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What happens to equity release upon death?

04/03/2022 |  min read

When considering equity release to access tax-free cash from your home, it’s important to understand what then happens with the plan once you die or enter permanent long-term care, and how the loan is paid back.

How is the equity release loan repaid ?

Upon death or entering permanent long-term care, the equity release plan needs to be repaid. Firstly, on death, the equity release lender must be informed and provided with a copy of the death certificate and probate document. That will usually be handled by the executors of your estate. If you enter long-term care, then either you or a loved one must notify the lender.

Then, with a Lifetime Mortgage, your inheritor(s) will usually have around 12 months to make repayment. This is often done through the sale of your home; however, it can also be repaid through other means if your inheritor(s) can repay the loan without selling your home.

The process of repayment can depend on several factors, the main one being whether the plan is taken out under one name, or jointly. If the plan is taken out jointly, repaying the loan will work on a ‘second death’ basis. This means it will continue until both names under the plan have passed away or entered permanent long-term care.

How will loved ones be affected?

Responsible Equity Release will only ever use lenders that are members of the Equity Release Council. This means that you will benefit from being covered by a no-negative-equity guarantee.

A no-negative-equity guarantee helps to protect your estate from any unexpected costs after you pass away. No matter what happens to the property market, you will never owe more than the value of your home. This also ensures that your loved ones won’t have any Lifetime Mortgage debt passed on to them.

However, the tax-free cash you release will reduce the value of your estate and may affect your entitlement to means-tested benefits. The reduction in the value of your estate will affect the amount of inheritance available to be left to loved ones. This could also reduce any potential Inheritance Tax liability. The FCA do not regulate Inheritance Tax planning.

Read more on Inheritance Tax and what happens to equity release after death.

Ready to start your Responsible journey, or want some more information?

You can use our free equity release calculator at the bottom of this page to discover how much tax-free cash you could release.

Or, to find out more about equity release, get in touch with our UK-based Information Team direct on 0800 048 5384. They can provide you with answers to your initial enquiries and guide you to book a no-obligation appointment with one of our fully qualified advisers.

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