Probate Loans

What is a Probate Loan?

A probate loan, also known as an inheritance or estate loan, is a financial product designed to assist beneficiaries and executors during the probate process.

They can be arranged quickly, and they’re secured against the value of your inheritance – so you can borrow more than with a standard personal loan and at a competitive interest rate.

In a nutshell, they can quickly relieve the stress and pressure from a lengthy, headache-inducing probate journey.

Want to speak to a specialist? Book a free, no-obligation telephone call with one of our advisers below. 

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Written by Sam Hodgson

Last Updated: 29/08/2024

Related: Can I get a Bridging Loan to Pay Inheritance Tax?

Key Takeaways

• Probate is the administration of a deceased person's assets, and in the UK, it typically takes 9-12 months.
• It can be expensive, including Inheritance Tax (IHT), funeral expenses, and property maintenance.
• But you can’t access money from the estate to pay for these things until probate is completed (often over a year).
• Beneficiaries and executors can use probate loans in the meantime to pay for IHT and other costs or to access an inheritance early.
• The two main types of probate loans are an inheritance advance and an executor loan.
• Inheritance Advance allows beneficiaries to effectively access their inheritance early, with no credit or income checks, personal liability, or monthly repayments.
• Executor Loans help executors pay estate expenses, such as IHT and funeral costs, without requiring beneficiary permission or the executor to be a beneficiary.
• You can also get a bridging executor loan, which works in a similar way to an executor loan but it’s secured against the executor’s personal home instead (more risk to the borrower, but usually cheaper rates).
• Probate loans work by your lender valuing the estate and lending you typically up to 60% of the value.
• And repayment is made directly from the estate (no monthly repayments), meaning your lender takes on the risk if the probate process takes longer or if assets sell for less than expected.
• Probate loans don’t require a credit check, proof of income, or monthly repayments. 

What is Probate?

When someone passes away, they often leave behind assets such as property, possessions, money and sometimes debts – collectively known as their ‘estate’.

In the UK, the process of dealing with this is referred to as ‘probate’.

Probate involves gathering the deceased's assets, paying off outstanding debts, and finally distributing the remaining assets to the beneficiaries in line with the will.

It sounds straightforward…

However, probate is a complex and time-consuming process, often taking nine to twelve months to complete.

At the very least, it involves:

• Collecting all the necessary documents
• Valuing the estate
• Paying any debts and taxes
• And distributing the assets among the heirs

And the entire process can be emotionally draining for the bereaved family members, who are already grappling with a loss. 

Why Might You Need a Probate Loan?

Financial obligations may also need to be met during the probate process.

For example, any Inheritance Tax (IHT) must be settled before the estate can be distributed.

How Can a Probate Loan Help?

We can help with financial products designed to assist during the probate process.

These are known as probate loans or inheritance loans, and they provide beneficiaries and executors with access to the funds tied up in an estate, even before probate has concluded.

If you’re a beneficiary, an Inheritance Advance lets you effectively access your inheritance money before probate concludes – so you can pay off debts, clear your mortgage, buy a new home, or fund your wedding, for example.

If you’re an executor, an Executor Loan can help you pay essential expenses such as inheritance tax (IHT), funeral costs, and property maintenance during the probate process

There are:

• No credit checks
• No personal liability
• And no monthly repayments

Potentially a huge relief for those navigating the probate process.

The repayment is taken directly from the estate, so you don’t need to worry about keeping up with monthly repayments. 

Who Are Probate Loans For?

Probate loans are for beneficiaries or executors of an estate.

As probate processes unfold, beneficiaries and executors often face considerable financial pressure.

For instance:

• There may be immediate funeral costs to cover
• Or ongoing expenses like property maintenance for the deceased's home
• An executor may need to settle outstanding debts
• Or there might be inheritance taxes tied to the estate.

These expenses can be significant and are usually required to be paid before the inheritance is distributed to the beneficiaries.

You might find yourself in a tight financial spot and need funds effectively locked away in the probate process.

This is where probate loans can prove to be a lifeline.

And they’re relatively safe compared to other types of loans because they’re secured against the estate – money you can prove to your lender is on its way. 

