At Equity Release Supermarket, we understand that when a loved one dies, dealing with their financial arrangements is probably the last thing on your mind. After all, this is a time to grieve without having to worry about trivial matters.
That said, at some point in the future, you are likely to be in this situation. Perhaps you, a relative or loved one has already taken out an equity release plan. If this is the case, then it’s important that you know what happens to your plan when you die – and so we have developed this guide to answer all the questions you may have.
- What steps do my beneficiaries need to take?
- Joint and individual plans
- Will a solicitor need to get involved?
- Should the beneficiaries speak to a financial adviser/solicitor?
- How long does the process typically take and is there much to do on the part of the beneficiary?
- What does Equity Release Supermarket do to make this process as pain-free as possible?
What steps do my beneficiaries need to take?
When your equity release plan is first taken out, you will be issued with a welcome pack by the lender that includes contact details including a plan reference number. This acts as a reference point for future & should be retained in a safe place & preferably known to beneficiaries/executors.
When a homeowner dies, your beneficiaries or executors should quote this number in any dealings they have with the lender.
If they do not have these details or can’t find them, (and the broker originally used is still practising), your beneficiaries can contact them to find out how to obtain the lender's details. What’s most important is that your beneficiaries contact the lender as soon as possible.
How quickly must the plan be repaid?
Most lenders provide a 12-month window in which the plan must be repaid in the event of the last surviving owner of the property dying or moving into long-term care. The loan remains outstanding with interest accruing until the mortgage is cleared in full.
Once your beneficiaries have contacted the lender, they will ask for a copy of the death certificate and they will also request the probate document, so they can contact the executors of the estate going forward.
The lender will then send a letter to the chosen executor(s), asking them to keep the lender informed about how they plan to repay the loan.
Typically, the executors will sell the property to redeem the mortgage, but ultimately, it’s up to the estate how they clear the outstanding balance within the timescale. For example, they may wish to use the property as an investment, such as a buy to let and therefore repay the equity release plan with a buy to let mortgage or alternative means of finance.
To keep the lender up to speed with the sale of the property, they may also ask for sale particulars - or contact the estate agent involved - to confirm that the property is being marketed and what the sale price is.
The lender will monitor the progress of the sale so that it is finalised and the loan is repaid within the 12-month period. They will also help the executors as much as possible to ensure that this is the case.
If, for whatever reason, this doesn’t happen, then the lender will review the situation and recommend next steps with the executors.
Ultimately, the lender has the right to repossess the property, but this decision is taken as an absolute last resort and the lender will always prefer to have regular communication with the executor(s) to resolve the situation.
Joint and individual plans
Depending on whether your equity release plan is held in joint or single names will determine who should contact the lender upon death and the actions that the lender will then take.
Joint plans – where one of the applicants has died
For plans held in joint names, where one of the applicants has died, it would normally be the remaining plan holder who contacts the lender, however, a family member may do this at such an emotional time.
In this situation, the lender will write to the remaining plan holder, requesting that the original death certificate is sent to them. This will be returned by recorded delivery. The lender will then note the death on their systems and then no further action needs to be taken.
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.
Joint plans – where the last applicant has died
In this scenario, the beneficiaries/executor(s) of the estate must contact the lender and the lender will request that the original death certificate and the probate document is sent to them, which they will return by recorded delivery, to either the property or correspondence address.
As discussed earlier in this guide, the executor(s) then has 12 months in which to sell the property and repay the amount outstanding.
Where a plan is held in a single name, then the beneficiary/executor(s) of that person’s estate should contact the lender. The lender will request that the original death certificate and the probate document is sent to them – which they will return by recorded delivery, to either the property or correspondence address.
Again, the estate then has 12 months in which to sell the property and repay the amount outstanding.
Bear in mind that until the property is sold, interest will continue to accrue, thus increasing the size of the equity release mortgage.
Will a solicitor need to get involved?
This all depends upon if the equity release plan was held in joint or single names and who has died.
For example, if the plan is held in joint names and one person dies, it is rare for a solicitor to become involved.
From a legal perspective, the plan does not change, as the surviving person (and name on the plan) continues to live in their home and their equity release plan continues as before until their death or move into long-term care.
