Do I need a will with equity release?

Explore what happens if you pass away without a valid will

We all know that having a will in place is very important if you want to have a say in what happens to your estate when you pass away. But do you need one if you are arranging an equity release plan?

To help you understand this important document and its connection to equity release, we will be discussing the following:

• What is a will?
• What is equity release?
• How does equity release work when you die?
• Can I guarantee that there will be something to leave to my loved ones?
• Do I need a will with equity release?
• How do I arrange a will?

What is a will?

A will is a legal document that dictates exactly what is to happen to your estate upon your death. Your estate is all your money, property, possessions and investments. 

By arranging a will, you can ensure the people and causes you care about will benefit from your estate in the way you wish. In the event of family disputes, you can also stipulate if there is anybody you do not wish to inherit from your estate. 

Those who you choose to inherit from your estate are known as your ‘beneficiaries’. The people you select to carry out your wishes are called your ‘executors’. These are usually one or two people who you know and trust, such as your spouse, children or a close friend.

Do note, a will is different to your Lasting Power of Attorney – known as your ‘living will’ – but you can arrange them at the same time for absolute peace of mind.

If you pass away without a will in place – known as dying ‘intestate’ – then your estate will be left to your relatives according to strict intestacy rules. These rules are the same for everybody and mean things could work out very differently to what you might want. You can read more about intestacy rules here.

What is equity release?

An equity release plan allows homeowners who are 55+ to unlock some of the tax-free cash from your home.

There are two main types of equity release plan: lifetime mortgages and home reversion plans. Lifetime mortgages are more popular and most of the equity release plans taken out in the UK are of this type.

There are typically no monthly repayments to make with a lifetime mortgage as the loan plus interest is only repaid when you pass away or move into long-term care. At this point your home will be sold to settle the loan. 

Home reversion plans, on the other hand, involve you selling all or part of your home to a reversion company in exchange for a tax-free cash lump sum. You then live in your home as a tenant but without paying any rent.

Not 55 or over yet? You may still be able to access some of your equity. Read our blog here to explore how to release equity if you are under 55.

Want to know how much you could unlock from your home? Check your eligibility and get your free quote now. Alternatively, talk to our friendly consultants on 0808 178 3055, or request a call back at a time that suits you.

How does equity release work when you die?

As equity release is usually a lifelong commitment, you or your estate only have to settle your loan plus interest when you pass away or move into long-term care. 

When the time comes, your family will need to notify your lender of your passing. Your lender’s customer care team will sensitively explain how to handle the closure of your plan. 

Ultimately with equity release, what happens on death is that your home is sold and the loan plus interest is repaid from the monies raised by the sale. Any money left over from the sale will be passed to your estate. From then, your wishes set out in your will determine what happens next. 

Your executor/s will typically be given up to 12 months to sell your home after your passing for a reasonable market price.

You can read more about “what happens to equity release when you die?” in this blog.

Can I guarantee that there will be something to leave to my loved ones?

If you select a plan from a provider who is a member of the Equity Release Council, the ‘no negative equity’ guarantee will apply. This ensures that your estate will never owe more than the value of your home when the time comes for your loan to be repaid. This is irrespective of how much interest accrues on your loan during your lifetime.

You may also be able to select an inheritance guarantee as a feature of your equity release plan. Doing this will mean that your estate will receive at least a specified ringfenced percentage of your home’s value, no matter how much interest may accrue on your plan. Your adviser can explain all about inheritance protection should you wish to know more.

Do I need a will with equity release?

Whilst it isn’t a condition of equity release to have a will in place, having one can offer real peace of mind for homeowners with a plan. This is especially true if you select the inheritance guarantee feature.

Without a valid will in place, any money left over from the sale of your house will be at the mercy of intestacy rules. Depending on how much there is left over to distribute, it may mean that close members of your family, including your children, do not inherit at all.

In addition, if you have a partner who you are not married to or are in a civil partnership with, they will not inherit through the laws of intestacy, even if you have children together.

If you do not have a spouse, partner or other close family then you will need to decide what you want to happen to the money left over after your plan is paid off. You may wish to leave all or some of your remaining estate to a charity, perhaps. By arranging a will, you can ensure a charity or cause close to your heart receives a legacy donation.

How do I arrange a will?

There are a number of ways that you can arrange your will. Here are some of the more common options:

Solicitor. Going through a solicitor who specialises in will-writing and probate is how many people prefer to arrange their wills due to the peace of mind that a legal service offers. Whilst this can be a more expensive option, if you have a large or complex estate then you are likely to benefit from the guidance a solicitor can offer during the process.

Professional will writers. These can easily be found online and often offer their services over the phone, online and by post. Professional will writers are not solicitors so cannot give you legal advice, which typically makes them a cheaper option. To find an estate planner visit the Institute of Professional Will Writers or The Society of Will Writers. 

Charity. Some charities offer free wills to encourage legacy donations. If there is a charity or cause close to your heart then you could check if they offer a free will-drafting service. Free Wills Month brings together a group of charities so people who are 55+ can write or update their simple wills free of charge. You can read about the next Free Wills Month here, which is taking place in October 2023.

DIY. If you have straightforward affairs then you may feel confident enough to write your own will. Remember, you will need to ensure your will is valid or you risk dying intestate. 

If you would like to discuss anything about equity release you can call our friendly consultants on 0808 178 3055, or request a call back for a time that suits you. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could unlock.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn