When you inherit a property, it’s easy to feel confused about what you need to do. Clearly, this will come at an emotional moment after a close loved one has passed away and many people feel daunted about the prospect and managing their financial affairs at this tough time.
Our guide talks you through the different options available to you when you inherit a property and aims to help make this process as straightforward as possible.
of people in the UK will inherit a property
(more than 18 million people)
of those – almost 12.5 million people – will choose not to live in the property.
10.25 million people (55%) inheriting a property wish to sell it as quickly as possible
If you are to inherit a property, what do you need to consider before you begin the process? There are three things to stress right away:
Take your time. Do not allow yourself to be rushed into a decision before you feel confident that you’ve made the right choice.
Make interim arrangements for the short term. This means checking that you have insurance to cover the property, that you have turned off the gas, water and electricity and have spoken to a neighbour to let them know that the property is empty.
Look for the appropriate paperwork. You’ll need to have the will of the person who has died to hand when dealing with all of their affairs, not just the property. Find this and identify any other key paperwork in relation to the property.
Types of property inheritance
If a property was a joint tenancy – i.e. a couple owned the property together – then the surviving owner automatically inherits this.
If the property was owned as a ‘tenancy in common’ – i.e. two or more people owned a set share of the total – then the deceased person’s share is inherited as per the terms of their will.
If the property was solely owned outright by the deceased – or joint owners who have both died – then it will be inherited as per their will.
The course of action you take next will also depend on whether or not you are the sole inheritor. If so the process becomes slightly more straightforward. However, if you have inherited the property jointly with other family members you will need to come to an agreement about how to deal with it and one that everyone is happy with. It is prudent to draw up an official agreement so that you won’t find yourself in difficulty should one party change their mind down the line.
What are your options?
If the property is right for your personal circumstances, you may decide that you wish to live in it yourself. As stated above, if you are the sole inheritor this is slightly more straightforward; it is your decision alone whether to inhabit the property.
If you do share the inherited property you will have to seek legal advice to draw up an agreement and ensure that all parties are compensated for their part ownership of the property. Again, you will need the agreement of your joint inheritors so it is necessary to discuss this with them before any decisions are made.
If you are the sole inheritor there are a few things to consider before you go ahead:
The value of the deceased person’s share is counted as part of their estate. The personal representative or executor for the deceased person’s estate is responsible for settling all financial affairs. They must ensure that all debts and any tax due is paid before they distribute the assets of the estate.
If you inherit a property which has a mortgage, you’ll be responsible for the monthly payments even if you don’t live there. If you are unable to pay these, there is a risk the property could be repossessed. A financial adviser will be able to help you work out your options or negotiate with your lender.
If you inherit a property that has a tenant you will have to take their legal rights into account. Giving them proper notice is important and it’s important to seek legal advice to help you negotiate their contract if you don’t understand the agreement.
If you already own a property, or the property is not right for you to live in, you may decide, as two thirds of people do (see stat above), to sell it on.
If you are selling this with joint inheritors you will need to agree who is going to manage the sale of the property and agree the minimum price you will all accept.
If you are ready to proceed with the sale you have two options:
If the property is in disrepair, you’re left to deal with a mortgage in arrears or the property is located far from your residence, you may be reluctant to invest the time and money to put it on the market. In this case, you can opt for a quick sale. We Buy Any Home could have the cash in your account in seven days, allowing you to move on with your life and invest the money as you see fit.
At the start of 2018 it took an average of 72 days to sell a house in the UK, up from 55 days in the summer of 2017.
The company you are dealing with is a genuine cash buyer:
Some companies out there will claim to be a cash buyer while they are really just middle men looking to sell your details on to others who have the funds to buy it with. Ask for proof of recent properties they have purchased from other customers and the contact details of the sellers so you can verify the deal. If they are genuine they should provide this with no issues.
You are not charged any upfront costs:
You should not be charged any fees for surveys or valuations. WeBuyAnyHome don’t charge any fees and neither should any genuine company. Always check this before you move forward with a company.
