Probate Loan: Using Inheritance Property to Obtain Cash Advance
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A probate loan refers to obtaining a cash advance using inheritance property as collateral. Probate loans are somewhat of an oxymoron because they aren’t actually loans. However, this term is used when property held in probate secures advance funding. Cash advances are paid by the decedent’s estate after all other outstanding debts and estate settlement fees are paid.
Heirs can apply for a probate loan through various sources including cash advance providers, private investors, and investment groups. Inheritance funding sources charge a fee for providing lump sum of cash which is deducted from the advance. Fees typically range between 10- and 50-percent of inheritance property value.
Inheritance fund providers assume a high level of risk when offering probate loans. The probate process can take several months to complete. Inheritance property can depreciate while held in probate. If estate executors require funds to pay creditor debts they can sell inheritance assets.
Probate loans are the last debt paid during estate settlement. In addition to having to wait long periods of time for payment to occur, funding sources run the risk of not being paid at all. This is particularly true when heirs contest the decedent’s last will. Contesting a will can suspend probate for months and potentially bankrupt the estate in defense legal fees.
When heirs apply for probate loans the funding source will require information regarding the estate and inheritance property. Most cash advance providers require a copy of the last will and testament, death certificate, and contact information for the probate executor. Estate information is validated through the court managing the probated estate.
Heirs usually must undergo a credit and background check to determine if outstanding judgments or liens exist that could interfere with repayment of the probate loan. If heirs have tax or creditor liens, outstanding alimony or child support, bankruptcy or foreclosure proceedings, they will not be eligible for inheritance loans.
Funding sources often require date-of-death valuations when providing advanced funds using financial accounts as collateral. If real estate is used as collateral, funding sources require property deeds and a current property appraisal.
Once documents and collateral are verified, funding sources provide heirs with a cash advance offer. If accepted, probate loans are distributed within 10 to 15 business days.
It is strongly recommended for heirs to obtain legal counsel before signing cash for inheritance loan documents. It is crucial to make certain cash advance loans are legally binding and protect both parties. It is also important to conduct due diligence before assigning inheritance rights to a probate loan funding source.
Heirs should conduct online research to determine if the funding source has had complaints filed. The Better Business Bureau can be a good source for reviewing complaints or compliments. Conduct research to determine if the funding source is licensed to do business in the state where the probate advance originates.
Probated estates valued under $100,000 usually settle within six to nine months. If possible, wait out the probate process to obtain the full face value of inheritance property. However, if an heir contests the will, obtaining a probate loan might be a good option.
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About the Author:
Simon Volkov is a probate liquidator and private investor who specializes in buying and selling inheritance assets. His website offers information regarding the process of obtaining a probate loan, probate, estate planning, and strategies to avoid probate. Learn more about the probate process at www.SimonVolkov.com.
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