Later-life lending and the estate
How to run a later-life lending case so the client's estate, pensions and family are considered before the lending is agreed, and where an introduction to Equity & General fits.
How to run a later-life lending case so the client's estate, pensions and family are considered before the lending is agreed, and where an introduction to Equity & General fits.
A lifetime mortgage or a retirement interest-only mortgage changes what the client's family inherits and how the estate is taxed. The lending decision and the estate decision happen together, whether or not anyone discusses the estate.
Your firm advises on the lending where it holds the permissions for it, with the suitability and vulnerability duties that come with them. Advice on pensions, investments and the estate is given by Equity & General. Put both sides of the decision in front of the client before they commit to the loan.
Send the client a short list of what to bring, and ask whether they would like a family member, friend or attorney present.
Some of these papers are for the planner. Asking for them at the start means the client gathers them once.
Your fact-find for the lending covers income, outgoings, the property and the purpose of the money. Add four questions that let you see whether the case needs a planner as well.
Record the answers. Do not comment on whether a pension or investment would be a better source of the money. That comparison is pension and investment advice.
Lending rules require you to consider whether the client's need could be met another way, such as downsizing, using savings or family help. Some of those alternatives involve pensions and investments, which you cannot advise on.
Where the client holds pensions or investments of any size, offer an introduction to Equity & General before you make your lending recommendation. The planner can advise whether drawing on those assets would serve the client better than borrowing. Your recommendation then rests on a tested set of alternatives, and your file shows it.
Wording you can use“Before I recommend any borrowing, I would like you to have advice on whether your pension or savings could meet this need instead. That is outside what I advise on. Equity & General has planners who do. Would you like me to arrange for one to call you before we go further?”
When the purpose of the borrowing is a gift, such as a deposit for a child, the case raises questions about the client's own security and about inheritance tax. A gift made more than seven years before death falls outside the estate. A gift made within seven years may be taxed if the estate exceeds the nil-rate band.
These are estate planning questions for a planner. Your part is to make sure the client has had the chance to take that advice before the money is released. If you are also arranging the child's mortgage, keep each client's file separate and take each person's consent separately.
A later-life loan is a good point for the client to review their will and to make lasting powers of attorney if they have none. Wills and powers of attorney are legal documents for a solicitor. Equity & General coordinates the financial side with the client's solicitor.
You can tell a client that a review of their will may be sensible after a decision of this size. Record that you said so. If the client has no solicitor, they can ask the planner about one.
Some later-life clients want their children involved, and some do not. Ask the client, record the answer and follow it.
Where family members attend, make sure the client speaks for themselves, and watch for pressure from anyone who stands to gain from the loan. If you see signs of pressure, speak to the client alone and pause the case if you need to. The same applies to the introduction. Consent comes from the client.
Agree the order with the planner before either piece of advice is given.
Proceed with the lending. Offer the introduction for the estate and will questions alongside.
The planner advises first. Your lending recommendation follows the client's decision.
The planner advises the giver on the gift and the estate. You advise on the lending.
Write the order on your file, with the date of the planner's recommendation where there is one.
On a retirement interest-only case for a couple, the interest has to remain affordable after the first death. The lender will test the surviving partner's income. Your file needs to show that the client understands what happens to the payments if one of them dies.
The survivor's income depends on the pensions. A defined benefit pension may pay a reduced pension to a surviving spouse. A defined contribution pension may pass to the survivor as a fund to draw from. The state pension does not transfer in full. Whether the household's pensions are arranged to support the survivor is a pension question, and a reason to offer an introduction before the loan is agreed.
Wording you can use“The lender will check that the payments are affordable for whichever of you survives the other. That depends on how your pensions pay out after a death, which is outside what I advise on. A planner at Equity & General can look at that with you before we go ahead. Would you like me to arrange it?”
Write to the client after completion with a short summary of the loan and the date of the next review. If the client was introduced to Equity & General, ask the client whether they would like you and the planner to share future changes, such as a further advance or a move into care. Record the answer.
Later-life loans can run for decades. Diarise a review at least every two years, and at any change in health, a death or a move.
Age on its own does not make a client vulnerable. Health, a recent bereavement, low confidence with money or a large and unfamiliar decision can. Look for the signs throughout the case, and adapt: more time, written summaries, a second meeting before any decision, and a family member present if the client wants one.
If you have any doubt about a client's capacity to make the decision, stop. Do not take consent for an introduction and do not proceed with the lending until the doubt is resolved, which may mean involving an attorney or seeking a medical view.
How the income evidence on a self-employed or director case points to planning needs, and when to introduce the client.
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Recognising vulnerability on a mortgage case, deciding when to make an introduction, and handling consent, family and attorneys.
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The line between mortgage and protection advice and pensions and investment advice, with the client questions that fall either side of it.
Read itYour firm keeps the mortgage and protection advice. Equity & General gives the pension, investment and estate planning advice, and a named partnership manager sets the arrangement up with you.