Estate Loans for Trusts & Probate Administration
Estate loans — also known as trust or probate loans — are short-term lending agreements; it’s a loan against assets that are tied up during the probate or trust administration process. When a person passes away, the process of transferring or distributing their estate takes time. In best case scenarios, probate can take at least 8 months and can drag on for a year or more. If there is an estate plan in place, the assets still goes through an administration process.
During that time, the estate’s executor may need to pay funeral expenses, property taxes, settle any claims on the estate, discharge debt, etc. When liquid assets (cash) are in short supply, that’s when an estate loan can assist the family when they most need it.
How It Works
Most banks and conventional lenders don’t offer estate loans as they won’t lend to entities like trusts and estates in probate. Why? Estate loans are short-term, lending on assets that are tied up during the probate or trust administration process. Similar to bridge loans, estate loans fills the gap between an immediate financing need and a longer-term loan. Once the estate administration process is complete, an estate loan can be replaced with conventional financing such as a mortgage loan.
Imagine a situation where a brother (Max) and sister (Maxine) inherit a parent’s real estate property. They’ve agreed to let Maxine buy out Max’s share of the property. Using an estate loan, Maxine has the funds necessary to give Max his inheritance without waiting. It also ensures that the property will transfer to Maxine with her parent’s property tax basis, a significant tax savings.
Hanley Law provides customized estate loans, structuring each loan to fit a family’s specific need. We know that managing an estate after the passing of a loved one is stressful, especially if cash limited. Proceeds from an estate loan can be used in a variety of ways, including the capital necessary to prepare the family home for sale, paying taxes or discharging an estate’s debt.