If you are a beneficiary to an estate in Phoenix, you will typically have to wait months and sometimes years to receive your inheritance. For some individuals, this is too long. Inheritance loans are a tool that can give you access to a portion of this cash before probate is over.
Inheritance loans come with risks and are often not worth the advance in payment. Before you get an inheritance loan, you should speak to a Phoenix probate attorney to determine if it is the right fit for you.
What Are Inheritance Loans?
Inheritance loans are sometimes referred to as estate loans, probate loans, or inheritance advances. It is a loan that uses your inheritance as collateral. You receive an immediate payout for a fee and/or interest payments. Typically, you would receive less than your inheritance amount, and the difference would make up the fees.
For example, if your inheritance amounted to $15,000 and the lender charged a 20% fee, the lender would immediately pay you $12,000. After the estate closed and the inheritance was paid out, the lender would collect the total $15,000 you were initially going to receive.
Typically, traditional lenders do not offer inheritance loans in Phoenix. Instead, there are companies that specialize in these types of loans. The lender will evaluate the estate and determine how much you stand to inherit. It will not consider your credit, employment, or income history when deciding if you qualify.
When Should You Consider Getting an Inheritance Loan in Phoenix?
Below are some of the reasons why a person would consider getting an inheritance loan in Phoenix.
- You need immediate funds to cover the cost of the estate. Expenses can build up during probate, including funeral costs, legal fees, taxes, and costs to maintain and repair properties.
- You need to pay off personal debts. You may want access to the inheritance to pay off medical bills, credit cards, or other loans.
- You are dividing interest in real estate between beneficiaries. If one heir wants to keep a piece of real property, while the other heir wants cash, you can use an inheritance loan to get the liquidity needed to divide the interest in the property.
- You need the money for daily living expenses. If you are unemployed or otherwise cannot wait until the probate process is complete, inheritance loans can give you access to immediate cash.
What are the Risks of Inheritance Loans in Phoenix?
There are multiple reasons why you should steer clear of inheritance loans, even if you are in one of the situations described above. Below are some of the risks associated with getting an inheritance loan in Phoenix.
- They come with high fees and interest rates. Fees can range from ten to forty percent of your total inheritance value. By taking the immediate cash, you may end up in an even worse financial position than before you received your inheritance, especially if the estate moves through probate quickly.
- There are complex legal issues that must be considered. You need to speak to an attorney to confirm that you are legally allowed to transfer the right to your inheritance or take out funding against it.
- You must be aware of predatory lending. Inheritance lending is a relatively new industry and is not highly regulated. Some companies take this as an opportunity to prey on individuals with little understanding of estate law and probate.
What Are Alternative Options to an Inheritance Loan in Phoenix?
There are other options available if you need access to money while waiting for your inheritance. You do not have to rely solely on inheritance loans.
- In Arizona, surviving spouses and minor children who were dependent on the deceased are entitled to a reasonable allowance paid out of the estate during its administration. This allowance can be paid either in a lump sum or in installments. The allowance has priority over all claims except estate administration expenses.
- Typically, personal loans will have lower interest rates than inheritance loans. There is also the option to pay the personal loan off early after you receive your inheritance.
Your Phoenix Probate Attorney
If you have questions about inheritance loans and would like to speak to a probate and estate planning lawyer, call Nicole Pavlik Law Firm. Nicole Pavlik is an experienced Phoenix estate planning attorney who can guide you through the probate process. Call Nicole Pavlik Law Firm today at 602-635-6176 to schedule a free consultation and discuss your probate needs.