All Probate/Inheritance Loans are not the same

It’s not uncommon that when a person unfortunately dies there’s often little to no cash in the Estate bank account and the only major Estate asset is the Decedent’s house that their Beneficiaries will inherit.

If the property was not held in Trust or owned in Joint Tenancy, then the Beneficiaries of the Descendant will need to go to court and most likely will need an Attorney.

Often the Beneficiaries are not able to “Finance” the Probating of the court matter, and since funds will be needed for court costs, legal fees and related Estate Expenses, then a “Probate/Inheritance Loan” just might be the solution.

The “2” main types of Probate/Inheritance Loans are:

Secured

  • This is a loan made to the Executor or Administrator of an Estate that owns real estate that has sufficient equity to obtain a secured real estate loan.
  • Secured Probate Real Estate Loans are only funded by Private Investors, since all the Big Banks and every other Institutional Lenders don’t lend to Probate Estates.
  • The only source available are Private Equity Loans, often referred to as Hard Money Loans.  While the interest rates and costs are higher than the Big Banks, they are the very best option for when Probate funds are needed.

 The “2” Main types of “Authority” contained in the Letters of Testamentary issued by the Probate Court to either Executors or Administrators are:

            Full Authority

 Allows the Executor or the Administrator to borrow on behalf of the Estate without prior court approval.

            Limited Authority

Executors and Administrators who have Limited Authority MUST schedule a court hearing and further present to the Probate Court the requested loan, the reason for the loan and the use of the funds.  In addition, any “Other” Beneficiary has the opportunity to contest the “Proposed Action” from the Executor or the Administrator.

Unsecured

  • This is a loan made to the Executor, Administrator or Beneficiary of an Estate where no real estate is owned, or if owned, where there’s not enough equity to obtain a secured real estate loan.
  • An Unsecured Probate Loan often referred to an “Inheritance Loan” is made against the future anticipated inheritance to a Beneficiary.  In some cases, this type of loan is easier to obtain, since no real estate is needed, but the drawbacks are  typically smaller loan amounts, and sky-high Interest Rates.  Many Inheritance lending companies charge over 100% annual interest.

It’s our opinion that an Unsecured Inheritance Loan should never be considered, since the costs almost always exceeds the benefits. 

A secured Real Estate loan is structured very much like all other types of real estate loans, but is simply made to a Probate Estate, and is signed by the Executor or the Administrator.  The loans all have normal scheduled monthly payments and a fixed interest that typically range from 8% to 10%.

We’ve kept things short, since we’re all busy, but if more detailed information is desired, then please feel free to contact our office, and we’ll be happy to send out additional information.

If anyone would like to make a comment on this Blog Post, then please do so, and if there’s a need for funds from a current Probate matter, then please give our office a call at (888) 797-7970 and we’ll do our very best to arrange the needed funds.

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