Deductible debts against the estate IHT - Equity Release

Trusts Discussion
1

My clients have taxable estates and intend to mortgage their PPR by c.300K with an equity release type product. They intend to gift the loan amount to their 2 adult children to enable them to improve their own properties. Assuming they survive for 7 years this would be successful PET and fall outside of their estate for IHT purposes, my concern is whether this type of planning would be caught by the Finance Act changes and the loan amount not deductible in their estate for IHT purposes.

Elizabeth Carey
Philip Ross

2

I can’t see any reason why it would not be deductible. The three areas targeted by the most recent changes are:

  1. Excluded property
  2. Relievable property (ie APR,BPR) and
  3. Debts which are not repaid after death.

I can’t see any of these applying but they’ve all been around for 3/4 years - I’m not sure if you are referring to something more recent (or before, and I just forgot/missed it)?

Andrew Goodman
Osborne Clarke LLP