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Equity release plans – What to consider?

3 May 2015

If you are approaching or are already in retirement and have found that your pensions, savings or shares are not worth as much as you had anticipated, then you may have considered whether an equity release plan could help.The main advantages to an equity release plan are an increased cash flow whilst you remain in your home and any money received will be free of income tax. There are a variety of plans available, where there is some form of charge placed over your property and in return you receive from the equity release company either income, a lump sum or a combination of both, depending upon your circumstances and requirements. If you do not have any beneficiaries then this may be an excellent option, releasing cash from your home.

Even if you do have beneficiaries, there may be some inheritance tax benefits when taking out an equity release plan. For example, if you have a large estate the value of this could be reduced and accordingly it will shrink your inheritance tax liability on death.

However, you will need to consider the implications for your family if your estate is reduced substantially. Deciding what percentage of your home?s value to release is a key decision. If you want to ensure that your family inherit a suitable sum from your estate, look for schemes which can guarantee a proportion of your estate will remain untouched.

An equity release scheme can only be drawn up in the names of those who own the property. If you live with someone who does not own the property with you, they may be vulnerable if you die, as the property would revert to the equity release company. Equity release schemes involve a number of costs, which you need to take into account in addition to the interest rate. These include fees involved in setting up such a scheme e.g. brokers fees, arrangement fees, legal fees and disbursements and any administrative fees payable both now and in the future. If you decide to pay off the scheme early, or change any of its conditions, you will probably be liable for further fees.

Remember that the usual outgoings on your home such as utility bills and council tax will still be payable. You must continue to ensure that buildings insurance is kept in force, as this will no doubt be a condition of the scheme and in some instances only approved insurers can be used.

You will have a duty to keep your property in a reasonable state of repair, which could be problematic if your health declines. It is important to take professional advise specific to your circumstances.

If you are considering an equity release plan, buying or selling a residential, contact Myers & Co Solicitors, based in Stoke-on-Trent, Staffordshire, residential conveyancing specialist Kerry Dundas by calling 01782 525016 or email kerry.dundas@myerssolicitors.co.uk.

 

The contents of this article are for the purposes of general awareness only.  They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.  Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.

 
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Kerry Dundas

DDI: 01782 525016

E: kerry.dundas@myerssolicitors.co.uk



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