If somebody leaves you a property in their will and you don’t want to live in it, how do you sell it? Is the process the same as selling your own property? Will you owe any tax to HMRC if you sell it? What is “probate” and how does it work?
Inheriting a property can bring mixed emotions and lots of questions. You may be experiencing a sense of loss and sadness that a loved one has passed away. Getting to grips with the complexities of selling inherited property at such a difficult time can be daunting. But it is possible to arrange a fast, stress-free sale of inherited property.
In this guide, our property experts have put together all the information you need to decide on the best course of action for you, and how to navigate the red tape involved in selling your inherited property.
Are You Named in the Will as the New Owner?
Before you can sell a property you need to establish your status as the legal owner. The process for doing so depends on whether or not the deceased wrote a will.
If the person who died left a will, this should name an executor and any beneficiaries. The executor is the person responsible for making sure that the wishes of the deceased, as detailed in their will, are carried out. They must also value the deceased’s estate, including any inherited property and calculate the amount of tax due to HMRC. There may be more than one executor. The beneficiaries are the people who stand to inherit.
If a person dies without a will, they have died “intestate”. Identifying the intended beneficiaries of their assets and belongings is more complex. The estate will be divided according to the rules of intestacy. Only married or civil partners and certain close relatives, such as children and grandchildren, can inherit under these rules. If there are no surviving relatives who can inherit, the deceased’s estate passes to the Crown — a process called “bona vacantia”.
What Is Probate?
You may have heard of “probate” but not fully understand what it means. Probate is the legal process of administering a deceased person’s estate (the money and property they leave behind). Any property you inherit is “probate property” and forms part of the deceased’s estate. Probate gives the chosen personal representatives the legal right to manage and distribute the estate. You cannot sell an inherited property until probate is granted (if probate is required).
Do I Need to Apply for Probate?
Not everyone who inherits a property needs to apply for probate. If the property was jointly owned at the time of death, it will automatically pass to the surviving owners.
If there is a mortgage on the property, contact the lender to find out if you need to apply for probate before selling.
How Do I Apply for Probate?
If probate is required before you can put the property on the market and the deceased left a will, you will need to apply to the Probate Registry for a “Grant of Probate”. If there is no will, the will is not valid, there are no named executors or the executors are unable to fulfil their duty, you will receive “Letters of Administration”.
How Long Does Probate Take?
It takes between nine and 12 months to obtain the Grant of Probate on average in England and Wales. If the will is complicated or missing, essential documents cannot be located or there is a disagreement between family members about how the estate should be shared, the process will take longer. However, as soon as you receive either a Grant of Probate or Letters of Administration, you can start preparing the house for sale.
Common causes of delay include:
- Late application for a Grant of Probate — this can take up to three months to arrive from the time the application is received.
- The executor cannot pay the inheritance tax that is due — the tax must be paid to HMRC before the Probate Registry will issue the Grant of Probate.
- An unclear, invalid or incomplete will — this could lead to family fights that delay the process.
- The named executor is unable to fulfil their responsibilities — if a named executor has passed away or become incapacitated since the will was written or they refuse to undertake the role, another executor must be appointed, which can take time.
- Named beneficiaries cannot be located — searching for the intended recipients of the deceased’s assets can add considerable delays.
- The will is complex — if a will requires permissions or documentation from multiple third parties, there are likely to be delays.
How Much Does Probate Cost?
You will need to pay an upfront fee for probate, but the amount due varies depending on who is applying and how much the deceased’s estate is worth.
If the estate is worth less than £5,000, there will be no probate fee to pay. If you appoint a probate specialist to guide you through the process, there will be an application fee of £155; going it alone will cost you £215. You will also have to pay £1.50 for each copy of the probate form required and multi copies are necessary to complete the process.
There are several options for those who choose to pay for professional help with the application process. A fixed fee specialist will calculate the amount payable based on an estimate of how much work will be involved in the application and how long it is likely to take. Many probate specialists and solicitors will charge an hourly rate based on the value of the estate — between 1% and 5% of the estate’s value (+VAT) is typical. Banks also offer probate services, but these are often the most expensive option.
