An inheritance loan isn’t really a loan. Instead it is an advance given to heirs who are entitled to assets and personal property held in a probate. A will is a legal process used to validate the Last Will and Agreement of the deceased. In cases where the deceased dies without a will (a will), the will is used to determine the legal heir and ensure the distribution of assets is handled in accordance with probate laws.
Inheritance loans are generally provided to heirs who are entitled to $15,000 or more. Two main funding sources provide cash for estate advances — legacy lenders and private investors. In some cases, private investors will provide a down payment when the inherited asset is under $15,000.
Funding sources generally charge fees which are deducted at the time of disbursement. Fees can range between 10 and 40 percent of the loan amount. The recipient is not responsible for returning to the funding source. Conversely, restitution is given to the lender when the inherited property leaves the probate court.
It is important to realize that funding sources carry significant risks when providing legacy loans. If the plantation lacks sufficient funds to make the down payment, the funding source has no legal recourse. An exception to this rule is if the funding source can provide sufficient evidence to prove the beneficiary provided false information about the estate.
Due to the high risk factor, reputable funding sources require substantial documentation of the assets available on the plantation. The recipient will be asked to provide a copy of the deceased’s will and death certificate, along with pertinent information about the estate.
Sources of funding usually require contact information for Housing Administrators and probate attorneys. These people will validate the identification of beneficiaries and rights to plantation assets.
Other forms that may be required when obtaining an inheritance loan include: Application for Probate, and Statement of Inventory and Valuation. If real estate is used as collateral, the source of funding usually requires a copy of the sales contract or listing agreement.
Inheritance loan recipients also need to provide personal information. Most sources of funding require a current credit report to determine whether the recipient has outstanding taxes or creditors’ liens, overdue child support, pending bankruptcy or legal issues that could preclude paying a down payment.
Beneficiaries are required to transfer their inheritance rights to a source of funding in exchange for a lump sum cash payment. Therefore, it is very important to thoroughly investigate the source of funding before signing a contract. Check with the Better Business Bureau, do some online research, and contact referrals provided by funding sources.
While waiting for inherited funds to be deferred in a will can be painful, it’s important to weigh the pros and cons of this type of transaction. Contact a minimum of three or four sources of funding to determine the true cost of getting a down payment. If you are entitled to $100,000 and the lender charges 40 percent, it will be $40,000. Do you really want to give someone forty thousand just to get your money now?
There’s no doubt that legacy loans can be a saving grace. Be sure to weigh your options carefully and make the best financial decision for your situation.
