As a last resort this can be a useful way of reducing or eliminating an Inheritance problem especially where extra cash could also relieve hardship.
You may raise capital on your home through either Equity Release or other mortgage schemes. There are two main types of Equity Release schemes available. In simple terms one involves the sale of all of part of your home “Home Reversion” and the other is a mortgage with interest either paid or rolled up.
The main difference is that with the “Home Reversion” scheme you are selling a percentage of your home (all or part) and therefore the cost is fixed. Whereas with the Mortgage option unless you pay the ongoing interest the future, the total costs are unknown.
The mortgage scheme is the popular route as it usually provides more capital. By taking out this type of plan, you are simply raising a mortgage on your property, a straightforward cash advance against the value of your home. You do with these funds as you wish, you do not have to repay any interest or capital back in your lifetime and the debt is added to your estate reducing your overall estate for Inheritance Tax purposes.
Of course the loan must be repaid, but this is all settled as part of your affairs after your death. In the event of you having to go into long-term care or a residential home you may be asked to settle the loan at this time.
The only decision you are left with is how you wish to spend your capital, you can of course spend it on yourself, (be careful not to buy anything that would increase the value of your estate). Alternatively, you can consider gifting or placing the funds raised in a Trust.
Main advantages of Equity Release Plans.
• To produce either a lump sum of money or income for life.
• You do not have to consider moving home.
• To potentially reduce Inheritance Tax from day one.
There are many schemes on the market and it is essential that you obtain sound advice not only about the schemes but how they fit into your financial plans. You should consider all the “what happens if questions” for example, what happens if you want to move down market or if your partner pre-deceases you.
We have a Free information brochure which covers the plans in more detail. Please provide us with a name and address and contact number and we will forward this to you.
Contact us for more information.
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Your Home is at risk if you do not keep up any mortgage or payments secured upon it!
You should remember that past performance is not necessarily a guide to the future. Market and currency movements may cause the value of units, and the value derived from them, to fall as well as rise and you may get back less than you invested when you decide to sell your units. The tax treatment of investments and pensions is not guaranteed and may change in the future.