A probate loan is a cash advance that is granted to the heirs of probated inheritance property. A probate loan is not a real thing. This term is used by heirs to transfer inheritance rights to a funding source for cash lump sums. After settlement fees and other expenses, cash advances are paid by an estate.
Private investors, investment groups and cash advance service providers can all be used as sources of probate mortgage funding. The advance is deducted from the upfront fee charged by funding sources. The fees can be anywhere from 10 to 50% of the inheritance value. When probated property is used as collateral, inheritance cash providers take on a significant risk.
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Probate can be a lengthy process that can take months or even years to complete. Over time, inheritance property can lose value and funding sources may not offer the full value. A probate judge can order the sale of inheritance property if an estate cannot pay its estate debts. This leaves cash available for inheritance providers at risk for non-payment.
Probate loans are often the last debt that is paid in an estate settlement. Funding sources are limited in their legal rights if the estate is financially unable to pay the debt. Even if the estate is able to repay the advance, funding sources will need to wait until the estate settles before they can offer compensation.
In order to obtain probate funding, heirs must provide documents and information regarding their expected inheritance. Investors will usually need an original copy of the last will and testament of the deceased, as well as contact information for the estate administrator. The court responsible for the case must validate the inheritance and estate information.