One of the most common conversations we have with clients today is not just about how to fund their own retirement, but how to support the next generation. Rising property prices, higher deposits, and the ongoing challenges faced by younger families mean that parents and grandparents often want to help financially while they are still alive to see the benefit.
Traditionally, this has meant relying on savings or selling assets. But for many, the largest source of wealth is tied up in their property. This is where equity release — through a lifetime mortgage, becomes a powerful tool. By unlocking part of their home’s value, homeowners can make gifts to children or grandchildren during their lifetime, without the need to sell or downsize.
In this article, we explore how gifting with equity release works, the rules that apply, and why it has become such a valuable option for families in 2025.
There is something deeply rewarding about being able to help family members when they need it most. Whether it’s contributing to a first home deposit, funding education, or simply easing financial pressures, many clients tell us that they want to see the impact of their support during their lifetime rather than leaving it all through inheritance.
Lifetime gifting has always been possible, but the challenge has often been liquidity. With wealth tied up in property, many homeowners have felt “asset rich, cash poor.” Equity release changes that dynamic, offering a way to convert some of that equity into cash while preserving the right to remain in the home for life.
A lifetime mortgage allows a homeowner aged 55 or over to borrow against the value of their property. The money can be taken as a lump sum or in stages through a drawdown facility. Importantly, once received, those funds are the borrower’s to use as they see fit — including making financial gifts to family.
From an inheritance tax perspective, gifts made using equity release funds are treated the same way as any other gift. If the donor survives seven years after making the gift, the value is fully outside of the estate for IHT purposes. Even if they do not, the tax treatment is generally more favourable than leaving the wealth in the estate untouched.
This makes equity release a powerful way to combine immediate family support with longer-term inheritance tax planning.
There are several reasons why gifting with equity release is increasingly popular today. The first is the housing market. For younger generations, saving a deposit while managing rent and living costs is more challenging than ever. Parental support has become a critical factor in helping many first-time buyers onto the ladder.
The second is education. University fees and living expenses create financial pressures that can set young adults back for years. Grandparents in particular often use equity release to contribute to education costs, seeing it as an investment in their family’s future.
The third is inheritance tax itself. With thresholds frozen and more estates caught by the 40% tax rate, gifting earlier can reduce liabilities while ensuring wealth is transferred in a way that benefits the whole family.
Beyond numbers and tax rules, gifting through equity release carries an emotional weight. It allows parents and grandparents to be part of important milestones, seeing their children buy a home, grandchildren graduate, or a family business expand.
This sense of involvement and shared achievement is one of the strongest drivers of gifting. For many, the knowledge that they were able to make a difference while still alive is more meaningful than leaving behind a larger inheritance later.
Of course, gifting with equity release is not without risks. The loan will reduce the value of the estate, and unless repayments are made, interest will compound over time. This means that families need to balance the desire to gift with the long-term impact on inheritance.
There is also the question of fairness. Not all children or grandchildren may need or receive the same level of support, and this can create tensions within families if not carefully managed. Clear communication and solicitor oversight are important to avoid disputes later.
Finally, borrowers must ensure their own financial security. Releasing equity to make gifts should never undermine the homeowner’s ability to fund their retirement or future care needs. This is why regulated advice is a requirement — ensuring that suitability is assessed and alternatives are explored.
Gifting strategies are most effective when coordinated across financial advisers, solicitors, and sometimes tax specialists. Solicitors help ensure that gifts are properly documented and estate plans are updated accordingly. Advisers ensure the borrowing is affordable and suitable, while also comparing alternatives such as downsizing or retirement interest-only mortgages.
By working together, professionals create a joined-up strategy that protects both the borrower and the family. This holistic approach is particularly important where significant sums are involved or where inheritance tax planning is a key objective.
The rise of gifting with equity release reflects a broader shift in how families view wealth. Increasingly, people want to enjoy their money, share it with loved ones, and see its impact during their lifetimes. At the same time, the safeguards built into today’s equity release market mean that this can be done responsibly and securely.
That said, gifting is not suitable for everyone. For some, preserving the estate is a higher priority. For others, the emotional satisfaction of helping family now outweighs the potential reduction in inheritance later. What matters is that the decision is made with full understanding of the implications, supported by professional advice.
Equity release offers a practical and meaningful way for homeowners to make financial gifts during their lifetime. It helps families bridge the gap created by high housing costs, education expenses, and rising living pressures, while also reducing future inheritance tax liabilities.
In 2025, gifting with equity release has become not just a financial strategy but a family strategy, one that brings generations closer together. With the right advice, solicitor coordination, and careful planning, it can be a responsible way to unlock property wealth and make a difference where it matters most.
About the Author
Wesley Ranger is the Founder and Director of Willow Private Finance, where he also serves as a senior mortgage and protection specialist. With over 20 years of experience, Wesley has helped clients navigate complex financial decisions around equity release, inheritance tax, and intergenerational wealth transfer. His focus is on ensuring that gifting strategies are used responsibly, balancing family support today with financial security for the future.
Important Notice
Equity release and lifetime mortgages are regulated financial products. They may not be suitable for all borrowers and will reduce the value of your estate. Taking out a plan may affect your entitlement to means-tested benefits. Gifts are subject to inheritance tax rules, including the seven-year rule, and should always be coordinated with professional legal and financial advice. Interest can accumulate significantly unless payments are made, which may increase the balance owed. Independent, regulated advice is mandatory before entering into any equity release arrangement. This article is for information purposes only and does not constitute personalised financial advice.
