Tackling the funding gap in estate administration

Founded in 2020 Provira is one of a handful of FCA-regulated organisations offering inheritance and estate lending services to cover inheritance tax and estate costs. 

In this latest Today's Wills and Probate Podcast episode host David Opie speaks with John Sanderson, Director of Partnerships at Provira, about the growing role of inheritance and estate lending in the probate process, exploring the reasons for increasing demand and how they work in practice both for consumers and probate professionals. 

Although still in its infancy as a sector, inheritance and estate lending has rapidly become a recognised solution to the cashflow problems that frequently arise during estate administration, with lenders like Provira offering beneficiaries access to up to 50% of their expected inheritance either before or after probate is granted. These funds can be released within days and can be used for almost any purpose, from clearing debts to meeting living or care costs. Another option is to borrow against the estate to meet estate liabilities, most commonly inheritance tax, but also other administration costs such as legal fees, surveyors’ fees or property renovation to enhance sale value.

Rising house prices combined with the long‑term freeze of the inheritance tax nil‑rate band have led to more estates incurring tax liabilities. At the same time, many estates are asset‑rich but cash‑poor, with value tied up in property and investments that cannot easily be accessed before probate. This creates a funding gap at a critical moment, particularly given the timing of IHT payments, which is driving interest and demand for lending services explains Sanderson. 

The Today's Wills and Probate podcast is available on your preferred podcast provider, and at www.todayswillsandprobate.co.uk. Subscribe today to hear all the latest news and views across the wills and probate sector.

Thank you to our podcast sponsors LEAP Estates, Estate Research, Property Ladder Group and Finders International.

Transcript

SPEAKER_00 0:23

Let's connect to the today's World and Probate Podcast, one of the leading sources of information for the Wilson Probate sector. Don't forget to subscribe and sign up to our free newsletter at today's World and Probate.co.uk and follow us on LinkedIn and Twitter.

SPEAKER_02 0:46

Hello, welcome along to the latest Today's Worlds and Probate Podcast. Today we have John Sanderson, Director of Partnerships at Provera, on to discuss inheritance tax loans and I mean lending in general around later life opportunities and probate opportunities as well. Great to have you on the podcast, John. Thanks very much indeed for joining.

SPEAKER_01 1:12

Yeah, well thanks for inviting us, David.

SPEAKER_02 1:14

I said that uh Prevera are one of these uh lenders uh that have kind of uh started to pop up in this space around uh lending at a kind of a really difficult point in time for people, whether it's sort of probate or in in inheritance or or even sort of beneficiary loans. And you're going to explain some of the differences between uh those products in just a second. But maybe before we dive into all of that, tell us a little bit about yourself and your background, please, John.

SPEAKER_01 1:43

Sure, yeah. So as you said, I'm I'm Director of Partnerships here at Prevero. I'm responsible for growing and maintaining our introducer channels. These can be typically private client solicitors, independent financial advisors, finance brokers, sometimes accountants as well, speciality accountants who deal with probate. Been here about two years now, and previously had similar roles at a divorce litigation fund and a and a merchant bank.

SPEAKER_02 2:13

And I said at the outset that it'd probably be worthwhile setting the scene very quickly around the products and services that Prevera provide. Effectively, you are able to lend up to a percentage of the estate for the purposes of whether it's inheritance tax payments or estate payments, or even for people to uh get some of their money a little bit quicker because of all the issues that we've we've had with the probate office.

SPEAKER_01 2:44

Sure. So we have two core products here. One is inheritance advance that allows beneficiaries to access up to 50% of their inheritance pre or post-probate within days, essentially, really fast, getting the money out of the door if required. The second product is estate advance, and that's aimed at executors, and they also can access up to 50% of the estate value, and that is for any estate liabilities or costs that they wish to pay. Typically, that'll be inheritance tax, but it can be any other costs such as renovating a property. We've had people coming to us through that to increase its value. There could be some existing debts that they wish to pay off, or even legal fees, or surveyors, etc. So any expenses within the course of administering the estate can be covered by the estate advanced product. The way the products work is they went up to 50% of the estate value, interest accrues monthly, it's rolled up into the loan and is repayable upon the on the ones of sufficient liquidity in the estate.

