If someone leaves you money in their will but you don’t want to wait until probate is over to claim it, you might consider getting an inheritance advance. An estate advance allows you to receive the money intended for you in exchange for compensation. How much does an estate advance cost? How much you’ll pay to access an early inheritance may depend on the advance company you work with.
Talking to your financial advisor can help you decide if it makes sense to take an advance on your inheritance.
Understanding estate advances
An estate advance is an advance on money that you can inherit from someone else. When someone dies, they can leave you money or other property in a will. This will is then submitted for probate, which is a legal process in which assets are inventoried, unpaid debts are paid, and inheritances are distributed to heirs.
This is all handled by the executor, and depending on the size of the estate, probate can take months or even years. If someone decides to challenge the terms of the deceased person’s will, this can prolong probate even further. An estate advance allows you to bypass all this and get your inheritance sooner.
How does an estate advance work?
Inheritance advances work by allowing you to get some of the money allocated to you in a will before probate is complete. The exact process can vary from company to company, but generally it works like this.
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You tell the company in advance how much you can inherit.
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The advance company verifies the amount and offers you a percentage of the inheritance up front, in exchange for a fee.
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If you accept the amount, the money is paid to you.
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When the probate is finalized, the advance company collects its fees and any remaining inheritance funds are returned to you.
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An estate advance is not the same as a probate loan. With a probate loan, you borrow money for a future inheritance, which you must repay to a lender with interest. There is usually a credit check and you may need to make payments while probate is pending.
With an inheritance advance, the advance company pays you money and gets a share of the inheritance for their services. No credit check is required and funding can be disbursed within days once your application is approved. When probate ends, any money left over after the advance company is paid to you and you don’t have to repay anything.
How much does an estate advance cost?
The cost of an estate advance will depend on the company you are working with. A typical fee structure is to pay a percentage of the inheritance to the company upfront which can range from 10% to 50%. Again, this money comes directly from the inheritance itself, rather than out of your pocket.
Here is an example of how an inheritance advance can work and what it can cost. Say you are going to inherit $100,000 from a distant relative and it will take six months for probate to finish. You need $30,000 right now to fund a major home improvement project.
You go to an estate advance company which agrees to pay you 30% of your inheritance, or $30,000, in cash. Meanwhile, the advance company wants 40% of the inheritance. You agree and get the money.
Six months later, when probate ends, the advance company is able to collect $40,000, its share of the inheritance. During this time, you get the remaining $30,000 for a total inheritance of $60,000.
Is an inheritance advance worth it?
Getting an inheritance advance can be worth it if you need money fast and don’t want to take out a loan. Again, there are no credit check requirements for inheritance advances and nothing to repay since you are not borrowing anything. You only receive part of the money you will inherit earlier.
Of course, you’re making a trade-off since you don’t get the full inheritance at the end of the day. The advanced business will want their cut, which again can be anywhere from 10% to 50% of what you will inherit.
What you need to decide is how much the convenience of getting an inheritance loan will earn you. If you need money for something critical, like a life-saving operation or medical treatment that insurance won’t cover, for example, then give up some of your inheritance money to get money right now might be a no-brainer.
On the other hand, missing part of your inheritance may be the best decision if your need for money is less urgent. For example, if you need money to pay for home renovations, you could get a home equity loan instead. Once the inheritance is received, you can take part of it to repay the loan and you don’t have to pay high fees to a company upfront.
How to get an estate advance
If you want to get an inheritance advance, the first step is to find a company to work with. This is quite easy to do since you can search for estate advance companies online. Keep in mind that you generally won’t find estate advances offered by banks or traditional credit unions.
Once you have chosen a company in advance, you will need to provide them with inheritance information, including:
The advance company will check the amount of the inheritance and make you an offer. This offer should specify how much money you will be able to get upfront and what percentage of the inheritance will go to the company upfront.
If you are happy with the offer, you can sign the documents and wait for the advance company to deposit money into your bank account. Depending on the company, you may be able to get the funds the next business day.
The essential
How much does an estate advance cost? There is no simple answer as it may depend on how much you can inherit and which advanced company you decide to work with. A better question to ask might be how much you’re willing to pay to access your inheritance sooner. This can help you decide if a lead is right for you.
Estate planning tips
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Consider talking to your financial advisor about the pros and cons of an inheritance advance. Your advisor can also give you advice on how to manage a large inheritance and how it fits into your overall financial plan. Finding a financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to three vetted financial advisors who serve your area, and you can interview your advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.
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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 you borrow, but that can be much less than what an advance might cost. Keep in mind that a probate loan may take longer to be approved, so there may be a wait to get the money. You’ll also need a good credit rating to qualify for the lowest interest rates.
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