equity release

powlface

Hi ,
 I am considering equity release to try to avoid my beneficiaries from paying large amounts of  inheritance tax when I dye . My house is worth in the region of one million Pounds, the value of which has accrued over many years , 
Is this something I should consider 

SuzeQStan

There are many better informed than me on here but knee jerk reaction would be what happens if the company you sell equity to collapses and you have to sell your home as the bankrupt company has to realise assets? Again im no expert in any way can only say what I would think in your situation. Would there be a single beneficiary or more than one?

HappyHarry

You might reduce inheritance tax but are you certain that your beneficiaries would get more?

If you took equity release, you can give a lump sum to your beneficiaries, but then will have a debt against your property offsetting these gifts.

If you die within seven years then those gifts (or part of them at least) fall back in to your estate, and your estate will be reduced by the outstanding debt and interest that you have paid.

If you survive more than seven years, then you will have paid seven years of mortgage interest, which right now in equity release deals could be substantially more than the 40% inheritance tax.

It may be that this route ends in you paying a mortgage company more than you would have paid in inheritance tax.

Keep_pedalling

Your beneficiary do not pay IHT your estate does. Downsizing is a far better option if you are living in a house far larger than you need. 

Keep_pedalling

SuzeQStan said:

There are many better informed than me on here but knee jerk reaction would be what happens if the company you sell equity to collapses and you have to sell your home as the bankrupt company has to realise assets? Again im no expert in any way can only say what I would think in your situation. Would there be a single beneficiary or more than one?

That would not happen, creditors may pick up the loan but they can’t change its terms and conditions.

TELLIT01

Most equity release mortgages are arranged through banks so risk of them going bust is pretty low.  There were cases in the past of companies purchasing properties below market value with an agreement that the current occupants could stay there either rent free or on reduced rent.  Those companies did have a tendency to go bust because they mortgaged the properties.  In that situation people could, and did, find themselves homeless.  Modern equity release doesn't work like that.