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Probate Funding: A Useful Option for So Many (Part 2 of 4)

By John Freund |

The following is Part 2 of our 4-Part series on Probate Funding by Steven D. Schroeder, Esq., General Counsel/Sr. Vice President at Inheritance Funding Company, Inc. since 2004. Part 1 can be found here.

Comparing Assignments with Loans: Apples Are Not Oranges

As previously stated, there has been some recent criticism of the companies engaged in Probate funding.[1] An Article entitled: “Probate Lending” started and ended with the premise that Probate Assignments are in fact disguised loans and should be regulated as such. Despite the predetermined conclusion by one author, in fact, the law treats Assignments and Loans quite differently and those distinctions are significant.[2]

  1. What is an Assignment?

An Assignment is a term that may comprehensively cover the transfer of legal title to any kind of property. Commercial Discount Co. v. Cowen (1941) 18 Cal. 2d 601, 614; see also In re: Kling (1919) 44 Cal. App. 267, 270, 186 P. 152. When valid consideration is given, the Assignee acquires no greater rights or title than what is assigned. In other words, the Assignee steps in the shoes of the Assignor’s rights, subject to any defenses that an obligor may have against Assignor, prior to Notice of Assignment. See Parker v. Funk (1921) 185 Cal. 347, 352, 197 P. 83.  See also Cal. Civil Code §1459; Cal. Code of Civil Procedure §369.

An Assignment may be oral or written and no special form is necessary provided that the transfer is clearly intended as a present assignment of interest by the Assignor. If only a part of the Assignor’s interest is transferred, it may nevertheless be enforced as an equitable Assignment. See McDaniel v. Maxwell, (1891) 21 Or. 202, 205, 27 P. 952.

It has been held that any expectancy may be assigned or renounced. See Prudential Ins. Co. of America v. Broadhurst 157 Cal. App. 2d 375, 321 P. 2d 75. Similarly, a beneficiary may assign or otherwise transfer his or her interest in an Estate prior to distribution. See Gold et. al., Cal Civil Practice: Probate and Trust Proceedings (2005) §3:86, p. 3-78. Probate Assignments are those taken prior to the completion of probate administration for which an heir/beneficiary transfers a portion of his/her expected inheritance in the estate in consideration of a cash advance (i.e. the purchase price).

  1. What is a loan?

A loan agreement is a contract between a borrower and a lender which governs the mutual promises made by each party. There are many types of loan agreements, including but not limited to: “home loans”, “equity loans”, “car loans”, “mortgage loan facilities agreements”, “revolvers”, “term loans” and “working capital loans” just to name a few.

In contrast to Assignments, loans do not transfer legal title and instead are contracts in which the borrower pays back money at a later date, together with accrued interest to the lender. A loan creates a debtor and creditor relationship that is not terminated until the sum borrowed plus the agreed upon interest is paid in full. Milana v. Credit Discount Co. (1945) 27 Cal. 2d 335, 163 P.2d.869. In order to constitute a loan, there must be a contract whereby the lender transfers a sum of money which the borrower agrees to repay absolutely; together with such additional sums as may be agreed upon for its use.[3]

The nature of a loan transaction, can be inferred from its objective characteristics. Such indicia include: presence or absence of debt instruments, collateral, interest provisions, repayment schedules or deadlines, book entries recording loan balances or interest, payments and any other attributes indicative of an enforceable obligation to repay the sums advance. Id, citing Fin Hay Realty Co. v. United States 398, F.2d 694, 696 (3d Circ. 1968).

Also, unlike Assignments, lenders typically insist upon several credit worthy factors prior to funding. For example, the “borrower” makes representations about his/her character including creditworthiness, cash flow and any collateral that he/she may pledge as security for a loan. These creditworthy representations are taken into consideration because the lender needs to determine under what terms, if any, they are prepared to loan money and whether the borrower has the wherewithal to pay it back, generally within a certain time frame.

