How a Probate Loan Works
If you’ve recently lost a loved one, you may hear terms like probate and beneficiaries. Other terms you may learn about include probate loans or an inheritance advance. The idea of some type of loan can be appealing if you are waiting for inheritance funding from your deceased family member. Before you search for a probate loan, you need to understand what they are and how the probate process works to know if they will be beneficial to your situation.
How the Probate Process Works
Before you start thinking about a probate loan, you should understand the timeline for the probate process. This is a complex legal process that can last for months or even years. It’s a necessary process to disperse the estate of the deceased person.
When Probate Begins
The probate process will begin when someone files a petition to open probate with the county court where the decedent lived before their death. The will is filed with the petition for the court to review. The probate court will set a hearing where it will appoint a personal representative or executor to oversee the dispersal of the estate.
Many times, the will includes the name of the person the decedent wanted to act as executor. The probate court will still need to approve them and give them letters of testamentary, which provides them with the authority they need to take care of the estate.
The Job of the Executor
Once the executor has been approved by the probate court, they have a monumental task ahead of them, especially if the estate was vast. They must notify the beneficiaries that they are mentioned in the will. They also need to notify any known creditors. Many states require them to publish a notice in the local newspaper for unknown creditors.
At the same time, the executor or personal representative must secure all assets. They will need to take inventory and locate all assets. For certain assets, such as real estate, they may need to have an appraisal done. Inventory must be completed by a deadline in some states, but it can be a time-consuming process.
The executor will need to pay all claims that come in against the estate. They must also file the final tax return for the estate and pay the estate tax if it is required in their state.
Distributing the Estate
Once all the debts are paid, the executor can begin dispersing the remaining assets to the heirs. This may include transferring deeds and titles to the new owners. They may also sell certain assets and put the money in the estate’s bank account to distribute to the heirs with the rest of the assets.
Once all assets have been dispersed and all accounts in the estate’s name closed, the executor may file a petition to close probate. Some states require the executor to give an accounting of the estate at the end while other states may require it during the probate process.
The Timeline for the Probate Process
The probate process will take several months to a year on average. If the estate is large and complicated, or there are delays, it could take much longer. Some estates stay in probate for years, delaying the inheritance funding until everything is resolved.
Creditors are usually given a deadline to file claims against the estate. This timeline can range from four months to six months or longer. The executor is also given time to file taxes and pay the creditors. If they need to sell assets, they may be working on the sale for months, especially where real estate is concerned.
Besides the home where the decedent lived, they may have other real estate. They could own one or more vacation homes, a business or more, or even undeveloped land. Real estate can take several months before the transaction is completed. This adds to the timeline for the probate process.
Delays in Probate
Anytime you’re dealing with beneficiaries and creditors with a large sum of money, there are bound to be conflicts. These conflicts can start right at the beginning with a dispute over the will. If an heir presents a newer will than what has been filed with the court, it will delay the proceedings until the probate court determines which will is valid.
An interested party may also claim that the deceased person was forced to sign the will or didn’t have the mental capacity to make sure a decision. The court will need to examine the claims and determine if they are accurate. The court will set a hearing to hear the claims.
There may be disputes with creditors who submit claims that the executor or personal representative refuses to recognize. Perhaps they are fraudulent or have already been paid. If the executor refuses to pay the claim, the creditor can file a suit with the court. The case will be heard by the court to determine whether the executor must pay the claim or not.
There can be other issues with the interpretation of the will. If it is ambiguous, the probate court will need to make the decision on how to move forward.
Each delay can add to the probate timeline. With the need for hearings to be scheduled and time given to provide evidence to support the claim, the probate process can take months longer than you might expect. If you’re waiting on your inheritance funding, these delays can cause you a great deal of anxiety.
Fortunately, you have the option of getting a probate loan to help you financially until your inheritance is dispersed. These probate loans can allow you to gain access to your inheritance early while you wait for probate to be completed. Before you decide to apply for a probate loan, you will want to learn what they are and how they work and how to protect yourself from the unexpected.
What are Probate Loans?
Probate loans are funds given based on an expected inheritance. You may have heard them referred to as inheritance loans, estate loans, or heir loans. These loans are different from probate advances. Before considering the differences between inheritance loans and inheritance advances, you’ll want to understand what estate loans are.
What is a Probate Loan?
A probate loan comes from a source other than a traditional bank or credit union. A traditional lender won’t usually approve an inheritance loan on collateral that isn’t yours yet, such as with an inheritance. Probate loans are generally provided by hard money lenders who look at the risk of funding an inheritance early and determine that it is a safe enough investment.
