Selling Inherited Property – The Ultimate Guide
Selling an inherited property will often mean having to research the ins and outs of complex matters such as inheritance tax and probate. But this also comes at an emotional time. Often, inheriting a house comes straight after the loss of a loved one, adding extra strain to an already difficult period. And there are many questions to get answers to.
There is the emotional impact of dealing with the loss of a relative – perhaps a parent. And then there is the paperwork, legal responsibility and financial matters to consider when inheriting an additional property.
While owning an additional property may bring financial benefits, there is a lot to consider. Especially when compared to managing a house that you already own.
Quick Page Navigation
- Getting help when inheriting a house
- What is probate?
- Applying for probate
- How much does probate cost?
- How long does probate take?
- What about inheritance tax?
- How much Inheritance Tax might I have to pay?
- What is the inheritance tax threshold?
- Should I live in my inherited property?
- What about renting out my inherited property?
- Should I leave an inherited property unoccupied?
- How to sell your inherited property
- Choosing the right property buying company
- Questions to ask house buying companies
Getting help when inheriting a house
But there’s no need to make a difficult time more anxious. In our simple guide, we deal with wills and probate when you inherit a house. We also look at the tax situation and how much money might be owed to HMRC.
We also deal with living in an inherited property or becoming a landlord by renting the house out. Our guide also looks at insuring an empty property and how to arrange a quick, hassle-free sale of an inherited property.
Is there a will?
Firstly, let’s look at the legal side of things when inheriting a house in the UK.
Before you can sell it, you need to establish your legal relationship with the property itself. Is the property your parents’ old house, for instance, or another property that belonged to a relative? Importantly, are you named in their will?
The first thing to do is to check if the person who died left a will. The probate process varies depending on whether there is a will or not.
Are you are named in the will as someone who can deal with the person’s estate (known as ‘an executor’)? If so, you can apply for a grant of probate from the Probate Registry.
If there is more than one executor, see the advice on the probate application form and guidance notes. The executors must estimate the value of the deceased person’s estate (including any inherited property) to calculate the tax owed.
The UK Government provides a guide to doing this as part of the probate process. While you can do an estimation of an estate’s value yourself, the probate process can be complex.
What is probate?
Legally, before you can sell an inherited property, you have to establish your relationship with the property. You may well be required to apply for probate.
This is name for the legal process that happens after someone dies. Probate includes distributing assets as set out in the deceased person’s will. This will include a list of all financial assets including both money and the the deceased persons estate.
The main purpose is to give a person (or people) the legal authority to deal with a deceased person’s estate. These people are known as personal representatives.
The situation regarding property is much simpler if you are a beneficiary in a will. This is someone handed a share of the estate by the person who directly inherits it.
Applying for probate
If you are an executor in a will you can apply for probate yourself. Alternatively, you can appoint a solicitor or somebody else licensed to provide probate services to do this on your behalf.
However, if there is no will in place you have to apply for something called ‘letters of administration’ and these can only be applied for by post.
How much does probate cost?
This will vary greatly depending on who carries out the work. Probate specialists and solicitors charge typically charge by the hour or as a fixed rate. The average cost for dealing with a probate claim is between 1 – 5% (+vat) and the final sum will depend on which firm you choose. Be sure to shop around before deciding who to work with. It may be worthwhile asking friends for recommendations as they may have experience of inheriting a house.
How long does probate take?
Typically probate takes around 6 – 12 months to be granted. However, the average time is 9 months. If a will is already in place it has been known for probate to be granted in as little as a few weeks but this is very rare.
Not everyone will need to go through the probate process, but it is worth seeking legal advice if you inherit a property or a share in one.
The UK Government has published a guide to wills, probate and inheritance. You may not need probate if the person that died:
- Had jointly-owned land, property, shares or money, as these will automatically pass to the surviving owners, or if
- they only had savings or premium bonds
You will need to get in touch with each asset holder, such as a bank or mortgage company, to find out if you need probate to access their assets. Different rules apply to each organisation. This is particularly important when it comes to selling an inherited property or house.
Seek expert advice when you sell an inherited property
We advise you to seek expert legal advice by contacting a solicitor. A good lawyer should help guide you through the process and may save you time and effort.
