Family member doing equity release - need advice

jl68

Hi everyone

Hopefully I am posting in the right category. I have a family member - my Grandad, trying to go through the process of equity release. He is 80 and I am the only other person left in the family and am the current beneficiary on his will. He has a gambling addiction and we had an argument with regards to equity release a couple of months ago. I gave him a sum of money of £12,000 to keep him going which he gambled away in 1.5 months. I know he is undergoing the process as I had access to his emails and saw an instruction from Equilaw. However, Equilaw are not the lender who will actually be giving the money over / not the company who the loan is through. I have no idea who the lender is, and am worried they're not going to be a reputable company and not a member of the equity release council. 

Basically, what I want to know is:

If the lender he is going with is NOT a member of the equity release council, and if his debt was more than what the property would be worth upon his death, would this debt then get passed to me? He has no other assets or money anywhere, so no savings / bonds / insurance pay outs etc. His estate will be just the property. I understand that if you go with a company who is a member of the equity release council, that you're guaranteed that your loan will not surpass the value of the property. But if he was to go with a company NOT part of the council, can they come after me upon his death?

Thank you in advance for any replies or help. 

silvercar

Equilaw themselves are a member of the equity release council, so hopefully that does mean that they only recommend lenders who also are members, but you could phone and ask them.

Worst case is that his debt is more than the property value, though generally won't so much that he would ever find himself in that situation as lenders don't want to end up in the exact situation you describe. They really don't want to do more than sell the house, take what is theirs and move on.

If the worst happened and the debt was more than the property value, the debt would be part of the estate and you wouldn't be liable. It isn't possible to inherit a debt in this way. The estate just ends up with a negative balance and everyone walks away.

jl68

Thanks for the reply silvercar. I did phone Equilaw and ask the lender although they said they couldn't give me information (which I was expecting) as I'm not authorised (I only knew about this because I caught a look at his emails). 

Thank you for the advice, it's good to know that I can just walk away at the end of the day. I just wasn't sure if lenders who aren't part of the equity release council could pursue me.

Linton

I do not know and cannot find out about non-members of the Equity Release Council but think you may be worrying unnecessarily, or possibly about the wrong things.

Equity Release is highly regulated by the FCA. Equilaw appear to be a well regarded firm of solicitors who manage the legal aspects of ER.  It would seem they are not advisors, so your father probably has an advisor from another company.  It is a requirement that people receive independent advice before taking out ER.  I cannot see an ER provider taking on anyone without advice.

ER is by its very nature a long term business and hardly suitable for scammers.  After all they have to pay out the money up-front and may not get any repaid for perhaps 30 years.  So it's hardly a way to make a quick buck.  The big players in ER are largely well known and respected financial institutions - eg L&G and LV.

But say the worst happens - Grandad gambles away all the money, the house for some reason is not sufficiently valuable to pay back the ER company, the ER did not come with a no negative equity guarantee, and there is nothing left in Grandad's estate.  In such circumstances there is no way you or any other family member could be held responsible for the debts - debts cannot be inherited by reason of kinship.

user1977

jl68 said:

I just wasn't sure if lenders who aren't part of the equity release council could pursue me.

It's nothing to do with what sort of creditor it is - it's a basic principle that nobody inherits a debt, if the estate is insolvent then any balance just gets written off.

MWT

Equity Release is a regulated product and as has been explained already, there is no risk of you inheriting debt.

In very loose terms, at age 80 he is unlikely to be able to release more than around 45-50% of the value of the property unless he is also able to show that he has medical conditions which will materially reduce his life-expectancy.

The lender will also require that they are the only secured loan against the property so you can take some comfort from that as he will not be able to whittle away at the residual equity in the property, but of course the interest will roll-up each year and property values are not likely to be increasing much in the near future.

jl68 said:

I gave him a sum of money of £12,000 to keep him going which he gambled away in 1.5 months.

Do not do this again, obviously, and perhaps if he is going ahead with the ER there may be a window of opportunity when he is flush with cash to suggest he should return that money to you...?

I would suggest that you seek help for yourself as well, there are groups like GamFam that help the families of those suffering from gambling addiction, and they may be able to suggest steps you can take moving forward from here...