Millions Planning Equity Relief To Avoid Inheritance Tax

Despite being persistently portrayed in the popular press as the generation that loves to 'Ski' and ‘Spend the Kids Inheritance’ two million retired people are finding other ways to avoid inheritance tax.

One in five say they plan to avoid heavy death duties from eating into their property and savings by drawing on equity release to help their children and grandchildren while they are still alive.

Inheritance tax looks set to hit the estates and legacies of 40 per cent of pensioners, and many plan to minimise the cost by spending it rather than leaving it in a will.

"It is understandable that retirees may want to see their children and grandchildren benefit from the money that would otherwise be put aside for their inheritance," said a representative of the insurance firm which carried out the research.

"Receiving these gifts can help offspring to financially prepare for their future, for example by providing a deposit on a first home.”

"Equity release products are a way for some retirees to be able to help their children, provided that it suits their individual circumstances," he added.

Many elderly grandparents are seeing their offspring struggling with mounting debts. They feel the need to help finically now instead of making their children wait until they are dead and gone. This also has the added advantage that now retired people can see the benefit their money is having on their family and friends.

Equity release is when you ‘unlock’ the money in your property. The money comes from the difference between the open market value of the house and the value of the mortgage. You will normally get your money as a cash lump sum. There are several different types of scheme and it is worth taking independent financial advice before making any decisions.

Equity release is not suitable for everyone and there are alternatives which can help to raise money. For example selling your current home and downsizing will mean you still keep full ownership of your home.

If you would like to know more about inheritance tax why not ask AnswerBank Business and Finance.