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urgent advice needed on equity release (i am a beneficiary in trust)

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jdh1975 | 23:36 Sun 17th Jun 2012 | Business & Finance
11 Answers
could someone please give me a bit of advice as i fear my parents are about to make a huge mistake!!
Last year my parents,myself and my sister saw a solicitor because my parents wanted to leave their house in trust to my sister and i to give us some inheritance and avoid any sale of the property to pay for care costs etc, everything was arranged, with the result being that the property is now divided 4 ways between my parents, sister and myself. Just to clarify, this means that if one parent passes away then the property is left to the remaining parent, when the remaining parent passes away then the house would belong to my sister and myself.
However my parents (both in their 60`s) are struggling currently with debts (approx 35k) and are both only working part-time, the debts are spiraling out of control.
They could get a mortgage over 8-10 yrs to raise capital to repay their debts but dont seem to think that they can afford a mortgage repayment and are adament that they plan to use an equity release scheme, when they advised me of this i knew it would be a huge mistake and this was confirmed when i went alone to see an independant financial advisor, i understand that once money is released then the interest would eat away over my parents lifetime and could potentially leave my sister and myself with no inheritance at all and could even leave us liable to repay money after the house was sold!!
I informed them of my dissaproval regarding their plans but they just seem to think that releasing equity and not having to pay back monthly (like a mortgage) would solve all of their problems.
Basically im just looking to find any advice on here (maybe from someone in a similar situation?) as i have fallen out with my parents and asked them why they even bothered to leave the house in trust if we are not going to see anything from it!!
If you are reading this then please dont take me the wrong way, i am in no way selfish or a gold digger, i would even revoke my beneficial trust in the property and have it just left solely to my sister but i wouldnt wish for her to be left with nothing either, i want my parents to be happy in their upcoming retirement too without the burden of a mortgage, its such a hard call, do i let them go ahead with their plans and when i get contacted by a solicitor, just disagree and scupper things???
I need sound advice on equity release, so would very much appreciate any advice. Thanks


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Hello, Not commenting on either you or your parents situation as it is difficult without further detail. There are a range of Equity Release schemes available today that all provide wide range of options from providing a monthly income or protecting a level of equity in the house.

To find out more about this option I would suggest that your parents perhaps with you and your sister speak to a financial adviser who specialises in Equity Release to understand what the options are, as from what your saying unless they repay some of their debts they are really going to struggle in retirement.

For more information on Equity Release please visit our website
If they are going to go ahead with this, and in their 60's they are not likely to get any other type of Mortgage, ensure they use a Company that is a member of SHIP the regulatory body. This would ensure that they are never left with negative equity.

If they are already so much in debt at retirement age they are in great risk of the debt spiralling out of control if they cannot keep on top of it, is there any way that your sister and you can clear the debts in view of the fact that you will both inherit the house.

Did the Adviser say anything about being able to get the equity release with the house being in a Trust and your parents effectively only owning 50%, as this may cause problems with the amount they would be able to release if any.

By the way, if either of your parents need future care, the house could not be touched while the other parent still lives there. If the second parent then needed care, and it was deemed that they had deprived themselves of assets to avoid fees, the house could still be claimed as if they still had full ownership.
Hi ubasses

You said ''By the way, if either of your parents need future care, the house could not be touched while the other parent still lives there. If the second parent then needed care, and it was deemed that they had deprived themselves of assets to avoid fees, the house could still be claimed as if they still had full ownership''.

This does not apply in all cases.
A friend of mine had half the house left to her by her father and she was on the land certificate.
The mother was taken into care and lived for about 9 years.
The Council were unable to take any of the house as she lived in it.
Even if she had not lived in the house the council could hve only got half the house as the other half was the property of he daughter.

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Is there a possibility of selling the house, they pay off their debts and buy something smaller?
Ultimately they have to do something to clear their debt or at least bring it to a manageable amount! Which ultimately may mean selling the home... and reducing your future inheritance - maybe even to nothing anyway!
They could both live another 20 years.... how are they going to pay for their old age if they cannot cope now?
Clearly if their debt is increasing.. they have too little coming in and roo much going out - imagine if that were to continue for 20 years!
Hi Moonglow,

You are correct in that situation, because the father had left his share of the house in his Will, however in this instance they will have disposed of a share of their asset whilst still living, and at a time when they are in debt, so that could be looked at in a completely different light.
If the debts are not tackled they will form part of the estate and will have to be repaid before any surplus is shared out among beneficiaries so it may be in your interests to help your parents tackle their debts.
Is there any way you can lend/give them some money in return for the expected future benefits?
Besides, I think half the house should be regarded as theirs to do with as they like while they are alive
I think they should downsize to something they can manage financially. Going down any other route you could all end up with nothing. Downsizing would immediately relieve the situation, better to have a smaller property than none at all.
I think you have been given the wrong advice by a solicitor that does not approve of equity release. You will not have to pay back negative equity, There are many different schemes out there to protect equity, pay back interest need to speak to an independant EQUITY RELEASE Adviser who knows what they are doing
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