TOPIC 5

Question 1

What are the two different ways in which joint property can be held?

Answer 1

Property can beheld jointly in two ways - Joint tenancy and tenants in common. Most advisers understand the essential practical implications of the two arrangements, but there are some legal nuances that are not necessarily common knowledge even among advisers.

Question 2

List five common alternatives to equity release:

Answer 2

Trading down, grants, sale and rent, informal arrangements, letting part of a property, debt counselling, using existing assets, pension restructuring, part-time work, other borrowing and using legacies and inheritances.

Question 3

Why will an equity release provider expect vacant possession when the planholder dies or moves into residential care?

Answer 3

Equity release schemes are based on the life expectancy of the placeholder and will end of their death. At this point the property will be sold.

Question 4

Moving to a smaller or cheaper property is one alternative to equity release. List the main disadvantages of this option:

Answer 4

The main disadvantages of this option are as follows:
1. There may be emotional attachments to the existing property.

2. The homeowner may lose contact with friends and even family if the move is to another area.
3. The homeowner may have to give up clubs, etc, if the move is to another area.
4. A move to a smaller property in the same area may not result in much capital being raised.
5. Cheaper property may not be in a good area or may not be suitable.
6. Other areas may not be geared towards older people.

Question 5

What issues should be considered by those contemplating informal arrangements with family or friends as an alternative to equity release?

Answer 5

The issues that should be considered are as follows:

1. The arrangement should be set up on a legal footing, with legal advice taken by both parties and the agreement fully documented.
2. The family’s/friend’s financial circumstances could change. This means they withdraw from the arrangement and/ or ask for repayment of a loan.
3. Will the family be able to maintain the arrangement over the long term?
4. Is the homeowner happy to be beholden to their family/friends?

Question 6

State five activities of daily living:

Answer 6

1. Dressing;
2. Eating;
3. Mobility around the house;
4. Being able to move from bed to an upright position/wheelchair and vice versa; and
5. Bathing

Question 7

Why is negative equity a particular danger with roll-up mortgage schemes?

Answer 7

This is a particularly danger with roll-up mortgage schemes because interest is accumulating during the plan rather than being paid. If the placeholder lives to a very old age, interest rate increases and/or property price reductions could lead to the placeholder’s mortgage debt being more than the value of the property.

Question 8

Cleo has died with no valid will in place. Her state is valued at £400,000 plus chattels. She is married to Tom, but none of her estate is owned jointly. The couple have a 19-year-old son. Explain what will happen to Cleo’s estate.

Answer 8

Cleo’s chattels plus the first £250,000 of her state will pass to her husband Tom. The remaining £150,000 will be split equally between Tom and the couple’s son.

Question 9

Which independent charity works with older people to find solutions to enable them to stay in their own homes for as long as they wish?

Answer 9

Care & Repair England

Question 10

What would a sensible timescale be to allow for the processing of an equity release plan?

Answer 10

It’s deniable to anticipate a six- to eight-week timescale from application to the release of funds.

Question 11

What is the risk associated with investment-linked annuities?

Answer 11

If the investment funds do not perform to expectations, the level of income could reduce.