SPEAKER_02 3:52

Who's making that valuation in terms of the value of the estate? Is that a Red Book valuation you're using?

SPEAKER_01 3:58

So we just look at all the documentation that's used in administering the estate typically. So any items which we are looking at, we'll, if it's a property, we'll want an independent valuation of it. We also have the ability to do some valuations ourselves of that nature, and then proof of any other assets such as a listed UK investments or bank statements. We operate in England, Scotland, and Wales currently. But yeah, just we just require the information that's typically to hand when you're administrating an estate.

SPEAKER_02 4:32

And how many monets have you found in the attic?

SPEAKER_01 4:35

So far, zero. Unfortunately, we we don't have the ability to value them, so we won't take them into account.

SPEAKER_02 4:40

I mean, clearly there is a growing marketplace for this. Prevera are one of a handful of providers in this space. Is it fair to say you're seeing an increase in demand for IHT and beneficiary loans?

SPEAKER_01 4:55

Yes, we've seen a huge increase in demand. We've gone through exponential growth in the last few years. I think that's down to a couple of things. First thing is there's been an increased awareness of this type of lending. Prevera was founded back in 2020. At that time, inheritance lending was pretty much unheard of in the UK. So over the over the last six years or so, we're still finding introducers that and customers that have not heard of this type of lending. So there is an ongoing kind of education awareness piece. So I think that's one factor that's driving increased demand. The the other one I would say is the increased value of estates. We're seeing far more estates than ever breaching nil rate thresholds and incurring an inheritance tax liability. That'd be down to, I don't say, over the last five years or so, house prices have solidly increased in most areas, and nil rate still remains at 325k, where it's been since I think 2009. Um, there was an increase to 500k if it's um a property going to direct descendants, but still that that doesn't touch the sides with a lot of estates. So, yeah, I'd say those are the two two main factors that I think is what is a reason for why there's an increased demand.

SPEAKER_02 6:14

Just before we started the recording, we were talking about the budget back in November. I mean, lots of conjecture about what might or or might not happen, but but certainly from our point of view as as private client professionals, that continued freeze of the nil rate band is having a massive impact on tax planning in general, isn't it? Or at least it should be. I mean, presumably what you're seeing is that people aren't simply preparing and therefore they are facing liability for AHT.

SPEAKER_01 6:53

So I can't I couldn't comment on that. All I can say is that there's there is still a lot of finding themselves with large inheritance tax bills.

SPEAKER_02 6:59

I think one of the things that I think about, particularly with the uh the estate loan, where you're able to effectively take an advance on whatever your inheritance might be. To me, that feels as though people are impatient, you know, surely this is something that they could be waiting for, or is it the case that people simply don't have the liquidity to cover estate costs?

SPEAKER_01 7:29

Yeah, so with our estate advanced product, which is that's said most commonly used for inheritance tax, it is a means to an end. As you know, probate can only be granted once some or all of the tax liability has been paid. So in that scenario, it's a means to an end. They they they don't have the liquidity, they may not want to take out a loan themselves and a personal loan for obvious reasons. So, yeah, so that there's no issue with impatience in that scenario, with our inheritance advanced product, where the beneficiary can get the money advanced for any any reason whatsoever. That that can there can be an element of impatience with that. They may want to pay off existing debts and pay for medical treatment or care. So I guess that's that's fine. We we do have the odd one where they just want to go on holiday to the Seychelles or buy a new car. So I'd say that's but that is impatience, but they're few and far between, from what I see, being honest with you.

SPEAKER_02 8:30

I mean, consumer duty's had a massive impact on the lending space, and you know, of course, businesses like Prevere are regulated by the Financial Conduct Authority. Uh how are you ensuring that you're complying with consumer duty and ultimately lending for the right reasons? And I mean, you know, for example, is a holiday that they say shells are the right reason? And and you know, is it in your remit to make that call?

