This guide explains how inheritance advance loans work, the main benefits, the situations where it can make sense, and the points you should weigh up before borrowing.
Why Does It Take So Long to Receive an Inheritance?
In the UK, an estate generally can't be shared out until the executor or administrator has completed a series of steps. These include:
Obtaining the death certificate and locating the Will
Valuing the estate's assets, including property, savings, investments and possessions
Identifying and settling debts and liabilities
Applying for a Grant of Probate (where there is a Will) or Letters of Administration (where there isn't). In Scotland, the equivalent is Confirmation
Paying any Inheritance Tax due and dealing with HMRC
Selling assets where needed, such as a property
Preparing estate accounts and distributing the funds
Simple estates can be settled in several months, but estates with property to sell, disputes, complex assets, or overseas elements can take a year or more. During that time, beneficiaries often know roughly what they will receive but can't access it.
What Is an Inheritance Advance?
An Inheritance Advance is a loan made to a beneficiary against their expected share of an estate. The lender assesses the value of the estate, its assets and liabilities, and the size of your expected inheritance. If approved, you receive a portion of that inheritance early, commonly up to 50%.
The advance, an arrangement fee and interest are then repaid directly from your inheritance once the estate is ready to distribute funds. Inheritance Advances can often be arranged before or after probate has been granted, and whether or not there is a valid Will.
The Main Benefits of an Inheritance Advance
Access to money without waiting for probate
The most obvious benefit is timing. Instead of waiting for the estate to be fully administered, you can receive a portion of your inheritance sooner. Some lenders say they can issue loan documents within two to three days of receiving the required information, with funds released the same day the documents are signed.
Assessment is based on the estate, not your credit history
Traditional lenders focus on your income, credit file and ability to make monthly payments. Inheritance lenders look mainly at the estate and the value of your inheritance. That means someone with a poor credit history, irregular income or no income at all may still be considered, provided the estate is suitable.
No monthly repayments
Because the loan is repaid from the inheritance, there are no monthly payments to budget for. This can help beneficiaries who are already under financial pressure or who are dealing with the costs of a bereavement.
No need to put your own property at risk
Inheritance Advances are typically not secured against your home or other personal assets. The lender's security is your entitlement under the estate.
Protection if the estate is worth less than expected
Most providers say that if the estate turns out to be worth less than anticipated and there isn't enough to repay the loan in full, you won't be personally required to make up the shortfall, provided you haven't breached the terms of the agreement. This is a key difference from conventional borrowing, though you should always check the exact terms of any agreement.
Simple interest
Many providers charge simple interest rather than compound interest, which means you aren't charged interest on interest already accrued. This makes the cost more predictable, although interest still builds up for as long as the advance is outstanding.
Flexibility on how you use the money
The funds are generally not restricted to a particular purpose, so you can use them for whatever your circumstances require.
Available in a range of estate situations
Advances can often be considered where there is a Will or where the person died intestate, and either before or after probate. That can be helpful where the estate is complicated, or probate is delayed.
Situations Where an Inheritance Advance Might Be Useful
Buying a property
If you've found a home but your inheritance is tied up in probate, an advance may provide part of the deposit or purchase price. This can help where timing is critical, for example in a chain or where a seller won't wait. You'll still need to meet any mortgage lender's requirements, so speak to a mortgage adviser early.
Paying off expensive debt
Some beneficiaries use an advance to clear debts such as credit cards, overdrafts or other costly borrowing. This only makes financial sense if the cost of the advance is lower than the cost of the debt being cleared, taking into account how long the estate is likely to take to settle. It's worth doing the sums carefully.
Covering everyday living costs
A bereavement can disrupt household finances, particularly if the person who died contributed to bills or if you had to reduce your working hours. An advance can help cover essentials such as rent, utilities and food while the estate is settled.
Funding funeral and bereavement-related costs
Funeral costs can run into thousands of pounds, and family members often pay upfront. While these costs can usually be reimbursed from the estate, that can take time. An advance may help if you're carrying costs you can't comfortably absorb.
Home repairs and improvements
Urgent repairs, such as a leaking roof or failing boiler, can't always wait for probate. Larger renovation projects may also be easier to progress if some funds are available earlier.
Major planned purchases
If you have a significant expense planned, such as a car, education costs or a wedding, an advance may allow you to proceed without waiting for the estate to be distributed.
Business or self-employment needs
Self-employed people and small business owners sometimes use an advance to invest in the business, manage cash flow or cover tax bills. As with any business borrowing, think carefully about the return you expect compared with the cost.
Estates where most of the value is tied up in property
If the main asset is a house that needs to be sold, beneficiaries can be waiting a long time for any funds. An advance can release part of the value while the sale is arranged.
Delayed or complicated estates
Disputes, missing paperwork, overseas assets or challenges to a Will can all extend the process. An advance may help where the estate is expected to take longer than you can reasonably manage financially. Bear in mind that longer delays also mean more interest builds up.
What to Weigh Up Before You Borrow
An Inheritance Advance is a form of borrowing, and it isn't the right choice for everyone.
It reduces your inheritance
The advance, arrangement fee and interest are all repaid from your inheritance. Interest typically runs at around 1.5% to 2% per month, so the cost can build up quickly if the estate takes a long time to settle. Representative APRs are often in the region of 26%, and the overall cost may be significant over 12 months or more.
Timing is uncertain
It's difficult to predict exactly how long probate will take. A delay of several months could add materially to the cost, so consider how the numbers would look if the estate took longer than expected.
Check the full terms
Look closely at arrangement fees, interest rates, how interest is calculated, early repayment terms and what happens if the estate is worth less than expected. Make sure you understand the agreement before signing.
Consider whether you need it
If you can comfortably wait for the estate to be distributed, you will avoid fees and interest altogether. Borrowing is most likely to be worthwhile where the benefit of having the money now clearly outweighs the cost.
Alternatives to an Inheritance Advance
Before taking an advance, it may be worth looking at other options:
Asking the executor about an interim distribution. In some cases, an executor can make a partial payment to beneficiaries before the estate is fully settled, where there are enough funds and no outstanding liabilities.
Personal loans or credit cards. These may be cheaper if you have a good credit record, though they involve monthly repayments.
Remortgaging or further borrowing. This may be an option if you own a property, but your home is at risk if you can't keep up repayments.
Family support or bridging finance. Short-term help from family or a bridging loan may suit some property-related situations.
Speaking to a free debt or money advice service, like organisations such as MoneyHelper, StepChange and Citizens Advice, can help if you're struggling financially.
Is an Inheritance Advance Right for You?
An Inheritance Advance may be worth considering if:
You're a beneficiary of an estate and expect a sufficiently large inheritance
You need access to some of the money before probate is complete
Much of the estate's value is tied up in property or other assets
You understand the full cost and have considered how long the estate could take
The benefit of having the funds now justifies the cost
If you're unsure, it can help to speak to a regulated financial adviser or a solicitor who can look at your wider circumstances.
Apply for an Inheritance Advance Loan
Glossary
Beneficiary: A person entitled to receive assets or money from an estate.
Estate: All the money, property and possessions left by someone who has died.
Executor: The person named in a Will to administer the estate.
Personal Representative: The general term for an executor (where there's a Will) or an administrator (where there isn't).
Grant of Probate: The legal document confirming an executor's authority to deal with the estate.
Letters of Administration: The legal document granted where there is no valid Will.
Confirmation: The Scottish equivalent of a Grant of Probate or Letters of Administration.
Intestate: Dying without a valid Will.
Inheritance Tax: A tax on the value of an estate above certain thresholds, currently charged at 40% on the taxable portion above the available allowances.