Can’t Wait For An Inheritance? Someone Will Fund You
Another twist on purchasing receivables is making its way into the mainstream in the form of an Inheritance Cash Advance.
For some, the aftermath of losing a loved one can turn into a long drawn out legal process and delay the transfer of rightfully owed inheritance in the process. Probate funders fix the problem, paying cash upfront, purchasing the future receivable of a will. The small industry is remarkably similar to the merchant cash advance world and uses the same terminology. “Inheritance Cash Advances are not loans,” one website says, “with an Inheritance Cash Advance, we send immediate cash to heirs in exchange for an assignment of a fixed dollar amount of their eventual inheritance.”
David Horton, a University of California-Davis law professor who delved into 1,119 probate agreements in the San Francisco area as part of a UPenn Study, said of the product “in almost all cases, with rare exceptions, the lender not only gets their advance back but also gets a huge markup.”
Interestingly, this type of funding is most popular in California, where some of the most complicated estate laws in the country make inheriting a hassle. But a less than flattering industry profile in Consumer Reports says that such companies “earn millions offering cash advances to heirs, with effective interest rates as high as 490 percent.”
And yet, industry advocates say that they are providing a needed service. “We are proud of the service we provide and the highest ethical way we conduct our business at IFC,” said Doug Lloyd, CEO of Inheritance Funding Company to Consumer Reports. “It is easy to understand why banks and other financial institutions are not in this business.”
His company has already advanced more than $200 million to customers. The following video is featured on their website: