Probate Funding: An Heir’s Best Friend

Probate funding involves a probate funding company advancing an heir some money against his or her expected portion of an estate. When the estate is settled, the funding company will recoup the inheritance advance, and receive a small fee from the proceeds of the heir’s portion.

Probate funding is growing in importance due to the growing numbers of baby boomers who die annually and have their estates go through probate.

What is probate? In short, it is the legal process that transfers a deceased person’s estate to the rightful beneficiaries. In the best of situations, it takes about seven month to settle a probate case – this represents the best case scenario. If the decedent dies without a will (intestate – that is without a will or living trust) or the will is contested in any way (i.e., accusations of mental instability, improper influence, forgery, etc), the probate process may take years. There are many cases where probate cases have taken up to three years to settle!

By design, probate is a slow, deliberate, drawn-out process. Some heirs, who are not financially well-off, will require money to cover their living expenses while the estate goes through the probate process. This is where probate funding comes in quite handy. If an heir is in a particularly bad financial situation, probate funding may be his or her best option to receive some immediate cash.

Probate funding companies normally set three pre-qualification criteria for heirs they will fund: a) the inheritance must be in probate with an attorney involved; b) the heir expects to receive at least $17,000 from the estate; and c) the heir wants probate funding.

Because of its steep discount, probate funding is expensive and is not designed for everyone. This funding is designed for people who are in a very bad financial situation and who have no other viable financial option. Probate funding should not be used for frivolous reasons such as shopping or buying unneeded consumer items.

No matter the circumstance, some heirs will require inheritance funding to meet any number of problems that may arise. Some problems which an inheritance advance may help include maintaining estate property to maximize value, paying a mortgage note, paying a tax bill, etc. In these cases, a financially-poor heir may not have an option other than to seek probate funding.

Most banks will not accept probate estate interests as security for a loan. And, heirs most in need of money are too often least able to qualify for a loan due to poor credit, lack of employment, or the inability to make the loan payments. This is normally where probate or inheritance funding companies enter the picture.

Instead of making a loan, these companies buy a portion of the heir’s interest in a probate estate at a discount. In other words, these companies provide the heir with an advance.

They then look to the probate estate for repayment. These funding companies are not concerned with low credit scores, employment status or the lack of income. The heir makes no monthly payments because the probate funding company is paid directly and in full from the estate upon distribution.

So, if you or someone you know is coming into an inheritance and need some funds to make it through a tough financial situation while you wait for the estate to be distributed, then probate funding may be for you. Check it out and spread the word.