Equity Release (taking a loan on your
home with no repayments) is on the increase, the first quarter of 2016 saw
record levels of lending. It was also reported that the “Bank of Mum and Dad” is
possibly the main source of deposits for offspring getting on the property
Now the desire to help one’s own children get a good start in life is normal, natural and to be welcomed but if any reader is contemplating Equity Release to raise deposit monies for their children please, I beg you, stop and think.
I wrote in 2012 about a case where Equity Release caused huge problems for a Widow. In brief: -
“A 71 year old who had lost her husband after 50 years of marriage had insufficient income to live and remain in her property. With no other savings, she could have considered Equity Release, using her house to generate a lump sum.
The problem is they did this12 years earlier when her husband retired. They entered into an equity release mortgage of £30,000 at 8.5% p.a. fixed which was a competitive rate at that time. (2001) A new car, that now needs replacing, a new Kitchen plus a holiday or two and there was nothing left.
The issue is that the loan now (2012) stands at just under £80,000 and is increasing rapidly.
Now imagine that instead of the holiday’s the kitchen and the car, they had given the money raised to their son as a deposit for his own home, her situation as a widow, would be no different, forced to live on a very restricted income.
Either way, she still has today potentially another 15 years or so normal life expectancy by when the Equity Release debt would have risen to £346,747. This must be repaid from the sale proceeds of her home on her demise. Such a massive debt to gift £30,000 to her son is simply ridiculous. He would inherit far more and they would both have enjoyed much better financial situations if Equity Release had not been entered into while she was so young.
Only too often we see the best of intentions produce catastrophic results. In the above case a car, a kitchen and a holiday (or a gift of £30,000) causing a woman to live on the breadline for maybe 18 years or more and leave potentially nothing to her family on her death is simply wrong.
The problem today is we are living longer and whilst Equity Release has its place in financial planning it should only be done after very careful consideration of all the alternatives and a discussion with a qualified professional, please see your IFA.
Call Georgina on 01277 630873 if you would like more details
Your Bereavement Check List
At Birkett Long we have found that many bereaved clients appreciate our simple check list as it helps them understand what needs to be done at this emotional and stressful time:
What do I need to do first?
· Obtain a medical certificate that states how your loved one died.
· Take the certificate to the registrar’s office to register the death. You’ll need:
the person’s full name and any previous names
- their date and place of birth
- their most recent address
- their occupation
- if there is a surviving spouse or civil partner you will need to give the above information about him or her too
and tell the Registrar whether the person who has died was in receipt of a State pension or other benefits.
It will help to take proof of your own identity and address (driving licence or passport and utility bill) and the same for the person who has died, along with their birth and marriage/civil partnership certificates.
· Locate the will if you know there is one, or make enquiries, and contact a solicitor.
· Contact a funeral home to set in motion the funeral arrangements.
· Inform the employer if your loved one was employed.
· Inform the Department of Work and Pensions if they were in receipt of a State pension, and inform financial providers if they received personal pensions or had investments. You can alert many Government bodies at once using the Tell Us Once web service www.gov.uk/after-a-death/organisations-you-need-to-contact-and-tell-us-once.
What documentation must I collect?
Our long experience tells us that there will be many forms to complete during the coming months. It will help if you have your loved one’s:
· National Insurance number
· A breakdown of their assets and liabilities
· Marriage or civil partnership certificate
· Tax reference number
And what about their home?
It can be easy to overlook the little things, especially if your loved one lived alone. Check their diary and cancel any appointments, and:
· Check that any pets are properly cared for
· If they rented their accommodation, contact the local authority, landlord or housing association
· Speak to utility companies to transfer the bill into someone else’s name or to finalise payment
· Speak to TV/internet companies and mobile phone operators
· Contact insurance companies
We can help through this entire process. We are also specialist advisers on will disputes and contested probate. Please contact Lorna Boorman on 01268 824926 or email email@example.com