A solicitor would only really become involved if the joint plan holders owned the property as tenants in common and a solicitor was needed to help sort out breaking a Trust or putting the deeds into a sole name. At which point the survivor would contact the solicitor and supply them with a death certificate and the Will.
Solicitors become involved on a more regular basis upon the death of the survivor in a joint plan or death of a sole borrower.
In these situations, the beneficiaries should contact a solicitor for guidance. Equity Release Supermarket's recommended panel of solicitors all specialise in equity release and can do this over the phone.
Following a conversation with their solicitor, the beneficiaries then need to send the lender the death certificate (as we’ve previously noted), notify the house insurance provider to let them know the property is empty and then apply for Grant of Probate to sell the property. Probate should generally take no more than 6 months (typically 3-4 months).
Your solicitor will be able to help you with all these steps.
Should my beneficiaries speak to a financial adviser?
At Equity Release Supermarket, we always advise beneficiaries to contact us, so that we can guide them and ensure that they speaking to the right people at both the lender and/or solicitors. This will also help us to keep our records up to date for future reference.
Particularly with joint plans, where one of the applicants has died, there are many good reasons for the surviving partner to seek financial advice. While this will be an emotional and difficult time, it is also an opportunity for the beneficiaries to have some input into the future of their family member and ensure that they are financially secure following the death of their partner.
Some of the benefits of having financial advice at this juncture are:
- Interest rates have fallen significantly over recent years and new plans have come onto the market offering greater flexibility and choice. If the plan was taken out many years ago, then it may be possible to move to a plan with a lower interest rate and greater flexible features that better meet their needs now & in the future.
- If household income has now fallen, we can run benefits checks to see, for example, if additional pension credits or a reduction in Council Tax can be claimed.
- If the plan has a ‘drawdown’ facility (i.e. all the available money wasn’t taken as a single lump sum and there is still money ‘in the pot’ – then could this extra money be used to pay for funeral costs or support the financial future of the surviving partner?
- If the surviving partner is now considering downsizing and moving to a smaller property, then they need to think about moving their equity release plan to the new property, or even repaying it in full. Repaying a lifetime mortgage early can incur additional charges and we’d suggest obtaining specialist financial advice.
How long does the process typically take and is there much to do on the part of the beneficiary?
In most circumstances, the loan will be repaid following the sale of the property and so the time the process takes depends entirely upon a successful sale.
That said, most equity release plans include in their terms and conditions that the plan must be repaid within 12 months following the death of the surviving partner (In the case of joint name plans) or their move into long-term care.
While the lender could repossess the property if it is not sold within 12 months, it is not in their best interests to do so and they will always try to work with the beneficiaries/executors of the estate to avoid this situation.
A beneficiary’s role varies greatly depending upon if the plan is held in joint or single names and if the last surviving applicant, in the case of joint plans, has died.
Their main role is to inform the lender of the death, provide the lender with the documentation they require and if they are also the executor of the estate, ensure that the equity release plan is repaid within 12 months.
As previously mentioned, a solicitor can be a great help to a beneficiary/executor during this process.
One thing to point out is that beneficiaries are always protected by plans that are with companies who are members of the Equity Release Council.
This is because all plans sold come with a ‘no negative equity guarantee’, meaning that if the loan to be repaid was ever greater than the value of the property, the beneficiaries would never have to repay the lender more than they could recover from the sale of the property. In other words, they never have to repay the lender using their own money.
What does Equity Release Supermarket do to make this process as pain-free as possible?
At Equity Release Supermarket, we provide an easy-to-use portal for all our clients. This has been created to serve your needs, now and in the future. It also acts as a reference point for both surviving parties or beneficiaries.
This contains important information regarding your plan, such as the solicitor and lender used and your plan number. It also includes any relevant documents that were stored during the application process, such as your valuation, offer and suitability report.
Where these details haven’t been made available, or the beneficiary/executor need contact details, either the original adviser or another member of our friendly team will be happy to point them in the right direction.
Please be advised that we do contact our clients annually to see if they need any further assistance, such as a review of their plan or if any of their details have changed. This should act as a prompt or reminder of our contact details if they are ever needed.
If you have any specific questions about what happens to your plan when you die or want to talk to us about equity plans in general, please contact the Equity Release Supermarket team on Freephone 0800 678 5955 or email firstname.lastname@example.org.