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Probate loans for Inheritance Tax

One of the biggest financial obligations during the probate process can be the payment of Inheritance Tax (IHT).

It’s a tax on the estate (the property, money and possessions) of someone who has died.

Currently, the IHT threshold for a single person in the UK stands at £325,000.

So, if the value of the estate exceeds this amount, the excess value is subject to an IHT rate of 40%.

And for larger estates, the IHT can be a substantial sum.

In simpler terms, the IHT needs to be paid before the beneficiaries can access the estate's inheritance.

It can be a catch-22 situation for the executor and the beneficiaries. They need to pay a large tax sum, but the probate process locks away their means to do so (i.e., the estate assets).

This is where executor loans come in.

They can assist in paying IHT and other costs and help you fulfil your duties without the financial strain.

And what’s great is they can be arranged without credit checks or proof of income.

The repayment is directly made from the estate, so you don’t have to worry about a monthly repayment. 

Bridging Probate Loans

Another popular loan to pay inheritance tax is a bridging loan.

They work in the same way as a standard probate loan, but it’s secured against your property instead of the estate.

This means you take on more risk as a borrower because your property is at stake in the agreement.

But you can qualify for lower interest rates because your lender also has less risk.

We have a full guide on the process of using a bridging loan to pay for IHT.

And if you’re unsure about the risks or which option is best for you, we recommend speaking to one of our qualified advisers.

We can have a look at your wider financial situation and walk you through the pros and cons of each option, so you feel comfortable you’re making the right call for you.

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Probate Loans For Beneficiaries

Probate loans for beneficiaries, also known as an inheritance advance, are designed for beneficiaries who want to access their inheritance sooner rather than later.

The primary benefit is the ability it provides to gain access to the inheritance even before the probate process concludes (which can easily take 12 months in the UK).

And one of the key advantages of the Inheritance Advance?

It doesn’t require any credit checks, personal liability, or monthly repayments.

This means your credit score or income level doesn’t impact your eligibility for a loan.

And it also means you’re not personally liable for the repayment of the loan, because it’s made directly from the estate once the probate concludes.

This means it’s a relatively secure and straightforward financial solution compared to many other types of loans. 

How Probate Loans Work

Probate loans are slightly different to traditional loans.

Valuing the Estate

This is the first step in the process.

A valuation is conducted that includes all the assets of the deceased, including:

• Property
• Cash
• Investments
• Savings
• And any other possessions of value like jewellery and cars

It’s typically conducted by a professional to ensure an accurate and fair market value.

The goal is to determine your inheritance value, which determines the maximum amount you can borrow.

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How Much Can You Borrow?

We can typically arrange borrowing for up to 60% of the value of your inheritance.

There is generally no maximum amount you can borrow as long as your inheritance will cover it within the range above.

How Do The Repayments Work?

Probate loans are unique in that the lender assumes a significant amount of risk, but the estate value backs it up.

Once your loan is issued, the repayment comes directly from the estate, meaning your lender depends on the probate process's successful conclusion.

If the probate process takes longer than expected or the assets sell for less than their assessed value, your lender absorbs the cost.

So, when your lender considers your application, they’ll consider the types of assets, their market value, the potential for depreciation, and the estimated duration of the probate process, among other things.

Your loan isn't secured against the beneficiaries' or executors' assets but rather against the inheritance itself.

This also means your lender takes on the full risk of fluctuations in the value of the estate's assets.

For example, if a property within the estate loses value during the probate process, it’s your lender who would lose out. 

The Benefits of Probate Loans

No Credit Check or Proof of Income Required

Most other types of loans are based on your financial history and income, which isn’t always favourable for everyone.

But as you you’re paying back your loan with the estate, there’s no need for your lender to look at your income or credit score to gauge if you’d be able to afford repayments.

No Monthly Repayments

Traditional loans also typically require regular payments to repay the borrowed sum and interest, which can be a strain on your finances.

With probate loans, there are no monthly repayments. It’s all repaid directly from the estate once the probate process concludes.

