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Sesame highlights inheritance concerns

Amanda Jarvis

May 11, 2006

While the older generation is releasing equity to make their retirement more comfortable, their offspring expect to gain significantly from an inheritance that would include the family home.

Granted, HM Revenue and Customs starts imposing a 40 per cent inheritance tax on estates valued over £285,000 and the average home in the UK costs just under £185,000 – the average detached house came in at just under £286,000 (according to England and Wales Land Registry figures for February 2006) – which means there are a lot of estates out there with the potential to breach the nil rate band. But it is not just the taxman consumers need to be wary of.

For dependents hoping to provide for their own long-term financial needs through a windfall inheritance they may be in for a shock, as escalating care home costs and an inadequate State pension mean, for those who can, the option of releasing equity in their home is proving increasingly popular. Council of Mortgage Lenders figures for 2005 show a 20 per cent increase in equity release mortgages from Q1 to Q4 in 2005.

The taxman might not have much to get his teeth into if elderly relatives have got there first.

The poll was conducted among 300 IFAs. When the advisers were asked to what extent consumers perceive different methods to be the best way to improve their financial position, 60 per cent said they were relying on inheritance.

Alastair Conway, head of customer propositions at Sesame, said: “It seems consumers are looking to property to provide a panacea for all their financial ailments, which it has the potential to do in some cases, but only for one of the interested parties. You simply cannot burn the property candle at both ends and expect a happy outcome.”


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