Fast Money in Hard Times

At some point in our lives, most of us will experience times when we urgently need money – to fund a medical emergency or necessary procedure, to stay afloat after the loss of a job, to fly cross-country for that special occasion … the list goes on and on. Hopefully, when times like these arise, we’ll have the money we need. If not, we face a dilemma: how, where, and from whom can we get fast money?

In my practice, I am frequently confronted with two situations in which fast money is an issue: (1) when an estate needs money to fund the expenses of probate; and (2) when an heir needs (or simply wants) to get his or her inheritance before the probate is finished. These situations usually arise when a person dies leaving little or no cash and only a piece of real property that will eventually be sold by the heirs. In the meantime, there are expenses to be paid on behalf of the estate and/or there are heirs anxious to receive their inheritance.

When there is real estate with equity, there are loan companies that will make a loan to the estate conditioned upon a promise to be paid upon sale of the real property. As for the heirs, if it is clear that the heir will receive an inheritance when the probate is concluded, there are loan companies that will make a loan to that heir. In return for cash, the heir will be required to assign the first part of his or her inheritance to the loan company. Before the heir receives any cash from the estate, the loan company is repaid.

The problem with fast money loans is that the loan companies charge very high interest rates. The loans to the estate are always higher than market rates and heir loan rates are extremely high — I have seen heirs pay as much as 25% of their inheritance in interest and fees! This is a very expensive way to get money.

I usually advise clients in need of funds to first try borrowing from a friend or relative who is willing to accept a lower interest rate than the loan companies. The friend or relative can file an assignment or record a trust deed against the property and be paid when the property is sold. By handling it the right way, the loan becomes a legally acknowledged and binding transaction. On the other hand, if there is no other source of funds, fast money loans can be a blessing. © 2013 by Marlene S. Cooper. All rights reserved.