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    • CliffordAlls
    • By CliffordAlls 20th Jan 18, 12:10 AM
    • 3Posts
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    CliffordAlls
    Provision for Children
    • #1
    • 20th Jan 18, 12:10 AM
    Provision for Children 20th Jan 18 at 12:10 AM
    We are both aged over 60 and own our home outright, plus two small flats overseas. We believe we have sufficient savings to see us through.

    We do not however have sufficient surplus to help our three children get onto the property ladder and they need help, as most do. If we took out an equity release deal on our home this should enable us to give them the proceeds of the release equally and this would help them all greatly.

    If obtaining an equity release represents a 'disposal' for Capital Gains Tax purposes I am assuming any resulting gain would be exempt so far as our only or main residence is concerned.

    Can anyone help us understand however how this transaction would operate for Inheritance Tax purposes? Presumably it would reduce ultimate liability quite considerably.

    We appreciate that interest compounds on the sum released until death but the upside of this idea is that the children could offset this to some degree through the capital appreciation thy might expect their own properties bought with the proceeds, which should offset the disadvantage of the equity release deal, at least to some extent.

    Any thoughts or ideas?
Page 1
    • 00ec25
    • By 00ec25 20th Jan 18, 10:19 AM
    • 5,965 Posts
    • 5,447 Thanks
    00ec25
    • #2
    • 20th Jan 18, 10:19 AM
    • #2
    • 20th Jan 18, 10:19 AM
    "equity release" in the sense I think you are using it is merely you borrowing money against a property with the lender deferring repayment until you die and the property is sold. That is not a disposal for CGT purposes, it is merely leverage

    obviously as the lender has a loan secured on the property which is having rolled up interest applied to it whilst you remain alive, the eventual size of your estate for IHT will radically reduce over time as the loan will be repaid from the estate
    • Pennywise
    • By Pennywise 20th Jan 18, 10:51 AM
    • 9,826 Posts
    • 18,124 Thanks
    Pennywise
    • #3
    • 20th Jan 18, 10:51 AM
    • #3
    • 20th Jan 18, 10:51 AM
    Can anyone help us understand however how this transaction would operate for Inheritance Tax purposes? Presumably it would reduce ultimate liability quite considerably.
    Originally posted by CliffordAlls
    IHT is complex, particularly in respect of gifts of money/asset. But in very simple terms, the value of gifts is still part of your estate for IHT unless you live for six years after the gift.
    • xylophone
    • By xylophone 20th Jan 18, 1:25 PM
    • 24,470 Posts
    • 14,325 Thanks
    xylophone
    • #4
    • 20th Jan 18, 1:25 PM
    • #4
    • 20th Jan 18, 1:25 PM
    Had you considered selling one or both of your overseas properties and gifting your offspring the proceeds?
    • CliffordAlls
    • By CliffordAlls 12th Feb 18, 9:13 AM
    • 3 Posts
    • 0 Thanks
    CliffordAlls
    • #5
    • 12th Feb 18, 9:13 AM
    • #5
    • 12th Feb 18, 9:13 AM
    Thanks for this suggestion and yes, as have considered this. The problem is that they would not raise sufficient to cover the provisions we would need to make.
    • Keep pedalling
    • By Keep pedalling 12th Feb 18, 10:47 AM
    • 4,520 Posts
    • 4,955 Thanks
    Keep pedalling
    • #6
    • 12th Feb 18, 10:47 AM
    • #6
    • 12th Feb 18, 10:47 AM
    Equity release would free up money now at a cost a greatly reduced inheritance in the future, especially if you are in your early 60s and do not meet with an early death, due to the compound interest on the loan.

    Have you considered downsizing?
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