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What is Inheritance Funding?

Pablo Garcia
Pablo Garcia

Inheritance funding describes a contractual arrangement whereby a funding company advances to an heir a percentage of the money the heir is expected to receive in a will. The funding company charges a fee for this service. Once the decedent’s estate is disbursed in probate, the funding company takes its fee from the heir’s share of the will and returns any remaining money less the advance to the heir.

An heir is anyone who inherits property or money of a deceased person through a will. Any heir of a will that is in probate, which is the judicial process of certifying a will, can contract with a funding company for an advance against her inheritance. Generally, most such companies require a minimum inheritance in the range of ten thousand dollars or more. There are no jurisdictional requirements for purposes of inheritance funding. The will can be in probate in any state in the US. Fees are based on the size of the inheritance and the length of time the estate may remain in probate

Trusts generally protect a person’s assets from dissolution of marriage.
Trusts generally protect a person’s assets from dissolution of marriage.

Inheritance funding is not a loan transaction. The funding company is buying the heir’s future inheritance at a discounted rate. There are no interest charges while the company waits for probate to conclude and the heir’s inheritance to be disbursed. However, some companies may charge additional fees for processing and evaluating the heir’s application, but usually these fees are deducted from the initial advance. The funding company recovers its investment by deducting its contractual fee from the heir’s share of the will before disbursing any amount remaining to the heir.

In an inheritance-funding contract, the heir is not responsible to the funding company if unknown creditors interfere with the heir’s inheritance or probate becomes more complex or lengthy than expected. It is the length of time that a will can remain in probate that sometimes prompts an heir to seek an advance against the inheritance. The company must absorb any losses associated with probate, unless the heir withheld information about matters adversely affecting the inheritance.

Beneficiaries of certain kinds of trusts may be able to use inheritance funding. Trusts generally protect a person’s assets from bankruptcy and dissolution of marriage. Trusts used for estate planning purposes specify what assets will be received by a beneficiary of the trust upon the grantor’s death. A trust created in the anticipation of death but not included in a will avoids the probate process, but it still releases the intended assets after the grantor’s death.

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    • Trusts generally protect a person’s assets from dissolution of marriage.
      By: Derrick Neill
      Trusts generally protect a person’s assets from dissolution of marriage.