Longer life spans, rising costs of living and increasingly expensive care costs have undoubtedly contributed to the growing popularity of flexible financial planning tools that allow people to optimise their financial resources during retirement. Many people face the prospect of insufficient income to meet the costs associated with retirement, and this leads them to turn to products like retirement mortgages and equity release for a solution.
A common reason to release equity from a house is to meet the costs of long term care. It is possible to nominate someone you trust to take decisions related to releasing equity on your behalf should you not be in the mental or physical capacity to do so. The legal document used to make such a nomination is a Power of Attorney (PoA).
There are two different types of Power of Attorneys and the type of PoA and the time that it was made will determine whether your parents can release equity through you and what it will take to set up a plan. New regulations came into force in October 2007, which have impacted the way PoAs taken out before this period function.
Before October 2007, an enduring power of attorney could be made to manage the affairs of someone who is mentally incapacitated and this document could be put in place before any incapacitation was apparent. Making an Enduring Power of Attorney post incapacitated was a lengthy process that required the court of protection to issue the Power of Attorney.
Since October 2007, the Enduring Power of Attorney (EPA) has been replaced by lasting power of attorney and it is no longer possible to make a new Enduring Power of Attorney. If you have an existing EPA, it still stands valid. However, a lender will need to see the original PoA document or a certified copy with original signatures. Reasons for equity release will also need to be verified.
Post October 2007, a Lasting Power of Attorney will need to be made to nominate someone you trust to make decisions on your behalf. There are two types of LPAs, LPA for personal welfare, and LPA for property affairs. An Lasting Power of Attorney for property affairs is required to set up an equity release plan.
When it comes to equity release through a nominee, lenders will essentially need to see that the capital is to directly benefit the beneficiary of the plan. While some lenders are more stringent and may have additional safety measures in place to ensure the authenticity of intentions, others may not be so. Sight of the fact that the PoA has been registered with the Court of Protection is also vitally important with any equity release application.Back