It’s not too good to be true:
If a company offers you 100% of market value, be extremely wary. They may lower the offer as you get further down the process. Like any business, the property buyer needs to factor making a profit into their pricing structure, which would not be possible if they were paying 100% of market price.
Trust your instincts:
If the company is acting with undue haste, offering you a surprisingly attractive price without much knowledge of your property or are carrying out valuations privately rather than by your local estate agent or RICS qualified surveyors, step away quickly. We Buy Any Home is managed by property professionals with more than 30 years experience and we seek to deal honestly and fairly with all buyers. Any of the above behaviour should set alarm bells ringing immediately. Find out more here about some of the things to avoid.
A guaranteed sale within as little as seven days.
The highest possible offer at the beginning pf the process and don’t lower this as you near the end of the sale.
No fees –
we even cover solicitor costs
If you decided you’d prefer to put the house on the market, you will need to prepare the property for sale and then put it on the market. Make sure you choose your agent carefully and that you trust them to enter your empty property and conduct viewings if you can’t be there yourself.
Remember, if the deceased owned the property in their name, a grant of probate will be required before you can sell the property. This comes in the form of a certificate which will be issued by the court. This confirms the validity of the will and grants you authority to deal with the estate. Do not underestimate the timescale required to obtain this grant. It can take up to three months. Take a look at our guide on selling a house in probate for more information.
11% of UK landlords inherited their properties 90% of landlords have to pay for repairs to their properties every year, with an average cost of £376.
(source university of york, telegraph)
If you don’t wish to live in the property but don’t wish to sell it, you could look to make an income by renting it out.
To determine whether or not renting the property is a smart choice you should consider:
Remember that if you rent the property out you’ll have to pay tax on any profit you make from the rental income. You’ll also need to make sure the property is in full possession of energy, gas and electrical safety performance certificates.
About eight per cent of estates (roughly 40,000) were required to pay inheritance tax in 2016/17. In 2015/16 about £4.6 billion of inheritance tax was paid, which was almost double the amount paid six years before, in 2009/10. It’s said that 60% of the people who need to pay inheritance tax do not realise they are liable to do so.
(source bbc, gov.uk, canada life)
This tax is owed by the estate of the deceased but if they can’t – or don’t – pay this then you might be required to do so.
Every estate benefits from a tax-free allowance called a ‘nil rate band’. This currently stands at £325,000 and any wealth that falls under that figure can be passed on without the need for inheritance tax. Anything above this is taxed at 40 per cent.
As an example, if you were left £500,000 then you’d pay nothing on the first £325,000 and 40 per cent on the remaining £175,000 – which is £70,000.
Couples who are married or in civil partnerships are able to combine their nil rate band. New rules from 2017 added a ‘main residence’ element to this tax, reflecting the fact that more people were inheriting properties valued above the nil rate band.
The ‘main residence’ rules add £100,000 each to the allowance for people leaving a property to a child or grandchild, rising to £175,000 each by 2020.
Eventually this means that couples will be able to leave £1 million tax-free, provided they pass a property down to a direct descendant.
Capital gains tax
You will need to pay capital gains tax if you make a profit when you sell a property that isn’t your main home.
You will need to let HMRC know which property is your ‘main home’ if inheriting a home leaves you with two properties. This must be done within two years of inheriting the property.
You do, however, have a capital gains tax allowance, which dictates the profit you can make before you need to pay. In 2017/18, you can make £11,300 profit before you pay capital gains tax.
You will need to pay income tax on the profits made from renting out a property. This rental income will be added to any other money you have coming in to determine your tax band and the rate at which you must pay.
Ultimately making a decision at a sensitive time can be extremely difficult. If you need any advice there are plenty of independent – and often free – charities and advice organisations you can consult. Equally, the experts at We Buy Any Home are on hand to answer any queries you might have about selling your property. Simply get in touch.