Recently I came into some inheritance money via death of a relative. The catch is the way the fund is set up I cannot access the money until i am 30 years of age (now 25 years old) so i will not be able to see the money for another five years.
I have looked for information online but the information provided is pretty murky and never really says how the process works and or how much interest will be added to the loan.
so basically… how does all this work? will i get a loan on money i cannot access for 5 years? what is the interest cost on such a loan.
well i inherited 110k. at age 30 i have access to 24k. at age 40 i have access to the remainder which both are sitting in savings and investments funds until i decide what i want to do with them.
i plan on keeping them where they are for the future. but i have car issues i need to have fixed so i can have a dependable car to get to and from work.
i am not looking to hand sign over my entire fund i just want a chunk that i can pay off later.
Suppose you stand to inherit $50,000. A cash advance is where they give you $35K now and in five years they take the $50,000. A loan is where they give you $50K now and charge you interest up the wazoo. Then in five years you give them the $50K plus interest.
They’re hoping you want it now badly enough to accept them grabbing as big a cut as they can get away with. Talk to a financial advisor, because anyone who offers you a cash advance or a loan is hoping you are either desperate or dumb.
IANAFinancialExpert. Borrow the money, but do not go to anyone who talks about cash advances or settlements. Disclose that you have $24K coming in five years, so you will probably get a better interest rate. Go to your bank or a credit union.
Obviously the reason the inheritance is set up this way is because a 25 year old is not considered financially responsible versus a 40 year old, and the concern is that you would blow all the money right away. While I understand that your only immediate need for the cash is that you need it to fix your car, the easy solution is to take a loan for the minimum amount you need and use that future inheritance as collateral. In other words, don’t take the loan against the 24K, but rather the $2,000 you need for the repairs (or whatever it is). And try to pay it back before you turn 30.
One obvious place to go for that loan is the institution that is holding the money for you as they are the ones that can most easily validate that the money is there. I would then shop around and call other banks and credit unions you are eligible to join and see if they can give a lower interest rate or more favorable payment terms (whichever is more important to you). I suspect that money was broken up that way as it’s designed to be for a downpayment on a house when you are 30, and to help pay for your kid’s college or other life issues when you are 40 (or possibly to pay off the rest of your house at that point).
What does the trust document say? If the relative didn’t want you to have the money for five years, the trust instrument probably has language that does not allow you to use the trust as collateral.
As a less-than-desirable member of the credit world, allow me to say:
Sell your first born before going to people who do “advances”.
Fark had an entry re a $400 “payday loan” which was paid off, IIRC after x years and 8 THOUSAND dollars.
If you think a 20% APR credit card is expensive, you do not want to read the fine print on “advances”.
Note: Yes, I know some tax preparers will loan on anticipated refunds - those are not what we are talking about.
The rules for such loans are generally regulated at the state level - some states allow only so much blood, others places allow them to suck you dry.
Start with the folks holding the trust - as mentioned, it is highly likely that the terms will not allow you to even use it as collateral. For enforcement, the testator (person whose will created the trust) may have specified that your attempt to borrow on it disqualifies you from ever getting a cent.
If you CAN use it as collateral, deal only with real banks not “Payday Loan” places.
Here is the other thing to consider regarding advances on inheritance/annuities - the longer the company has to wait to collect, the higher the interest/fee. Five years is a pretty long wait for a return on their investment, I would expect they would only offer you between 60% to 75% of the face value.
ETA - As bizerta said, inheritance funds are different than an annuity. According to the will, what happens to the fund if you die? Does it go to your estate or is it redistributed among the remaining survivors? A cash advance or loan against those funds may not even be possible. It almost certainly is not wise.
t-bonham@scc.net, let’s refrain from personal remarks about other posters (especially if you can’t manage to spell the word “the” correctly yourself - a nice illustration of Gaudere’s Rule.;)) No warning issued, but there’s no need to be insulting.
If you’re in work, you really should be able to get a modest loan to keep a functional car on the road without having to mortgage your inheritance. Can you not service a loan of that size out of your earnings?
If you borrow against your expected inheritance on the understanding that you pay back principal plus interest when your inheritance comes through, you will pay five years interest on the whole amount of the principal. That will be much, much more than the interest you would pay if you clear the loan by instalments over, say, two years, which (unless you have a really badly-paying job, or want to pay much more for your car than you need to) should be easily doable.
The fact that you have 24k coming to you in five years time should give the lender some comfort. But you should definitely not be looking to the 24k to repay your car loan; that would be a much, much more expensive deal that you need.
If you ever had a Student Loan of the 4 year college variety, you know what deferred interest looks like - that loan for the first year is real expensive by the time it becomes payable.
Can you trade the car for a cheaper (working) one which will last long enough to get you to that first disbursement?
I am not a lawyer, but I have created a couple of trusts for my family and am a trustee for a few other trusts. But I am just some guy on the internet, so take everything I write with a grain of salt.
If the money is in a trust, the trust might have language permitting you to request some of the funds at the discretion of the trustee. If you have a legitimate need for the funds (say repairing your car so you can get to work or school, or you need the money for your education), you may be able to persuade the trustee to make a payment. The trustee may prefer to pay the funds to the car repair place or school or wherever directly, rather than simply advancing you the funds directly.
You should ask the trustee for a copy of the trust, and for an accounting of the trust at regular intervals. They might not be required to comply, but they may do so anyways. The trust may have language that requires a periodic accounting upon the beneficiary’s request (you = beneficiary).
If the trustee is a family member, and if they won’t give you a copy of the trust or tell you that you can’t have any of the money, try to find out who the lawyer was who set up the trust and find out if you can confirm that what the trustee is saying is correct. Sometimes if the trustee is a family member, they may not understand the trust document correctly or in full, so you might not want to take just their word for what the trust says.
There are places that will give you an advance loan against such funds, but remember, they only do it because the make a large profit doing so, and that profit comes straight out of money that would otherwise go to you.
Here’s a silly thought. Why don’t you try learning to become responsible with whatever income you have right now, instead of frittering away whatever fortune you have coming to you? The laws protecting your trust fund are there for a reason – five years may seem like forever now, but trust me, once you grow up you will be glad that you waited.
(And yes, mods, this is entirely germane to the discussion, IMHO.)