Unless the equity release agreement, or any side agreement, provides otherwise, I would have thought that the interest pertaining to A’s interest in the property was a valid charge against the residuary income of his estate, so that B was entitled only to the balance of the residuary income after deduction of A’s share of the interest.
However, this raises further questions, as in most cases where equity release is used I understand the interest is rolled up and payable only on a sale of the property - in which case:
Does the repeal of s.2 Apportionment Act 1870 result in A’s share of interest no longer subject to apportionment on a day to day basis and is to be treated as the liability of the estate income only when it becomes due and payable?
if the property is sold whilst B has an interest in possession, is the whole of A’s share of the interest deductible against B’s income entitlement?
If so, is B liable to satisfy any shortfall immediately, or will it be reduced only by the annual income to which B would otherwise have received?
If B dies before the shortfall is cleared, does it remain a liability of their estate, or does their dearth terminate the liability?
If the property is sold only after the death of B, at which time their interest in possession has terminated, does the liability fall on the remaindermen of A’s estate.?
I do not suggest that members of this forum should seek to answer the above questions, other than perhaps commenting on the first. If my understanding of the effect of the Trusts (Capital and Income) Act 2013 is correct, then the scenario described in the initial posting would appear a mischief not in mind when the legislation was drafted.
Whilst my thoughts are reflected in my further questions, I am not aware that there has been any qualitative guidance published around this and it would be interesting to know if any professional bodies have considered the situation.
I also fear that even if the will and equity release were completed at the same time, the relationship between the respective provisions might not have been fully considered.