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Estate financing allows heirs to receive an advance on their inheritance from a financing company, which deducts a fee and recovers its investment from the testamentary share due to the heir. Trust beneficiaries may also be eligible. It is not a loan, and the heir is not liable for unknown creditors or complications in the succession.
Estate financing describes a contractual arrangement whereby a financing company advances an heir a percentage of the money the heir is expected to receive in a will. The lender company charges a fee for this service. Once the deceased’s estate has been paid into probate, the finance company takes its share of the heir’s testamentary share and returns the remaining money less the advance to the heir.
An heir is anyone who inherits a deceased person’s property or money through a will. Any heir to a probationary will, which is the judicial process of certifying a will, can contract with a finance company for an advance on his or her inheritance. Generally, most of such companies require a minimum inheritance in the range of ten thousand dollars or more. There are no jurisdictional requirements for the purposes of estate financing. The will can be approved in any state in the United States. The fees are based on the size of the estate and the length of time the estate can remain in the estate
Financing an estate is not a loan transaction. The lender company is buying the prospective heir’s estate at a discounted rate. There are no interest charges while the company awaits the conclusion of the succession and the disbursement of the heir’s estate. However, some companies may charge additional fees for processing and evaluating the heir application, but usually these fees are deducted from the initial down payment. The financing company recovers its investment by deducting the contractual amount from the testamentary share due to the heir before disbursing any remaining amount to the heir.
In an inheritance finance agreement, the heir is not liable to the financing company if unknown creditors interfere with the heir’s inheritance or the succession becomes more complex or lengthy than anticipated. It is the length of time a will can remain on probation that sometimes prompts an heir to ask for an advance on the estate. The company must absorb any losses associated with the estate, unless the heir has withheld information about matters that adversely affect the estate.
Beneficiaries of certain types of trusts may be able to use estate funds. Trusts generally protect a person’s assets from bankruptcy and dissolution of marriage. Trusts used for estate planning purposes specify which assets will be received by a trust beneficiary upon the death of the grantor. A trust created in anticipation of death but not included in a will avoids the probate process, but still releases the intended assets after the grantor’s death.
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