How do you get a loan against your inheritance?

Managing an estate after a loved one’s passing is not just emotionally challenging but often financially demanding as well. Executors are responsible for settling liabilities like Inheritance Tax, covering funeral expenses and maintaining properties within the estate – all of which may require immediate access to funds before probate is completed.

This is where executor loans, also referred to as probate loans, come in. These loans provide executors with the financial flexibility to address urgent estate related obligations without waiting for assets to be liquidated.

On this page, we will explore how executor loans work, their key features, and the costs and risks associated with using them. We will also discuss how cash buyers can benefit executors managing loans tied to inheritance, or looking for ways to pay Inheritance Tax efficiently.

What is an executor loan?

An executor loan is a regulated, unsecured credit agreement designed to provide funds for settling an estate’s financial obligations. Unlike secured loans, it is not tied to any property or land as collateral. Executor loans are commonly used to cover liabilities such as Inheritance Tax, as well as other debts associated with the estate.

Here are the key features of an executor loan:

• Loan amount: Typically, personal representatives can access up to 70% of the value of the inherited estate.

• Timing: Loans are available both before and after the grant of probate (if there is a will) or the grant of letters of administration (if there is no will).

• Purpose: Funds can be used to pay off estate debts, liabilities or taxes.

The loan, including interest and any associated charges, is usually repaid from the proceeds of the estate’s assets once they are liquidated. However, this repayment will reduce the overall amount distributed to the estate’s beneficiaries.

Executor loans can be a valuable option for covering immediate costs, but it’s important to consider the impact on the estate’s final value and discuss the decision with all parties involved.

Where can you get an inheritance loan?

There are a few inheritance/executor loan lenders in the UK, with the most common being:

• Barclays Bank

• HSBC

• Lloyds Bank

• Ampla Finance

• Clifton Private Finance

• Drake Mortgages

How can an executor loan help pay Inheritance Tax?

Executor loans can be a practical solution for covering Inheritance Tax obligations. When an Inheritance Tax bill arises, the executor of the will can secure a loan to settle the tax directly with HMRC. This makes sure timely payment, avoiding penalties or delays in the probate process.

Once the grant of probate is issued, the loan is repaid from the estate funds. Interest on executor loans used to pay Inheritance Tax may qualify for tax relief, but only if it is paid for a period ending within 12 months of the loan being issued.

Probate loans are usually available to individuals who meet the following criteria:

• Applicants must have lived in England, Scotland or Wales for at least two years.

• The applicant must be the personal representative of the estate, either as the executor or administrator.

• The deceased individual must have been domiciled in England, Scotland or Wales at the time of their death.

In addition to paying Inheritance Tax, executor loans can be used to cover various estate-related expenses, including:

• Covering burial or cremation expenses.

• Paying for solicitors, accountants or probate specialists.

• Handling upkeep, insurance or other property related costs.

• Facilitating early distributions to beneficiaries while waiting for estate assets to be liquidated.

Executor loans provide access to essential funds without requiring credit checks or placing charges against estate property, making them a flexible option for managing estate-related financial responsibilities.

How much can you borrow for a probate loan?

You can usually borrow between 50% and 70% of the value of your inheritance (depending on the lender). There is usually no fixed maximum amount, as long as the inheritance is sufficient to cover the loan within this range.

Are loan amounts based on property’s value or taxes owed?

When assessing your application, lenders will evaluate several factors, including:

• The types of assets within the estate (e.g. property, investments, cash)

• The market value of these assets.

• The potential for depreciation in value.

• The estimated duration of the probate process.

The loan is not secured against the personal assets of beneficiaries or executors. Instead, it is secured against the inheritance itself, meaning the lender assumes the risk of fluctuations in the estate’s value.

How do repayments for executor loans work?

Repayment of an executor loan is typically structured to align with the estate’s liquidation process:

• Once the loan is issued, repayment comes directly from the estate’s assets.

• The lender relies on the successful conclusion of the probate process to recover their funds.

