Many people are unsure of what happens regarding their equity release plan once they die. Death isn’t something anyone wants to spend too much time thinking about, but it’s good to know where you and your loved ones stand financially.
So, what happens with an equity release plan after a death? Read on to find out.
What is an Equity Release Plan?
An equity release plan allows the property owner to release money from their property without selling up or moving. It allows the owner to get cash (tax-free) from their home and continue to live there. Repayment is usually made in the event of the house sale after death or a move to long-term care.
Equity Release After a Death
While equity release plans are popular and hugely beneficial to many, it is not suitable for every homeowner. It is always best that the next of kin know such plans and the administration involved after death.
The executor of the will usually has a year from the property owner’s death to sell. The money is then used to pay any outstanding fees, loans and costs (interest, solicitors, estate fees etc.). The remaining funds are then allocated to the relevant beneficiaries. Some property owners may have enough cash in their estate to pay these loans and fees without selling the property. The beneficiaries will never be in a position of owing more than the property value after the owner’s death due to ‘no negative equity guarantees.’
Death of a Partner
If a spouse passes away with a joint equity release plan, the remaining spouse can stay in the property. Loan repayment is only due once both spouses have died or entered into permanent care. At this point, the process is that of a standard equity release plan, detailed above.
If the plan was in the deceased spouse’s name only, the remaining spouse might have to move out and sell the property. In this situation, the surviving party would need to check the plan’s terms and seek professional advice.
Home Reversion Plan
Home Reversion plans involve the lender owning some or all of the property in exchange for a fixed sum they have issued the buyer. In his situation, the property needs to be sold after the buyer’s death to pay off the debt. It is important to ensure the executor of the will understands this, as the process is often swift after death.
For more information about our services, contact Equity Release Brokers on 01277 620083.
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