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Equity Release Supermarket News How Equity Release and Inheritance tax Can Work in Tandem
How Equity Release and Inheritance tax Can Work in Tandem
Equity Release Supermarket News How Equity Release and Inheritance tax Can Work in Tandem

How Equity Release and Inheritance tax Can Work in Tandem

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Mark Gregory
Checked for accuracy and updated on 31 October 2023

So many people take pleasure from gifting or supporting family members whenever they can, and most would love to help their family with bigger ticket items such as getting a foot on the housing ladder or covering university fees but unfortunately are unable to do so financially.

At Equity Release Supermarket, we find that many customers come to us believing they can’t afford to support their family financially until after their death, but this is not the case. Plus, it’s much nicer for our customers to see their family celebrate their wedding day, buy a new house, family holidays or enjoy a more stress-free way of living for example, with the money they were able to gift them through equity release.

Our entire team at Equity Release Supermarket, including our Head Office operations specialise in equity release with the aim of providing an exceptional bespoke service to all our customers. We are not inheritance tax specialists but here we explore the foundations of it and the seven-year rule in a broader sense.

How will inheritance tax affect gifting money?

Inheritance tax can be complicated; therefore, we always recommend getting specialist inheritance tax support if you have more questions. However, in essence inheritance tax is paid on the total value of your estate, which is calculated by combining all your assets (home, savings, investments for example) and deducting any loans or debts you may owe. Equity release could therefore effect inheritance tax as it’s included as a liability in the amount you owe.

However, you are able to make a gift of money, property, or other assets to become exempt from inheritance tax (IHT) if the person gifting the monies lives for seven years afterwards. This is a fundamental concept for any person planning to pass on wealth to the next generation, particularly if their estate exceeds the current IHT threshold.

Lifetime mortgages are often used to provide a ‘living inheritance’ to pass wealth down to the next generation at a time when they need it most, regardless of whether or not the estate is likely to be subject to inheritance tax on the eventual death of the client or their spouse.

This strategy can be very effective where there may be a future inheritance tax liability and there is scope to make use of potentially exempt transfers, or chargeable lifetime transfers within the clients’ nil rate band.

One of the main benefits of using a lifetime mortgage strategy is that it will release funds that can be used for legacy planning, while at the same time the loan and rolled up interest will create a debt which will reduce the taxable value of the estate.

What next?

If you find yourself in this position, then the best thing to do is discuss your plans with one of our equity release specialists, who will assess your requirements, including how much you are looking to gift, and the size of your estate.

Following the initial consultation their advice may be to consult with an inheritance tax specialist if equity release is a solution for your objectives.

Our smartER™ tool can also help customers to research their equity release options. The platform enables you to view products and deals based on your personal circumstances to give you a much clearer idea of your options. It’s easy to use and will only show you accurate rates and exact amounts that are available.

Equity release is an advised product and regulated by the FCA, which means that you need to speak to a financial adviser if you’re considering taking equity from your home. It’s important that you speak with a whole of market adviser who is independent of any specific lender to ensure you get the most suitable product possible. Equity Release Supermarket advisers are exactly that - independent and whole of market, and you can find your local adviser here.

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