Possibly — But a Homeowner Protection Trust Can Make It Difficult
This is one of the most important disadvantages to understand before making a Homeowner Protection Will.
After the first homeowner dies, their protected interest in the property is held within the Will trust.
The survivor can normally continue living in the home.
But they may no longer own the whole beneficial interest outright.
That can make it harder — and sometimes impossible — to obtain equity release later.
Why Can the Trust Cause Problems?
Equity-release providers need satisfactory security over the property.
With a Homeowner Protection Trust, part of the beneficial ownership may belong to the trust rather than to the survivor personally.
Some lenders will not lend where property is held partly in trust.
Others may require the trust to be changed or brought to an end before lending.
Lending criteria can change, so the position always needs to be checked at the time.
Why Would Ending the Trust Be a Problem?
Because the trust exists for a reason.
Suppose David dies and his protected share is held in trust ultimately for Emma and James.
Susan later wants equity release.
If a lender insists that David’s trust must first be ended and his protected share transferred outright to Susan, the protection David created may be lost.
His inheritance could then once again be exposed to:
- remarriage;
- a changed Will;
- a new partner;
- financial difficulties;
- care circumstances;
- or other future events.
So equity release may involve a genuine choice between:
keeping the inheritance protection
and
giving the survivor greater access to the capital in the home.
This Is One of the Main Trade-Offs
Homeowner Protection Wills deliberately prevent the survivor from owning the protected share completely outright.
That provides greater protection for the ultimate beneficiaries.
But it can also reduce the survivor’s ability to borrow against the whole property.
There is no point pretending otherwise.
Greater inheritance protection can mean less financial flexibility for the survivor.
Why Might the Survivor Need Equity Release?
Nobody knows what their finances may look like 10 or 20 years after the first death.
They might want money for:
- additional retirement income;
- adapting the home;
- major repairs;
- private care;
- helping children or grandchildren;
- replacing a car;
- holidays;
- or simply improving their standard of living.
If most of their wealth is tied up in the home, equity release might otherwise have been an obvious option.
A Simple Example
David and Susan own a £500,000 home equally.
David dies.
His £250,000 interest is protected by his Homeowner Protection Trust.
Susan continues living in the house.
Ten years later, Susan wants to release £75,000.
Although the property is worth £500,000, Susan does not own the whole beneficial interest outright.
Half remains protected by David’s trust.
An equity-release lender may therefore be unwilling to lend while that trust remains in place.
Can the Survivor Just Borrow Against Their Own Half?
Do not assume so.
It might sound logical to say:
“Susan owns half, so why can’t she just borrow against her half?”
But lenders generally want satisfactory security over the whole property rather than an undivided beneficial share.
So the existence of the trust may still prevent or complicate the borrowing.
What If Everyone Agrees?
Even if:
- the survivor agrees;
- the trustees agree;
- and the children agree,
that does not mean a lender has to lend.
The lender still applies its own legal and underwriting requirements.
Trustee agreement alone does not solve the problem.
Could the Trust Be Ended?
Possibly.
That may depend upon:
- the wording of the Will;
- who benefits under the trust;
- the beneficiaries’ ages and capacity;
- tax consequences;
- and whether everyone whose agreement is required is willing.
But ending the trust could remove some or all of the inheritance protection it was designed to provide.
It should never be done simply to obtain a loan without considering the wider consequences.
What If the Children Refuse?
That can create a genuine conflict.
The children might reasonably say:
“Dad created this trust specifically to protect his inheritance for us.”
The survivor might equally say:
“I have lived here for years and now need access to some of the value.”
Both positions are understandable.
That is why this possibility should be discussed before the Wills are made, not many years later when the money is needed.
What If Equity Release Is Already in Place?
That is different.
An existing lifetime mortgage or equity-release arrangement will already have its own terms and security over the property.
The proposed Homeowner Protection Will therefore needs to be considered alongside the existing lender’s requirements.
Do not assume the two arrangements will automatically work together.
What About Retirement Interest-Only Mortgages?
A Retirement Interest-Only mortgage — often called a RIO mortgage — is different from traditional equity release.
But it is still borrowing secured against the property.
Whether one is available after the trust has arisen will depend upon:
- ownership;
- affordability;
- age;
- lender criteria;
- and the trust structure.
The survivor should not assume that later-life borrowing against the whole property will remain available.
Could Downsizing Be a Better Alternative?
Possibly.
Suppose Susan lives in a £500,000 home and needs £75,000 of accessible capital.
Instead of equity release, she might sell and buy a smaller property.
Her own share and part of the trust share could potentially be used towards the replacement home.
Some trust capital might then remain outside the property.
But downsizing can have trust and tax consequences, so it needs to be dealt with properly.
[Can the Survivor Move House After the First Death? →]
Equity Release Is Regulated Financial Advice
I do not advise whether somebody should take an equity-release product.
That requires advice from an appropriately authorised adviser.
My responsibility when preparing the Will is different:
to make sure you understand that creating the trust may restrict the survivor’s ability to obtain equity release later.
Should This Stop You Making a Homeowner Protection Will?
Not necessarily.
For some couples, protecting the children’s inheritance is the higher priority.
For others, preserving maximum financial flexibility for the survivor matters more.
There is no universally correct answer.
The real question is:
Which matters more to you?
Maximum flexibility for the survivor?
or
Greater protection for the eventual inheritance?
People With Limited Retirement Income Should Think Particularly Carefully
If most of your wealth is tied up in the home and the survivor is likely to have modest income and savings, equity release may become much more important later.
The restriction could therefore matter more than it would for someone with:
- substantial pensions;
- savings;
- investments;
- other property;
- or other accessible capital.
The Will should fit your financial circumstances, not simply your family tree.
Ask This Question Before Signing
Before making Homeowner Protection Wills, ask:
“If my partner survives me for another 20 years, could they reasonably need access to the capital tied up in our home?”
If the answer is yes, that should be discussed openly.
It does not automatically mean the trust is wrong.
It means you need to understand the restriction you are accepting.
In Simple Terms
Can the survivor automatically obtain equity release after the first death?
No.
Can the trust make equity release more difficult?
Yes.
Do some lenders refuse trust-owned property?
Yes.
Can the survivor simply borrow against their own share?
Do not assume so.
Might a lender require the trust to be ended first?
Potentially.
Could ending the trust destroy the inheritance protection?
Yes.
Should this be considered before making the Wills?
Absolutely.
Protection Has a Price
A Homeowner Protection Will gives the ultimate beneficiaries greater certainty.
But that protection means the survivor does not own everything outright.
One consequence may be reduced access to equity release and other later-life borrowing.
You should know that before making the Will — not discover it when the survivor needs money many years later.
Homeowner Protection Wills
[Find Out If a Homeowner Protection Will Is Right for You]