Probate, also called probate court, is a legal process that occurs following the death of an individual, called the decedent. The purpose of probate is to administer the decedent’s will. Probate is also the process used to administer the decedent’s estate if they do not have a will in place. The time-consuming nature of probate can lead to long waiting periods for heirs to receive assets. In some cases, heirs turn to probate advances to access money left to them in a shorter timeframe.
Keep reading to learn more about probate generally and the probate advance process in particular.
What is Probate?
Probate court addresses several needs related to the estate of the decedent. It can encompass paying off debts owed to creditors and proving the validity of the decedent’s will. Probate also involves distributing assets to heirs. Additionally, it includes the appointment of an executor or representative to administer the estate, the American Bar Association explained.
In cases where the decedent does not have a will, probate also determines how to distribute assets between heirs. Similarly, probate court is the forum where disputes related to an estate are resolved. Depending on the specifics of an individual’s estate and will, probate can be a lengthy, time-consuming process. The court needs that time to ensure last wishes are carried out and assets are distributed properly.
In cases where a decedent lacks a will, the court must also apply state law to determine asset distribution. This can add more time to the probate process. The wait for probate to resolve leads some heirs to seek options to access their part of the estate more quickly. This is where an advance on probate becomes relevant.
What are Probate Advances? How Does the Probate Advance Process Work?
Probate advances are essentially inheritance cash advances provided by a lender. After an heir reaches out, the lender assesses the situation and requests relevant legal documents and information. The lender normally contacts the estate’s executor or representative as well.
If the lender decides issuing a probate advance is in its best interest, it will make an offer to the heir. The specifics depend on the individual situation. However, the heir generally has to pay a premium for that faster funding. In simpler terms, an heir will receive a partial amount of their inheritance money upfront. In exchange, they provide the lender with their total inheritance after probate resolves.
Probate Advances and Probate Loans: A Comparison
A probate advance differs from a probate advance loan. Although the terms are similar and both involve borrowing money, the structures are different in a few key areas.
Details of Probate Advances
Probate cash advances have a fixed repayment amount based on the size of the heir’s inheritance. Depending on how long it takes probate to resolve, the functional interest rate of the advance will change. With a probate advance, the borrower does not have to repay the lender until probate resolves.
Additionally, probate advance fees are uncommon. Lenders tend to build the cost of providing funds to heirs into their offer. However, this is not a requirement. It is always prudent to fully understand terms, conditions and additional fees before committing to any loan or advance.
Details of Probate Loans
Probate loans are exactly that: loans. They require collateral, in this case meaning the heir’s share of the estate. They also involve a loan application and approval process. Credit scores and other common factors in loans can come into play for lenders making a decision.
Probate loans include a repayment schedule that begins after the loan is issued. Borrowers must pay interest on their inheritance loan until it’s fully repaid. This is unlike a probate advance, where repayment is expected only after the probate process ends.
Why Do Heirs Use Probate Loans and Advances?
Probate can take months or even years to complete. Uncertainty around the timing of estate distribution can make probate loans and advances seem attractive. Heirs may choose to use a probate advance to address important, current expenses that can’t wait until probate ends. However, inheritance funding companies don’t require lenders to share a specific reason why they need funds.
Deciding whether a probate loan is right on a personal level requires careful review. The cost of inheritance advances can be high depending on the specifics of the offer. Working with a trust and estate lawyer can provide a better understanding of available options and likely outcomes.
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