Repayment Made Directly from the Estate

This method of repayment provides two key benefits:

It eliminates personal liability for the loan, meaning if the estate's value falls short you aren’t personally responsible for repaying the difference.

And it ensures the loan doesn’t impact your personal finances or credit score in any way - it’s linked solely to the estate.

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What To Do as Executor of the Estate

If you’re named as the executor of an estate, you’ll need to:

• Arrange and pay for the funeral
• Settle any of the deceased's debts
• Pay any inheritance tax due
• Get a valuation of the estate (properties, investments, and any other possessions)
• Distribute the remaining estate to the beneficiaries

This isn’t an exhaustive list, but it’s some of the main responsibilities.

As mentioned earlier, IHT needs to be settled before the Grant of Probate is issued, a legal document that gives the executor the authority to manage the estate according to the will's terms.

Once you have Grant of Probate, you can access the estate’s assets to start paying off any debts or taxes – and this includes selling properties or investments if needed.

You can only start paying money out to beneficiaries once you’ve cleared all debts and taxes for the estate.

Sometimes the probate process is not straightforward, and you might face challenges like disputes over the will's validity or claims against the estate.

If you’re not available or willing to perform your executor duties, the court usually appoints an administrator or a Personal Representative.

They have the same role, but they must apply for a Grant of Letters of Administration instead of a Grant of Probate.

Need help securing your probate loan? Book a free, no-obligation initial call below, and we can walk you through the process.

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FAQs

Can You Get a Loan For Probate?

Yes, you can get a loan for probate. Probate loans, like an inheritance advance or executor loan, are designed to help beneficiaries and executors manage financial obligations during probate. They can be used for Inheritance Tax, funeral costs, property maintenance, or any other expenditures.

Can I Borrow Money Against Inherited Property?

Yes, you can borrow money against inherited property with a probate loan.

How Long Does it Take to Get an Inheritance Loan?

The timeline to get an inheritance loan depends on the lender and the complexity of the estate, but  it can be as quick as 48 hours from application to receiving funds.

What is a Probate Grant?

A Grant of Probate is the legal document that gives the executor the authority to manage the deceased's estate. If an executor isn't available, a Grant of Letters of Administration is issued to a Personal Representative instead.

Do Banks Help With Probate?

Yes, some banks offer probate services. They can help with tasks like gathering information about the deceased's assets and liabilities, preparing tax forms, and distributing the estate, but their services can come with fees.

What Is an Executor's Loan?

An executor loan is a type of probate loan that helps you pay the estate’s expenses, such as inheritance tax, funeral costs, and property maintenance. It’s repaid when the money from the estate is released.

Can I Get an Advance On My Inheritance?

Yes, you can get an advance on your inheritance through an inheritance advance loan. This loan allows you to access a portion of your inheritance early, and you pay it back when you receive your inheritance from the estate.

How Do I Borrow Against an Inheritance?

To borrow against an inheritance, you can apply for an inheritance advance or a similar type of probate loan. A lender assesses the value of the estate and your expected inheritance and provides a loan based on that amount.

Can Executors Access Bank Accounts Before Probate?

Generally, executors cannot access the deceased's bank accounts until they’ve obtained Grant of Probate. Some banks may release funds for specific expenses like funeral costs before the probate process is complete.

Can an Executor Use Their Own Bank Account?

An executor should not use their personal bank account for the estate's financial transactions. Mixing personal and estate finances can cause confusion and potentially legal issues.

What Banks Do Inheritance Loans?

Several financial institutions offer probate or inheritance loans, but not many traditional banks do. A popular option is to use a lender that specialises in probate loans. At Clifton Private Finance, we can connect you to the right lender for your situation.

Probate Loan Interest Rates

Probate loan interest rates can vary widely depending on your lender and the specific circumstances of the estate.

Getting a quote or speaking to an advisor is the best way to find out what the interest rate would be for your specific loan.

What Is a Probate Bridging Loan?

A probate bridging loan is similar to a normal probate loan, but they’re secured against your home. It’s an extra risk to you as your home is listed as collateral, but you can get cheaper interest rates to compensate.

If you’re unsure which is best for you, our advisors can talk you through your options.