Once the estate has been valued, this sum needs to be reported to HMRC. The taxation service provides a phone helpline to answer questions on probate and Inheritance Tax following a death. It can be accessed using this link.
What about inheritance tax?
When you sell your main home, you do not have to pay Capital Gains Tax. However, the situation is different when you make a profit when you sell a property that isn’t your main home.
This could be an inherited house or flat. If inheriting a house means you own two homes, you will have to nominate one of them as your main home.
People that inherit property must tell HMRC which is their main home within two years of inheriting the property. If you fail to do this, and sell one of the properties, HMRC will decide which property was your main home.
This could be costly for you in terms of the tax you will have to pay. Instead of selling the inherited property, you may decide to rent it out. However, you will have to pay tax on the income you make.
More advice on taxation when you rent out a property in England and Wales is available here.
How much Inheritance Tax might I have to pay?
In some circumstances, the estate won’t have to pay tax. These can be where the estate:
- all passes to the deceased’s spouse or civil partner, a charity or a community amateur sports club or
- has a value below the Inheritance Tax threshold of £325,000
Consult your tax expert or HMRC to work out your family’s own circumstances – remember, these can vary widely. You will want to be sure you have got this right before deciding to sell an inherited property.
You must pay inheritance tax on a person’s estate if this is worth more than £325,000. If the deceased left the estate to their children or grandchildren, the threshold goes up to £475,000. This applies to adopted, foster or stepchildren, too.
This threshold also applies if the person’s estate is less than £2 million. More information about Inheritance Tax and passing on a home is available by clicking here.
If someone is married or in a civil partnership and their estate is worth less than their threshold, it is different. Any unused threshold can be added to their partner’s threshold when they die. This means their threshold can be as much as £950,000.
People that are executors or administrators of the will have to pay Inheritance Tax. They can use funds from the estate to make this payment.
What is the inheritance tax threshold?
At present, the standard Inheritance Tax rate is 40%. This is only charged on the part of the estate that is above the inheritance tax threshold.
So, as an example from the Government, say the estate you inherit is worth £500,000. With your tax-free threshold of £325,000, Inheritance Tax will be 40% of £175,000 (£500,000 minus £325,000). This example would mean an Inheritance Tax bill of £70,000.
Inheritance Tax can be reduced to 36% on some assets. This reduction applies if 10% or more of the estate is left to charity in the deceased person’s will.
What if you are required to pay Capital Gains tax from profits on the sale of any additional properties, aside from your main home? Use the HMRC’s online calculator to work how much tax you owe.
Should I live in my inherited property?
This is something people who inherit a property consider. If the inherited house would be a second property in addition to your main home, it is usually best to sell.
Why? We’ve dealt with the tax bills that people inheriting an estate can face above. Every extra property you own brings extra responsibilities in ensuring it is kept in good condition.
There will be extra utility bills to pay as well as Council Tax. Also, properties of any age need money put aside for regular repairs and maintenance.
Don’t forget the need to arrange for annual home insurance as well. Owning that extra house on top of your other responsibilities is probably a headache you may wish to avoid.
What about renting out my inherited property?
Another option some people think about when inheriting a house is whether or not to rent it out.
This would provide an income every month with little effort. And you would keep the property as a long-term asset – correct?
But in practice, being a successful landlord requires a lot more than turning up and collecting the rent.
It can be a full-time job. And the task is usually best devoted to professionals and those with time to devote to property rentals. If you already have a full or part-time job doing something else, it’s best to give this second thoughts.
An article on price comparison website Go Compare says:
“Being a landlord can be a complex and time-consuming job. And the legalities and financial obligations involved mean it’s not right for everyone.”
It’s true that you will already have a property you know about and won’t have to choose and buy one. But there are many challenges including finding the right tenants.
Being a landlord might give you a chunk of cash every month – that is, assuming your tenants pay on time!
Many tenants may live quietly and do not create hassle. But we’ve all heard about nightmare tenants who refuse to pay their rent. Damages to a landlord’s property and anti-social behaviour happen all too often. And while there can be tax breaks, any income you make on the rent will be taxable.
