Heir advance is an option for beneficiaries to obtain cash for inheritance assets held in probate. Advances to heirs are not loans. There is no interest charged and the estate repays the funding source once probate settles.
Heir advance also refers to irrevocable life insurance trust structured settlement payments. Decedents engage in estate planning and devise a financial plan which provides annuity payments to beneficiaries over a period of time. Heirs can sell annuities in whole or part in exchange for a lump sum cash payment.
Cash advances for inheritance are provided through funding sources such as private investors, banks, or cash advance companies. Heir loans are generally reserved for beneficiaries entitled to assets valued at $15,000 or more. Beneficiaries assign inheritance rights to the funding source in exchange for a lump sum of money.
Funding sources charge a fee for providing cash for inheritance. Fees can range from 25- to 40-percent. For example, if a beneficiary is entitled to $100,000 of probate money, the funding source fee could range between $25,000 and $40,000.
Investors engaging in inheritance funding incur substantial risks. Although they conduct due diligence to ensure the estate is financially capable of repaying the advance, many things can go wrong during probate.
Probate is required to validate decedents’ last will and testaments, settle outstanding debts, and distribute assets to named beneficiaries. When decedents own real estate with a mortgage loan, the estate must continue paying loan installments, property taxes, homeowners insurance, and expenses related to maintaining the property.
This can place a heavy financial burden on estates. The average settlement time of probate is six to nine months. If the estate does not possess financial means to pay outstanding mortgage debt, the property could fall into foreclosure.
If heirs contest the will, probate can extend for a year or longer. Contested wills rarely accomplish anything other than bankrupting the estate and fattening the wallets of probate lawyers.
Probate can further be complicated when decedents die intestate; without a will. Each state abides by probate laws and distributes assets to beneficiaries accordingly. Heirs involved in intestate probate might find it more challenging to locate a cash advance funding source.
Heir advance companies require beneficiaries to provide a current credit report and will search government databases to determine if any outstanding liens, judgments, child support, spousal alimony, or bankruptcy filings exist.
Estate information will be verified through the probate court. Applicants must provide a copy of the decedent’s last will, death certificate, and probate personal representative contact information. Additional documents might include the petition for probate, inventory and appraisement statement, and realty listing or sales contract.
Once cash advance loan approval is obtained, funds are distributed within 5 to 15 business days. Much depends on the amount of the heir loan and funding source policies.
The recipient of inheritance funding assumes no personal liability to repay the advance should the estate lack sufficient funds when probate settles. The funding source cannot legally pursue heirs or the estate for restitution. The exception is if recipients provide untruthful information which can be proven in court.