Gifting equity release to help loved ones

Equity release can provide a way for homeowners to share their hard-earned wealth with loved ones in later life, while they are still around to see them enjoy it. From help getting on to the housing ladder, to assisting with a wedding, equity release can help families to share life’s most important milestones.

A living inheritance

Traditionally people only inherited when their loved ones passed away, but with people living longer and the cost of living increasing it’s becoming more common for families to choose to gift a living inheritance.

This often financially facilitates a loved one to achieve an important life goal such as owning their first car, buying their first home or going to university. The attraction of a living inheritance is that you would be around to share these magical moments with the people you care about (and help them to spend the money wisely).

‘Bank of Mum and Dad’ supports first-time buyers

If you have children or grandchildren then you’ll probably be well aware how hard it’s been for first time buyers to get on the property ladder in recent years.

With the average house price in the UK now £254,606* even a 5% deposit equates to £12,703.30 and a 20% deposit would be an eye-watering £50,921.20. So, it is unsurprising that people are turning to their elders for help, resulting in the Bank of Mum and Dad (BoMaD) playing an ever-present role in the housing market.

New research** has revealed that more than half (56%) of those under the age of 35 received a financial gift to help them step onto the housing ladder, with 71% of these new homeowners saying they would not have been likely to buy without financial support from family or friends.

A family affair

As well as contributing (or even completely covering) deposits to purchase homes, parents are gifting money to help their children pay off debts, fund day-to-day living, pay university fees or even opting to spend on travel with their loved ones to enjoy some quality time together.

Whatever your motivation, helping the younger generations can put a strain on many families. It often leaves parents and grandparents consequently delaying retirement, using their savings or even having to sell their homes to help their family out financially.

For those who would like to be able to help their children financially but are perhaps concerned about the pressures on their own finances, equity release could be an ideal option for all involved.

Equity release gifting

Releasing some cash to gift to family is becoming a more popular choice for many homeowners over the age of 55. It enables parents and grandparents to see their housing wealth go to good use while they’re around to benefit from seeing their loved ones enjoy a better quality of life with less financial stress.

By releasing a cash lump sum from your own property, you could effectively give your children and grandchildren their inheritance early. The money you release can be spent in any way you choose, and the loan typically isn’t repaid until the plan comes to an end, usually when you pass away or move into long-term care.


How equity release can help with inheritance tax planning

When it comes to planning what you want to leave to different members of your family – or others who are close to you – it pays to remember the tax implications of the choices you make. Inheritance tax (IHT) can mean that people you hoped to provide for are left with less than you anticipated, and it can also leave them grappling with figures and paperwork during a time of grief.


One way to plan your inheritance tax more effectively is to give financial gifts during your lifetime. We see many of our customers use equity release for exactly this purpose. When you release equity from your property, you reduce the value of your estate. This will most likely reduce the amount of inheritance tax payable on your death. In some cases, this could take the value of the estate below the IHT threshold of £325,000.

Understanding the tax implications

While giving financial gifts can help you with inheritance tax, there are still tax implications that you’ll need to be aware of^.

  • Inheritance tax is not paid on any gifts made more than 7 years before you pass away. This means that the timing of any gift you make is an important part of tax planning.
  • Each year you can give a tax-exempt amount of up to £3,000.
  • Small gifts of up to £250 don’t count towards this limit, so long as they are not given to somebody who will also be receiving a larger gift.
  • Christmas and birthday presents don’t count towards these limits.
  • Payments made to support a person’s living costs – such as an elderly relative – are also exempt, as our regular monthly payments which come out of your income rather than your savings.
  • Wedding gifts of up to £5,000 for a child, £2,500 for a grandchild or £1,000 for anybody else are also tax free and excluded from your annual allowance.
  • Gifts given to a person over the age of 18 will not be subject to income tax. However, they may affect entitlement to means-tested benefits if savings are incorporated into the means testing.
  • Gifts given to charities are always tax-free.

Whether you want to change somebody’s life with your gift, or simply treat them to an experience they might not otherwise have had, gifting is a great way to make your inheritance mean more. If you are thinking about taking out an equity release plan to gift, then you need to speak to an equity release specialist.

They can help you to explore your options (including the alternatives) and help you to understand the implications, such as how it may affect your entitlement to means-tested benefits, now and in the future. A lifetime mortgage, the most popular type of equity release, is a loan secured against your home.

Equity release may involve a home reversion or a lifetime mortgage, which is secured against your property. To understand the features and risks, ask for a personalised illustration.

Equity release requires paying off any existing mortgage.