Are you Asset Rich Cash Poor with a massive potential IHT liability on your Spanish Property?

Fiduciary Wealth Team

The global financial crisis has completely altered the landscape for anyone wishing to borrow from traditional lending sources such as high street banks which either don’t have the capacity to lend because they are struggling to redress their balance sheets or have simply lost the appetite to lend on what might appear on the face of it the safest of transactions.

The ‘liquidity crisis’ has also impacted on equity release schemes in Spain where interest could be rolled up without the need for monthly debt servicing. Home owners looking to release capital from their property now face an uphill task in releasing cash. However, creative solutions can be found.

Whilst traditional lending sources may have dried up there are private banks and boutique lenders willing to offer facilities to high net worth individuals at extremely competitive terms particularly where there is an opportunity for a bank to secure additional business.

We have strong relationships with many banks through which are able to provide credit to clients unable to rely on their existing lender. Our role as intermediary is not only to source the facility but to present a detailed proposition to the lender in a way that will improve the prospects of a successful outcome whilst protecting the interests of the client at all times.

Similarly clients looking to release equity from their Spanish properties may find it more advantageous to include their UK property as part of a portfolio offering as this opens up the door to prospective UK lenders.

Equity release could potentially have an additional advantage of reducing your estate liability for inheritance tax purposes. If you are single with no direct descendants and own your home mortgage free in Spain you have a massive potential IHT liability on that property.  If you own a property worth say €2.5 million your beneficiary would have to pay tax in excess of €800,000 to inherit your home and unlike the UK where the estate of the deceased pays inheritance tax in Spain it is the beneficiaries who are liable for the tax before assets can be distributed.

It is important that your overall financial requirements are assessed rather than dealing with the borrowing in isolation. There may be better options available than releasing equity from property such as the drawdown of a tax free sum from a pension fund. You may have to transfer non pension assets into a QNUPS and draw down pension income to demonstrate you can service the debt before you can secure any lending.  Investments can be turned into income producing assets in a tax efficient way through the use of offshore wrappers or you may be lucky enough to own a plane or a yacht where we can negotiate an improved facility to extract equity or reduce costs.

Whatever your motives for looking to release equity, be it to reduce your estate liability for IHT purposes or simply to maintain your current lifestyle it is essential you speak to a financial adviser who can take a holistic view of your financial situation.

Find out how we can help you. Give us a call us on Tel: +956 796 911 or email