How Does Equity Release Work When You Die and Affect Your Estate

When you die, your estate will be responsible for paying off any outstanding equity release debt. This is because equity release is a loan that you take out on your home, and it must be repaid before your beneficiaries can inherit the property.

Your estate will typically need to sell your home to pay off the debt, which can be a lengthy and costly process. The equity release lender will usually appoint a solicitor to handle the sale of the property and ensure that the debt is paid off.

Your beneficiaries may be left with little or nothing after the debt has been paid off, as the equity release lender will be paid first. This can be a difficult situation for families to navigate, especially if they were relying on the inheritance to support their own financial needs.

The executor of your estate will be responsible for talking to the equity release lender and arranging payment after you've passed away. This can be a complex process, but most lenders are happy to work with the executor to come up with a solution.

The money owed on your equity release plan is due following your death, and the balance will be paid via the sale of the property, unless other assets are used. In most cases, the balance will be paid via the sale of the property.

The executor of your estate can't begin dealing with your financial affairs until they've received a grant of probate. This is a document that confirms their authority to manage your estate.

The lender will write to the remaining plan holder, requesting that the original death certificate is sent to them, if a plan is held in joint names. This will be returned by recorded delivery.

The surviving plan holder continues to live in their home and the equity release plan continues until their death, or they move into long-term care. This is a key benefit of joint equity release plans.

The estate then has 12 months in which to sell the property and repay the amount outstanding, after the death of the single plan holder. Interest will continue to accrue, increasing the size of the equity release mortgage.

Typically, the executor of your estate will have 12 months to pay back the lifetime mortgage upon your death, by selling the home on the market.

Most lifetime mortgages now come with a no negative equity guarantee, which means your beneficiaries will never have to repay more than the home is sold for, even if this is less than the amount owed.

The executor of your estate will handle the repayment, which typically needs to be completed within 12 months of your death.

The lender will require regular updates on how the sale is progressing, and interest will continue to accrue on the lifetime mortgage until the plan is settled in full.

Your home will be sold to repay the lifetime mortgage after you die, unless other funds are available to cover the cost of the lifetime mortgage.

Your executor or next of kin will need to tell your equity release provider and send them a copy of your death certificate and probate document.

You'll need to make sure your executor has your policy number, as they'll need it to contact the provider.

The provider will want to know how the debt is to be repaid, and if this involves the sale of the property, they'll require regular updates on how the sale is progressing.

Most lifetime mortgages now come with a no negative equity guarantee, which means your beneficiaries will never have to repay more than the home is sold for.

Typically, the executor of your estate will have 12 months to pay back the lifetime mortgage upon your death, by selling the home on the market.

Interest will continue to accrue on the lifetime mortgage until the plan is settled in full.

Your home will be sold to repay the lifetime mortgage after you die, unless other funds are available to cover the cost of the lifetime mortgage.

If you have a joint lifetime mortgage, your partner won't need to repay when you die, as the plan only needs to be repaid after both partners die or move into long-term care.

The cost of paying back the provider can be a significant concern for many people considering equity release. The cost of equity release can be broken down into various components.

Set-up fees are a common cost associated with equity release, and they can range from £500 to £2,000. Interest rates on equity release plans can be high, often between 4% and 7% per annum.

The interest rates on equity release plans can add up quickly, so it's essential to understand how they work. Some equity release plans come with a fixed interest rate, while others have a variable rate that can change over time.

The total cost of equity release will depend on the specific plan and the amount borrowed. It's crucial to carefully review the terms and conditions of any equity release plan before committing to it.

You can protect some of the value of your home when entering an equity release agreement to ensure a portion of it is left to your beneficiary. This is achieved through a protected equity guarantee, also called an inheritance protection guarantee.

A protected equity guarantee allows you to 'ringfence' or protect a percentage of the property's equity from being used to repay the equity release debt. The larger the percentage you protect, the less equity you can release from your home.

If you choose a lifetime mortgage with inheritance protection, you can ring-fence a portion of your home's future value to be passed on to your beneficiaries when you die. This amount will not be affected by how much interest the lifetime mortgage gains, either.

Here are some key things to consider:

It's worth noting that the steps your beneficiaries need to take will depend on the type of equity release plan you've taken out.

If you release 95% of your home's equity, there'll be little money - or perhaps none - to pass on to your children.

A protected equity guarantee can help you 'ringfence' or protect a percentage of the property's equity from being used to repay the equity release debt.

You can set aside a predetermined percentage of your home's equity for your beneficiaries, but this will impact how much money you're able to receive.

For instance, if you set aside 40% of your home's equity, you'll receive an equity release offer that's 40% lower.

Equity-released cash may result in higher inheritance tax liability if it has not been spent.

