Taking an inheritance advance is something you might consider if you expect to receive money from an estate, but don’t want to wait for probate to conclude. An inheritance advance, also called a probate advance or probate cash advance, allows you to receive a lump sum of money upfront.
In exchange, you agree to allow the advance company to purchase part of the inheritance. An inheritance advance can put money in your hands quickly, but there are some drawbacks to keep in mind. We will go over the details.
Talking to your financial advisor can help you create a plan for managing an inheritance.
Understanding Inheritance Advances
An inheritance advance is an advance against assets you stand to inherit. It’s similar to a payday advance loan in that you’re getting access to money now that you would otherwise have to wait until later to receive.
An inheritance advance is not a loan since you don’t pay anything back to the lender directly. Instead, you’re allowing the advance company to make a claim against part of the inherited assets you expect to receive. Once probate ends, the estate can pay out the agreed-upon amount to the advance company and forward any remaining assets to you.
Here’s an example of how an inheritance advance might work. Let’s say that your parents leave you $100,000 in their will when they pass away. After probate fees and expenses are paid, you expect to inherit $90,000. But you need $25,000 right now to pay for your child’s college tuition expenses.
You decide to work with an inheritance advance company that requests to purchase 30% of the inheritance or $27,000. In the meantime, the company agrees to pay the $25,000 you need to you in a lump sum. Once probate ends, the advance company collects the $27,000 it purchased and the $25,000 that was advanced to you from the estate, along with its fee. The remaining inheritance money would then be paid out to you.
Benefits of Inheritance Advances
There are several advantages associated with inheritance advances, starting with fast and convenient access to cash. While a probate loan may take several days or weeks to get approved and funded, it may be possible to get an inheritance advance in as little as 24 hours after approval.
Inheritance advances typically don’t require any credit checks, which could make them a good option for borrowers with poor credit. You won’t pay interest on an advance, though again, the lender can charge a flat fee.
An inheritance advance is a flexible way to borrow since you can use the money to cover just about any type of expense. You don’t have to offer any collateral for the advance.
And you don’t have to worry about making payments either since the advance company collects the amount owed to it directly from the estate.
Drawbacks of Inheritance Advances
Taking an advance against an inheritance can have some downsides. And they may not be right for everyone. The obvious drawback is you’re sacrificing part of your inheritance for the convenience of being able to get cash today.
Going back to the previous example, you’d have to consider carefully whether handing over $27,000 plus fees to the advance company is worth getting the $25,000 you need now to pay for education expenses. You might find that another funding option may be preferable.
For instance, taking out a Parent PLUS loan or even a private student loan might be a better alternative. Or you might decide to get a home equity loan instead if you’re comfortable using your home as collateral.
When to Consider an Inheritance Advance
The best time to consider an inheritance advance is when you need money and you’re certain that an inheritance is coming your way. Inheritance advance companies may not advance money to you if there are any doubts about how much you’ll receive or whether you’ll inherit from someone at all.
You might get an advance against your inheritance if you need money urgently and you’ve considered all other borrowing options. Other possibilities for borrowing can include home equity loans, a home equity line of credit or a personal loan. For smaller expenses, you might consider a credit card instead.
If you’re considering an inheritance advance, it can be helpful to estimate how much money you’ll need. You can then shop around to compare inheritance advance companies to see what you might be able to get upfront. Talking to a financial advisor can help you weigh the pros and cons if you’re on the fence about whether an advance is the right move.
How to Get an Inheritance Advance
To get an inheritance advance, you’ll first need to find a company that offers them. You can search online for inheritance advance companies, as this type of funding usually isn’t available at banks or credit unions.
Next, you can look at the advance company’s requirements to see if you’re eligible for an advance. If you’re not sure whether you qualify, you can contact the company for a consultation. If you are eligible, you’ll need to share some details about the inheritance and provide certain documents, including:
- Copy of the death certificate
- Copy of the will if one is available to you
- Probate petition and letters of administration
- Valid ID
You’ll also need to give the advance company the name of the executor or trustee who’s handling the estate settlement. You won’t need to provide information about your income or credit scores.
Once the inheritance advance company has everything it needs, it will review your case and make an advance offer. If you accept the offer, the inheritance advance company will pay the money to you, sometimes as quickly as 24 hours later.
Choosing the Right Inheritance Advance Company
An internet search will turn up a number of results for inheritance advance companies, like inheritancefunding.com for example. But it’s important to find the right one to work with. When comparing inheritance advance options, it’s helpful to consider:
- How much you can get from an advance
- What percentage the advance company purchases
- Any fees you might pay and when those are due
- Funding speed
It’s also important to look at the company’s overall reputation. Reading customer testimonials and online reviews can give you a better idea of how easy an inheritance advance company is to work with and how satisfied its customers are.
Bottom Line
An inheritance advance can provide financial relief if you expect to inherit money. But time is of the essence. Taking an advance against inherited money does come at a cost, which is important to remember. Looking at all of the pros and cons, and considering other funding options, can help you decide whether an advance makes sense for you.
Estate Planning Tips
- Planning out your entire estate can seem overwhelming and difficult. But a financial advisor who specializes in estate planning can help. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you have a sizable estate, estate taxes on either the state or federal level could be hefty. However, you can easily plan ahead for taxes to maximize your loved ones’ inheritances. For example, you can gift portions of your estate in advance to heirs, or even set up a trust.
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