When you inherit a property the probate process in England can seem complicated and daunting if you’ve never been through it before. And complexities can arise that delay the transfer of ownership and the subsequent sale of the property if you choose not to keep it.
If you’ve inherited a house, you probably have a lot of questions. This guide will answer some of the most common questions to help you through the process.
What to Do after Inheriting a House
There are several things to take care of as soon as you inherit a property:
Make Sure the House Is Secure
A vacant property could attract criminal activity, or damage could occur if the utilities aren’t turned off. Ensure that windows and doors are locked, turn on the burglar alarm if there is one and turn off the water, gas and electricity. Remove anything that has sentimental or monetary value.
Contact the Council and Utilities Companies
Let the council know that the property is empty — they may reduce the council tax rate — and cancel the utilities to avoid running up a large bill.
Insure the Property
Take out an “unoccupied home insurance” policy to cover the property until the probate process has been completed. Any insurance policies held by the deceased will probably be terminated within 30 days of their death.
Get the Property Valued
Research recently sold properties in the area similar to your inherited property to get an idea of how much it might be worth. House Buyer Bureau can provide a free no-obligation cash offer within 24-hours.
Questions to Ask When You Inherit a Home
You probably have many questions about how inheriting a property works, but what should you ask to get all the information you need and make the best decisions? A few sensible questions are:
- Is there a will, and are you named as the beneficiary?
- Is there a mortgage on the property?
- Do you want to live in the property, rent it out or sell it?
- What are the running costs of the property? Is it financially viable to live in it or rent it?
- Is any renovation work needed to make the property habitable/rentable?
- Is the local property market healthy, or will selling/renting be a chore?
- What taxes will you be liable to pay if you sell, rent or keep the house?
- What is the house worth in the current market?
- When can I sell the house?
A solicitor or probate specialist will be able to help you work through these questions. You can also find some information, such as how much the property is worth, online.
How Does Probate Work?
Probate is the legal process of administering a deceased person’s estate (their assets and money). You will need to apply for probate to establish yourself as the new legal owner.
If the deceased left a will and named you as the beneficiary of their home, you will need to apply to the Probate Registry for a “Grant of Probate”. This takes around six to eight weeks if there are no delays.
When probate has been granted you have the legal right to do whatever you wish with the property — live in it, rent it out, renovate it or sell it.
If there is no will it can take a lot longer to establish your right as the legal owner of the property. Instead of a “Grant of Probate,” you will need to apply for “Letters of Administration”. When someone dies without a will, “intestate”, their assets will be divided according to the “rules of intestacy”.
Who Can Inherit a House if There is No Will?
If a property owner dies intestate, only married or civil partners can inherit under the intestacy rules. These rules are also used to determine who inherits if a person leaves a will that is not legally valid.
“Common-law” partners will not automatically inherit if their cohabiting partner dies. Only those who are currently married or in a civil partnership will inherit. This remains true if the couple has informally separated but not done so legally.
Suppose there are surviving children, grandchildren or great-grandchildren. In that case, the legal partner will receive all the personal belongings of the deceased, the first £270,000 of their estate and half of anything remaining. The other half of the estate after the initial £270,000 will be divided equally among the children. If there are no surviving offspring, the partner will be the sole beneficiary of the deceased’s estate.
If the person who died jointly owned property under a “joint tenancy” with their partner, the surviving partner will inherit the deceased’s share. If the partners are only “tenants in common”, the deceased’s share will not automatically pass to the surviving partner.
If there is no surviving partner, any of the deceased’s children will inherit the property under the intestacy rules.
Grandchildren, great-grandchildren and other close relatives may inherit under the rules of intestacy under certain circumstances.
If no surviving relatives are eligible to inherit the estate, it will pass to the crown.
What Happens When Multiple Siblings Inherit a House?
If siblings are named “joint tenants” of an inherited property, they each have equal rights to it, and if one dies, their share will pass to the surviving siblings. If the siblings are “tenants in common”, each sibling owns a specific proportion of the property and any profits from selling will be divided accordingly.
Siblings who inherit an equal share of the inherited property have several options to consider:
- Keep the property and live in it — this is unlikely to appeal to most adults who will have their own lives, partners and children.
- Keep the property and use it at different times — the siblings could establish a timeshare agreement whereby each has the property for fixed periods throughout the year. This might appeal if the house is in an attractive holiday location and all the siblings are reluctant to sell the property for emotional or financial reasons.
- One sibling lives in the property — the resident sibling needs to have the funds to buy the other sibling(s) out, or the non-resident siblings can retain shares in the property — the value of which they will collect when the property is sold.
- One or more siblings buy the other(s) out — if there is a disagreement about whether to sell or keep the property, those who wish to keep it could buy the other(s) out.
- Sell the property and split the proceeds — if everyone is happy to sell, this is the easiest way to divide the property.
- Rent the property out — this could prove to be a lucrative investment. Not only will it provide an ongoing income, but it will also allow all parties to benefit from any increase in the property’s value between the time of inheritance and when it is sold. However, renting a property can be time-consuming, stressful and it does not provide fast access to cash which some or all of the siblings may need. There may also be capital gains tax to pay when the property is finally sold.
