If someone leaves you money in their will but you don’t want to wait until probate ends to claim it, you might consider getting an inheritance advance. An advance against an inheritance allows you to collect money that’s set to come to you in exchange for a fee. How much does an inheritance advance cost? The amount you’ll pay to access an inheritance early can depend on which advance company you’re working with.
Talking to your financial advisor can help you decide if taking an advance against your inheritance makes sense.
Understanding Inheritance Advances
An inheritance advance is an advance against money that you stand to inherit from someone else. When someone passes away, they can leave money or other assets to you in a will. That will is then subject to probate, which is a legal process in which assets are inventoried, outstanding debts are paid, and inheritances are distributed to heirs.
All of that is handled by the executor of the will and depending on the size of the estate, probate can take months or even years to complete. Should someone decide to contest the terms of the deceased person’s will, that can drag the probate out even longer. An inheritance advance allows you to bypass all of that and get your inheritance sooner.
How Does an Inheritance Advance Work?
Inheritance advances work by allowing you to get some of the money that’s been earmarked for you in a will before probate ends. The exact process can vary from company to company but generally, it works like this.
- You tell the advance company how much you stand to inherit.
- The advance company verifies the amount and offers you a percentage of the inheritance up front, in exchange for a fee.
- If you agree to the amount, cash is paid out to you.
- When probate is finalized, the advance company collects its fee and any remaining inheritance funds are turned over to you.
An inheritance advance is not the same as a probate loan. With a probate loan, you’re borrowing money against a future inheritance, which you must pay back to a lender with interest. There’s usually a credit check involved, and you may need to make payments while probate is ongoing.
With an inheritance advance, the advance company pays money to you and gets a cut of the inheritance for their services. There are no credit checks required and funding can be delivered in a matter of days once you’re approved. When probate ends, any money that’s left after the advance company gets paid to you and there’s nothing you have to pay back.
How Much Does an Inheritance Advance Cost?
The cost of an inheritance advance will depend on the company that you’re working with. A typical fee structure involves paying a percentage of the inheritance to the advance company which can range from 10% to 50%. Again, this money comes directly out of the inheritance itself, rather than from your pocket.
Here’s an example of how an inheritance advance might work and what it can cost. Say that you’re going to inherit $100,000 from a distant relative and it’s going to take six months for probate to wrap up. You need $30,000 right now to fund a major home renovation project.
You approach an inheritance advance company that agrees to give you 30% of your inheritance, or $30,000, in cash. Meanwhile, the advance company wants 40% of the inheritance. You agree and get the cash.
Six months later when probate ends, the advance company is able to collect $40,000, its share of the inheritance. You, meanwhile, get the remaining $30,000 for a total inheritance of $60,000.
Is an Inheritance Advance Worth It?
Getting an advance against an inheritance could be worth it if you need money fast and you don’t want to take out a loan. Again, there are no credit check requirements for inheritance advances and nothing to pay back since you’re not actually borrowing anything. You’re just getting a portion of the money you’ll inherit a little early.
Of course, you’re making a trade-off since you’re not getting the full inheritance at the end of the day. The advance company will want its cut, which again, may be anywhere from 10% to 50% of what you’ll inherit.
What you have to decide is how much the convenience of getting an inheritance advance is worth to you. If you need money for something critical, like a life-saving operation or medical treatment that insurance won’t cover, for instance, then forgoing some of your inheritance money to get cash right now could be a no-brainer.
On the other hand, missing out on a chunk of your inheritance may be the best move if your need for cash is less urgent. For example, if you need money to pay for home renovations then you might get a home equity loan instead. Once the inheritance comes through, you can take part of it to pay back the loan and you’re not stuck paying a high fee to an advance company.
How to Get an Inheritance Advance
If you’re interested in getting an advance against an inheritance, the first step is finding a company to work with. That’s fairly easy to do since you can search for inheritance advance companies online. Keep in mind that you typically won’t find inheritance advances offered by traditional banks or credit unions.
Once you choose an advance company, you’ll need to give them some information about the inheritance, including:
- The estimated amount
- The name of the executor who’s handling the estate
- A copy of the deceased person’s death certificate
The advance company will verify the amount of the inheritance and make you an offer. That offer should specify how much money you’ll be able to get up front and what percentage of the inheritance will go to the advance company.
If you’re satisfied with the offer, you can sign off on the paperwork and then wait for the advance company to deposit money to your bank account. Depending on the company, you might be able to get the funds as quickly as the next business day.
The Bottom Line
How much does an inheritance advance cost? There’s no simple answer, as it can depend on how much you stand to inherit and which advance company you decide to work with. A better question to ask might be how much you are willing to pay to access your inheritance early. That can help you to decide if an advance is right for you.
Estate Planning Tips
- Consider talking to your financial advisor about the pros and cons of an inheritance advance. Your advisor can also offer tips on how to manage a large inheritance and where it might fit in to your overall financial plan. Finding a financial advisor doesn’t have to be hard. 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.
- You might consider a probate loan instead of an inheritance advance if you don’t want to sacrifice fees to an advance company. With a probate loan, you’ll have to pay interest on the amount of your inheritance that you borrow but it may be much less than what an advance might cost. Keep in mind that a probate loan may take longer to get approved, so there might be a wait to get the cash. You’ll also need a good credit score to qualify for the lowest interest rates.
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