Gifting With Equity Release in 2022

Want to Gift Your Loved Ones Through Equity Release? We’ll Show You How
Contributors: Nicola Date, Katherine Read. Reviewed by Francis Hui
Gifting Equity Release Is a Great Way to Help Loved Ones Without Selling Equity in Your Home. It’s Often Used When the Equity Holder Doesn’t Want to Sell Their Property, but They Would Rather Give It Now While They’re Still Alive. Find Out How It Can Benefit You & Your Family.

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Have you always dreamed of being that generous friend or family member who makes your loved one’s dreams come true?

If you are a homeowner over the age of 55, you might just be able to make this dream a reality!

Introducing equity release. The financial product that allows you to unlock the cash tied up in your home.

How can this money be used as a gift?

Continue reading to find out more!

How Equity Release Is Used for Gifting?

The equity you release can be used to pay for children’s college tuition or grandchildren’s weddings, among other things.

In addition, you can use the funds to give your family an early inheritance.

Perhaps you have always wished to take a trip with your family? You can do so with the equity that you have released.

It’s an especially good idea for retired people, as they will have more equity in their homes and often don’t need it all themselves.

Use our equity release mortgage calculator to discover how much equity you might have available to help your loved ones.

What You Will Need?

To release equity from your home, you will need:

  • To own your home that is valued at over £70,000
  • To be over the age of 55

You can receive your annuity payments through a credit card or a checking account1.

To start the equity release process, you can contact your financial adviser, who will help you find the best plan for you and your family.

How Does it Work?

The person seeking equity releases signs over part of their property ownership such as their family home, cottage, second residence, etc, into a special trust2 .

That guarantees they’ll receive enough money during retirement years.

This is to ensure that they don’t outlive their savings while also guaranteeing the recipient gets what he or she is owed.

The equity release provider pays the person an annuity3 that provides income during retirement years and also gives the beneficiary4 a lump sum from the equity in their home.

A gift equity release can be any amount you choose, but it has to be at least 50% of what’s left on your mortgage balance after subtracting your current equity in the property (the equity released),

And paying off outstanding debts such as credit card balances, loans etc., with monthly payments paid until death.

Equity release providers typically charge about $150 per year for every $100,000 of equity they are releasing –

So if someone had $200,000 worth of equity left on their mortgage they would need to pay about $300 annually.

There are some equity release providers who will allow people to take out equity releases over a period as long as 30 years (called ‘mortgage term conversion’).

This is so that they can continue living in their home for the last few months or years before retirement when they need it most without having to move away from family, friends, etc.

It’s worth asking your equity provider about this option.

Equity holders should plan ahead for what happens if there are no children interested in taking on the mortgage obligations at any point during these 30 years.

The equity release provider will contact the executor5 of your estate to arrange a sale or conversion of equity to assets, subject to the terms and conditions in your equity release agreement.

You can also make it out to be a tax-free gift from equity release.

Equity holders can also gift, or give away, a percentage of their equity to other people as long as they retain the remaining equity and continue making mortgage repayments.

All that is required for this gifting option is written consent from both parties involved in the transaction – you (the equity holder) and your beneficiary. 

Tax is potentially payable by the recipient of the gift, often seen as an unfair effect of the tax system. Careful thought is needed before making lifetime gifts in excess of £325,000.

4 Benefits of Gifting With Equity Release

  • Reducing your estate taxes.
  • Passing on assets to beneficiaries without having to pay capital gains tax6 or any inheritance tax7.
  • Helping your friends or family who might be in need.
  • Giving your family an early inheritance.

4 Drawbacks of Gifting With Equity Release

  • The equity holder may have to pay income tax8 on the money they receive.
  • The equity release provider will ask beneficiaries who get a gift in equity law agreement if they want it and can reject or make changes where necessary.
  • There are costs involved in equity release.
  • Your family will receive a smaller inheritance when you pass away or move into permanent care.

Common Questions

Do You Pay Taxes on a Gift of Equity?

Can You Gift Equity to a Friend?

Do You Need the Equity Release Beneficiary's Consent?

What's a Gift in Equity Law?

In Conclusion

Most people are worried about what they’re leaving behind for their loved ones?

With equity release, you can make sure that they are covered while you are still alive.

With property prices booming, you may be able to secure your family an optimal early inheritance.

With tough economic times resulting from Covid-19, many individuals need financial support.

If you have any friends or family members who have been severely impacted by the pandemic, you could be the person to help them through these difficult times.

Speak to your financial adviser to consider if this is the best step.

Before You Go…

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Editorial Note: This content has been independently collected by the SovereignBoss advisor team and is offered on a non-advised basis. Sovereignboss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.

rachel w

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
John Lawson

Written by
John Lawson
Founder SovereignBoss

John is passionate about education and has made it his life-long mission to assist UK citizens on their future financial options, with a specialist interest in equity release, and SovereignBoss is the natural extension of this passion.

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
kath icon

Katherine Read
Consumer Affairs Writer

Since joining the editorial team at SovereignBoss, Katherine has become focused on bringing transparency to finances and opportunities for those approaching retirement age. She writes on the topics of equity release, home reversion, and mortgages.

Nicola Date
Writer & Journalist

Nicola is a financial writer for SovereignBoss and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.

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