Obtaining a probate cash advance requires heirs to use inheritance property as collateral. Heirs assign inheritance rights to a funding source in exchange for lump sum cash. Heirs are not required to repay the advance. Instead, funding sources file a creditor claim through decedent estates.
Probate cash advances can be advantageous when estates are suspended in probate for an extended period of time. Probate is required to settle decedent estates and often takes several months to complete. Inheritance property suspended in probate can depreciate in value or may have to be sold in order to pay creditor debts.
When heirs exchange inheritance assets for cash advances they must adhere to state probate laws. Probate advances are provided through funding sources such as private investors and cash advance companies. Some financial institutions offer advanced funds when heirs are entitled to titled property such as realty or motor vehicles.
The probate process can be lengthy and require several months to settle. Many things can occur which deplete estate finances and leave funding sources holding the bag. Funding sources have no legal recourse to pursue estates if restitution cannot be made. Therefore, heirs do not receive full value for their forthcoming inheritance.
Instead, funding sources charge an upfront fee which is deducted from cash advances. The amount generally ranges between 10- and 40-percent of asset value. For example, if heirs are entitled to $30,000 and the funding source charges 30-percent, heirs would receive $21,000; resulting in a $9,000 loss. Heirs are responsible for estate taxes on the full amount.
It is crucial for heirs to calculate the true costs of obtaining a probate loan. If the estate will settle in a few months, heirs would be wise to wait instead of paying taxes on funds they will never receive. However, if the Will has been contested or if probate could extend for several months, it might be a smart financial decision to obtain a cash advance.
It is best to consult with a tax accountant, financial planner, or probate lawyer to weigh the pros and cons of this decision. Professionals can calculate risks involved and help heirs make informed decisions.
To qualify for probate cash advances, heirs must undergo credit and background checks to determine if they have outstanding debts, liens or judgments that can interfere with payment. If heirs have outstanding taxes, child support or spousal alimony, chances are they will not qualify for a probate loan.
Heirs in need of probate cash advances must obtain permission from other heirs entitled to inheritance assets. Funding sources typically require written authorization from the estate administrator and each heir.
Funding sources typically require heirs to provide property appraisals to determine current market value. In most cases, estate administrators are required to obtain appraisals to satisfy probate requirements. Heirs should request appraisals from estate executors to avoid paying this expense.
Heirs in urgent need of cash may find probate cash advances are a good solution. However, this option is often quite costly. Prior to applying for a cash advance, heirs should research alternative funding options such as borrowing funds from family or friends, or obtaining a personal loan.
Probate liquidator and real estate investor, Simon Volkov offers additional information regarding estate planning and probate cash advances to help visitors make informed decisions. His website includes a personal finance article library which includes tips to avoid probate and how to execute Wills and trusts at www.SimonVolkov.com.