Heirs or beneficiaries of a probate estate may receive unsolicited mailings or other advertisements offering to provide cash advances, purchase property interests, or other services. Some advertisements use information gleaned from public court records or mimic formatting similar to official documents to persuade the public to contact the company and to lend the advertisement a level of officialness. Before calling these marketers, heirs or beneficiaries may want to understand why they have been targeted and how these companies may seek to profit from them.
What is this notice and why did I receive it?
For all estates initiating probate proceedings in Washington, the party petitioning the court to start the probate must list the heirs and beneficiaries with their mailing addresses in the petition. This information is publicly available from the court clerk and can be obtained by any person or entity. Certain companies, such as short-term lenders (i.e., pay day loans), real estate investors and brokers, etc., may use this information to target marketing communications to probate heirs or beneficiaries soliciting the sale (often at a significant discount) or use of their inheritance or bequest as collateral for an advance (some companies specify that they will advance up to one-third but do not specify what their “fee” will be). Real estate investors may even solicit an heir or beneficiary to sell their interest in real property owned by the probate estate and usually at a discount.
Why would a person sell or mortgage their inheritance at a discount?
A primary reason these advertisements work is by appealing to people’s desire for money now without waiting for the probate process to finish, which can typically take up to six months or longer. As a hypothetical example, let us say Child A will inherit one-half of their deceased parent’s estate under the probated Will. However, because the probate process requires the personal representative/executor to marshal all assets of the estate and satisfy all legitimately filed creditor claims before distributing to heirs or beneficiaries, the amount of time from being notified that Child A will inherit something to receiving their actual distribution of the estate may be a year or possibly longer depending on the complexity of the estate.
Next, assume Child A needs money sooner rather than later (e.g., to buy a house, new car, vacation, etc.), and receives an unsolicited mailing saying they can get money now for their inheritance. Child A contacts the cash advance company, who after requesting a copy of the Will and a verified inventory of assets and liabilities of the probate estate makes a cash advance offer to Child A. (NOTE: An heir or beneficiary of a probate estate usually may request a copy of both the probated Will, if any, and a copy of the estate’s asset and liability inventory from the personal representative, executor, or administrator).
Next, assume the cash advance company will advance up to one-third of Child A’s inheritance but will charge a relatively high percentage of the overall inheritance as the company’s fee. Child A decides to take the cash advance offer now and pay the fee whenever the inheritance comes. The cash advance company typically has a very good idea of what it will be paid based on the information Child A provided. Also, if the cash advance company has to wait one year or longer before making its principal loan amount back and percentage-based fee, this would still be a very good investment, especially considering interest rates are at historic lows. Thus, because Child A decided not to wait, they gave up a percentage of their inheritance for the convenience of receiving a portion of their inheritance now.
A similar but more lucrative situation may occur for real estate interests. This is because real estate investors can link a decedent with county real property tax assessment public records and determine what properties the probate estate will likely sell. Continuing to use the hypothetical Child A, who would now also inherit a one-half interest in a house that would have to be sold, a real estate investor may contact Child A and ask if they would like to sell their interest for a specific amount. The investor already may have an idea of how much the house will sell for after obtaining a Comparative Market Analysis of similar houses that have recently sold in the same neighborhood. Thus, Child A may be selling their real estate interest for pennies on the dollar if they are ignorant of the local housing market and opt to take the investor’s offer.
What can a person do instead?
It is usually best to obtain as much information as possible before making a decision. Talk to whoever is administering the probate estate and get all the facts available. A personal representative, executor, or administrator has a duty to settle the probate estate and are the best person to know what needs to be done before distributions are made. Also, if they have completed an estate inventory and appraisement by the time an heir or beneficiary speak to them, they may be able to provide a better understanding of what an inheritance share could be. Depending on the specific situation, other creative solutions may be possible.
Speak with a knowledgeable probate attorney to understand what legal options are available to you.
If you have questions regarding a future inheritance and would like to speak with an experienced probate attorney, please contact any of our Probate Administration attorneys, or call our office at 206-624-6271.
