ELDERLY islanders are suffering because the inheritance law does not allow for lifetime mortgages. A public consultation on whether laws should be altered to introduce testamentary freedom ends on 31 August.

Chris Barnes is urging people to get involved in the consultation after raising his fears based on a friend in her 70s who is property-rich but cash-poor.

In the UK, people in similar situations have been able to raise money by setting up a lifetime mortgage, whereby cash is advanced and the debt, with interest, becomes payable on the homeowner’s death.

‘Lifetime mortgages have been the subject of much media coverage in the UK,’ said Mr Barnes.

‘They are an excellent alternative to equity-release schemes, which have seen very low property valuations and whereby the ownership of the property is taken over by the lender.’

Concerns about his friend led to him inquiring whether lifetime mortgages were available in Guernsey.

‘Instantly the proverbial brick wall was encountered,’ he said.

‘Guernsey inheritance law is very specific in that the property is automatically passed on to the near family and therefore any outside agency, such as a bank, would have to sue the estate for recovery of the debt and accrued interest should the beneficiaries of the estate be unwilling to sell the property or be unable to find other means to settle the debt.’

It was impossible to arrange a bond to cover this, he said.

And a legally binding agreement promising the lender that the property would be sold, if necessary, to cover the debt was also impossible, he added.

Mr Barnes said his friend was not the only person in the situation of being property-rich but cash-poor.

‘Far from it – and those who disbelieve the situation are, frankly, looking through rose-tinted spectacles,’ he said.

‘With the now-increasing burden to fill the void as a result of the change in fiscal policies which has been forced on us, the problem is becoming more and more acute.’

The law on inheritance needed to take into account changing trends in society, he said.

‘In many cases, for instance, the children concerned are not dependent on receiving the family home as inheritance, which was customary in the past.’

He warned that the Inheritance Law Committee might have few responses to its consultation.

‘I urge people, many of whom are affected by diminishing living standards, to obtain the consultation of testamentary freedom document from Frossard House and support the need for a full review into the suitability of the inheritance law and how it affects today’s society.’

He hoped that if there were changes to the law, it would open the way for financial institutions to be encouraged to re-examine the feasibility of offering lifetime mortgages.

‘For many people, like my friend, who have most of their capital tied up in their home, there will be the opportunity for them to release much needed money for investment,’ he said.

‘This would result in the elderly being able to cope more easily with the increasing cost of living, declining pension values and possibly even a reduction in levels of support from the States. It will help to alleviate their anxiety about the future and enable them to enjoy that future as independently and comfortably as possible.’

Inheritance Law committee member Jean Pritchard backed the calls for people to get involved in the consultation.

‘Please respond – the deadline is the end of August and that’s coming up fast. I would like to hear all comments, from whatever stance you are taking,’ she said.

The issue of lifetime mortgages is beyond the committee’s mandate, but any responses on the issue would be passed to Commerce and Employment, she said.

The department was tasked with looking at equity-release schemes under the Corporate Anti-Poverty Programme.

In May, the States agreed with its recommendation not to investigate lifetime mortgages further, taking the stance that they would not provide an effective means of alleviating poverty locally.

n Following initial changes to the law of inheritance in Guernsey, the review committee wants islanders’ opinions on further changes, including giving people the right to will both real and personal property to whomsoever they like (as in England and Wales).

At present, property must go to members of the family and, for example, a surviving spouse must inherit at least one-half of the ‘life interest’ in the property. This means he or she can occupy the home until death or remarriage.