What About Inheritance?

For most people, their home is their largest asset and what will happen to their estate after they have passed away may cause many a sleepless night.

For many of us, it is important that we are able to leave an inheritance for our loved ones when we are gone. After dedicating our lives to looking out for those closest to us, the money we leave behind is a final gift to them.

Protecting Their Inheritance

You may dream of leaving a final gift to your loved ones, enabling them to do the things that they perhaps otherwise would not have been able to afford such as settling their own debts or providing them with an opportunity to get onto the property ladder. Equity Release could provide you with the opportunity to turn your dreams into reality.

A common myth surrounding equity release is that many people believe that taking out an equity release plan will prevent them from being able to leave an inheritance for loved ones. However, this does not have to be the case. The reality is that you can potentially ring fence a portion of your property’s value with a protected lifetime mortgage.

When you raise money through equity release, you receive a lump sum or regular cash payments on the understanding that the scheme provider is fully repaid when you die or have to move into long-term residential care. This usually involves selling your home in order to pay the equity release balance. Any money left over from the sale can then be passed onto your loved ones but if there is no money left over then they will receive nothing.

By ring-fencing a specific amount via an Inheritance Protection Guarantee, it will allow you to protect a percentage of your property’s future value which can then be left to your loved one’s after you have passed away or moved into long-term residential care. This ring-fenced amount is regardless of how much is outstanding on the loan. For example, if you ring fence 30% of your property value then this percentage can be left to your loved ones as inheritance.

For those people in good health, equity release could represent a way to lessen their inheritance tax liability upon their death. This is because any financial gifts that they bestow upon loved ones are not taxable if they survive for seven years after the date of the gift. Money released via equity release could be gifted for example to pay off a mortgage for a son or daughter or could be used to fund a grandchild’s education. However, it should be pointed out that if you die before the seven year time limit expires, then that gift would be subject to inheritance tax on a sliding scale due to tapered relief (assuming that your estate exceeds the Inheritance Tax threshold).

Please be aware that releasing equity from your property could have an effect on any means-tested state benefits now and in the future. It’s important to seek independent tax advice to understand the effects of Equity Release on your estate. Equity Release may involve a Home Reversion Plan or a Lifetime Mortgage which is secured against your property.