Unlocking funds in probate
By Lee Gilmore, business development consultant at Bridging Finance Solutions
Bridging loans are incredibly flexible and may be put to a variety of uses – including resolving probate issues when concluding a will.
When a will is presented between various parties, it can throw up financial hurdles. There are numerous benefits to be gained by fast tracking the settlement process and using a short-term finance solution to meet resolution.
By using bridging, beneficiaries of a will are able to pay legal fees and inheritance tax straight away, releasing 70% of the value of the property immediately without making any interest payments, which are covered by the loan facility.
This ultimately allows the beneficiary to market the property for a longer period of time to maximise its value, which will be far greater than the interest payments on a bridging loan, rather than discounting the property for a quick sale or through auction.
Carrying out someone’s will is not always as straightforward as we might like. Although the ownership of their various assets might be easy enough to resolve, the average person will take on a network of debts and credits which must be resolved in their will.
Bridging finance offers a person’s family some breathing space and they can use the loan to pay off debts instead of being forced to sell assets as quickly as possible. Bridging lenders are also highly flexible and quick to put solutions in place. There’s no red tape and it’s possible to create a loan structure that’s perfectly suited to individual circumstances.
In many ways, a bridging loan for probate finance is very similar to a standard bridging loan. The loan will generally be for a short, fixed term, commonly less than 12 months (though longer terms are available), and can be of any value from tens of thousands to tens of millions of pounds.
When concluding a will, beneficiaries will inevitably face tax implications which must be factored into the overall process. Again, bridging can help streamline and manage this inevitable challenge by providing a quick fix solution.
Many estates in the UK become liable for inheritance tax, which must be paid within six months and typically a 40% share of the estate upon liquidation. Again, this financial pressure can be eased through the use of bridging finance, as it enables the will’s executors to restructure and refinance to meet the cost of inheritance tax.
Without bridging finance, it would be very difficult to resolve the financial affairs that can be brought about in a deceased person’s will. The time pressures that quickly become apparent would require that many estates be quickly broken down and sold, rather than being realised at their full value. Bridging loans are therefore a helpful tool that enables individuals to pass on their wealth through generations and allows inheritors to benefit more from their parent’s estates.