Equity release

[Alfiemoon1]

Can someone explain to me how this works and if it avoids inheritance tax. Older dsis who is a financial nightmare upto her eyes in debt through stupidity probably some physiological issues not falling on hard times has arranged for a financial advisor to come and discuss this with us as she has calculated dm house is worth £600k and inheritance tax will be about £100k and doing equity release will avoid this??
while I love my dsis I don’t trust her regarding money I know what she’s like and I know she is on interest only mortgage with no endowment plus 3 other loans secured on her house not fixed so probably crippling her financially
dm is in poor health but is of sound mind but is a sucker for bailing dsis out lending her money so has agreed to discuss it with the financial advisor the will is set so we both get 50% each so i will be there dm has over £10k sitting in her current account has savings accounts no idea what is in them no doubt dsis knows but dm doesn’t need to do equity release to stay in her house so i am concerned over dsis motives regarding this

If I were you, I would seek independent financial advice regarding this.

Put simply, your mother’s estate will be reduced either way. By paying IT on any portion above the threshold or by paying funds owed to the equity release company,

General, rough, rule of thumb re equity release is that debt doubles every 10 years. So, if you release £50k then, after 10 years, you owe £100k. After 20 years this doubles again to £200k owed.

Do not let your sister bulldoze your mother into this. Equity release can be ok in some circumstances, but you need independent financial advice regarding this particular situation.

I second what @Furries has said. Equity release is a minefield and you (or rather, your DM) really do need INDEPENDENT advice - not sales talk dressed as “advice” from a company who offers equity release. Make sure you see an independent financial advisor. There will be a fee, but it’ll be worth if it means you don’t end up in financial difficulty.

It will reduce iht as there will be a smaller estate. Any monies released will have to be paid back with a not small amount of interest. It's usually seen as a last resort. You need to seek independent financial advice as any company offering it will make it seem like the best thing ever.

The Equity Release Council released a bulletin about using ER for IHT purposes last year - basically make sure you get advice from an adviser specifically experienced in IHT planning.

https://www.equityreleasecouncil.com/wp-content/uploads/2022/03/IHT-planning-tech-bulletin-12.pdf