However, it’s not an unusual experience, with 36% of people set to inherit property in their lifetimes. Yet, according to research carried out by bridging lender MFS, 70% of the people who inherit these properties would not want to live in them
In fact, whilst inheriting property is a type of gift, it can begin to feel like a burden to children or family members who do not wish to live in their inherited property, and have to decide whether to sell or rent out the home, as well as considering the paperwork, and the monetary and tax implications.
Shared inheritance – making choices
Inheriting a property becomes much more complicated when the property is left to multiple children. If you are sharing your inheritance with a sibling, you will both have to be on the same page as to the aims of the property. Do you want to sell it, or rent it out for an income? Does one of you want to live in it? When one sibling is more invested in the property, or has their own personal goals for it, moving forward can become very tricky. Perhaps your sibling wants to live in the property, but you don’t, for example. How can this be fairly dealt with? Does your sibling buy you out? Do you rent out the property to your sibling, taking rent on half of the property? Whatever you want to do, it has to be agreed by all family members – meaning the more of you the property is split between, the more difficult it is.
Probate is the process that confirms the will and transfers a deceased’s estate to the beneficiaries. In some cases, if there is no will, or the will is contested, it can be a little less straightforward and take longer to finish the probate process. A grant of probate
usually takes within 6-8 weeks to arrive, and then finalised issues of inheritance and the estate can take from about 3-6 months, or longer, if there is a large estate with various bank accounts, properties etc, and if there is little agreement between the inheritors.
Even though it’s tempting to forgo the lawyers when dealing with family, it’s important to stay professional. Have everything noted down and done professionally. Disputes over inheritance can cause long lasting problems in families. Even if you completely trust your siblings in whatever handshake agreement you come to, make sure it’s noted down in writing, and everyone feels content with the final agreement.
Be aware of whether the property still has a mortgage – as the new owner, you’ll have to continue making the mortgage payments, unless you decide to sell it.
If you are keeping the property, it makes sense to register the property in your name, done through a solicitor as part of the probate process. If you know you are selling the property, you do not need to register it in your name, as the deceased’s estate essentially sells it to the new owner.
Capitals Gains Tax
In some situations, inheriting a property can put you at a disadvantage. Capital Gains Tax might be payable, based on whether the property has increased in price in the time between you inherited it and sold it on. There is a CGT allowance of £11,300, as of 2017, and tax is dependent on whether you pay a standard or high rate.
reallymoving note: Please be aware that as of 6th April 2020, the deadline for paying CGT will be reduced from 10 months to 30 days.
Inheritance tax is due on estates over £325,000 at a rate of 30% (2017). This will often be taken from the estate itself, meaning if you sell the property, the tax will be taken from the sale. Inheritance tax needs to be paid within 6 months of the person’s death, or the HMRC start charging interest on top of the inheritance tax amount due.
Selling or renting?
More than half of people asked in a study by lenders MFS said that they would sell the inherited property to buy one of their own. Getting on the property ladder is not easy, and it seems obvious that inheritance would be used as a stepping stone.
However, selling a property can be an emotional and difficult experience after a death. Some people want to hurry through a sale as quickly as possible, regardless of whether they get a decent price. Others don’t want to let go of the house immediately, and the idea of clearing through items and throwing things away can be traumatic.
Joint inheritance is fine, as long as both inheritors are on the same page – if they both want to sell, for example. But even that has issues – what price are you expecting? Are you willing to wait to get that price, or will you lower it? After how long will you lower the price, and by how much? Knowing these things in advance so you can all feel certain about the path and timeline is important.
You may wish to rent out the property
instead of selling it. This could bring in a steady income, one that could be split between inheritors. If none of you are in a rush to sell, or the market is not ideal, then renting can be a great solution. The property may need updating
, and if you live far away from the property, consider how much time and money will need to be spent on an agent to manage the property. Also, bear in mind you will have to pay tax on any profit you make from renting the property.
Preparing to sell your property
30% of those inheriting property said they planned to renovate or do up the property before selling it.
This makes complete sense. Many inherited properties have been lived in by the same person for a long time. If the person who owned it was elderly, often the home will have been adapted to make it more accessible, perhaps with bathroom rails, stair-lifts or different types of alarms. These elements, whilst making the property useful for an elderly person, will likely to not appeal to potential buyers.
It can feel incredibly painful to strip bare and refurnish a home that has belonged to a loved one, but if you are aiming to get the property in good condition promptly, it is important to clear out and sort through items thoroughly. It may feel too soon to decide to throw away or donate items. It may be best to put items you’re not sure about into storage, or discuss with other family members – it might be surprising which objects hold sentimental value for others.
When thinking about renovating, consider whether your focus is on a quick sell – if so, what things have the greatest impact for the least money and time spent? A good clear out, a fresh coat of paint in neutral colours and even ripping up old carpets and laying down wooden floors can make a massive difference. Let in lots of natural light, try and minimise the amount of furniture left in the property whilst it’s being shown, tidy up elements that frame the property, like the front and back gardens, jet wash any paving and get the windows cleaned and polished.
Be sure to get valuations on the property so you know how much to expect, and to be sure about tax going forward. Older homes may not satisfy efficiency standards and be aware that rules about efficiency have changed in the last few years, so make sure to find the EPC, or update it if it is over 10 years old
. A property cannot be sold without an up to date EPC
, undertaken in the last 10 years.
Making severe changes to the building can not only be costly and time consuming, but can cause issues if the inheritors don't agree on how much the property should be altered. Considering who is aiming to move into the area can help you in framing the property - and help you with a quicker sale.
How long will it take?
Trying to sell within probate can feel like it takes forever – but if you commit time to clearing the home, making it look appealing and getting it on the market, there’s no reason to assume it should take a long time. You may be eager to have it sold sooner rather than later, as you’ll be paying any council tax and possibly other fees. It’s also worth remembering that you may need ‘vacant property insurance’ if the property is empty for more than 30 days.
There is no need to rush into selling or renting if you are not sure what to do with the property (or don’t feel like you can agree when it is a joint inheritance), as long as you deal with any outstanding mortgage payments, insurance and fees. Making choices about the inherited property should be done with a clear head – assess whether you might be disappointed at selling that property in a few years, whether it might be a great rental opportunity, or if you may want to move into it down the line, if it is larger than your current home.
Find out more about dealing witht the estate of somebody who's passed away
1. Find a Chartered Surveyor
as quickly as possible, especially before you spend your own cash renovating the property. The HMRC
will need an accurate figure for probate purposes.
2. Don’t forget to inform the council if the property is unoccupied, as they may reduce your council tax liabilities.
Updated February 2020