Over the coming years, it’s expected that billions in wealth will be handed down in the form of inheritance. As younger generations receive lump sums, chances are at least some of this wealth will find its way into the property market.
But it may not be a smooth journey, as our underwriter, India Pover, has discovered.
“I come across the occasional deal where inheritance makes up a big part,” she said.
“Sadly though, as we all probably know by now, the probate system is in a bit of a state. There is a backlog of applications holding up the system.
“This isn’t what you need when the process is complex enough as it is. A mistake or wrench in the works can result in delays and additional costs.”
Inheritors themselves may not be in the right frame of mind for all this. The grief of losing a loved one will take its toll, and dealing with family finances and the probate system has been known to create rifts among inheritors.
And all this is before we take an actual investment plan into account. One which may itself prove complicated.
“An investor may want to take what they’re expected to receive and use it for a residential investment,” India added.
“But what if it’s not quite enough? What if the investment also requires the borrower to capital raise against a family business, and sell existing assets?
“This a lot to manage, which may only be made more difficult with uncertainty over inheritance tax (IHT) and other probate costs looming.”
We can take steps to accommodate all this uncertainty however. To start with, we’d make sure all the external arrangements were accounted for. We’d gather evidence for the capital raise, and the selling of the existing assets. We’d then be able to turn our attention to their potential liabilities.
“Across our bridging range, we can accommodate certain ‘real-life’ expenditures. This can include divorce settlements, defaults, and IHT.
“Up to 40% of our funding can be put towards IHT and other probate/executor costs. What I’d do in this case, is make sure the borrower knew that we could earmark a certain amount of capital specifically for their IHT concerns.
“This will, at the very minimum, provide peace of mind in the middle of a very stressful period. Hopefully, knowing this is covered will allow them to focus their energies on the investment.”
All our products factor in the real financial world. Meaning, we can find a way forward for broken chains, CCJs, gifted deposits, and more. As much as possible, we’ll do everything we can to ease our borrower’s burdens.