If the inheriting siblings cannot agree on whether to sell or not, those who wish to sell can ask the will’s executors to force a sale by taking the case to court under the Trusts of Land and Appointment of Trustees Act 1996. However, this will not always be successful. It can also be time-consuming, expensive and cause lasting damage to the relationship between the siblings who are in disagreement.
Do You Pay Tax on Inheriting a House?
At the time of inheritance, there is usually no tax to pay. However, there may be income tax, capital gains tax and inheritance tax to pay when you start earning a rental income from the property or sell it.
Income tax will be payable on any profit you earn from your inheritance, for example, dividends from shares or rental income.
Inheritance tax is usually paid by the estate of the deceased. If the estate can’t or doesn’t pay it, you may be contacted by HM Revenue and Customs (HMRC) and asked to cover the cost. There is generally no inheritance tax on “gifts” given to spouses or civil partners, nor charities and political parties. Children inheriting from parents will have to pay tax if the property’s value exceeds the relevant threshold. There may also be tax to pay on any gifted properties within seven years of the owner’s death. The rules around inheritance tax can be complicated, and it’s wise to seek the advice of a legal professional who specialises in probate law to ensure that you understand your obligations.
Capital gains tax. If you decide to keep the inherited property, no capital gains tax (CGT) will be due. However, if you choose to sell, now or in the future, CGT will be due on the amount the property has increased in value since you inherited it if it is not your primary residence. The standard rate of CGT for residential property is 28%. For example, if you inherit a property that is valued at £250,000 and you sell it eight years later for £325,000, you will pay CGT on £62,700 (the sale price minus the value of the property at the time of inheritance and your personal tax-free allowance). The easiest way to avoid paying capital gains tax is to sell the property as soon as the probate process is complete, as it is unlikely to have increased in value during this time.
Speak to a legal professional to make sure that you understand your tax obligations. This may help you decide what to do with the property once it is transferred into your name and avoid any unexpected tax bills.
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Does Inheriting a House Affect Benefits?
Inheriting a property can affect any means-tested benefits you receive. Means testing considers the amount of savings you have, which includes property that is not your main home. Benefits that may be affected by your inheritance include:
- Universal Credit
- Pension Credit
- Child Tax and Working Tax Credit
- Council Tax Support
- Housing Benefit
- Income Support
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance.
The UK benefits system can be complex. Anyone who inherits a property will have unique circumstances, so it’s best to seek professional advice regarding your eligibility to continue receiving benefits. As soon as you are notified of your inheritance, contact the Department for Work and Pensions (DWP) to update your change in circumstances. You can often do this via your local Jobcentre Plus. You can also seek free advice from the Citizen’s Advice Bureau.
How Does Inheriting a House Affect First Time Buyers?
If you inherit a property, you are no longer classed as a first-time buyer (FTB). As a result, you will not be eligible for first-time buyer support such as stamp duty land tax relief and the Help to Buy first-time buyer scheme.
What Happens If I Inherit a House with a Mortgage?
If the house you inherit has an outstanding mortgage balance, you will become responsible for the repayments, even if you do not live in the property. In this scenario, there are several possibilities:
- The deceased has a life insurance policy that will pay off the remaining mortgage. You will have nothing to pay and can do with the property as you wish once the probate process is complete.
- Sell the property and pay off the mortgage. Once you have established yourself as the legal owner through probate, you can sell the property and use the proceeds to clear the outstanding mortgage balance. Anything that remains (after taxes are paid) is yours to keep.
- Take out a mortgage in your name. If you want to keep the property and you have the means to keep up the mortgage repayments, take out a new loan in your name. If you want to rent the property out, this will need to be a buy-to-let mortgage.
Can You Refuse to Accept an Inherited Property?
You are under no legal obligation to accept any inheritance gifted to you, even if you are named in the deceased’s will.
Why would you want to turn down a “free” property? There are many reasons why some beneficiaries choose to disclaim their inheritance, from personal to practical reasons. Perhaps you fell out with the deceased and feel uncomfortable profiting from their death? Maybe you have poor health, and taking on the probate process plus selling the property is too much? Some people turn down an inherited property to benefit others, for example, if the property will then pass to someone who is more in need or who is already resident in the house.
There are two ways to reject your inheritance: disclaim it or redirect it. If you choose to disclaim an inheritance, you must reject it before ownership is transferred to you. This must be done in writing and no later than two years after the death of the person who gifted you the property. You cannot accept part of an inheritance and reject another part. For example, if you are left £100,000 and a property, you must choose to accept or reject the entire gift. The rejected inheritance will be returned to the deceased’s estate and distributed to the remaining beneficiaries.
Alternatively, you can create a “deed of variation” to redirect your inheritance to a beneficiary of your choosing, regardless of whether they were named in the will or not. It is permissible to accept part of an inheritance and redirect the rest.
Sell Your House Fast Once Probate Is Completed
If you choose to sell your inherited property, House Buyer Bureau can help. We are experts in achieving quick house sales and have the funds to buy your property in as little as 7 days.
The probate process can be lengthy, and marketing the property of a loved one who has passed away can be distressing. We can offer a fast, straightforward sale with no viewings and no lengthy wait for a buyer.