Do Banks Do Inheritance Loans? Here Are Your Alternatives

When an individual passes away, their assets undergo probate before distribution to heirs. This process can take months or years, leading beneficiaries to need funds sooner. Traditional banks generally do not offer financial products specifically termed or structured as inheritance loans or advances.

Nature of Inheritance Funding

What is often referred to as an “inheritance loan” is typically an inheritance advance or probate advance. This financial arrangement allows heirs to receive a portion of their expected inheritance before the probate process concludes. Unlike conventional loans, an inheritance advance is not based on the heir’s credit score, income, or employment history. Instead, the advance is secured by the heir’s claim to the assets within a probated estate.

The repayment of an inheritance advance is tied directly to the distribution of the estate’s assets, not to the individual heir’s personal finances. Heirs do not make monthly payments, nor do they assume personal liability for the advance. If the estate distributes less than anticipated, the funding company typically absorbs that shortfall, as the transaction is non-recourse. This distinct structure differentiates it from a traditional loan where personal repayment obligations and interest accrue.

Providers of Inheritance Advances

Traditional banking institutions do not offer inheritance advances. Their lending models are designed for conventional loans based on a borrower’s creditworthiness and ability to make regular payments. The specialized nature of inheritance funding, an advance against future estate distributions, does not align with typical bank offerings.

Instead, specialized financial companies focus on providing these inheritance advances. Their business model involves purchasing a portion of an heir’s future inheritance, rather than issuing a loan. This arrangement suits the specific needs of heirs who require liquidity while an estate is undergoing probate. These companies manage the complexities of estate law and the probate process, recovering their advance directly from the estate when it eventually distributes the assets.

Requirements for Obtaining an Advance

Before applying for an inheritance advance, an heir needs to gather specific information and documentation to establish their claim and the estate’s viability. This includes details about the deceased individual, such as their full legal name and date of death. Information concerning the estate itself is also necessary, including its estimated value and any known debts or liabilities.

Key documents commonly required include the death certificate of the decedent and a copy of the last will and testament, if one exists. Probate court documents, such as the petition for probate and letters testamentary or letters of administration, are essential, as they verify the legal initiation of the probate process and the appointment of the estate’s personal representative. Proof of the applicant’s identity, often a valid photo ID, and documentation confirming their status as a legitimate heir or beneficiary are also standard requirements.

The Application and Funding Process

Once an heir has gathered necessary information and documents, the application process for an inheritance advance begins by contacting a specialized provider. Many providers offer an online application or a phone consultation to initiate the request. After initial contact, the heir submits the prepared documentation, which can be done electronically through an online portal, email, or fax.

The provider then reviews the submitted materials to verify the heir’s entitlement and assess the estate’s assets and liabilities. This review process can take a few days, though some providers offer underwriting within 24 hours. Upon approval, the heir and the funding company sign an agreement outlining the terms of the advance, including the amount and any associated fees. Funds are then disbursed, often within a few business days, directly to the heir’s bank account.