In cases of Probate Assignments, an Advance Company rarely considers creditworthiness of the Assignee, because it is not he/she who is responsible to satisfy the obligation. That obligation falls upon the Estate or Trust fiduciary. In addition, Probate Assignments cannot be deemed to be a loan if the return is contingent on the happening of some future event, (i.e. Final Distribution). Altman v. Altman (Ch. 1950) 8 N.J. Super.301, 72 A.2d 536., Arneill Ranch v. Petit 64 Cal. App. 3d, 277, 134 Cal. Rptr. 456, 461-463 (Cal. Ct. App. 1976).  True Probate Assignments, executed in consideration of an advance, have no time limit for payment, nor do they accrue interest post-funding. Furthermore, an assignee is not required to make periodic interest payments and in the vast majority of cases no payment at all. Moreover, although loans are often secured against real property, Assignments in Probate should not be secured. Estate Property is generally not owned or distributed to the heir at the time the Assignment is executed.

A critical distinction between Probate Assignments and loans, is that when an Assignment is executed, there is no unconditional obligation that the Assigned amount be paid and/or when it might be paid. Once assigned, the Assignor owes no further obligation to the Assignee over those rights sold/assigned. And, the Assignee has no recourse against the Assignee/Heir should the heir’s distributive share be less that what he/she assigns. In other words, to “constitute [a] true loan [] there must have been, at the time the funds were transferred, an unconditional obligation on the part of the transferee to repay the money, and an unconditional intention on the part of the transferor to secure repayment.”  Geftman v. Comm’r 154 F3rd 61, 68 (3d Cir. 1998) quoting Haag v. Comm’r 88.T.C. 604, 615-16, 1987 WL 49288 aff’d 855 F. 2d 855 (8th Cir. 1987).

Many jurisdictions in addition to California, recognize that the absolute right to repayment or some form of security for the debt as the defining characteristics of loan.[4] While the structure and elements slightly vary, the following is a side by side comparison of some of the basic distinctions of loans and Assignments in Probate Funding:

Tenor: This is the time limit for repaying the loan as well as the interest rate charge.Tenor: No time limit for payment. No interest accrues.
Obligor on the Assignment: The Borrower is contractually obligated to repay.Assignee on the Assignment: Assignee/Heir does not pay anythingA third party (i.e. administrator pays the Assignment.
Recourse: The Borrower is unconditionally obligated.Recourse: In absence of fraud, the Assignee has no recourse should his interest be less than what is assigned or even $0.00.
Interest Payment and Capitalization: The interest rate charge for the loan and time limit for interest payment. It also stipulates conditions under which unpaid Interest will be added to the outstanding loans.Interest Payment and Capitalization: Interest does not accrue post funding and the Assignment is fixed.
Penalties: Late payments are typically subject to penalties and/or trigger default.Penalties: No payments are due.  No Default deadlines for payment imposed on Assignee/Heir.
Creditworthiness: Essential for approvalCreditworthiness: Not essential
Default: Foreclosure is an option; a borrower could bear default.Default: No penalty no matter when Assignment is paid. Assignments are not secured. Foreclosure is not an option.

Moreover, given the uncertain time frame for recovery and absence of recourse against the Assignee/Heir, it would be impossible to assign an interest rate or make a Truth in Lending (“TILA”) disclosure, 15 U.S.C. §1601 (2012). Since the purpose of the TILA is to assure meaningful disclosure, the simplicity of an Assignment eliminates any necessity of making interest rate disclosures as required by interest bearing loans. When the Assignor sells a portion of his/her interest for a fixed sum Assignment, what additional disclosures are necessary?

In short, there are many significant differences between Probate Assignments and Loans. Courts and Legislatures throughout the country have recognized these distinctions and have considered them when regulating or providing necessary review over either product.

Stay tuned for Part 3 of our 4-Part series, where we discuss California’s regulation of Probate Funding, and how such regulation can serve as a model for other jurisdictions.

Steven D. Schroeder has been General Counsel/Sr. Vice President at Inheritance Funding Company, Inc. since 2004. Active Attorney in good standing, licensed to practice before all Courts in the State of California since 1985 and a Registered Attorney with the U.S. Patent and Trademark Office. 


