last debt to be paid during the settlement of the estate. If the estate is financially unable to pay the debt, the funding sources have little legal recourse. Even if the estate is able to repay the advance, funding sources must wait until the estate is settled before receiving compensation.

Probate funding sources require heirs to provide information and documents about the anticipated inheritance. Investors generally 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 run background and credit checks to determine if heirs have outstanding liens or judgments that could interfere with payment. Heirs with tax or creditor liens, outstanding child support or alimony payments, or bankruptcy petitions will not be eligible to receive inheritance funds.

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, the heirs must provide a current appraisal of the property.

Once the financial records and ownership of the estate are verified, the funding source provides the heirs with a cash advance offer. Upon acceptance, estate loans are dispersed within 10 to 15 business days.

Heirs applying for probate loans should obtain legal advice before signing contracts. Doing so ensures that the cash advance loan documents are legally binding and protect all parties involved in the transaction. It is also important to do your due diligence before assigning inheritance rights to a funding source.

Start by doing some research online and check with the Better Business Bureau to see if there have been any complaints. Contact your state business records department to make sure the funding source is licensed to do business in your state.

When properties are valued below $100,000 and the probate can be resolved quickly, it is usually best to wait until the probate process is complete. However, if you contest the last will, obtaining a probate loan can be a smart financial decision. Contesting a will can suspend estate liquidation for months and often bankrupts small estates due to legal defense fees.

Those unfamiliar with probate cash advances should consult with an estate planning attorney to determine if this is the best financial decision.