Equity release should be commonly used to avoid Inheritance Tax (IHT), according to brokers.
Some areas of the UK are potential IHT hotspots, as a result of property price rises, according to figures from Scottish Equitable. The insurer pointed out over £1bn is wasted in tax annually.
Londoners are most likely to have IHT liability, and average house prices of £232,830 mean individuals with £17,170 of savings may be liable.
However, the situation is not confined to the capital. The average homeowner in Bath needs just £34,000 of investments for IHT to be problem, while in Tunbridge Wells £30,000 of investments are required.
Dean Mirfin, business development director at Key Retirement Solutions, said: ‘While an insurance trust funded by income would be the first option equity release is increasingly used to avoid IHT, but many clients do not realise it is an option.’
However he added: ‘Avoidance involves a cost and the overall inheritance will be less, so what we generally advise is to release equity and replace its value with life assurance if possible.’
Those in the North of England are least likely to be affected, as the average homeowner would need to have savings of over £176,556.
IHT is currently charged at 40% on estates valued above £250,000.