Equity release and your family's inheritance

What the family actually gets

When the home is sold, the lender is repaid the loan plus rolled-up interest and the rest goes to your estate. If a £300,000 home has grown to £435,000 in fifteen years and a £60,000 loan at 6.2% has grown to about £148,000, the family gets about £287,000 from the house. Left to roll up for twenty-five years, the same loan would be about £270,000 against a home worth perhaps £556,000. The no-negative-equity guarantee means the family can never have to pay anything in.

Three ways to protect an inheritance

1. Inheritance protection. Many plans let you ring-fence a percentage of the home's future value, say 30%, which is guaranteed to go to your estate whatever the debt does. The price is a lower maximum loan (and sometimes a slightly higher rate).
2. Pay the interest. Voluntary payments of up to 10% a year, penalty-free, stop the debt growing. Some families arrange for adult children to make these payments to protect their own inheritance.
3. Take less, via drawdown. Interest only accrues on what you draw. The cheapest plan is the one with the smallest balance for the shortest time.

Talking to the family

Advisers report that the biggest regret is not the plan but the silence. Children who find out at probate feel deceived; children told at the start almost always say "it's your money, enjoy it". Tell them what you are doing, why, roughly how much, and that the debt grows. Show them the illustration. Ask whether any of them would rather lend the money themselves, or help with interest payments. The free Family, Inheritance and Gifting PDF has a page on how to have the conversation.

Inheritance tax: the other direction

Most estates pay no inheritance tax: the allowances are £325,000 per person plus £175,000 if the home goes to children or grandchildren, doubled for a married couple, so £1 million in total. For the minority above that, equity release can reduce the bill, because the debt is deducted from the estate and money gifted more than seven years before death is outside it. Release £100,000, gift it to the children, live seven years, and the estate is smaller by £100,000 plus the interest. That can save £40,000 or more in tax. It is not a reason to do it on its own, and the sums need a solicitor or adviser who does estate planning, but it is real.

Gifting a deposit

The most common family use of released equity is a deposit for a child or grandchild. It is allowed, it is tax-free for the recipient, and lenders accept it with a signed gift letter and proof of where the money came from (the equity release completion statement). Gifts count for inheritance tax only if you die within seven years, and £3,000 a year is exempt regardless. The PDF includes gift letter wording.

Two things people forget. First, a gift made shortly before you need council-funded care can be treated as if you still had the money ("deprivation of assets"). Second, gifted money in a child's home is at risk if their relationship ends; their solicitor can protect it with a declaration of trust.

A note on the numbers. Rates, loan-to-value limits, fees and timescales are typical figures at the time of writing (2026) and vary between lenders and with your age, health and property. This is information, not advice. Equity release must be arranged through an FCA-authorised adviser, who will give you a personalised illustration before you commit to anything.