With the Close Brothers’ property wealth manager arrangement you sell your house to the company who then lease it back to you. For your sale you do not receive cash just an investment into a load of other properties at pretty much the worst time to consider investment into property.
The document given refers in its key points to the investment as being liquid. Liquid? I’d like to see that coming out of a tap! The accompanying document then says if you try and encash your investment it could be deferred for up to 12 months as the properties it invests into are not readily saleable. Better still the salesy brochure uses an example, which shows if a married couple, aged 75 (probably the average age for such a scheme) tried to encash they would be subject to a 60% discount.
Discount? Discounts are supposed to be good! This is a 60% charge. The whole idea is to save 40% tax and as well as paying the company 6.5% up front charge as well as 0.3% per year you will also have to fork out for all maintenance of your property as it is inspected every three years to see what alterations are needed! Oh by the way there’s another paragraph detailed ‘other expenses’ and that comes to another 0.7 of the fund!
In short, don’t bother as there are plenty of simple approaches to consider and here are a few:
Ensure your will is set up correctly. If you are a couple you can use both nil rate bands ensuring you don’t pay Inheritance tax for estates of £570,000 or less;
You could sell up and downsize to another property and use the cash to put into trust.
Many trusts allow you to put your capital away but also to still receive an income form the investment for the rest of your life;
Consider raising a mortgage against your property and putting that capital into trust. The debt will stay in your estate but the capital in trust will go outside your estate – the time taken dependent on the type of trust. The advantage here is that the mortgage interest is neutralised by the income coming from the trust so the net effect to you should be zero with the capital raised on the mortgage and subsequently put into trust making its way outside your estate and subsequently saving 40% in the process;
You could insure yourself for the tax and put the policy into trust. Although I do not like this option as it still involves paying the tax it would be considerably cheaper than the option marketed above;
Consider also selling your property to your children/beneficiaries and paying them a market rent for the property from the proceeds of the sale which you subsequently put into trust (a favoured option of mine if you can do it).
With this option you get to live in your property and also the capital is taken outside the estate. In many instances the income from the trust can be more than the rent you pay so you end each month with extra income;
You could of course give your house to your children but you would still have to pay a full market rent for the property otherwise it would be classed as a gift with reservation and fall back inside your estate again;
There is also the option of doing an equity release from your property and putting this in trust but there are more economical ways to release money from your property.
Consider all options before using expensive insurance company products.
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