We have a lovely place here in Lanzarote and it's going to our nephews and nieces eventually. But as they're in the UK, they'll have to pay 40% tax, which pisses me off

I've been looking at equity release and you can get between 60% and 80% of the value of the house depending on your age. It will give us some extra spending money. The kids will still get a hefty benefit and less tax to pay.

We're talking a fair bit of money here, so would like opinions and experiences please.

We have a very good lawyer, so it will be all water tight if and when we decide to go ahead

Thanks

Lawyer? You need good accountant experienced with UK and ES taxes.
Money gifts from equity release are tax free only if giver doesnt die in next 7y. That is UK law, I bet ES has similar catch.
You'll find that equity release are never pound for pound, of property true value.

According to Banco Santander:-

How does it work?

While with a traditional mortgage you, as a customer, receive the full amount of the loan from the bank and make monthly payments to repay the debt, with a Reverse Mortgage, in exchange for mortgaging your home, you will receive a monthly payment that you will not need to pay back in your lifetime. After death your heirs will have to repay the loan and its interest.

The monthly amounts received through a Reverse Mortgage for a fixed term are not subject to personal income tax.

In addition, this monthly income can supplement any other income that you may be receiving such as a pension or other funds; and the loan can be paid back early if you wish.

Who can apply for a Reverse Mortgage?

• People over 65.
• They must be the homeowners.
• No other mortgages on the property.

What are the requirements?

• The property must be their main residence.
• The value of the property must be above certain thresholds.

What are the main advantages?

TAX ADVANTAGES

The amounts received through a reverse mortgage are not subject to personal income tax.


YOU KEEP YOUR HOME

You will be able to continue living in your current home as the owner.


VALUE FOR YOUR HEIRS

The heirs will get the remaining value of the house after the debt has been paid off.

https://www.bancosantander.es/en/par...poteca-inversa

Personally, I would stay away from reverse mortgages as they have a high potential for blowing up and stopping what you want to happen from happening - and specifically in this case, anything you do that leaves your heirs with a substantial loan to repay (whether or not it is a reverse mortgage) and especially if that loan is going to require a refinance/ loan application, is IMO likely to lead to your property being sold within a year or two of your death, irrespective of your wishes.

Why not at the point where you are considering going over to equity release you sell up and rent. That way you should get market value for your property and be able to pay rent from what you sell for. When the inevitable happens your family inherit whatever money is left. Sounds simpler than going equity release with same end outcome.

I don't know how much the property is worth, but it would only be taxed at 40% over the threshold (£325k or £500k if your estate is worth less than £2M).

But if it's a very valuable property, it might be worth investing in some proper advice and potentially looking at putting it in trust if you want to avoid inheritance tax.

The problem with renting is that you lose control of your home - for a variety of reasons you could be forced to move, which is the sort of disruptive event that people prefer to avoid during their retirement. Also the quality of rental properties is generally lower than owner occupied homes, and few are available at the mid-level size/ price and above.

Mainly because this is our dream house.

Thanks for the useful replies

To make it clearer as to what I have seen...

Some places offer to buy your home for around 60% - 65% of the house value and then you live there forever, rent free. Apparently legally watertight. The cash is for you to do what you want

This explains it...

https://www.idealista.com/en/news/le...usufruct-right

Any experience of this sort of thing ?

But that pretty much guarantees that your home won't go to your heirs, which was one of your stated objectives.

OK got you, it was just another option.

Spanish gift tax is payable immediately. No 7 year rule.

You have got me thinking about my options on this topic - also found this from Banco de España

https://clientebancario.bde.es/pcb/e...a_inversa.html