How to Solve Probate Issues with Private Lending
Managing probate estates can be problematic for many reasons, many of which are caused by lack of liquidity in the estate. Private lending can help executors efficiently and responsibly manage probate estates by ensuring adequate cash flow and providing liquidity to handle and distribute estate assets.
Many probate estates have limited liquidity, meaning that all, or a majority of, the probate estate consists of non-cash assets. Without sufficient liquidity to probate the estate, valuable estate assets might have to be sold, simply to ensure that the probate process is carried out properly and fairly. Sale of the estate assets means that heirs will not be able to inherit property which may have significant monetary and sentimental value. Also, selling an asset rather than allowing heirs to inherit the asset may cause valuable income tax and property tax benefits to be wasted. Estates also need sufficient liquidity to ensure that the probate estate makes its way through the court system. Since no disbursement of funds or assets may be made without the court’s order, an executor needs access to funds in order to pay monthly bills, pay for funeral and medical expenses for the deceased, and pay fees associated with the probate court proceedings—such as filing fees, publication fees, and probate referee fees, to name a few. Executors also must pay separate fees for certified letters testamentary or certified letters of administration in estates which contain real property.
Matters can be further complicated when considering the complicated probate procedures associated with settling an estate. The court may order the executor to be bonded in the amount of the estate’s value, necessitating payment of a large fee for bond premiums. The executor must also send a notice of proposed action to beneficiaries upon sale of real property, giving the beneficiaries an opportunity to object to the sale—potentially costing the estate additional money for extraordinary fees. The court may also limit the executor’s powers. Generally, executors can request that the court allow them to administer the estate with full powers under the Independent Administration of Estates Act (which allows executors to take certain actions without seeking court approval). However, these requests are sometimes denied or otherwise not allowed by law, and the executor will need to request permission from the court to take certain actions.
Also (and in some cases unbeknownst to the family), the deceased person’s home may be subject to a reverse mortgage. Elderly people sometimes take out reverse mortgages to provide sufficient cash for living expenses during their golden years without the need for monthly mortgage payments; however, upon the death of the homeowner, the reverse mortgage loan immediately comes due, meaning that either the estate or the family must pay off the entire loan within a very short time in order to keep the property. Many families do not have the flexibility or liquidity to pay off the entire balance of a loan such as this in a short time. Private lending provides a significant benefit to executors and families dealing with scenarios such as these. Private loans made to estates can eliminate these issues entirely by providing flexibility for the estate’s executor to be able to manage estate assets without being forced to sell them in order to make ends meet.
Private loans are a great alternative to traditional banks, who are unfamiliar with the probate process and who generally decline to make loans to estates. Private loans are convenient, providing quick review and approval, and generally the funds are available within a very short time after the loan is approved. The loans can have very flexible terms ranging from one day to three years, depending on the estate’s needs, and generally have no prepayment penalties, so the estate can pay off the loan at a convenient time. Private loans help solve myriad estate issues and provide flexibility for the executor in order to carry out the deceased person’s wishes, assist each beneficiary in receiving their share of the inheritance without being forced to part with valuable family property, and allow heirs to maximize the value of their inheritance.
About HCS Equity:
HCS Equity provides private real estate loans throughout California. For more than 15 years we have used our own capital to provide heirs, probate/estate attorneys, guardians and conservators specialized financing. We are focused on being a financial resource for estates that are experiencing liquidity shortages. We work directly with the executor of the estate or estate attorneys to quickly create liquidity, in order to solve financial problems and to fund buyouts of heirs and other beneficiaries.
For more information please contact:
Ben Heilig 415.205.8251
CA DRE #02074311
About the author:
Mara M. Erlach is a Senior Counsel at Greene Radovsky Maloney Share & Hennigh, LLP, where she is a member of the firm’s Trusts and Estates practice group.