The steps your beneficiaries need to take will depend on the type of equity release plan you've taken out, but if you've taken out a standard plan, they won't need to do anything.

Protecting your loved ones from the financial implications of equity release is crucial. A no-negative-equity guarantee ensures that the cost of repayment will never exceed the value of your home, shielding your beneficiaries from additional costs.

This type of guarantee is not foolproof, however, and the value of your estate may still be impacted if the lender claims the full value of your home. A protected equity guarantee, also known as an inheritance protection guarantee, can help ringfence a percentage of your home's equity for your beneficiaries.

By using a protected equity guarantee, you can set aside a predetermined percentage of your home's equity, ensuring that your beneficiaries receive a portion of the property's value when you pass away. For example, if you set aside 40% of your home's equity, your beneficiaries will receive an equity release offer that's 40% lower.

If you choose a lifetime mortgage with inheritance protection, your beneficiaries will be able to inherit a portion of your home's future value, unaffected by interest accrual. This can be a more secure option for those who want to leave a legacy for their loved ones.

Here are some key benefits of using a protected equity guarantee:

If you're wondering whether a solicitor should get involved, the answer depends on the specific situation. If you're the first person of a joint policy plan to die, then there's usually no need for a solicitor.

In a joint equity release plan, the solicitor rarely gets involved, as the plan continues until the last partner dies or moves into long-term care. However, if one person dies in a joint plan, the solicitor may still be needed to help with the necessary steps after death, such as sending the death certificate to the equity release provider.

If you're the sole borrower, or if the surviving partner of a joint plan dies, a solicitor will likely be needed to guide the beneficiary through the process. This includes sending the death certificate, notifying the home insurance provider, and applying for the grant of probate, which can take 3 to 4 months and shouldn't exceed 6 months.

In these situations, it's essential to contact a solicitor specialising in equity release for guidance and help.

A solicitor can also assist with other tasks, such as helping the beneficiary reassess the equity release plan to determine if it's being managed appropriately and how they can secure their future after your death.

Here's a summary of when a solicitor is likely to get involved:

If your estate's value will be reduced by equity release, it may affect your entitlement to means-tested benefits. This is something to consider when planning your finances.

A lifetime mortgage can result in limited or no property equity remaining, reducing your financial options in the future. This is a key point to think about when deciding whether to secure a loan against your home.

If you have a joint equity release plan, it's a good idea to consult a financial adviser after one partner dies. They can help the surviving partner reassess the plan and determine if it's being managed appropriately.

A financial adviser can help the surviving partner move to an equity release plan with lower rates, better features, and more flexibility to secure their needs now and in the future. This can be a good option if interest rates have fallen since the original plan was set up.

If the household income has fallen after one partner's death, a financial adviser can perform benefit checks to determine if further help is available. This can include claiming benefits like additional pension credit or reductions in Council Tax.

The surviving partner may want to downsize and move to a smaller property, but they need to assess the implications first. A financial adviser can help them determine if early repayment charges will apply or if the new property is enough security for the lender.

Here are some key points to consider when seeking financial advice after one partner dies:

Most lenders are happy to work with the executor of the estate to come up with a solution. The executor of your estate can’t begin dealing with your financial affairs until they’ve received a grant of probate.

Typically, your home will be sold to repay the lifetime mortgage after you die. However, if other funds are available to cover the cost of the lifetime mortgage, the executor may be able to use these instead of selling the house.

Most lenders allow up to 12 months after you or the last plan holder dies for the executor to repay the equity release debt. This offers enough time to arrange the property sale for a reasonable market price and get the proceeds to settle the loan.

The loan will remain outstanding and continue to accrue interest until it’s cleared in full. Estate agents and solicitor fees will also be paid, along with your beneficiaries, when the lifetime mortgage is repaid.

In most cases, lenders will expect to receive their money within twelve months of your death. This work will be handled by the executors of your estate, who will communicate with the lender to outline when and how the money will be repaid.

The executor will have 12 months to pay back the lifetime mortgage upon you or the last remaining applicants’ death, by selling the home on the market.

If you move into a care home, your equity release plan will end and you'll need to repay the provider. This is because the understanding is that you won't be moving back to your own home.

You'll need to repay the provider immediately, unless you borrowed jointly, in which case the plan will continue until your surviving partner either dies or also goes into permanent long-term care.

If there are funds leftover after the provider is repaid, these might need to be used to fund the care costs, either for private or for state-funded care. Your local council will conduct a financial assessment to see how much you might need to pay.

If you have assets over £23,250, the council won't contribute to costs for your care. This is the case in England and Northern Ireland for the financial year 2024-25, although different rates apply in Scotland and Wales.

Moving into full-time care is treated the same as if you die, as far as equity release is concerned. This means that if just one partner moves into full-time care, the other can continue living in the home until they die or move into full-time care.