Lifetime Mortgages  

Lifetime mortgages: your questions answered

According to Miles: "If you are looking to support inheritance tax planning, you would want to take as much as possible.

"If it is just for gifting to the next generation without the need to account for an IHT problem, then only take what you need, as interest will accrue on everything that is taken, even if it's not used."

Fellow panellist Tony Wickenden, managing director of Technical Connection, commented: "From a purely IHT efficiency standpoint, [it is worth] making a lump sum gift as soon as possible to remove the asset from the estate as soon as possible. 

"This will get the 'seven-year clock' running and ensure that all growth on the asset or amount given accrues outside the estate."

But where there is a lack of certainty over who is to benefit and when a trust could be used, Wickenden said the donor could retain some access to the funds by way of a loan trust or a discounted gift trust.

"They could also use a business relief-qualifying investment, subject to all the usual caveats re liquidity and access to funds and risk", he said.

Wickenden added: "Another course might be to gift regularly over time, using a loan/drawdown facility. In short, many moving parts to the decision and advice based on understanding what's important to the client and how the tax rules work is essential."

Q: Does the client have to repay the lifetime mortgage in their lifetime?

Panel: The lifetime mortgage must be repaid on death or when the last remaining owner of the property moves into long term care.

Q. Historically equity release has had a bad reputation. How can we dispel the myths of the past?

Wickenden commented: "The Equity Release Council and L&G have some excellent myth busting tools on their website."

Bowden added: "Equity Release carries some negative 'baggage' in the perception of some.

"So, clear, full and honest explanation of the product, ensuring any ER solution is appropriate for the client's needs and aspirations, and reassuring the client as to the guarantees and standards offered by members of The Equity Release Council, should dispel some of the myths."

Q. Some of my clients are asset heavy. How much emphasis should I be putting on their property value compared to other types of investments in their portfolio, and growing these?

Miles said: "This is a very difficult question to answer generically as all clients will vary both from a tax, asset and risk point of view.

"The encouragement is to bring the property into the advice process and consider it as an option alongside all other assets. Decision making will be based on tax position, benefits and future aspirations of each client."