Probate loans are a great way to release equity from an inheritance or to divvy up a difficult segment of a property that has been left to multiple heirs. Probate loans are a staple of the inheritance game, but many people simply don’t understand how they work or why one might choose to utilize such an asset during the probate process.
Probate is the process by which a deceased person’s will is legally “proved” and subsequently executed. This process can be done with or without the help of a lawyer or other legal professional, but typically only in the simplest of cases. A probate case is made more complex when there are a number of beneficiaries, or when the assets to be allocated are sprawling or difficult to appraise — sometimes the probate process involves a mixture of these hang-ups.
Why use a probate loan?
A probate loan, or inheritance loan, is something that beneficiaries use in order to accomplish many ends. Primarily, these loans are used in order to buy other heirs out of a property or to cover the costs of the probate process itself. This can take months or even years during a contested case, and during this time you, as a beneficiary won’t have access to the funds that were earmarked for you. While no one wants to think of their parents, grandparents, brothers, or sisters as a piggy bank, a prolonged probate settlement can really drain the assets left in the will or your own personal savings account. A probate loan helps your cash flow during this period by floating you the money you need to pay these and other expenses.
Similarly, probate loans are used when an estate is divided up evenly among multiple heirs, and one wants to keep the family home rather than selling it for the cash value. Your home is often your most valuable possession, so there may not be enough additional equity in the estate to divide the remainder equally after allocating the home to one sibling. By borrowing against the value of the home, one sibling can essentially mortgage the home in order to buy the others’ share of the property in order to maintain the equitability of the will’s directives. Lenders are often happy to supply loans for this purpose because the home can be leveraged as collateral rather than falling back on reliance on creditworthiness.
A probate loan can be used for other expenses as well, however. You can borrow against the value of assets that you anticipate future ownership over in order to pay for anything that you have in mind. Many homeowners utilize this funding stream in order to engage in renovation projects on their own homes.
Sarasota Florida pool builders, for example, are a great place for you to funnel this capital. Building a pool onto your home, especially in Florida — the Sunshine State — can greatly increase the value of your home. As well, the addition of a pool provides endless fun for those long summer days. Installing a pool during the winter months will give you access to this water feature for the duration of the coming summer and can be financed through the use of a probate loan in order to defer the cost of construction and save you from dipping into your current cash flow or savings account.
When we are made heirs to an estate, our loved ones want us to have their possessions in order to enrich our own lives. Taking advantage of the windfall is what your loved one would have wanted, so gaining some fun out of their gift to you is the perfect way to honor their memory.