Managing probate without paying out for specialist help may be tempting, but if the will is complicated or problems arise later in the process, a layperson acting alone could incur higher costs in the long run due to mistakes and delays.
Will I Have to Pay Inheritance Tax?
If the inherited property is worth more than £325,000, you will have to pay inheritance tax. Properties below this value fall in the Nil Rate Band (NRB). Married couples or those in a registered civil partnership are exempt from inheritance tax.
The higher inheritance tax threshold of £475,000 applies if the deceased left their estate to their children or grandchildren (which includes adopted, foster and stepchildren) and their total estate was worth less than £2 million.
A spouse or civil partner can transfer any unused NRB when the first person dies to the surviving partner, potentially doubling the tax-free threshold to £650,000. When the surviving partner dies, their named beneficiaries will be able to take advantage of this higher threshold. This increased NRB is known as Transferable Nil Rate Band (TNRB). If the deceased left their home or a share of it to their children or grandchildren, the tax-free threshold can be further enhanced by adding a Residence Nil Rate Band (RNRB) or “home allowance” on top of the NRB and the TNRB.
The executor of the will is responsible for paying any inheritance tax that is due. If there is no will, the administrator of the estate performs this task. The money is usually transferred directly from the deceased’s bank account to HMRC via the Direct Payment Scheme (DPS). But it can also be paid from the proceeds of selling an inherited property.
Some people choose to rent their property out instead of selling it to avoid paying inheritance tax. However, the rental income from the property will be taxable.
How Much Inheritance Tax Will I Have to Pay?
Inheritance tax will be charged on the value of the property that exceeds the NRB (or the combined total of all eligible nil rate bands). For example, if the NRB is £325,000 and the property you inherit is valued at £500,000, you will pay tax on £175,000. The standard inheritance tax rate is 40%.
If the deceased left at least 10% of their estate to charity, the rate of inheritance tax may be reduced to 36%.
When Do I Have to Pay Inheritance Tax?
Inheritance tax must be paid by the end of the six months after the death occurred. After this, HMRC will start adding interest to the bill. The executor can choose to pay the tax on certain assets over a period of 10 years, but interest will be charged on the balance. And if the asset is sold, the executor must pay off the full amount due.
Do I Have to Pay Capital Gains Tax If I Sell an Inherited Property?
What? I may have to pay MORE tax on my inherited property? If you already own a property that is your full-time residence and you sell the inherited property for a profit, you will be liable for capital gains tax.
You must inform HMRC which is your main home within two years of inheriting. If you fail to do so before selling one of the properties, they will decide which is your main home (and whether capital gains tax is due).
How much capital gains tax you pay will depend on:
- Whether you are a basic, higher or additional rate taxpayer
- The size of your financial gain
- Whether the property is residential or commercial.
The tax rate can vary between 10% and 28%. Seek advice from a legal professional to make sure that you understand how much you will be liable to pay.
Is Selling the Right Choice?
If you inherit a house that you do not wish to live in or that you are not able to use as your main residence, you can either sell the property or rent it out.
Renting out a second property for profit may seem appealing but being a landlord is not without its headaches. It will be your responsibility to find and vet prospective tenants, ensure that all necessary paperwork is in order, chase unpaid rent, and respond promptly and effectively to requests for maintenance and repair work.
Being a landlord can be an onerous task that many people do not have the time for — especially if they have work and family commitments as well as the responsibility of running their main home.
There will also be tax to pay on the rental income you earn and plenty of regulations and legislation to comply with, such as health and safety law that requires landlords to arrange annual gas safety checks, provide smoke alarms and ensure that wiring and electrical appliances are safe.
While many tenants are law-abiding and responsible, we’ve all heard the stories of “nightmare tenants” who refuse to pay their rent, cause considerable damage to a property, and have to be evicted via a lengthy and expensive court process.
Many landlords engage the services of property management professionals to handle all of the above. But this will be another expense to add to the list.
Selling is an attractive option for many people who have neither the time nor the inclination to take on the hassle of renting an inherited property out, and who would benefit from an immediate injection of cash.
