Losing a loved one is hard enough. Then you learn it might take months, even a year, to actually get the money or property they left you.
Probate loans, also known as inheritance loans, inheritance advance or executor loans, are a type of short-term borrowing which is designed to provide you with early access to part of the deceased’s estate.
Unlike traditional loans, probate loans are not based on your credit rating or personal circumstances.
Instead, they are lent against the value of estate assets.
Need to cover inheritance tax or other probate costs? A probate loan could be the answer.
The Need for Probate Loans
Probate can be a lengthy process, often taking months or even years to fully complete.
During this time, as an executor you may face financial challenges. You might need funds to cover immediate costs, such as funeral expenses, legal fees, or estate taxes (IHT).
Alternatively, you may want to provide beneficiaries with some of their inheritance before probate is granted or a property sold.
Probate loans come with several key features and benefits
- Quick access to funds: Probate loans can be approved and disbursed within days, providing quick access to funds.
- No personal guarantees: The loan is secured against the estate, not your personal assets.
- No monthly repayments: The loan is normally repaid in one lump sum once the estate is settled.
- Risk protection: If your final inheritance doesn’t cover the loan balance, the lender bears the risk, not you.
Typical scenarios
These types of loans can be useful in a few different ways. Here are some common uses for probate loans:
Paying Inheritance Tax
Inheritance tax in the UK can be a significant financial burden and it needs to be paid within six months of the end of the month in which the deceased passed away.
If the tax is not paid within this timeframe, HMRC may start charging interest.
However, the probate process, can often take longer than six months. This means that the inheritance tax may be due before the estate funds can be utilised.
And probate can’t be given until the IHT bill has been paid.
This is a common scenario where a probate loan can be extremely beneficial. A probate loan allows you to access a portion of the estate which you can use to pay the inheritance tax.
There are no credit checks and no charges placed against property.
Funding Estate Expenses
Executors and personal representatives will often need to pay costs associated with administering an estate.
Items such as funeral costs, professional fees, maintenance and insurance all need to be paid before payments to beneficiaries.
An estate loan can release funds so that these expenses can be paid.
There are no credit checks and no charges placed against property.
Paying Beneficiaries
There will be occasions where beneficiaries may request access to their inheritance while probate is still ongoing.
As an executor you will be able to organise an inheritance advance loan, based on the value of the estate and their share.
The loan will be approved against the estate assets, so there’s no need for personal guarantees, proof of income or a certain financial status.
Equally, there’s no need for any regular payments and most lenders do not charge early repayment fees.
Related: Can an executor pay beneficiaries before probate is granted?
The cost of borrowing
Probate loans are a type of short term loan and so there are costs to pay.
They have an initial arrangement fee and a monthly interest rate. The arrangement fee is usually a percentage of the loan amount, and the interest rate is charged on the outstanding loan balance.
Schemes don’t generally require any monthly payments. The accrued interest is settled when the loan is finally paid off.
Taking the next step
Probate loans and inheritance loans are provided by specialist lenders, who understand probate and the process of winding up a deceased person’s estate.
Whether you are an executor, or a beneficiary, please call us on 020 8301 7930 for more information.
This is a no-obligation call where we will explain how these types of loans could work for you.
FAQs
The specifics will relate to the size of the estate, any tax due and the will. The loan can advance all of the Inheritance Tax bill and up to 50% of a beneficiaries share.
As a beneficiary, you can use a probate loan for any purpose. This could include paying off debts, covering living expenses, or investing in opportunities.Do I need a strong credit history to apply for a probate loan?
No, your personal credit rating is not relevant for a probate loan. The decision is based on the assessment of the estate.
The lender will undertake their own research and due diligence before approving the loan. They bear the risk if your final inheritance doesn’t cover the loan balance. This means you won’t be required to pay the shortfall.
Yes, probate loans are available even if there’s no will. The estate will be administered according to the Rules of Intestacy.
Probate loans are provided by specialist short term lenders. Decisions can normally be made in 48 hours, with funds available in 7 days.
Yes, it’s acceptable for multiple beneficiaries of the same estate to submit separate advance applications. Each loan is underwritten based on the individual beneficiary’s portion of the estate.
No. There is no requirement for any monthly repayments. The loan plus interest will be fully paid back when the estate pays out your share.
Yes, an executor’s loan will be suitable for this purpose. 100% of the tax bill can be funded this way.
Yes this is fine. The loan is underwritten against the deceased’s estate, not your personal circumstances. So there’s no need to worry about credit checks or proving income.
Probate is the legal process a deceased person’s estate goes through in court.
First and foremost, it’s about determining if the will, if one exists, is valid. This is crucial because it grants the executor (the person named in the will) or a court-appointed representative the power to manage everything to do with the deceased’s possessions.
This includes tasks like identifying and valuing all assets (bank accounts, property, investments, etc.), paying off any debts or outstanding taxes, and finally, distributing what remains to the beneficiaries named in the will.
If there’s no will, state laws dictate how the assets are split up. Probate essentially provides a legal framework to ensure a person’s estate is handled in a structured, accountable way after their death.
However, complying with the court system can lead to significant delays and expenses for those involved.
You can read more on the Which website.
Unfortunately, there isn’t a one-size-fits-all answer when it comes to how long probate takes.
The process can vary significantly based on how complex the deceased person’s estate happens to be. If they had multiple properties, various investments, or complicated tax affairs, it will naturally take longer to sort everything out.
Disputes within the family over the will or how assets should be distributed can also cause major delays as these often lead to court challenges. Additionally, probate laws and procedures aren’t the same everywhere, affecting the timeline.
Finally, how quickly the executor works to gather information, value the assets, and keep beneficiaries informed also plays a role.
In the simplest of cases, probate might be finished within around 6 months.
However, it’s common for probate to take between 9 months and a year. Sadly, in complicated cases, the process can drag on for several years.