What is an Inheritance Advance and how does it work?
* Disclaimer: This is not intended to be financial advice. Always seek professional support and guidance that is specific to your needs and situation.
An Inheritance Advance is a type of loan where you borrow money against the expected inheritance you’re due to receive later in life.
If funds are needed for an emergency or to help support a new venture then accessing these funds before they become entitled to them.
Like anything money related there are lots of benefits to an advance such as this but there are also a few things to be aware of. Here, we’ll break all that down as well as show you a typical process for obtaining an advance.
Table of Contents
1. Understanding Inheritance Advances
An Inheritance Advance is very easy to understand and its benefits become apparent quite quickly. Essentially, you’re just receiving part of a lump sum that you would have earned/inherited anyway, it’s just you’re getting it earlier.
People in the UK can access a portion of what they stand to inherit early through an inheritance loan. Eligible applicants can access up to 60% of their inheritance with often no upper limit.
These advances can often be accessed before the probate process concludes (hence why you might often hear them called probate loans) which makes them very appealing for people who require a lump sum in a relatively short space of time. As we’ll discuss later there can be costs involved from lenders which may give pause for thought.
2. What is the process of obtaining one?
Once you’ve understood what they are, and the implications of getting one on future inheritance the process can often be very straightforward.
First you need to find a lender that can help attain this advance for, take your time finding the right one for you. Assess terms and conditions, as well as fees and potential interest rates.
Then, gather up documentation such as the death certificate, a will (if that is needed), confirmation of assets and liabilities, and proof that you are who you say you are. Once your application is complete a lender will assess the value of the estate to determine the loan amount.
Once approved, applicants often receive the money in their account in just a few working days.
3. Some of the costs and considerations involved
Because you are entitled to this money, the costs involved aren’t to do with monthly repayments where you end up paying back more than you borrowed but over a longer period of time. No, instead the main cost consideration comes from rates which are charged by lenders. These rates are small but if you’re borrowing a lot of money, it can add up.
These rates are essentially the cost of unlocking that inheritance before the allotted time. These rates may provide pause for thought or consideration for other ways to access funds such as estate loans.
4. The eligibility criteria for an Inheritance Advance
For people to access portions of their inheritance they need to first prove that they indeed are inline to inherit funds. This can be proved through the deceased’s will, for instance. In addition the estate must be going through the probate process and a professional firm often needs to be involved in helping to settle the advance with the person applying for it.
The benefits of this advance are that there are no monthly repayments and the money is not secured against your assets meaning the criteria is very open.
5. The pros and cons of Inheritance Advances
Finally, then, let’s break all this down into pros and cons.
The pros are clear – the ability to access large portions of money quickly and with little risk against your personal financial situation. It can also be done quite quickly, provided documentation is submitted applicants can receive money in just a few days. There may also be scenarios where inheritances are not subject to taxes.
One drawback is that you may not receive a substantial amount when the inheritance is finally divided out, causing you to lose out. Another is the fees you’ll be charged, meaning a portion of what you stand to inherit will go to a business.
Fast access to money that you’re set to inherit
If you need access to capital to fulfil an ambition, build a business, or battle one of life’s many curveballs, an Inheritance Advance may be the answer.