Receive an Inheritance Advance with Inheritance Loans
The assets from an estate cannot be distributed to heirs until after the probate process is completed. Probate can last anywhere from 6 months to 3 years. During this lengthy process, heirs may find themselves in a situation in which they need to borrow against the estate property and receive an inheritance advance. Probate loans or inheritance loans allow an heir to borrow against property in their inheritance until the probate can be settled.
Estate Loans to Satisfy Estate Obligations
During the probate process, the heirs may need funds to take care of numerous financial obligations related to the estate such as paying for funeral costs, legal expenses, settling debts or claims on the estate, making repairs to properties or buying out or paying off other heirs. An estate loan with a hard money lender allows the heir to quickly receive funds borrowed against property from the estate and satisfy various immediate obligations of the estate.
Estate Loan Example
One common example of an estate loan is when heirs are left with a property as an inheritance. Often times, one or more of the children are the successor trustees of the trust created by the parents and the parents are now deceased. One heir may wish to maintain ownership of the property while another heir wants cash in exchange for their interest in the property.
A trust can take out a short-term hard money trust loan against a property with the loan proceeds going towards satisfying one of the heir’s interest and the property can subsequently be deeded to the other heir. There may be favorable tax and property tax benefits when property passes from a parent to a child so a tax professional or attorney should be consulted.
The goal of this type of favorable tax transaction is to have the property pass from the parent’s trust to a child (while paying off one or more beneficiary’s interest) in such a way that does not cause a reassessment of the property value. Maintaining the existing tax assessment value may save the child thousands of dollars each year in the form of lower property taxes. This yearly savings makes the trust loan an excellent investment. (Note: Current California regulations may allow a reassessment exemption when property is transferred from a parent to a child or grandchild. Regulations in other states may vary.)
Trust Loan Example
If a trust distributes to two children (trust beneficiaries) and then one of the children acquires the other 50% ownership from the sibling, the property can be reassessed (at least to the 50% interest being acquired) since the transfer from one sibling to another is not exempt. However, if a trust loan is made to the trust and one sibling receives cash while the other sibling receives the property (100%) from the parent’s trust, then the transfer should be seen as exempt (transfer from parent to child).
Some hard money lender is able to make the loan to the trust and then make an exception to allow one of trust beneficiaries to assume the loan. Once the title is transferred to the heir receiving the property, the owner can then refinance to a less expensive conventional loan.
Loans to Trusts, Estates, Probate Not Available from Conventional Lenders
Conventional lenders such as banks and credit unions are generally unable to provide estate, probate, inheritance or trust loans, but some hard money lenders are able to lend against the real estate contained in the estate. Conventional lenders generally do not allow assumption of their loans while a hard money lender may have the flexibility to allow the assumption.
Reverse Mortgage Refinancing for Heirs
North Coast Financial is also also to provide reverse mortgage refinancing to heirs who wish to maintain ownership of a inherited property that had been secured by a reverse mortgage. Conventional lenders will not refinance reverse mortgages for heirs but hard money lenders can provide this type of funding. A loan can be made to the estate which can then be assumed by the heirs. This allows for the heirs to maintain ownership of the property, have the title of the property transfer into the heir’s name and prevent a reassessment of the property value which can save thousands of dollars in property taxes each year (consult a tax professional or attorney).
Contact North Coast Financial now and get your estate loan funded quickly.