Considerations of Inheritance Funding Cash Advance Loans
Inheritance funding refers to obtaining lump sum cash in exchange for assigning rights to inheritance property. This can be beneficial to heirs entitled to property which is held in probate for long periods of time. There can be financial consequences, so it is important to weigh the pros and cons before entering into an agreement.
To obtain inheritance funding heirs must locate a funding source. The most common inheritance cash providers are private investors. Some cash advance companies offer this type of funding, as do a few banks. However, most banks require estate beneficiaries to take out a loan using inheritance property as collateral.
On average, the probate process takes between 4 and 6 months to complete, but can take upwards of 2 years if heirs contest the Will or if other problems surround the estate. When inheritance property is suspended for long periods of time, the assets can depreciate in value. Or, if legal counsel is required to protect the estate against contesting the Will, inheritance assets may need to be sold to pay attorney fees.
Oftentimes, estate executors are forced to liquidate inheritance property to pay creditor debts or taxes owed by the decedent. When real estate is secured by a mortgage loan, the estate is responsible for remitting loan payments, homeowner's insurance, homeowner's association dues, and property taxes. Real estate expenses can easily bankrupt small estates or require the sale of valuable assets intended for heirs.
Sadly, less than 80-percent of heirs receive the full amount of inheritance due to court ordered sale of assets or property depreciation. Assigning inheritance rights to a funding source can allow heirs to receive upfront cash for assets which may depreciate in value or may not exist once probate settles.
Funding sources that provide cash for probated inheritance property assume significant risk. When heirs receive inheritance funding they do not have to repay the advance because they assign rights to the property. Instead, funding sources submit a creditor claim to the estate. Once probate settles the funding source is given the property used as collateral.
If the court orders property sold, the funding source has no legal recourse to collect advanced funds. The exception to this rule is if the funding source discovers the heir provided falsified information. Due to the potential risks, funding sources charge an upfront fee for advancing funds. The average cost is between 10- and 40-percent of asset value.
Funding sources should conduct investigation to ensure heirs are entitled to probated inheritance property. Most require heirs to provide a current credit report and undergo a background check. Funding sources rarely provide inheritance cash advances heirs have tax liens, creditor judgments, outstanding taxes, alimony or child support which could interfere with repayment.
Heirs are generally required to present the decedent's last will and testament, probate case number, death certificate, and contact information for the estate executor or probate lawyer managing the estate.
When real property is used for inheritance funding, investors require a current appraisal to determine fair market value. Appraisal costs are at the expense of the heir. Inheritance funding is typically only offered to heirs entitled to at least $15,000.
Heirs should conduct due diligence to ensure the funding source is trustworthy and licensed to conduct business. Heirs should also spend time comparison shopping funding sources in order to obtain the lowest cash advance fees.
Last, but not least, heirs should calculate the true cost of inheritance funding. In addition to upfront fees, heirs may be responsible for inheritance taxes against the full amount of their inheritance. It is best to consult with a tax attorney to determine if engaging in inheritance funding is a wise decision.
To obtain inheritance funding heirs must locate a funding source. The most common inheritance cash providers are private investors. Some cash advance companies offer this type of funding, as do a few banks. However, most banks require estate beneficiaries to take out a loan using inheritance property as collateral.
On average, the probate process takes between 4 and 6 months to complete, but can take upwards of 2 years if heirs contest the Will or if other problems surround the estate. When inheritance property is suspended for long periods of time, the assets can depreciate in value. Or, if legal counsel is required to protect the estate against contesting the Will, inheritance assets may need to be sold to pay attorney fees.
Oftentimes, estate executors are forced to liquidate inheritance property to pay creditor debts or taxes owed by the decedent. When real estate is secured by a mortgage loan, the estate is responsible for remitting loan payments, homeowner's insurance, homeowner's association dues, and property taxes. Real estate expenses can easily bankrupt small estates or require the sale of valuable assets intended for heirs.
Sadly, less than 80-percent of heirs receive the full amount of inheritance due to court ordered sale of assets or property depreciation. Assigning inheritance rights to a funding source can allow heirs to receive upfront cash for assets which may depreciate in value or may not exist once probate settles.
Funding sources that provide cash for probated inheritance property assume significant risk. When heirs receive inheritance funding they do not have to repay the advance because they assign rights to the property. Instead, funding sources submit a creditor claim to the estate. Once probate settles the funding source is given the property used as collateral.
If the court orders property sold, the funding source has no legal recourse to collect advanced funds. The exception to this rule is if the funding source discovers the heir provided falsified information. Due to the potential risks, funding sources charge an upfront fee for advancing funds. The average cost is between 10- and 40-percent of asset value.
Funding sources should conduct investigation to ensure heirs are entitled to probated inheritance property. Most require heirs to provide a current credit report and undergo a background check. Funding sources rarely provide inheritance cash advances heirs have tax liens, creditor judgments, outstanding taxes, alimony or child support which could interfere with repayment.
Heirs are generally required to present the decedent's last will and testament, probate case number, death certificate, and contact information for the estate executor or probate lawyer managing the estate.
When real property is used for inheritance funding, investors require a current appraisal to determine fair market value. Appraisal costs are at the expense of the heir. Inheritance funding is typically only offered to heirs entitled to at least $15,000.
Heirs should conduct due diligence to ensure the funding source is trustworthy and licensed to conduct business. Heirs should also spend time comparison shopping funding sources in order to obtain the lowest cash advance fees.
Last, but not least, heirs should calculate the true cost of inheritance funding. In addition to upfront fees, heirs may be responsible for inheritance taxes against the full amount of their inheritance. It is best to consult with a tax attorney to determine if engaging in inheritance funding is a wise decision.