Later-life lending, equity release and the estate
How equity release and later-life lending affect a client's estate, and how the estate-planning conversation with E&G runs alongside the lending.
How equity release and later-life lending affect a client's estate, and how the estate-planning conversation with E&G runs alongside the lending.
Arranging later-life lending involves you in a decision with long-term consequences for the client and their family. Releasing equity from a home, or taking a retirement-interest-only mortgage, changes what the family inherits, how the estate is taxed and how the client funds the rest of their life. You may be the first professional the client speaks to about it.
The lending decision affects the estate, so in a Pecunia partnership the person arranging the mortgage and the person advising on the estate speak to each other.
When a client releases equity from their home, they are spending part of what they would otherwise have passed on. The lending therefore affects the estate. You may see it before the solicitor, the wider family or any financial adviser, because the client comes to you to arrange the lending.
Estate planning done before equity is released has more options open to it than planning done afterwards. Because you see the client first, you can make sure the wider conversation takes place.
A lifetime mortgage reduces the value of the home that passes on, and the rolled-up interest compounds over the years the client lives there. Depending on the circumstances, releasing equity can reduce an inheritance-tax bill, because the debt reduces the estate, or it can complicate the picture in ways the family does not expect.
Whether any of that is the right outcome is a planning question. It depends on the client's other assets, their income, their intentions for the family and the tax position of the estate. You arrange the lending. E&G advises on what it means for the estate and whether the wider plan holds together.
Lifetime mortgages and retirement-interest-only mortgages are regulated mortgage contracts. Where you hold the equity-release permission, the advice on the lending itself is yours to give, along with the suitability and vulnerability duties that come with it. Where you do not hold it, E&G or another qualified adviser can handle that part too.
Advice on pensions, investments and estate planning always sits with E&G. So the equity-release recommendation may be yours, while the questions that surround it belong to Equity & General under its FCA authorisation (No. 474163): how the estate is structured, how released capital should be used, and whether the client should draw on other assets instead.
A later-life client may have a will written decades ago, or no will at all. A decision to release equity, downsize or help a family member should prompt a review.
Wills, powers of attorney and the structure of an estate are part of the planning E&G coordinates, working alongside the client's solicitor. You do not advise on any of it. You may be the person who notices that the paperwork no longer matches the client's life.
For a later-life client the home may be the largest asset they own, and above the available thresholds it is fully exposed to inheritance tax. The residence nil-rate band, lifetime gifting and life cover written in trust are all established ways to plan for that exposure.
Each of those is regulated or specialist advice that belongs with E&G. Your part is to spot the exposure. You know the value of the property and the age of the owner, and together those can point to an inheritance-tax question.
One reason clients release equity in later life is to help children or grandchildren onto the property ladder. A gifted deposit from released equity is complicated. It has inheritance-tax consequences, it affects the client's own security, and it may involve your own work if you go on to arrange the child's mortgage.
You can arrange both mortgages. E&G can advise the older client on whether the gift is sound, how it affects the estate and how their own retirement is funded once the money has gone. The family gets advice that fits together.
Some later-life clients will be vulnerable through age, health, bereavement or the size of the decision. Any introduction has to be made gently and in the client's interest.
That means giving people time, involving family or attorneys where the client wants them there, and offering an introduction only where it serves the client. You raise the possibility of advice and leave the choice with the client. E&G's advisers pick it up at the client's pace.
A later-life introduction can test whether equity release is the right route before the client commits to it. For some clients, drawing on a pension or other investments would serve them better than borrowing against the home.
That comparison is regulated pension and investment advice, and it is E&G's to give. Introducing early, before the lending is arranged, means the client gets that answer while it can still change the decision. It also protects you, because the lending recommendation you go on to make has been tested against the alternatives.
The two run side by side. You arrange the later-life mortgage where you hold the permission. At the same time, with the client's consent, you make a warm introduction to E&G for the pension, investment and estate-planning side. E&G coordinates with the client's solicitor on wills and powers of attorney, and picks up the regulated advice using the facts you already hold.
You keep the client relationship and follow every introduction through the partner portal. You share in the initial advice income and in the ongoing value of the assets under management. Commercial terms are agreed individually, and the value recurs over time after the mortgage completes.
Later-life clients may hold invested wealth alongside the property, and their estates can be complex. Introductions at this stage can build ongoing value from assets under management, which is the part of a relationship that carries enterprise value in your firm.
Families notice when a client has been looked after well at a difficult moment, and that can lead to further introductions. This describes how the arrangement works. It does not forecast any firm's results.
If you hold the equity-release permission, the advice on the lending is yours to give, with the suitability and vulnerability duties attached. Advice on pensions, investments and the estate is E&G's. If you do not hold that permission, E&G or another qualified adviser can handle the lending as well as the wider planning.
Raised with care, it is part of looking after them. You are already discussing their home and their family's future, so offering a route to estate advice, at the client's own pace and with family involved where they wish, fits that conversation. The client decides whether to take it up, and when.
No. E&G advises on the financial side, which includes inheritance tax, protection, how released capital is used and how retirement is funded, and it works alongside the client's solicitor on wills and powers of attorney. You keep the client relationship across all of it.
That comparison is regulated pension and investment advice, and it is E&G's to give. You arrange the lending, and the question of whether lending is the right route in the first place belongs with E&G. Introducing early means the client gets that answer before committing to anything.
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