If the probate process takes longer than expected or the estate’s assets sell for less than their anticipated value, the lender absorbs the loss. This unique structure ensures that beneficiaries or executors are not personally liable for repayment, reducing financial pressure on them during the estate administration process.

What are the costs of Probate loans?

Probate loans can be a helpful financial tool when settling a loved one’s estate. However, understanding the associated costs is important before committing to one. Here’s a breakdown of the typical costs involved:

Probate loan cost example

To better understand the expenses, consider this example of a £50,000 probate loan:

• Interest rate (12% annually): £6,000 per year.

• Origination fee (3%): £1,500 upfront.

• Administrative fees: £500.

• Total cost (1 year): £8,000 or more (excluding potential early or late payment fees).

While probate loans can be expensive, you should always shop around for different lenders offering competitive interest rates and lower fees. Many lenders are willing to negotiate origination or administrative fees, especially for larger estates.

What are the risks of using an executor loan to pay Inheritance Tax?

While executor loans can be a helpful way for paying Inheritance Tax and covering estate related expenses, they come with a level of risk that executors should carefully consider before committing to such a loan:

How quickly can you get an executor loan?

Executor loans are a financial solution designed to provide quick access to funds for executors managing an estate during the probate process. These loans can help cover immediate expenses such as Inheritance Tax, legal fees or property maintenance while waiting for the estate to be settled. But how quickly can you secure an executor loan? Let’s break it down…

How long does it take to get approved?

The timeline for securing an executor loan largely depends on the lender and how quickly you can provide the required documentation.

Most lenders can assess and approve applications within 48 hours once all necessary documents are submitted. Required documents usually include:

• The death certificate of the deceased.

• A valid will identifying you as the executor.

• An estate valuation showing the assets and liabilities of the estate.

Some lenders offer faster services for simpler estates, enabling quicker approvals.

How fast do you get your funds?

Once approved, funds are generally disbursed within 7 days, allowing executors to address urgent estate related costs. In cases where the lender is experienced in probate lending or the estate is straightforward, funds might even be available sooner. The speed of disbursement depends on factors, such as:

• The lender’s internal processing times.

• How efficiently the estate’s financial and legal information is verified.

Delays often occur when required documents are missing or incomplete. Double-checking that you have all the necessary paperwork can save time. Estates with straightforward assets, such as single property and clear beneficiaries, are processed faster than those involving multiple properties, business interests, or disputed wills

Why should speed matter?

Executor loans are designed to address time-sensitive financial challenges, making speed a vital factor for many executors. These loans can help with pressing issues such as:

• Paying Inheritance Tax: HMRC requires Inheritance Tax to be paid within six months of the date of death, regardless of whether probate is complete. Delays can result in penalties and interest charges, adding financial strain to an already difficult situation.

• Covering property maintenance costs: Properties within the estate may need immediate attention, such as repairs, utility payments, or insurance premiums, to maintain their value and insurability. 

• Managing funeral expenses: Funeral costs often arise long before the estate’s funds become accessible, leaving executors to cover these expenses upfront.

By securing funds quickly, executor loans provide a practical solution to those challenges, ensuring the estate is managed efficiently without unnecessary delays. 

More importantly, quick access to funds can alleviate the emotional and financial stress that often accompanies the probate process, allowing executors to focus on their responsibilities during a challenging time.

Why is a cash buyer beneficial for executors loans?

Using a cash buyer can be a massive advantage for an executor managing the financial and logistical challenges of an estate, particularly when an executor loan is involved. This is mainly because a cash buyer can help you line up the sale of the inherited property on the day that probate is granted, where the funds could then be redistributed to pay off the executor loan. 

Unlike if you found a buyer on the open market, here at The Property Buying Company, we can line up the sale of your property with the same day as probate has been granted (provided that you had enquired at least 7 days before it was granted). 

We do not rely on third party financing for our property purchases, and instead, we have a multi-million pound cash reserve, which means we can buy when you are ready to sell. We understand that executors need reliable timelines when managing loan repayment and distributing estate assets. Our secure sale helps avoid financial stress and reduces the risk of loan default.

Ready to line up a buyer for a probate property? Simply fill out your postcode below…