According to Reader’s Digest*, 3 out of 4 parents in the UK intend to leave an inheritance for their children one day. These inheritances are set to increase whilst the house prices in the UK continue to rise steadily.
However, this also means a hike in inheritance tax, as many homes get pushed over the lower Inheritance tax threshold of £325,000** – this year alone, 35,600 families are subject to a 40% tax averaging at £166,000 on their received inheritance. This rises to £234,000*** for properties in London and the South East.
Thankfully, there are ways to avoid leaving your loved ones with such a high inheritance tax bill.
Equity release enables you to access a portion of the funds tied up in your property now without having to move or sell your home. You are free to do whatever you want with the cash, meaning you can share it with your loved ones whilst you’re still here, instead of leaving them with an enormous inheritance tax bill- they will only be taxed on the remaining portion of your home.
With equity release schemes you can either borrow money against the value of your home (known as a lifetime mortgage), or sell part of your home at a reduced market rate, but remain living there throughout your life (a home reversion scheme).
According to Which?****, the money you release can be passed onto your heirs and, providing you survive the gift by seven years, there will be no tax to pay. You are free to do as you please with the money.
✓ Tax-Free Lump Sum – You can claim a tax-free lump sum to do with it as you wish. Most will use this to supplement their pensions and help improve their quality of life in retirement.
✓ Stay In Your Home – Rent-free for the rest of your life should you wish to
✓ No Negative Equity Guarantee – This ensures that if the amount you owe exceeds the value of your property, you and your family will not be liable for the shortfall. This provides peace of mind knowing that your family will not incur any debts as a result of your policy
✓ Fully Regulated – The Equity Release market is fully regulated by the Financial Conduct Authority (FCA)
✓ Flexible – New product innovations have created many flexible plans and payment options, as well as a reduction in interest rates, ring-fencing a value to keep for yourself or leave as an inheritance
The loan is recovered only when the property is sold, in the event of death, or if you have moved into long-term care.
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