Estate loans or probate loans are usually given out on a percentage of the total inheritance. Just like with other loans, you’ll need to get approved. The probate lender will look at your credit rating and employment history and your ability to repay the loan.
If the lender determines that you are safe enough of a risk, they will extend an offer for inheritance funding. Once you accept the offer and complete the loan documentation, the probate loan company will fund the loan into your bank account.
What is the Cost of a Probate Loan?
Probate loans have the same type of structure as other loans. You will pay interest on the amount you receive for the length of time you have the loan. The interest rate will be higher with estate loans than other loans based on the amount of risk the lender must carry.
You will make monthly payments to pay the interest until the inheritance money is released and you can pay off the balance. You will want to make sure there are no hidden fees wrapped up in the loan that could cost extra.
How Probate Loans Can Help
A probate loan can help you out financially until you receive your inheritance money. There are many situations where you may need an estate loan to pay bills or outstanding debts, help you make the mortgage payment or pay funeral costs.
You may have been the caregiver for the deceased family member. If you were caring for them and didn’t have a job, you may have no income to rely on and need the money from a probate loan until probate is completed.
If you live in a state with an inheritance tax, you may use the estate loan to pay the inheritance tax. Perhaps you need to pay legal fees with a probate attorney or take care of medical bills. Probate loans can provide you with much-needed funds that will sustain you until you receive your inheritance. Before you apply, you should also consider the disadvantages of probate loans.
Another situation where probate funding can help is with real estate you want to keep from the estate. If you are inheriting real estate with other beneficiaries, you may not agree on what you want to do with the property.
You may want to keep the real estate while your siblings may want to sell. You can use loans from a hard money lender to buy out the other heirs. Other lenders generally won’t provide funding for a probate estate property.
Once the deed has been transferred into your name, you can refinance with a traditional loan and pay off the inheritance advance or loan. Hard money lenders are more willing to fund this type of loan, especially with real estate and other assets in the probate estate.
Problems with Probate Loans
While probate loans can be a valuable resource to help you in difficult times, you need to be aware of the risks and challenges that come with this type of funding. If you’re struggling financially, you have to consider the addition of monthly payments with estate loans. You want to determine if your budget can handle the additional payment.
Another concern is if your inheritance funding is delayed, the costs of the estate loan will continue. You could end up owing more than what you will be receiving or the inheritance loan wiping out all your inheritance.
If issues arise that take the money from the inheritance, you might end up getting less or nothing at all from the estate. You will still be responsible for paying an inheritance loan back. It’s better to wait as long as you can to get an estate loan to reduce the amount you must pay back.
Are Probate Advances Different?
Another option for funding your inheritance early is with a probate advance. Also referred to as an estate advance or inheritance advance, a probate cash advance also provides funds early based on your inheritance.
While you still receive the funds from a probate cash advance early, there are some significant differences between it and an estate loan. The most significant difference is that you don’t need to make monthly payments. If you have a tight budget without much money left after paying bills, this will provide some relief for you.
A probate advance is like a purchase agreement. The company agrees to purchase a portion of your inheritance for a fee. The fee depends on how long it will be before probate is completed and how much you need to borrow. Because the probate advance is higher risk than other loans, you can expect to pay more for the funding.
Credit Isn’t As Important
While you will still fill out an application for a probate advance, the lender will focus more on the inheritance rather than on your credit rating. They will talk with the executor or probate attorney who has the legal authority to disclose information about the case.
Probate advances are funded by a hard money lender who isn’t afraid to provide high-risk financing. Just make sure you check about any hidden fees that could add to the cost of the advance.
How the Process Works for Getting a Probate Loan or Probate Advance
You will need to fill out an application to get a probate loan or advance. The lending company will review your information and discuss the case with your attorney to determine if you qualify for a loan.
If the probate advance company determines that you do qualify, they will make an offer. A reputable company will be transparent with their offer by including all terms and fees for the funds.
If you agree to the offer, you will sign the documents. Once inheritance funding company receives the documents, they will fund the advance, usually within a couple of days.
You aren’t under any obligation to accept an offer even if you are approved. You will want to review the paperwork carefully to determine if it’s a good choice or if you should look elsewhere. You can speak with your probate lawyer who will advise you on this issue.
Choose Your Probate Loan Carefully
Before you commit to an estate loan to get your inheritance sooner, you’ll want to do your research. Find out about the inheritance funding company through the Better Business Bureau. Talk to them about any questions you might have.
If you are interested in taking the next step, you can apply with ProbateAdvance.com. You can rest assured that we will answer your questions and provide transparent pricing with no hidden fees or unexpected terms. We want to help you get the money you need now instead of waiting for your inheritance money later on. Contact us to find out more about an inheritance advance and how it can help you.