SPEAKER_01 8:57

Well, as you say, as an FCA regulated lender, we we are obliged to ensure that vulnerable customers are identified and protected. So we have a whole range of processes. For example, frontline staff are trained to spot signs of vulnerability, they respond with empathy, and we can adjust processes and communications accordingly. We have a vulnerable customer identification checklist, which is run through during customer interactions, and we always insist on having a telephone or video call with them to help with that assessment. So, I mean, from a from a compliance point of view, that that's that's how we identify vulnerable customers. If they're not vulnerable and they decided to borrow, then that it's up to them what they spend the money on, really. As long as they're aware of the costs, and uh which we're always clear and transparent about that, then uh yeah, it's it's their decision, I guess, at the end of the day.

SPEAKER_02 9:56

I was at a conference recently and and consumer duty came up as a as a topic of conversation, and uh I don't think lawyers, and and this is a a general sweeping generalization, so apologies for those people that do uh really fully understand the impact of it, but there was a feeling at the conference that uh the legal sector hasn't really fully grasped the impact of consumer duty. What kind of impact has it had on a business like Prevera?

SPEAKER_01 10:28

We we haven't had any issues with with lawyers kind of questioning or objecting to our products typically. I've never had had it raised as a concern with any of our you know our introducers who are you know a lot of them are private client lawyers. I think maybe I don't know, maybe because we're so clear and transparent with with the way we operate, we simply make people aware of their options and we'll give them a clear outline of costs, and and obviously with no obligation whatsoever to take out the loan, they're free to make the decision, so no pressure, etc. So I yeah, I've not had I've not had uh anyone question it from a consumer duty point of view.

SPEAKER_02 11:10

I suspect, John, that there'll be people listening to this who you know are listening, probably don't fully understand or may have not even come across uh this sort of funding before, but are pretty familiar with with litigation funding for matrimonial matters. But I mean there are some key differences though, aren't there? Talk us through what some of those differences are.

SPEAKER_01 11:35

Yeah, so with the as I said earlier on, obviously I used to work in the the uh divorce or family litigation funding business industry. So that there would be a loan that was taken out to essentially fund the cost of the divorce or family proceedings. And they the way they would differ, they differ from a probate loan, is they I mean the the the the lending metrics were similar, you'd the people could typically borrow up to 50% of their anticipated settlement figure, and that would be in that case, it would be a divorce, uh divorce settlement. The way they differ is they they typically have monthly drawdowns on the litigation funding funding loans, so and then they are paid directly to the solicitor or law firm representing the client. So I think in those scenarios, you do find for obvious reasons that the solicitors do tend to be a little bit on more on board because they are paying that they're arranging to have their own invoices paid rather than having to defer them for 12 or 18 months or however long proceedings take. Whereas obviously comparing that to a to a probate loan, there's there's no pressing leak need for to pay a lawyer. It's but but there is a but there is a pressing need to pay your inheritance tax often. So in that scenario, it's something that has to be paid to get the desired outcome. So there is parallels there, but yeah, the main difference is that you know the monthly drawdowns, whereas with an inheritance loan, typically you'll you'll you'll apply for the advance and it'll get paid on day one. Those are the main differences. I mean, it's something we've looked at, we've uh possibly going into in the future. Quite a number of the people within the firm have got experience of of divorce litigation funding, so we we have been looking into that. But uh, what's this space for that one?

SPEAKER_02 13:26

Well, we'll come on to uh litigation funding in in just a minute, John, and I have got a question around that, but before we do, just to finish on this kind of thought process around the engagement that the the lawyer has in this whole process. In your role, you're obviously trying to get people on board in terms of uh using the product. Is there a typical scenario that the lawyer is going to identify as an opportunity for this sort of funding? You know, is there a is there a kind of a telltale scenario that you can share with listeners that that they might sort of spot and think, do you know what? Actually, this is a this is a great opportunity for us to engage in these sorts of services.

