Assessing mental capacity for equity release is critical if there is any concern regarding mental capacity or if there could be a challenge to this arrangement in the future.
It is becoming increasingly common to perform an assessment of mental capacity at the time of taking out an equity release mortgage because the nature of the financial decision and how this can impact the value of assets for future inheritance.
If you have a client who lacks mental capacity and you’re seeking an assessment for equity release, please speak to one of our professionals at Mental Capacity Assess.
What is an Equity Release?
Equity release is a way to unlock some of the money that’s tied up in an individual’s home’s equity for people over the age of 55. The money may be released as a lump sum or in instalments. Many retired people are struggling because of limited cash flow, but reside in expensive homes. There are two types of Equity Release products; Home Reversion and Lifetime Mortgage. A lifetime mortgage is the most common form of equity release.
What is an Equity Release Capacity Assessment?
An Equity Release is an assessment that determines whether a person is able to make a decision on purchase an equity release product or not. Since selecting an equity release product is an important decision, an equity release mental capacity assessment can be important to ensure there is a contemporaneous record of the state of mind at the time the mortgage is taken out. The is loan guaranteed against the property that is not usually paid until the last residing borrower dies or moves into long term care.
How are Mental Capacity Assessments for Equity Release regulated?
The Mental Capacity Assessments carried out in relation to Equity Release or a Lifetime Mortgage relate to case law and elements of the Mental Capacity Act 2005 (MCA). The financial products are regulated under the Financial Conduct Authority. The Equity Release Council maintains standards which provide recommendations and criteria on choosing an Equity Release product.
Why a Mental Capacity Assessment for Equity Release important?
Obtaining equity from a house or property is a decision which requires serious consideration. Before taking such a decision, the person must be assessed whether he/she has the mental capacity of making such a decision. Our psychiatrists can help prepare a mental capacity report for equity release since they are experienced with preparing the relevant documentation and also arrange remote video call assessments and complete a legally defensible report. It is also important to evaluate the terms and conditions of the Equity Release product and the interest rates offered so our experts will review them during the assessment.
What happens if a client lacks the capacity for equity release/lifetime mortgage?
Those who make decisions about Equity Release Product are often vulnerable, and although not openly highlighted, they may have mental capacity issues when making a decision, for example resulting from cognitive impairment in early dementia. To make such an important decision of their property, it is important to assess the mental capacity of the person. Failure to assess a client’s mental capacity can be detrimental as a wrong decision can have serious consequences for family members in the future and the financial wellbeing of the individual.
Family members of the person will typically receive a smaller inheritance when the person dies when obtaining an equity release. Also, obtaining an equity payment may reduce a person’s right to some of the benefits provided by the State. Once committed to equity release, one cannot take out any other loans using the property as security.
For more information on Mental Capacity Assessments for Equity Release, speak to one of our professionals at Mental Capacity Assess.