[1]  David Horton and Andrea Chandrasenkher, supra (2016) 126 Yale 105-107.  Professors Horton and Chandrasekher analogized Litigation Funding to the ancient doctrine of champerty even though acknowledging California has never recognized the doctrine, See e.g. Mathewson v. Fitch, 22 Cal. 86, 95 (1863).

[2] The conclusions in Probate Lending were debunked, by Jeremy Kidd, Ph.D. Associate Professor of Law, Mercer, Probate Funding and the Litigation Funding Debate, See Wealth Strategies Journal, August 14, 2017.

[3] 47 C.J.S. Interest and Usury; Consumer Credit Section 123 (1982).

[4] See In re Nelson’s Estate (1930) 211, Iowa 168; Dobb v. Yari, (NJ 1996), 927 F. Supp 814; Turcotte v. Trevino (1976) 544, S.W. 2d 463; quoting.47 C.J,S. Interest and Usury; Consumer Credit Section 123 (1982); Turcotte v. Trevino 544 S.W.2d 463 (1976), Cherokee Funding, LLC v. Ruth (2017) A17A0132; “…New York recognizes the absolute right of repayment or some form of security for the debt as the defining characteristic of a loan.   Its courts have explicitly stated that ‘[f]or a true loan it is essential to provide for repayment absolutely and all events or principal in some way to be secured…’ MoneyForLawsuits VLP v. Row No. 4:10-CV-11537]. Thus, a transaction that neither guarantees the lender an absolute right to repayment nor provides it with security for the debt is not a loan, and as a result, cannot be subject to New York’s usury laws…”   (emphasis added). “…In Brewer v. Brewer, 386 Md. 183, 196-197 (2005), the Court of Appeals held that “redistribution agreements are permissible and, so long as they comply with the requirements of basis contract law, neither the personal representative nor the court has any authority to disapprove or veto them.  See also In re: Garcelon’s Estate 38 P. 414, 415 (Cal. 1894), Haydon v. Eldred, 21 S. W.457, 458 (Ky 1929). See Massey vs. Inheritance Funding Company, Inc. Court of Appeals, 7th Dist (TX), 07-16-00148-CV.

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Legal-Bay Pre-Settlement Funding Announces Funding for Fireworks Injuries and Building Explosions

By Harry Moran |

Legal-Bay LLC, the premier Pre Settlement Funding Company, reports that they are seeing an uptick in lawsuits against negligent pyrotechnicians and residential homeowners in the wake of the 4th of July holiday. Fireworks injuries and property damages join the escalating lawsuits that have been filed due to building explosions at gas stations, chemical plants, and oil refineries, falling under such categories as worker's comp, premises liability, personal injury, wrongful death, and beyond.  

Explosion lawsuits are filed more often than one would think. Whether in a place of business or a residential property, danger lurks for victims of others' negligence. Accidental gas leaks or faulty propane tanks are probably the most well-known type of house or building explosion, but sometimes, negligent installation by inexperienced workers or business owners looking to cut corners can lead to disaster. Likewise, if a person is injured or their property is damaged by fireworks—whether from a professional show or a neighbor's backyard—they are entitled to compensation.

Explosion payouts obviously vary depending on the severity of the damage caused and extent of injuries. Just last year, for example, a New Jersey man who suffered severe burns from an explosion while working on an electrical panel in 2019 sued his employer for gross negligence. The man was instructed to work on the electric panel even though he was not a licensed electrician. The resulting explosion inflicted burns over half of his body, requiring over 100 surgeries and a lifetime of future care. He was awarded $28MM for pain, suffering, and loss of ability to earn a salary.

Chris Janish, CEO of Legal-Bay, commented, "Extreme explosions can result in chemical burns, broken bones, and sometimes even death, not to mention the environmental impact and property damage that can occur. Legal Bay stands at the ready to assist victims of any type of explosion get the money they have coming to them."If you or a loved one was seriously injured or killed in an explosion, you may have grounds for a lawsuit. To apply for a cash advance lawsuit loan from your anticipated lawsuit settlement, please visit the company's website HERE or call 877.571.0405 where agents are standing by to hear about your specific case. 

