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By Simon Volkov
Heir advance can refer to two different methods of receiving cash through inheritance. The first method involves transferring property rights to a funding source in exchange for lump sum cash. This type of cash advance is not a loan and heirs are not responsible for repayment of advanced funds.
The second heir advance method involves receiving annuity payments through an irrevocable life insurance trust. Decedents establish estate planning protocol that gifts payments to heirs over several years or as a one-time lump sum payment. Heirs can sell future annuities in whole or part to a funding source. This type of transaction often requires court authorization.
Funding sources are usually private investors, but some cash advancing companies and lending institutions engage in this type of funding as well. Locating a source usually involves considerable research as this is a specialized niche.
Those who engage in this practice often require heirs to be entitled to assets valued at $5,000 or more. Heirs assign property rights to the funding source, but this does not guarantee the cash advance provider will receive the property.
Since funding sources are at risk for not receiving inheritance property used as collateral they assess fees for providing advanced funds. Fees usually range between 25- and 40-percent of the assets’ appraised value. When possible, heirs should comparison shop to obtain the best probate loan rate.
Distribution of inheritance property does not occur until estates undergo the entire probate process. It is not uncommon for assets to be suspended in probate for several months. In cases where heirs contest decedents’ last will or when third party claims are filed against the estate, probate can extend for years.
If decedents die without leaving a Will the probate process requires additional time. Courts must confirm an estate administrator to manage estate settlement proceedings. Rightful heirs must be identified to ensure appropriate distribution of assets according to state probate laws.
Estates without a valid Will are referred to intestate estates. Although probate law varies by state, inheritance property is most often distributed to the surviving spouse and direct lineage relatives such as siblings, parents, and children. Heirs entitled in intestate inheritance gifts often find it challenging to locate a funding source.
If the estate is comprised of real estate secured by a mortgage note the estate is required to remit installment payments to prevent foreclosure. The estate is also financially responsible for keeping homeowner’s insurance premiums and property taxes current. When estates do not have sufficient funds the court can order the property sold.
When decedents owe outstanding debts, but do not have sufficient funds to pay, the court can order property sold. This can be problematic if assets were used to secure an heir advance. Due to associated risks, funding sources require heirs to undergo an application process.
Cash advance applicants should be prepared to provide a copy of the decedent’s Will and death certificate; estate administrator or probate attorney contact information; and a current copy of their personal credit report.
Funding sources review credit reports to determine if applicants have pending bankruptcy petitions; child support or spousal alimony obligations; or outstanding liens or judgments. These obligations can interfere with property transfers when probate settles and often prevent heirs from obtaining cash advances.
Once inheritance advances are approved, funds are provided within 1 to 3 weeks. Cash advance recipients are not responsible for repayment of advanced funds should the estate be unable to transfer probate property upon estate settlement.
Funding sources are prohibited from pursuing the estate or heirs for restitution unless it can be proven that heirs provided untruthful information to obtain the heir advance.
About the Author: Simon Volkov is a private investor and probate liquidator who provides heir advance funding to qualified recipients. He specializes in buying probate real estate in SoCal, Nevada, Arizona, and Washington. Learn more about the process involved for obtaining inheritance funding at SimonVolkov.com.
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