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Inheritance Loans

Inheritance loans aren't really loans at all. Instead, they are cash advances available to beneficiaries entitled to assets held in probate. Probate is the process used to determine the validity of a decedent's Last Will and Testament and proper distribution of financial holdings and personal belonging.

In order to qualify for inheritance loans, beneficiaries must be entitled to at least $15,000. There are two primary inheritance cash funding sources: inheritance lending companies and private investors.

Both types of funding sources charge a fee for providing cash for inheritance advances. Fees range from 10- to 40-percent of the borrowed amount and is usually deducted from the disbursement check. Once probate settles, the estate reimburses the funding source.

Reputable funding sources require substantial documentation about the estate and the beneficiary. For obvious reasons, the funding source will want to verify estate funds to ensure they will be repaid. Therefore, the beneficiary will need to provide a copy of the decedent's Will and death certificate, along with information regarding the estate.

Most funding sources require the name and contact information for the Estate Administrator and probate attorney, along with a copy of the Petition for Probate and Inventory and Appraisement statement. If the decedent owned real estate which will be used as collateral for the inheritance loan, the funding source generally requires a copy of the listing agreement or sales contract.

Beneficiaries will be required to provide a current credit report or authorize the funding source to obtain one on their behalf. The credit report is necessary in determining if heirs have outstanding tax or creditor liens, bankruptcy proceedings or delinquent child support which could interfere with repayment of the cash advance.

It is important to realize the funding source carries significant risk in providing inheritance loans. In the event the estate lacks funds to repay the advance inheritance, the funding source cannot take legal action against heirs who obtain advance funds. The exception to this rule is if the funding source can prove the heir provided false information about the estate.

While it can be tempting to obtain an inheritance loans, it is important to weigh the pros and cons of this type of transaction. If the estate can be settled within a short period of time, beneficiaries might want to look at other options.

Beneficiaries who obtain inheritance loans are required to assign their inheritance rights to the funding source. Therefore, it is crucial to engage in due diligence to ensure the funding source is reputable and in good standing with the Better Business Bureau.

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Published on December 09, 2008 at 02:15 AM

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