A legacy as loan security?

Holmey101

My ex father in law passed away 3 months ago leaving his estate, (less 1 x £5k legacy to somebody else), to my 2 adult daughters, the estate being substantial, with over £100k in his current account, a mortgage free house valued shortly before he died at over £150k and several hundred thousand £ in shares.

Both my daughters are single parents who's finances have been badly effected by COVID along with additional expenses they have incurred since their grandfather died relating to sorting out his estate and have asked me if I know of any way they could raise a bridging loan until probate is granted using the legacy/will as security. 

I've no idea, so I'm asking here...

Regards,

Holmey

sheramber

Who is executor?

Executor’s expenses incurred in the course of their duties can be charged to the estate.

Holmey101

sheramber said:

Who is executor?

Executor’s expenses incurred in the course of their duties can be charged to the estate.

They are joint executors.

naedanger

Have they spoken to either their own banks or the bank that is holding £100,000 to see if they will offer them a loan.

They say that they have expenses from sorting out the estate. They should speak to the bank holding over £100,000 to see if they will pay these bills directly from frozen account.

Sea_Shell

If they are equal joint beneficiaries of the residual estate, and there is £100k in cash, can they not agree to give themselves a small advance on the inheritance, fully documented of say £5-£10k each to tide them over?

Even after any IHT is payable (if applicable) on the whole estate, surely that's going to leave plenty of cash available for distribution?

What's a ball park figure for the whole estate including the "several hundred thousand of shares?

*Edit* - Is the £100k in just one account, or spread about a bit.    I realise that you're going to need to wait for probate to sort the whole thing out properly, but are you able to get any money out of any of his accounts with just the death certificate?

Holmey101

"If they are equal joint beneficiaries of the residual estate, and there is £100k in cash, can they not agree to give themselves a small advance on the inheritance, fully documented of say £5-£10k each to tide them over?"

That's what they are looking for, £5k each would be more than enough to tide them over.

"What's a ball park figure for the whole estate including the "several hundred thousand of shares?"

Around £1 million in total.

"Is the £100k in just one account, or spread about a bit.    I realise that you're going to need to wait for probate to sort the whole thing out properly, but are you able to get any money out of any of his accounts with just the death certificate?"

The £100k is in 1 current account, but that's been frozen once the bank was notified that he's died.

Basically, the main question is, if they were to approach their own banks and explain the situation, (that once probate is granted and everything sorted out they are going to inherit several hundred thousand pounds each), and they are able to back that up with a letter from the solicitors dealing with probate confirming this, would that bank be likely to accept this as security for a loan that in the circumstances is a small amount considering the amount of inheritance due to them?

Regards,

Holmey

naedanger

Holmey101 said:

Basically, the main question is, if they were to approach their own banks and explain the situation, (that once probate is granted and everything sorted out they are going to inherit several hundred thousand pounds each), and they are able to back that up with a letter from the solicitors dealing with probate confirming this, would that bank be likely to accept this as security for a loan that in the circumstances is a small amount considering the amount of inheritance due to them?

I would have certainly thought so. The bank might even be interested that they could be good future customers with that sort of money. If I was in a similar position and the bank refused to lend I would not be happy with them. And risk to the bank seems extremely low.(The loan may be unsecured if it is technically not possible to use the estate as security prior to probate. However unsecured loans are still a common form of bank lending.)

Also the bank that holds the frozen £100k might be willing to lend them the money as well.

xylophone

It should be possible to use the £100,000 in cash to pay off part of the IHT under the Direct Payments Scheme ?

https://www.gov.uk/paying-inheritance-tax/deceaseds-bank-account

This may be regarded as an instalment payment so that probate can be granted?

Have your daughters checked on whether there was any transferable nil rate band (from a late wife of FiL) to set against the value of his estate?

https://www.gov.uk/paying-inheritance-tax/yearly-instalments#:~:text=You can pay your Inheritance,want to pay in instalments.&text=You must pay the tax,as their house or shares.

If all else fails ask the bank holding the cash for a bridging loan?

Brynsam

Starting point is to talk to their own banks and/or the bank where the current account is held for your ex FIL.

Would renting out his house in the short term be a possibility to bring in some income/keep down the costs of heating etc, especially during winter?