The death of a loved one is an extremely challenging time for any bereaved family, so dealing with the financial pressures and complications that can be brought about by the probate process is the last thing those dealing with the loss of a family member want to be confronted with.
But the sad reality is that the distribution of inheritance and the conclusion of a will is often very rarely straightforward. In many cases, it is labour intensive, emotionally draining and more often than not, can prove to be extremely expensive, with the average cost of probate sitting between 1% and 5% of the overall value of the estate.
In fact, the entire process can take months, sometimes even years as the ownership of assets are distributed, outstanding debts are paid and legal documents are processed. This can place unnecessary financial pressure on those left behind, with some beneficiaries finding themselves faced with substantial legal fees or inheritance tax liabilities on the death of a family member.
Recently, we have had a number of enquiries for the use of bridging loans to support an application for probate. In each of these cases, the borrower was looking for a fast and efficient way to raise capital and alleviate cashflow problems to cover outstanding debts following the death of a loved one.
This trend seems to be gaining traction in the industry, as a growing number of people seek ways to cover the cost of an inheritance tax bill and the associated costs associated with the death of a loved one, says Andrew Shirtcliff, business development director of legacy at Ampla Finance.
“We are seeing an increasing level of enquiries from our partners who have clients either having to pay a significant inheritance tax bill, but with little or no liquid assets, or clients who are beneficiaries of an estate and need an advance on an inheritance due to them, to perhaps take out a time bound investment such as a property purchase,” he says.
In situations like this, a bridging loan for probate can prove to be a valuable tool as they provide swift and flexible short-term finance, in advance of any assets being sold, as the funds can be released quickly, often within days. It also provides the next of kin with breathing space and financial reprieve at a time when they need it most.
One of the main advantages of a bridging loan for probate is that it can be used to cover any outstanding debts that may need to be settled while a longer-term solution is sought, such as the payment of legal fees or inheritance tax liabilities, which can be high in cases where the value of the estate is substantial.
It can also help to alleviate the stress associated with complicated or unexpected financial problems that arise around the deceased’s finances, once the restructuring of assets and legal affairs are sorted out.
Another benefit is that a bridging loan for probate allows for the release of funds from inherited property equity which can then be used for refurbishment in order to maximize potential value before a controlled sale of the inherited property takes place. This can prevent the need to liquidize any assets as well as safeguard against quickfire under market value sales in order to settle debts.
As with all bridging loan applications, a bridging loan for probate requires the borrower to present an asset, which in some cases may be a residential or commercial property, while in others, the total value of the will is all that is considered.
In order for an application to be considered, information about the client, how much they would like to borrow, a certified copy of the will and death certificate and full details of the assets and liabilities is required, along with a structured exit strategy on how the loan will be repaid. Once the application is reviewed and accepted, the loan agreement documents are signed by the client and the loan amount is transferred to the nominated account. The loan is then repaid on settlement of the estate.
It is important to remember that not all lenders will lend on the value of the will, particularly if the intricacies of the estate are complicated, so it is important brokers unfamiliar with the bridging process work with specialist distributors who can guide them in the right direction by sourcing the best bridging loan solution for them and their client.
Sonny Gosai is senior sales development manager at Norton Broker Services
