How much in fees to set up Equity Release Scheme

BeresfordN8

Hello

I hope someone can advise on this. My parents are planning to set up an equity release scheme (using a discounted gift trust). The financial company selling this scheme (to them) has stated that their charges will be £48,000. In addition to this charge, the mortgage company will add another £16,000.

The documents provided to my parents do not make clear what any of these charges relate to. For this reason I am very against using this company to set up a scheme.

Even if the company lowers the charge, it does not strike me that the organisation is one to do business with. (If something is worth £48,000 one minute and £10,000 the next - something is very wrong IMHO).

Is this an exorbitant fee?

How much should one think of paying?

Is it possible to get a scheme with a fixed fee rather than a percentage fee?


Thanks for any advice.

Keep_pedalling

Using equity release to save IHT (I am assuming this is the reason based on the forum you posted in) seems an odd way to go about things, those high fees and the build up of interest could cost more then any IHT charges on the estate, especially if virtually all their weath is tied up in this one property.

You parents should seek advice from an IFA before they do anything else.

kidmugsy

Don't touch it with a bargepole. See if you can find an IFA with experience and expertise in this area.

Are your parents aware of the recent changes to IHT, giving more favourable treatment to houses left to direct descendants? They start to take effect from April 2017.

BeresfordN8

To be honest kidmugsy, I don't know if they are aware of that, no.

They have been told by a solicitor not to touch with a bargepole, but they believe this solicitor is trying to take the business from the first organisation - which calls itself "estate planners and inheritance tax advisers".

Keep_pedalling

BeresfordN8 wrote: »

To be honest kidmugsy, I don't know if they are aware of that, no.

They have been told by a solicitor not to touch with a bargepole, but they believe this solicitor is trying to take the business from the first organisation - which calls itself "estate planners and inheritance tax advisers".

Sounds like a bunch of salesmen, who's bottom line is lining their own pockets rather than providing your parents with what is right for them.

Equity release is usally the last restort for cash poor house owners trying to make their life more comfortable, rather than people concerned about IHT. Their solicitor is absolutely correct, but it sounds like they have fallen for the sales pitch hook line and sinker.

An IFA will charge for his / her advice but that advice will be based on their needs not a salesman's.

BeresfordN8

Thank you KP. I agree with everything you say! That's how I see the situation too.

xylophone

This is rather worrying.

What exactly are your parents trying to achieve?

https://www.moneyadviceservice.org.uk/en/articles/equity-release

http://www.knilljameswealth.co.uk/sites/default/files/KNILL%20JAMES%20IHT%20Book.pdf has a calculator which may help BUT bear in mind that this was pre below.

http://www.ashfords.co.uk/passing-on-the-family-home-the-new-inheritance-tax-allowance/

Your parents should take independent financial advice from an expert.

http://societyoflaterlifeadvisers.co.uk/

BeresfordN8

I agree it is rather worrying. Thank you for your links. Will continue to try to steer the matter in the right direction.

As I understand it, they are trying to offset IH for beneficiaries. In addition, a lump sum is released, to be used for ??? I'm not sure what.

Keep_pedalling

Presumably the lump sum will go into the discounted gift trust, but if IHT is an issue then I would have thought if that they would other assets other than the house to sink into such a scheme, and assuming these assets exist it would be much simpler and cost free to gift some of these assets rather than get involved in what looks to be a very expensive tax dodge scheme.

If they are cash poor living in a £1M+ property, then downsizing makes much more sense.

The whole thing stinks.

xylophone

Have your parents considered PETS?

http://www.pruadviser.co.uk/content/knowledge/technical-centre/potentially-exempt-transfers-facts/

BeresfordN8

Yes, I think they are aware of this. Thanks.