Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Is Equity Release Safe?

The facts and the myths.

Estate planning

We’re going to be looking at Wills and Lasting Power of Attorney. They’re both are as important as each other but it’s not compulsory to have either in force when you take out a Lifetime Mortgage, but it’s advisable.

You can choose to use a family solicitor to create the documents or, if you’ve chosen to use one of our panel of independent specialist solicitors, they would be pleased to draw up the documents for you.

Wills
This is a document where you express your wishes for what happens after your death. It can cover everything from who you leave your house to, who inherits specific items like watches, cars, collections etc. It can state that you want the value of your estate to pass in specific shares to your beneficiaries. It can specify what sort of funeral you want and also what music you’d like to have played.

In short, it covers everything you want to have happened after your passing, including instructions not to provide for specific people if that’s what you want. In these circumstances, it would be a good idea to state in the Will why a certain individual is being excluded.

If you die without a valid will in place things can get complicated. It’s likely the estate won’t be shared out the way you wanted. It’ll certainly take a lot more time to settle and there’ll be additional costs. I would recommend you look at:

https://www.gov.uk/inherits-someone-dies-without-will

This UK Government site can give you the details you need.

Lasting Power of Attorney (LPA)
Unlike a will, a Lasting Power of Attorney can deal with your financial affairs and your health and wealth when you’re not in a position to do so.

There’re two distinct documents:

Property and Financial Lasting Power of Attorney.
Health and Welfare Lasting Power of Attorney.

They’re similar but as you can see they protect different aspects of your life. Essentially, when you set up your LPAs, you choose up to four people each that you’d like to act on your behalf when you are unable to do so. They’re called Attorneys. Most wives choose their husband as an Attorney and vice-versa. This is fine for most situations but not in the case of buying and selling property as a husband can’t sign on his wife’s behalf. The solution is to have a second Attorney, maybe a son or a daughter, or trusted friend who can sign on their behalf.

Again, I’m going to point you towards a UK Government site for full details:

https://www.gov.uk/government/publications/make-a-lasting-power-of-attorney

In the meantime, here are a couple of real-world examples of how both can work.

Property and Financial LPA
Mr and Mrs Jones have a joint bank account and Mr Jones has a deposit account in his own name. When Mr Jones passes away, Mrs Jones will be able to access the joint account but whilst Mr Jones’s affairs are being wound up, she won’t be able to access the funds on deposit. If there was a Property and Finance LPA in place full access to the deposit account would be immediately available.

Mr and Mrs Jones have taken an extended holiday but have put the family home on the market whilst they’re away. During that time, an offer is made by a motivated buyer who wants to complete as soon as possible. With Mr and Mr’s Jones out of the country, this can’t happen until they return. However, if they’d set up the Property and Finance LPA, and had appointed their son as Attorney, he could sign on their behalf.

Health and Welfare LPA
Mr and Mrs Jones want to sell the family home and move closer to their daughter. However, Mrs Jones has developed Alzheimer’s and has been declared unfit to make decisions for herself. This will prevent the house from being sold or a new one being bought in joint names because Mrs Jones can’t sign the documents herself.

The solution, without the Health and Welfare LPA, would be to apply to the Court of Protection. A Deputy from the Court would ultimately act upon her behalf but this can take time and is a costly process.

Please see the link below for more details.

https://www.gov.uk/courts-tribunals/court-of-protection

To summarise. When we’re looking at your eligibility or need for a Lifetime Mortgage we’re looking at three key areas. Your short term requirements, in other words, what do you need the money for now. Your medium-term needs, such as putting a Drawdown facility in place for additional future borrowing. Finally, your long term needs so your estate can be distributed according to your wishes.

In addition, if your health or circumstances change during your lifetime, you can nominate a loved one to look after your affairs rather than a court-appointed stranger.

The costs of setting up Wills and Lasting Powers of Attorney can be added to the amount you want to borrow but be aware that you’ll be paying compound interest on the costs for the duration of the mortgage. Your Equity Release adviser will talk you through your options.