Comment on the Article by Ian Cowie "Grandparents urged to help first time buyers cope with high house prices - and beat IHT"

Mr Cowie reported in the Telegraph on 11 April 2011 that homeowners aged over 55 that have no or minimal savings and investments and face potential Inheritance Tax bills  - or, for that matter, residential care fees bills - could contemplate taking out equity release on their property.  

The premise is that the monies raised from the equity release scheme could then be gifted to their family ( provided that they survive seven years from the date of the gift, for Inheritance Tax purposes).  This could, for example, be used to help grandchildren get onto the housing ladder, or family that may be struggling in the current climate, whilst leaving a debt on their estate that is deductable for Inheritance Tax purposes, leaving less final tax to pay.

The article by Mr Cowie is quite correct and, at Ashfords, our equity release department has assisted retired home owners taking out equity release for  precisely this reason.  However, as the article conceded, taking out equity release to mitigate Inheritance Tax is an expensive option and critics would say home owners should downsize, release monies and gift the monies rather than running up the debt.  Of course, that does not take into account the fact that home owners may well enjoy where they are living, that their house is maintained to their standards and that they do not want to move to a potentially less desirable area away from friends and family.  

However, one must not forget the true picture of equity release that  Ashfords' equity release department sees on a daily basis. From our experience,  fewer than 1% of home owners take out equity release to mitigate the Inheritance Tax burden. In fact, the majority of retired home owners taking out equity release schemes do so to pay off existing mortgages that  they still have on their properties (often taken out to help the family).  Other home owners take out equity release simply to allow  themselves to maintain their standard of living in retirement and/or to carry out essential repairs to their home.  

Ashfords' equity release team provide independent expert legal advice to those who wish to release equity from their home. Our Solicitors advise clients of the risks and benefits of the Equity Release product that has been recommended by a Financial Adviser and will explain to the clients the product in detail, and the legal obligations involved in the Equity Release Scheme.

Ashfords LLP is regulated by the Solicitors Regulation Authority.  The information in this note is intended to be general information about English law only and not comprehensive.  It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.