Do you like paperwork? Because being a landlord involves quite a lot of administration.
The Go Compare article also states:
“The thought of being in control of your own investment may be appealing. But if you’ve put resources into a rental property you probably shouldn’t be thinking in the short term.
‘View it as a long-term investment; it costs you to get in and it will cost you to get out,’ said David Hollingworth of London & Country Mortgages, Gocompare.com’s mortgage product partners.
If you want a quick release of cash, your money is locked in by being a landlord. If you choose to get out of the situation, it may take some time to sell the property on. Especially if you use traditional estate agents.
Should I leave an inherited property unoccupied?
Often, a property being inherited through someone’s estate is left empty while the legal and the tax situation is sorted out.
For a short period, this can be fine. But if the situation goes on for months whilst the will is dealt with, there can be problems.
Houses and flats that are left empty often deteriorate. There can be leaks from the piping or radiators and turning the utilities off may create problems in future.
If the property is going to remain unoccupied for more than 30 days, you will need unoccupied home insurance.
Requirements include that the property is checked every seven days. You will also be asked to ensure that gas, electricity and water supplies are turned off to prevent damage. Also, the areas of the property that are visible outside like the front garden, are kept well maintained.
Insurance company Tower Gate has published a guide to the specialist types of insurance that are available for inherited property. It can be read via this link.
An empty house can become damp and attract pests. The property can also attract anti-social behaviour such as vandalism, arson or even squatting.
Owners of unoccupied properties may become unpopular. In extreme circumstances, this kind of behaviour can reduce the value of neighbours’ homes.
After a while, it’s not hard to identify an empty house. The property usually looks neglected if it is ignored with peeling paintwork and an overgrown garden.
Unfortunately, such properties attract people with bad intentions.
How to sell your inherited property
Let’s say you’ve dealt with the probate process and sorted all the paperwork. So now you own the inherited property – or your share of it.
The extra house or flat means you must keep on top of any outstanding mortgage payments and utility bills. On top of that, your extra property must always be insured and maintained.
This could be a headache, considering that you are already probably responsible for one main property.
As we said before, the inherited property may be miles away from where you live, and your children attend school. And becoming a landlord is usually an additional hassle best avoided.
Leaving the inherited house or flat unoccupied means the condition of the property is only likely to get worse. Yes, you could refurbish your new property. A typical refurbishment will take around 12 weeks to complete and cost £30,000. Do you have time, money and energy for what could be a lengthy and expensive project?
Choosing the right property buying company
You may wish to consider selling the property on quickly without all the heartache. While you may have an emotional attachment to the inherited property, a clean break could help you move on. It could also be just the tonic to enable you to realise some long-held plans.
An easy solution is for a reputable house buying company to arrange to sell your inherited house or flat quickly. Look for a company that has a proven reputation for buying homes in any condition throughout England.
They should provide a genuine, speedy route to sell an inherited property without headaches. Your chosen company should be accredited members of national industry bodies such as the PRS – Property Redress Scheme.
Questions to ask house buying companies
Do they adhere to Trading Standards’ Quick House Sale framework? Not all companies in the marketplace will meet these standards.
As you make your choice, look at whether a property buying companies can offer you the following benefits:
- Do they have access to a substantial cash fund? This ensures the company can buy your house within just 28 days – or within a timescale that suits you
- Will they keep things simple? You have enough to deal with following the recent passing of a loved one. Will paperwork be kept to a minimum? And is their buying and selling process transparent?
- Will the property company charge fees at any stage of the sales process? Would they cover any of your legal fees?
- Lastly, would the company help you sell your inherited property in any condition? And does it buy property in any location?
So, while there are plenty of companies to help sell an inherited property, we recommend you consider your decision carefully.
Selling an inherited property means more to people than just bricks and mortar. Aside from its financial value, someone’s old family home – or one owned by relatives – can spark strong emotions. But leaving these feelings aside, we believe sellers always deserve clear, straightforward communication throughout their dealings with a property company.
Want to find out more about how to sell an inherited property?
To get a Free, No-Obligation offer for your property simply enter your postcode at the the top of this page.
Alternatively, contact one of our team at National Property Buyers on 0115 740 1900.