Tailored finance can support those who have life thrust upon them. Bridging is there to help with divorce settlements, broken chains, and probate issues. The latter may prove especially important in an economy where billions in property wealth is set to be handed down over the coming years.
The probate system is complicated. As are family dynamics when the time comes for inheritors to engage with estate planning. Fortunately, bridging finance can help iron things out.
Say three siblings inherit an estate evenly after probate had been granted. The estate is solely made up of a family home valued at £600,000 with no mortgage. One of the siblings (let’s call her Emma) may want to keep the family home to rent out, while the other two (James and Jack) want their share in cash.
To accommodate all this, Emma will need to raise £400,000 to buy out her brothers. But, it may not be possible to apply for a standard mortgage because the property hasn’t been transferred into her name yet, and the house can’t be sold or refinanced until James and Jack agree to the arrangement.
Emma could secure one of our bridging loans against the property as a solution. We would take a first charge on the property as the siblings work out the details, and look to refinance our loan with a BTL mortgage once the title is in her name.
An agreement, overseen by a solicitor, will confirm James and Jack will receive their share from our loan, while Emma retains ownership. Once the title is in Emma’s name, she will then be able to apply for a BTL mortgage, which would cover our facility. We would likely also include a contingency that the house be sold on the open market by a certain date if external funding couldn’t be secured.
This would allow Emma to own the home and get the ball rolling on renting it out without needing to wait months for the ownership system to catch up. It also minimises the risk of friction between siblings as a solution is found quickly.
Working on a similar case?
Where capital is needed to address inheritance tax within fixed timeframes, an early sense-check can help explore suitable funding options.
FAQs
What is probate?
Probate is the legal right to deal with someone’s property, money, and possessions (their “estate”) when they die. It needs to be applied for, but only certain people can apply for probate, and this is determined by whether or not there’s a will in place. If there’s a will, “executors” named within it can apply. If there isn’t a will, the person’s closest living relative can apply for probate.
Why is so much property wealth expected to be handed down over the coming years?
As a result of shifting demographics and an aging population, many expect there to be a “great wealth transfer” over the coming years. In the UK, an estimated £5-7 trillion is expected to pass from one generation to the next in 30 years. Millennials and Gen Z are expected to benefit from this.
What is estate planning?
Estate planning involves working out how one would like to pass their assets on after their death. Usually, it revolves around putting plans in place so assets can be passed on with minimal friction, and that tax costs are limited. We cannot help with estate planning. Those in need of support will need to turn to qualified financial advisors and estate planners.
