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Talking to loved ones about equity release

Last reviewed 11th December 2023

4 min read

Equity release is a big financial decision, so it's advisable to involve your loved ones in the conversation from the beginning.

Likewise, if you have a loved one considering equity release, it's also advisable to talk to them about the long-term implications.

We’ve made this quick guide on how to talk to your family about releasing equity – whether you’re considering it yourself, or your loved one is.

If you're considering equity release...

Once your loved ones know how equity release works, they can help you weigh up the pros and cons. This could be a big help to you through the equity release process.

Family members could also attend any equity release appointments with you. They might think of questions you hadn’t thought of – meaning you can be confident you’re making the right decisions.

Involving family from the start also means they’ll know how any inheritance will be affected if you release equity.

It may also help to reassure them that the equity release industry is regulated, and that it won’t leave them in debt when you’re gone.

If your loved one is considering equity release...

If your loved one is thinking about releasing equity, a good start is to listen to what they have to say.

It might help to ask them why they are considering equity release, what the benefits are, and what they would like to spend the money on.

It’s also important to make sure they understand how equity release works and that it’s a big financial decision. Plus, as equity release isn’t right for everyone, it may help to look at alternatives with them.

And it could be useful to attend equity release adviser appointments with your loved one. They can explain how equity release works, how it will affect them, and how it could affect any inheritance. They can also advise your loved one on whether or not equity release is right for them.

Top tip
Know someone who's taken out equity release? Ask for their perspective on how it's changed life for them. It could give you some useful insight into how releasing equity could make a difference to your loved one.

Common equity release questions

To help you and your loved ones make an informed decision, here are answers to five of the most common questions about equity release:

1. Is equity release safe?

Equity release is regulated by the Financial Conduct Authority (FCA).

The Equity Release Council (ERC) also has standards to protect customers, such as the ‘no negative equity( opens in a new tab)’ guarantee. So, as long as you choose a plan that adheres to ERC standards, you’ll never owe more than your house is worth – meaning releasing equity won’t leave your family in debt.

But it’s worth keeping in mind that releasing equity may mean there’s limited or no property equity remaining. This could reduce your financial options in the future.

2. How does equity release affect inheritance?

Equity release is a loan secured against your home, which is repaid from the sale of your property when you die or move into permanent care. This means your family may receive less or no inheritance from the sale of your home when the time comes.

However, if the product follows ERC standards, the amount owed can never exceed the value of your house – so your family won’t be left with any debts relating to the sale of the property. This means any other assets or cash inherited won’t be impacted.

If you’re thinking of releasing equity, some providers let you protect a portion of your property’s value as inheritance. Just ask your equity release adviser.

It may also help to talk about why you want to release equity with your loved ones. For example, perhaps you want to see them enjoy an early inheritance while you’re still here?

3. Does equity release reduce inheritance tax?

Releasing equity can reduce inheritance tax on your estate. This is because the amount of inheritance tax you pay depends on the size of your estate. As rules around inheritance tax planning are complicated, you should seek professional financial advice.

4. What happens when you die or move into permanent care?

This depends on the type of equity release plan. Your equity release adviser will take you through all the options when you apply.

With some types of equity release, such as a lifetime mortgage, whoever is responsible for the estate will need to sell the property when you die or move into permanent care.

The money from this sale will repay the equity release, including any compound interest accrued. This usually needs to be done in the first six to 12 months after you’ve passed away or moved into care.

5. What are the alternatives to equity release?

Equity release isn't right for everyone, but there are other options if you need more money in later life.

Alternatives to equity release include using savings or investments, downsizing, selling valuable assets, and even looking for grants. It’s best to speak to a financial adviser to help you pick the right option for you.

Releasing equity on your own

You don’t have to get your loved ones involved in the equity release process. It’s completely up to you. But however you decide to proceed, it’s important to get financial advice from an expert. Our article on Why you need equity release advice explains the importance of seeking out independent, expert advice.

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The thoughts and opinions expressed in the page are those of the authors, intended to be informative, and do not necessarily reflect the official policy or position of SunLife. See our Terms of Use for more info.