Equity Release As A Financial Planning Tool
A TOOL IN PENSION PLANNING:
Putting money into a pension fund is often one of the most tax efficient savings potentially available. With higher rate tax relief at 40%, the more that one can put into a pension fund, the better.
The problem for many people though, is that while they have potential capacity to put money into a pension fund, having significantly less than the maximum amount currently allowed, they cannot afford to make the cash contributions.
For those homeowners who are aged over 55 years and are still earning, equity release can be a very effective tax efficient solution.
A TOOL FOR INTERGENERATIONAL GIFTING:
In the past, equity release may have been seen as a last resort, but it is now regarded as a real opportunity for parents and grandparents to help their children, and grandchildren, during their own lifetime.
Rising property prices has meant that many children are either struggling to get onto the property ladder or, if they are fortunate enough to have been able to purchase a property, are saddled with large debts.
Rather than wait until grandparents, or parents, pass away before they can inherit, children can get the benefit of their inheritance early thus providing opportunity for the donors to enjoy the pleasure of seeing the children, or grandchildren, benefit.
A TOOL TO LESSEN THE IHT BURDEN:
Equity release is a way for homeowners to release cash from their property whilst retaining the right to stay in their home. The cash released can be used at the discretion of the homeowner, but it does provide a real opportunity for clients to take inheritance tax planning steps that would not otherwise be available.
A TOOL TO RELEASE CASH FROM “BUY TO LET” PROPERTIES OR A HOLIDAY (SECOND) HOME:
Whilst it has been possible, for a number of years, to use equity release to raise money against the value of the family home, it is only recently that a new opportunity has become available whereby equity release can be used with both a holiday (second) home and with a residential investment property (buy to let). This increases the opportunity for IHT planning.
