Structuring Later Life Lending to Support Lifetime Gifting and Inheritance Tax Planning

The client was a 70-year-old homeowner with a substantial asset base, including pensions, cash reserves and a London townhouse valued at £1.7m. She had three children, all living overseas.

While two of her sons were financially secure, her daughter required support, including assistance with a property purchase. The client wanted to provide this support while also making lifetime gifts to her sons as part of a broader estate planning strategy to manage the distribution of her estate and address inheritance tax exposure.

It was important that she retained sufficient resources to meet any future care needs and could continue living in her home. The broader objective was to manage how and when wealth was passed to her family while maintaining long-term financial security.

The client’s estate was valued at £1.7m, with inheritance tax exposure remaining a key consideration as part of her broader estate planning strategy.

Her income profile meant a conventional mortgage with ongoing repayments was not appropriate. The approach therefore needed to release capital from the property without introducing a repayment burden, while aligning with the wider estate planning strategy.

Timing was also a key consideration. The gifting strategy needed to be structured carefully in the context of the seven-year rule and the potential exposure should the client pass within that period.

Darren Johncock, Later Life Lending Director, structured the case to align the client’s immediate objectives with her longer-term estate planning strategy.

A lifetime mortgage was identified as the most appropriate structure, allowing capital to be released without the need for monthly repayments. Based on a property value of £1.7m, £750,000 was raised at 45% LTV, with features selected to provide flexibility over time, including downsizing protection from day one and fixed early repayment charges over an eight-year period.

Careful consideration was given to how the lending structure would interact with the client’s wider estate position, particularly in relation to inheritance tax and the timing of gifting. Releasing equity and implementing the gifting strategy reduced the overall value of the estate, improving the client’s inheritance tax position and supporting the efficient use of available allowances, including the Residence Nil Rate Band.

The implications of the seven-year rule were considered as part of the planning process, with the client proceeding on the basis of her overall financial position and personal circumstances. The strategy was positioned as part of an integrated advice approach, with specialist inheritance tax advice provided alongside the lending recommendation and coordination across the client’s wider advisory team to ensure the strategy was aligned and implemented effectively.

The structure allowed the client to release capital from her property and implement a coordinated gifting strategy, enabling her children to benefit from her wealth during her lifetime while she remained in her home.

This approach reduced the overall value of the estate, improving the projected inheritance tax position and supporting the efficient use of available allowances, including the Residence Nil Rate Band.

Crucially, the structure balanced immediate family support with long-term financial security. The client retained control over her living arrangements, with no requirement for monthly repayments and flexibility built into the arrangement.

The approach also supported alignment across the family, with clear visibility on the strategy and its longer-term intent.

As part of the wider advisory process, the client was encouraged to review and update her Will to reflect the revised estate structure.

This case demonstrates how carefully structured later life lending can form part of a wider estate planning strategy, enabling the controlled transfer of wealth while preserving flexibility and long-term financial security.