Inheritance Advance: How Much Do They Cost?

Receiving an inheritance can often be lengthy, causing financial strain if you need money urgently. An inheritance advance might offer a solution. If you’re wondering, how much does an inheritance advance cost? the answer is not simple since there are factors to look at first.

What is an inheritance advance?

An inheritance advance, sometimes called a probate advance or probate cash advance, is a financial arrangement that allows heirs to receive a portion of their inheritance before the estate is fully settled through probate. Unlike loans, inheritance advances do not require repayments or interest payments. Instead, the company provides advance purchases of a portion of the future inheritance at a discounted rate.

How does it work?

When you apply for an inheritance advance, a company will review your documentation related to the estate. This typically includes:

• Valid photo ID
• Inventory of estate assets
• Petition for probate
• Letters of administration
• Notice to creditors
• A copy of the will and death certificate
• Document identifying the estate’s administrator

After verifying your claim, the company provides you with an upfront payment based on a percentage of your expected inheritance. The company then recoups their investment plus a fee from your inheritance once the probate process concludes.

How much does it cost to get an inheritance advance?

The cost of an inheritance advance can vary widely, influenced by factors such as the size of the inheritance, the complexity of the estate, and the company’s fee structure. Typically, probate advance fees range from 10% to 50% of the amount advanced.

Sample Computation

Let’s say you are entitled to $50,000 from an estate. You decide to get an inheritance advance, and the company offers to advance $20,000 to you now. The fee for this advance is 20% of the advanced amount.

Here’s the breakdown:

1. Advance Amount: $20,000
2. Fee Percentage: 20%
3. Fee Amount: $20,000 × 20% = $4,000

When the estate is fully settled, the company will take their $4,000 fee from the total inheritance. If the estate distribution is $50,000, you’ll receive:

• Initial Advance: $20,000
• Fee Deducted: $4,000
• Remaining Inheritance: $50,000 – $20,000 (advance) – $4,000 (fee) = $26,000

So, after the probate process, you will receive $26,000.

What are the pros and cons of an inheritance advance?

Pros

1. Immediate Access to Funds: Receiving a portion of your inheritance quickly can be a lifeline if you face urgent financial needs, such as medical expenses or unexpected bills. This immediate cash flow helps you address critical issues without delay, alleviating financial stress in times of need.
2. No Monthly Payments: An inheritance advance is different from a traditional loan because it does not require monthly repayments. Once you receive the advance, you don’t have to worry about making regular payments or accumulating interest. This feature makes it easier to manage your finances without adding to your monthly obligations.
3. No Credit Checks: Your credit history usually does not impact your ability to get an inheritance advance. This is advantageous if you have poor credit or a history of financial difficulties. Since the advance is secured by your future inheritance, the focus is on the estate’s value rather than your creditworthiness.
4. Fixed Fees: The fees associated with an inheritance advance are generally set at the beginning and do not increase over time. This means you know exactly how much it will cost, even if the probate process takes longer than expected. The predictability of fixed fees helps in financial planning, knowing there won’t be any surprise charges down the line.

Cons

1. High Fees: The cost of obtaining an inheritance advance can be substantial, often ranging from 10% to 50% of the amount advanced. This high fee is a significant downside, especially if you are receiving a large inheritance. It means you could end up with considerably less money after the advance company takes its share.
2. Potential Resentment: Other family members might feel resentful if they receive their inheritance later because you accessed your share early. This can lead to family conflicts or strained relationships, especially if the advance impacts how much is left for other heirs.
3. Less Money Overall: Since the advance company charges a fee, the total amount you receive from the inheritance will be less than if you waited for the probate process to complete. This reduction in the final inheritance amount can be a major drawback, particularly if the estate is large.
4. Risk of Lower Inheritance: If the final value of the estate is less than anticipated, you might still owe the agreed-upon fee. This situation can lead to financial strain if you rely on the inheritance advance for immediate needs and the estate’s value falls short of expectations.

Is it a good idea to get one?

Deciding whether to get an inheritance advance involves evaluating your current financial situation and the urgency of your needs. If you need cash quickly and cannot wait for the often lengthy probate process, an advance might be a practical solution. However, the cost of the advance should be weighed carefully against your immediate financial needs.

Consider how the fees will impact your overall inheritance. If the advance fees are high, you might end up with significantly less money once the estate is settled. Assess whether the immediate relief provided by the advance is worth the reduction in your eventual inheritance. If the fees seem excessive, it might be worthwhile to explore other financial options.

What can be your alternative?

If an inheritance advance seems unsuitable for your needs or too costly, there are several alternatives to consider:

1. Wait for Probate: If you can manage your financial situation until the probate process concludes, waiting may be the most cost-effective option. This allows you to receive the full inheritance amount without incurring additional fees. Patience can be beneficial if you can afford to wait.
2. Personal Loans: Traditional personal loans or lines of credit might offer a lower interest rate compared to the high fees associated with inheritance advances. While personal loans require repayment and a credit check, they may provide more favorable terms if you have good credit.
3. Home Equity Loans: If you own a home, a home equity loan or line of credit can provide immediate funds. These loans use your home’s equity as collateral and typically offer lower interest rates compared to other types of loans. However, they do require regular payments and can put your home at risk if you fail to repay.
4. Budget Adjustment: Adjusting your budget and managing your expenses while waiting for the inheritance can be a practical approach. This might involve cutting non-essential spending or finding temporary sources of income to bridge the gap until the estate is settled.

The cost of an inheritance advance can vary

The cost of an inheritance advance varies based on the advance amount, the size of the inheritance, and the company’s fees, usually between 10% and 50% of the advance. While it offers quick access to cash, the fees can be high, so it’s important to weigh these costs against other options. Your decision should consider how urgently you need the money and your overall financial situation.