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December 16, 2021

Legacy Release helps clients navigate the choppy waters of inheritance tax

By Spear's

A large early tax bill is the last thing anyone wants while dealing with a complex inheritance. Legacy Release can help clients navigate those choppy waters

‘One of the reasons Legacy Release exists is to help our clients deal with the problem of having to pay inheritance tax before they’ve actually received their inheritance,’ says Simon Dawson, the firm’s chief commercial officer.

It’s a situation, he explains, which sometimes befalls HNW clients because of a catch in Britain’s probate rules stipulating that inheritance tax must be paid before a grant of probate can be made. This can cause particular problems for asset-rich and cash-poor beneficiaries, who may find themselves saddled with a bill that exceeds their liquid assets at the time.

The more complex the estate, Dawson says, the more potential for other problems too. ‘It is likely that beneficiaries have different priorities, and whilst some may be happy to wait, others may need to access their inheritance sooner, perhaps to pay for school fees or a wedding,’ he says. ‘In other cases, there might be a need to hire a forensic accountant to trace assets, or a lawyer who isn’t able to work on deferred terms. These might not be testamentary costs, meaning they can’t be taken from the estate.’

In such circumstances, he tells Spear’s, Legacy Release can provide HNW clients with a fast and timely loan up to the value of 70 per cent of the estate. As the loan is secured against the value of the estate itself, rather than the beneficiary’s own credit status, the money can be arranged reliably and swiftly, without complications.

Dawson is keen to stress that the firm’s loans are entirely unconditional. ‘The advance can be used for almost any purpose,’ he adds. ‘What matters for us is that the client has the money when they need it most.’ In return, borrowers pay a flat two per cent of the amount borrowed, with a monthly charge of 1.35 per cent levied on the balance. Payment is taken from the estate once probate is settled.

With a background in litigation lending, Dawson draws parallels between the world of divorce loans – now an established part of HNW family law – and the emerging field of inheritance lending. ‘We’re one of only a handful of firms in the market here,’ he adds. ‘We understand the complexity of the problem, and the simplicity of the solution.’

While the major retail banks previously provided specialist loans for inheritance release, these offerings have been pared back in recent years. Part of the reason, Dawson says, is the heightened level of risk for lenders, particularly when it comes to valuing large and complex estates. ‘As the lender, it’s entirely up to us to assess the value of the estate,’ he says. ‘We require no personal guarantees or security, as we take on the burden of risk.’ Given the loans are based on real assets, there’s minimal risk of default.

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As one of the emerging field leaders, Legacy Release recently received the backing of a major funding partner backed by significant private equity. Dawson hopes this will help the firm expand its presence, and the inheritance loan market itself.

With a specialist firm providing execution-only services to HNW clients, the proposition currently falls outside of the regulatory orbit of the UK’s Financial Conduct Authority. One of the advantages of this, Dawson says, is the added agility it brings, with the firm able to lend at speed without any need for delay.

‘As we develop our offering, we will almost certainly look to become FCA-approved,’ he says. ‘At the moment, though, our focus is on the HNW community. And we know our clients value our ability to move as quickly as possible.’

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