SPEAKER_01 14:08

So it's uh it would typically be the requirement for an estate advance that a lawyer would identify. And during the process of administration, they obviously start collecting data, information about the deceased estate, and the the trigger point would be if there's an inheritance tax liability and whether or not there is sufficient liquidity to fund that from within the estate. If the estate's predominantly property, then obviously there's not going to be sufficient liquidity to pay off any significant inheritance tax. If there's part of the estate is in just in in high street banks or in listed listed stocks or in investments or investment portfolios. Sometimes these these organizations will release funds to the to the solicitor to make these inheritance tax payments, but often they won't. So I guess the process is how much is the inheritance tax bill and and can we pay it from within the estate pre-probate? That's that's the question that that estate administrators have to ask. And if they can't, that's that's where we can step in.

SPEAKER_02 15:19

Is there a minimum estate value that you will lend against?

SPEAKER_01 15:24

We don't have a minimum estate value, but we do have a minimum loan value, advance value, and that's that's currently£10,000. We don't have a maximum amount. I mean we have several which are over a million currently that that are that are that are ongoing on large estates. But yes, uh, so anything over£10,000, we're we're happy to look at lending.

SPEAKER_02 15:46

We are fast running out of time for the discussion, and before we finish, I suggested that I wanted to return to this litigation funding issue because I I think to my mind, and this may very well be a freebie, John, from an ideas point of view, albeit you've probably given it some thought, massive increase in the number of estates that end up in dispute. You know, go talk to contentious probate lawyers and and they're you know they'll tell you it's uh it's it's absolutely on the increase. An opportunity there for a funder to look at that in the same way that you you might look at a family litigation dispute?

SPEAKER_01 16:24

Yes, so that there has been an increase in contentious probate matters over the last uh couple of years, certainly, but it is a tricky area to fund. Underwriting is difficult from our point of view because many cases there's no guaranteed minimum minimum settlement amount. So that that that that incurs uh very big risk to us as a lender. Ways that I've worked at places before where where where they have tried to do that, and it's always been difficult, this type of lending. Typically, you would need council's opinion on likelihood of success and quantum. And and I'd expect that you would ask the client to fund that themselves, pre-litigation funding, which makes it expensive. You'd be looking at at least£10,000, probably, for council's opinion on a on a moderately complex matter. So there's there is these barriers to entry with it, and also how it differs from traditional inheritance lending is we we can see reasonably with reasonable accuracy the value of an estate. When it becomes contentious, someone could end up with all of the money, someone could end up with none of the money. So that's that's a huge risk for us. And as our funding is unsecured, there's there'd be no recourse for us in that in that scenario. So it'd be very risky. So that's it's something that we haven't looked at doing. I think there's there is some funders say that they do it, but I've I've not heard of one getting getting off the ground. I may be wrong about that, but I've not heard of that happening so far.

SPEAKER_02 17:56

Well, it's been a bit of a meander around uh probate lending, and I think you know it's a it's a challenging area in the sense that and you raised the the issue yourself there, John. One, I don't think there's there's still a huge amount of understanding about what it is and the opportunities that there are for it. Uh so it's been great to have you on uh to uh to talk through uh some of that. Uh and also I think we've kind of raised the specter of some reticence that uh people might have about using the the services, but uh you know the fact that the organizations are all FCA regulated, you know, this isn't any of the wild west that we had with funeral planning or anything like that, it's a really, really important point to make. So uh yeah, it's been really interesting to have you on, John. Thank you very much indeed for joining and and for sharing your insight.

SPEAKER_01 18:49

Thanks, David. No, it's been uh it's been a pleasure.

SPEAKER_02 18:52

The Today's Wars and Probate Podcast is available on your preferred podcast provider. It's also available on today'swars and probate dot co dot uk. My thanks to John, and thank you as ever for listening and we'll see you again soon.