How to Sell an Inherited Property
There are no restrictions on selling an inherited property, but the process can be more complex and prone to delays than selling a non-probate property, as outlined above.
The first step to take when you are notified of your inheritance is to confirm your status as the new owner. This will involve determining if there is a will and applying for probate.
Next, make sure that the property is secure. It is not a good idea to leave a house full of furniture and personal belongings unoccupied for any length of time. Remove any valuables and make sure that windows and doors are locked. Depending on how long the property is likely to sit vacant, installing a few CCTV cameras may be a good idea.
If a property is unoccupied for long enough, maintenance issues can arise that will cause significant damage and expense if left unattended. There is also a greater risk of fires, pest infestations and accidents. Make sure that the electricity, gas and water supplies are switched off and that smoke alarms are active.
The property owner’s death could terminate any insurance that covered the property when they were alive. As soon as possible, contact the insurance provider to inform them of the owner’s death and discuss what this means for insurance purposes. Some lenders will allow the policy to run until it expires, but others may terminate it 30 days after the policy holder’s death.
If the property is likely to remain unoccupied after the current insurance policy lapses or for longer than the continuing policy allows — typically 30 days — you must take out “unoccupied home insurance”. This may carry with it certain responsibilities, such as periodically visiting the property to check it is secure and in a good state of repair. Policies will differ, but all good unoccupied home insurance should cover fire, flood, storms, theft and attempted theft, vandalism, damage from impact and damage from oil or water. There are some common exclusions to look out for, such as burglary through forced entry, works undertaken by builders and contractors (they should have their own insurance) and damage caused by major renovation work.
If you fail to inform the insurance provider that the property is empty, your policy could be invalidated, and if you try to make a claim, the provider may refuse to pay out.
An empty, uncared for property will be more difficult to sell. Engage professional help to speed the probate process along and maintain the property to a good standard if you want a quick sale.
Should You Renovate an Inherited Property Before Selling?
A vacant, probate property is appealing to many buyers because they can move in as soon as the sales process completes and there is no risk of property chain problems. However, if the property is in a poor state of repair or has dated appliances and decor, it may be difficult to sell.
Carrying out major building and renovation works take considerable time and money, but they could help to secure a buyer and a higher sale price. If you decide to update the property, make sure that any improvements you make are a worthwhile investment — will they boost the sale price significantly enough to cover the cost of the work, plus a tidy profit? If not, why spend the time and money?
For many people, renovation is not an option due to limited time and resources, or because the changes required would not deliver a healthy return on investment. Making major alterations to a loved one’s home can also be upsetting for many people who inherit a property and a quick house sale is their preference.
How to Sell Your Inherited Property Fast
- Find out if there is a will and apply for probate — you need to establish yourself as the legal owner of the property before applying for a Grant of Probate (if there is a will) or Letters of Administration (if the property owner died intestate).
- Hire a probate specialist or solicitor — DIY probate is allowed but could lead to mistakes and delays.
- Explore your tax obligations — will you have to pay inheritance tax and/or capital gains tax?
- Secure and maintain the property — an empty property is at risk of criminal activity and maintenance issues, which will make it harder to sell.
- Take out unoccupied home insurance — if the property is going to be unoccupied for more than 30 days, this specialist insurance will provide essential cover.
- Renovate or sell your house fast — extensive building works can be time-consuming, expensive and emotionally draining. Selling to a reputable quick house company is the fastest way to turn an inherited property into cash.
Unfortunately, there are some unscrupulous quick house sale companies in operation that will engage in dodgy sales tactics to secure your custom, such as tying you into long contracts or making a high cash offer, then dropping the amount immediately before the exchange of contracts.
Check out our handy guide on how to choose the best quick house sale company for tips on what to look for and what to avoid when searching for reputable property buyers. House Buyer Bureau has helped thousands of people to sell their properties in a time scale that suits them. We are honest about the way we work and the offers we make. Our team is set up to work entirely remotely and we can offer completion in as little as 7 days. There are no solicitors, estate agent or surveyor fees to pay.