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Legal-Bay Lawsuit Funding Announces Increased Commitment to Product Liability Funding

By John Freund |

Legal-Bay LLC, The Lawsuit Pre Settlement Funding Company, announced today their newfound focus on product liability claims for plaintiffs and lawyers involved in ongoing mass tort litigations. Due to increasing product liability lawsuit loan requests, Legal-Bay has committed more capital to secure even more specialized lawsuit funding for the law firms and plaintiffs out there with product liability cases due to their complex and time-consuming nature.

Legal-Bay's knowledge of product liability lawsuits and experience with mass tort litigations for various products and defective products makes them the leading lawsuit funding firm to call for a complex product defect case involving defective products or product rejection. This experience, as well as Legal-Bay's overall capital, gives them the reputation of the best lawsuit funding firm that exists today.

The lawsuit loan company's team of experts studies each national litigation, often leading the legal funding industry on which cases to begin funding. Many other lawsuit loan companies and lawsuit cash advance places and loan companies do not fund these types of cases due to the complex and time-consuming nature. However, this is just part of why Legal-Bay remains so committed to helping people who have suffered as a result of a defective surgical product or medical device gone wrong, including those that migrate in the body or cause other long-term damage.

If you are wondering what to do when a large corporation will fight your case or if a large corporation or company is fighting your claim, don't hesitate to contact Legal-Bay today. To learn more about product liability lawsuit funding, product liability lawsuit claim loans, product liability lawsuit money, or defective product settlement funding amounts, please visit our new product liability funding site, at: 

Currently, Legal-Bay is expanding their product liability wing as they review various product liability cases and product liability class action suits with national law firms for legal funding options.

Below is a list of just some of the product liability mass tort cases that Legal-Bay's team is actively monitoring or has funded in the past:

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Legal-Bay is currently reviewing and assessing case worth or proposed settlement amounts for many other bad products or defective products not listed above.

Chris Janish, CEO commented on today's announcement, "Legal-Bay has been built on product liability funding.  We are the leading and best mass tort funding company in the country, in my sincere opinion.  We work with the top lawyers on each specific litigation, and see cases and litigations from start to finish.  We are a guiding light for many victims who may need guidance on a product liability attorney to choose, and funding for surgical needs due to defective product or legal funding just to pay bills.  We do it all and take substantial risk—unlike most other litigation finance companies—to help our clients and law firms alike." 

To learn more, or to receive a free case evaluation on your bad product claim or defective product suit claim, or if you are looking for a product liability lawyer or product liability law firm please visit Legal-Bay's new website built for these types of claims at: 

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Level Acquires Tower Street Finance to Target Probate Lending Sector

By John Freund |

An article in ETF Express covers the announcement from Level, a family law and private client lender, that it has acquired Tower Street Finance in order to expand its presence in the probate lending sector. Level’s acquisition strategy is reportedly being guided by the growth in activity around probate lending, which is being fuelled by processing delays and individuals’ demand for third-party capital amid a difficult economic climate.

Commenting on the acquisition, Level’s founder and CEO, George Williamson said: “Tower Street Finance have been the standout market leader since pioneering the probate market in 2020, while Level has done the same in the family law market.  By combining Tower Street Finance’s unparalleled expertise and network in the probate market with our platform and trusted reputation, we have a significant advantage over our competitors.”

Jim Sission, co-founder of Tower Street Finance, will be joining Level alongside two of his employees. Sission said that the acquisition by Level brings together the two company’s expertise across family law and probate lending, and will create “a best-in-class platform for legal funding.”

In addition to the acquisition, Level also announced that it had secured another £10 million in outside investment, comprised of a £5 million equity capital investment from Kendal Capital and £5 million debt investment from Correlation Risk Partners. Kendal Capital’s CEO and co-founder, Grant Kurland will be joining Level’s board of advisers, which already includes notable industry names such as Neil Purslow, CIO of Therium Capital. Kurland said that “the combination of Level & TSF is well placed to capitalise on their respective market leading positions in the family and probate sectors.”