Equity Release Concern.

[Lucky4Seven]

I am asking for some advice by my mum who is 74.

About 15 years ago, she was advised by her financial advisor to take out equity release.

I have no idea what she borrowed.

The concern is that I feel that the financial advisor wrongly advised her to do this.

Her property is only worth around £450K.

As she will no doubt have to go into a nursing home when she gets much older, she would then need to sell her house to pay for her care, leaving no inheritance.

I am concerned as to why the financial adviser told her to do this because she will not be leaving any monies which would take her over the inheritance tax threshold.

Can anyone offer any advice please.

[2222]

She was around 60, which is a bit young for equity release, but maybe she was happy to have some money to spend on herself whilst she was still in good health?

You say that she will no doubt have to go into a home, but the stats are that only about 1 in 3 people do end up in that situation. (IIRC) And the average stay is quite short. So, even with the equity release, there may still be something left for her heirs.

When someone goes into a nursing home, it's probably sensible to sell their house, rather than trying to let it out. To let it, you might find that there is a great deal of work needed to the property, as many elderly folk do not modernise their home.

I don't think you have even scratched the surface of showing that the FA was negligent. He may have been, but you'd need far more information to prove it.

[2222]

These stats from the USA:


One out of every four of us will die while residing in a nursing home. For most of us, that stay in a nursing home will be brief, although this may depend upon social and demographic variables like our gender, net worth, and marital status. These are the conclusions of an important new study published in JAGS by Kelly and colleagues (many of whom are geripal contributors, including Alex Smith and Ken Covinsky).

The study authors used data from the Health and Retirement Study (HRS) to describe the lengths of stay of older adults who resided in nursing homes at the end of life. What they found was that out of the 8,433 study participants who died between 1992 and 2006, 27.3% of resided in a nursing home prior to their death. Most of these patients (70%) actually died in the nursing home without being transferred to another setting like a hospital.

The length of stay data were striking:

• the median length of stay in a nursing home before death was 5 months
• the average length of stay was longer at 14 months due to a small number of study participants who had very long lengths of stay
• 65% died within 1 year of nursing home admission
• 53% died within 6 months of nursing home admission

https://www.geripal.org/2010/08/leng...es-at-end.html

[Lucky4Seven]

She was around 60, which is a bit young for equity release, but maybe she was happy to have some money to spend on herself whilst she was still in good health?

You say that she will no doubt have to go into a home, but the stats are that only about 1 in 3 people do end up in that situation. (IIRC) And the average stay is quite short. So, even with the equity release, there may still be something left for her heirs.

When someone goes into a nursing home, it's probably sensible to sell their house, rather than trying to let it out. To let it, you might find that there is a great deal of work needed to the property, as many elderly folk do not modernise their home.

I don't think you have even scratched the surface of showing that the FA was negligent. He may have been, but you'd need far more information to prove it.

As far as I am aware she hasn't spent the money she borrowed. My brother has spoken to her FA as to why he said to take equity release out in the first place.

I am just concerned that the equity release will eat up any inheritance and might lead to the estate being in debt.

Her house is in an excellent state as she does look after it so that is not the issue.

I am aware that nursing home fees can be very expensive.

[2222]

"I am just concerned that the equity release will eat up any inheritance and might lead to the estate being in debt."

That would be wonderful. Your mum came into this world with nothing, and if she is in debt when she leaves it, she'll be making a net profit.

Seriously, all these equity release loans have a guarantee that the loan won't exceed the house value, so it can't leave the estate in debt. Incidentally, if the estate is insolvent, that's just bad for the creditors. It's not your responsibility to bail them out.

"As far as I am aware she hasn't spent the money she borrowed." That's really weird. Mostly, people take these loans out because they want to spend the money. It sounds like your mum borrowed the money and just hung onto it. If that's what the FA really advised, you are right that it would be hard to justify. Even if she invested the money, it's hard to justify borrowing at quite a high interest rate in order to invest.

I think the starting point for all this is to have a chat with your mother about what happened. You can't, in any case, complain to the FA on her behalf without her authorisation**. I should warn you that any claim against the FA may be statute-barred after 15 years.


**Edit: Well, I see your bother has started that process. Did he get a response yet?

[Lucky4Seven]

"I am just concerned that the equity release will eat up any inheritance and might lead to the estate being in debt."

That would be wonderful. Your mum came into this world with nothing, and if she is in debt when she leaves it, she'll be making a net profit.

Seriously, all these equity release loans have a guarantee that the loan won't exceed the house value, so it can't leave the estate in debt. Incidentally, if the estate is insolvent, that's just bad for the creditors. It's not your responsibility to bail them out.

"As far as I am aware she hasn't spent the money she borrowed." That's really weird. Mostly, people take these loans out because they want to spend the money. It sounds like your mum borrowed the money and just hung onto it. If that's what the FA really advised, you are right that it would be hard to justify. Even if she invested the money, it's hard to justify borrowing at quite a high interest rate in order to invest.

I think the starting point for all this is to have a chat with your mother about what happened. You can't, in any case, complain to the FA on her behalf without her authorisation**. I should warn you that any claim against the FA may be statute-barred after 15 years.


**Edit: Well, I see your bother has started that process. Did he get a response yet?

My brother, who is the eldest, has power of attorney and is currently waiting to hear back from the FA over why he told her to take out equity release, but to also see if there is a way in which she can get out of it.

[Amethyst]

It would be bizarre for your mum to have taken out an equity release plan of some kind when she was not in need of the money and has not actually used it for anything. This would flag concerns that that financial advisor was looking at his commission rather than the best interests of your mother.

Send a Subject Access Request (Subject Access Request Letter ) to both the IFA and whoever the plan is with/the lender. Your brother should be fine to do that under the PoA he holds.

Mis-sold Equity Release info from FOs - https://www.financial-ombudsman.org....y-release.html

[Lucky4Seven]

It would be bizarre for your mum to have taken out an equity release plan of some kind when she was not in need of the money and has not actually used it for anything. This would flag concerns that that financial advisor was looking at his commission rather than the best interests of your mother.

Send a Subject Access Request (Subject Access Request Letter ) to both the IFA and whoever the plan is with/the lender. Your brother should be fine to do that under the PoA he holds.

Mis-sold Equity Release info from FOs - https://www.financial-ombudsman.org....y-release.html

Thank you will let him know x

[2222]

An unscrupulous FA who arranges equity release purely in order to get commission can then earn even more commission by helping the client invest the cash. So, this does not add up.

as Ame says, do a SAR and take it from there.