Probate Advances vs. Probate Loans: What You Need to Know

Losing a loved one is already a difficult experience, and the probate process can add additional stress. Probate is the legal process where the deceased’s assets are distributed to heirs, debts are settled, and the validity of the will is confirmed. Unfortunately, probate can take months or even years to complete, leaving heirs waiting for their inheritance. If you’re in need of cash before probate is finalized, probate advances and probate loans might seem like a solution. But while these two options sound similar, they are quite different.

What is Probate?

Probate is the legal process in which a court oversees the distribution of a deceased person’s estate. It ensures that the deceased’s debts are paid off, and remaining assets are distributed according to the will (or state law if there is no will). This process can take a long time—sometimes months or years—before heirs actually receive their inheritance.

Since heirs have to wait for the probate process to conclude, they may face financial difficulties if they need that inheritance sooner.

What is a Probate Advance?

A probate advance (also called an inheritance advance) allows heirs to access part of their inheritance before probate is finished. This is not a loan, meaning there’s no repayment requirement if the estate takes longer to settle or is smaller than expected.

Here’s how it works:

1. A company reviews the expected value of your inheritance.
2. They offer you a portion of that inheritance upfront, typically 10% to 50%.
3. When probate is complete, the company takes their share directly from the estate.

With a probate advance, you are not personally responsible for repayment. Instead, the company collects its portion from your inheritance once probate is finished.

Benefits of Probate Advances:

• No repayment required if the estate is delayed or smaller than expected
• Fast access to cash, often within a few days
• No credit checks or interest charges

Things to Consider:

• High fees, sometimes comparable to steep interest rates
• Your inheritance amount will be reduced due to fees
• Terms and conditions vary by state; some states may require court approval

What is a Probate Loan?

A probate loan works like a traditional loan, where you borrow money based on the value of your expected inheritance. Unlike a probate advance, a probate loan requires repayment—you are responsible for paying it back, even if the estate takes longer to settle or is worth less than anticipated.

Here’s how it works:

1. A lender assesses the expected value of your inheritance.
2. They offer you a loan based on that inheritance.
3. You repay the loan, plus interest, over time.

Benefits of Probate Loans:

• You may be able to borrow a larger sum than with a probate advance
• Ideal for people with good credit who can manage loan repayments

Things to Consider:

• You are personally responsible for repaying the loan with interest, regardless of the timing of probate
• Credit checks and loan approval are typically required
• If the estate is smaller than expected, you may end up in debt

Key Differences Between Probate Advances and Probate Loans

Pros and Cons of Probate Advances

Pros:

• No personal repayment obligation if the estate is delayed or smaller
• Quick approval and disbursement (often within days)
• No credit checks or traditional interest
• No monthly payments or traditional debt

Cons:

• Fees can be very high, sometimes similar to high-interest rates
• Your inheritance will be reduced due to the company’s fees
• Terms and consumer protections vary by state, and court approval may be required in some states
• Potential for predatory practices by some companies

Pros and Cons of Probate Loans

Pros:

• Potential for a larger loan amount than with a probate advance
• Great option for those with good credit who can handle monthly payments

Cons:

• You must repay the loan with interest, even if the probate process takes longer than expected
• If the estate is smaller than expected, you could still end up in debt
• Credit checks and approval are required
• Monthly payments and interest rates apply

Legal Considerations

The laws surrounding probate advances and probate loans differ from state to state. Some states, like California, regulate probate advances to protect consumers from high fees and predatory practices. Before proceeding, it's essential to check if your state has specific laws regarding these financial products.

Additionally, probate advances can carry significant fees, so it’s important to read all terms carefully and seek legal advice if you’re unsure about the details of the agreement.

Which Option is Right for You?

Choosing between a probate advance and a probate loan depends on your financial situation and what you’re looking for.

Go for a probate advance if:

• You need quick access to funds without worrying about repayment
• You don’t want to deal with credit checks or monthly payments
• You’re okay with accepting a smaller inheritance because of high fees

Go for a probate loan if:

• You have strong credit and can manage loan repayment
• You need a larger sum of money
• You don’t mind paying interest and dealing with the loan approval process

Are Probate Advances Safe?

Probate advances are generally safe as long as you’re working with a reputable company and fully understand the terms. Since they aren’t loans, you don’t have to worry about personal repayment obligations if the estate is delayed or smaller than expected. However, high fees could reduce your inheritance, so be careful and consider all options before moving forward.

How to Get a Probate Advance

The process for obtaining a probate advance is usually straightforward and fast:

1. Apply Online: Complete a form with details about the estate and expected inheritance.
2. Provide Documents: You may need to submit documents like the will, death certificate, or probate paperwork.
3. Get an Offer: The company will evaluate your case and offer you a specific amount.
4. Receive Funds: If you accept the offer, you could have the money in hand within a few days.

Since probate advances are based on your inheritance, you don’t need to worry about credit scores, employment, or collateral.

Final Thoughts

The probate process can be long, and if you need access to funds sooner, both probate advances and probate loans can help. However, they work in very different ways. A probate advance may be a better option if you need quick access to funds and don’t want to worry about repaying the money. On the other hand, a probate loan might be ideal if you have good credit and can manage a loan with interest.

Make sure you understand the terms, ask plenty of questions, and consult with a legal or financial advisor before making a decision.

If you're unsure about probate or inheritance planning, reach out to a professional for guidance on the best course of action.