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Property News
Advice for those seeking equity release to avoid IHT - 16/05/2006
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Retirees who seek equity release in order to avoid paying inheritance tax (IHT), have been warned of the dangers of this practice.
The IHT threshold is now £285,000, with people inheriting estates over this value having to pay the tax on transferral of household.
Some consumers have been advised to seek equity release on their properties in order to avoid paying this tax.
By releasing a portion of one's property into private ownership, the taxable value is decreased; with the possible outcome that a home evades the levy.
However, consumers have been advised to be wary over these practices since they can result in poor selling practices.
A recent report from the Financial Services Authority found that using equity release for IHT mitigation is a "very finely balanced arrangement".
It added that cases arose where the customer's estate could be left off worse had no action been taken to evade IHT.
Meanwhile, Murdo McHardy, head of product development at Scottish Widows, said today that "equity release could have a big impact on IHT".
He added that "some people still don't realise they will be liable for IHT" and that when they do, they might be tempted to seek equity release in order to avoid it.
© Adfero
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