The loss of a loved one leads to a grief process that can take months, if not longer, to resolve. While most people are aware of this protracted emotional journey, many are unpleasantly surprised when they learn that the probate process can take just as long – if not longer. After probate is granted in Canada, it commonly takes between six and 12 months to settle an estate.
However, various factors can push this period into a second year. Estates vary in complexity, and questions about everything from provincial jurisdiction to the process of gaining a tax clearance certificate from the Canada Revenue Agency all play a role. If heirs get into disputes about the terms of the will, litigation can tie up the process even longer.
That sounds like a long time – I saw online that it should only take six to eight weeks. What’s the deal?
There are two main parts of the probate process in Canada: the official court schedule (six to eight weeks), followed by full settlement of the estate (four to ten months). Some online sources only take the first part of the process into account. However, this only refers to the issuing of the Certificate of Appointment of Estate Trustee by the court. After that, the settlement process begins.
Here’s a quick overview of the probate timeline in Canada:
- Filing the application (1-2 weeks). This involves collecting such needed documents as the death certificate, will, and listing of assets and liabilities. This begins the court process.
- Court processing (6-8 weeks). The court reviews the initial paperwork but may need more information to move toward appointing the executor. This time frame can also take longer, depending on the jurisdiction. Cases in busy urban jurisdictions can take three months or longer, depending on docket backlogs.
- Receiving the certificate (up to 2 weeks after court approval). If the executor gets to work valuing assets as soon as s/he receives the certificate, this can cut down on delays further down the line.
- Administering the estate (6-9 months). This includes such steps as identifying and valuing assets (typically up to 2 months, but can run longer if private business interests, artwork, and other assets exist that are difficult to value). Other steps include paying taxes and debts (2-3 months, depending on the time that creditors take to come forward and demand payment). The last state involves distributing assets to heirs (1-2 months). This last phase can take more time if the distribution process is particularly complicated.
While the probate process grinds on, the heirs may need access to at least some of the proceeds shortly after the loss of their loved one. In Canada, the costs of funerals are significant – a simple cremation can run between $2,000 and $5,000. A traditional funeral can cost between $9,000 and $20,000, and that’s before acquiring cemetery property. While many people include those costs in their wills, the amount of time that it takes to distribute that money is much longer than people generally want to wait to bury their loved ones. Some people pre-pay their funeral expenses to avoid that difficulty, but there are many other cases where the costs of moving on mean that some sort of inheritance funding is necessary.
In cases like this, inheritance advances or probate loans are available financial products. Both of these have advantages and drawbacks that we will discuss further in other articles. In the meantime, here are some basic facts about both of these options.
An inheritance advance involves selling part of your inheritance for cash up front. This is not a loan; as a result, you do not have to go through a personal application process that would involve analysis of your income and credit score.
Instead, the potential lender evaluates the estate and decides whether or not you qualify for a right to inheritance. Once they verify that you have a right to part of the estate, they will offer you a lump sum for part of your inheritance. For instance, if you are eligible for $100,000 out of the estate, they might offer you $40,000 now for $50,000 of your share once it’s distributed. You receive the cash immediately, and once probate settles, the company receives its payment directly. The $10,000 that you are giving up is the price of immediate funding (instead of having to wait months, if not longer, for the distribution). The size of this premium may vary, depending on the risk that the lending company considers part of the process.
A probate loan generally comes from a private or “hard money” lending source as many traditional banks and credit unions do not make this type of loan. Instead of selling part of your inheritance, you’re using some or all of your inheritance as collateral for a loan. You have to go through a due diligence process that involves income verification and credit score checks. In this case, the lender considers both the estate paperwork and your personal credit background to determine whether or not to approve your application – and to set an interest rate. Upon qualification, you receive the funding and begin making monthly payments, with interest. Depending on the terms of the loan, you will continue to make monthly payments until the loan is satisfied, or you will make one larger payment at probate settlement once you receive your distribution from the estate to bring the principal down to zero.
At Amansad Financial, we have experts ready to help you navigate the differences between probate loans and inheritance advances so that you can make the right decision for yourself and your family. Our representatives are not only well-informed in terms of legal requirements but also aware of the difficult emotions that are part of the grieving process. Reach out today to start talking about the best funding products for your needs.