Selling an inherited property

You will have lots of questions when inheriting a property because it can be a complex process. There are a few reasons you may inherit a property, including the death of a loved one, and this emotional time is impacted by the legal work and papers that must be dealt with.

This guide is to help you navigate through. It covers the legal side of selling a property you have inherited, but also goes through your options should you wish to live in the property, or if you are considering renting it out.

If you have inherited a property, it’s best to speak to legal experts to help you with the finer details, especially if you want to sell it. However, the team at haart are also on hand for guidance. Find your local branch and call us to chat through your options.

Inheriting a property when someone dies

Before you can do anything with an inherited property, you need to establish your legal rights to it. The property might be your parents’ old house or another property that belonged to a relative, however the new legal owner of any property must be determined legally, usually through the deceased’s will and a legal process called probate.

Working out who gets the property will depend on whether there is a will or not. Before you go any further, check:

• Is there a will? Not everyone leaves one when they die
• Are you are named in the will as someone who can deal with the person’s estate known as an ‘executor’?

If you are an executor, you can apply for a grant of probate from the Probate Registry.

What does an executor do?

Executors must estimate the value of the deceased person’s estate (including any inherited property) to calculate the tax owed to HMRC. Sometimes, there is more than one executor named in the will. A guide to doing this can be found at gov.uk as part of the probate process.

What is probate?

Probate is a legal process that establishes who owns the property or finances when someone dies.

Probate includes distributing the assets (things that belonged to the now deceased) by using the deceased person’s will. Property is considered an asset (often called the estate) so if it’s being left to anyone they have to apply for probate, which makes the property legally theirs.

If you are a beneficiary in a will this process is much simpler. A beneficiary is someone who has been named to inherit property, land, or money in a will.

Not everyone will need to go through the probate process, so it is worth seeking legal advice if you inherit a property or a share in one.

Applying for probate

You will need to get in touch with each asset holder named in the will, such as banks and mortgage companies, to find out if you need probate to access the deceased’s assets as different rules apply to each organisation. If you are an executor of a will you can apply for probate yourself or you can appoint a solicitor or somebody else licensed to provide probate services to do this on your behalf. It is usually far easier and less stressful to use legal services.

What is there is no will?

If there is no will in place you will have to apply for something called ‘letters of administration’, legal documents that prove a person can legally deal with someone’s estate. These can only be applied for by post. This allows someone to act as the administrator of an estate after someone has died.

According to the official Government advice: “You can apply to become the estate’s administrator if you are 18 or over and you are the most ‘entitled’ inheritor of the deceased’s estate. This is usually the deceased’s closest living relative.”

• Relatives are the most entitled inheritors in the following order:
• husband, wife or civil partner (including if they were separated)
• children (including legally adopted children but not step-children)
• grandchildren
• great-grandchildren
• parents
• brothers and sisters
• nieces and nephews
• half-brothers and half-sisters
• half-nieces and half-nephews (the children of the half-brothers and half-sisters of the deceased)
• grandparents
• aunts and uncles
• cousins
• half-aunts and half-uncles (the half-brothers and half-sisters of the deceased’s parent)
• half-cousins (the children of the half-brothers and half-sisters of the deceased’s parent)

Do you always need to go through probate?

You may not need probate if the person that died:

• Had joint-owned land, property, shares or money, as these will automatically pass to the surviving owners
• If they only had savings or premium bonds

How much does probate cost?

Probate specialists and solicitors typically charge by the hour or as a fixed rate. There is no ‘set cost’ as each case will be unique, however, the average cost for dealing with a probate claim is between 1 – 5% of the property’s value +VAT.

You can shop around for quotes before deciding who you use and asking friends or family who have dealt with probate might also help you.

How long does probate take?

Probate usually takes around 6 – 12 months to be granted. If a will is already in place it can be much quicker, but this is rarer.

What is inheritance tax?

When you sell your main home, you do not have to pay capital gains tax, but property you have inherited is subject to inheritance tax if you decide you want to sell it.

Inheritance tax is a tax on the property, money, and possessions of someone who’s died. If inheriting a property means you own two homes, you must nominate one of them as your ‘main home’ and inform HMRC within two years of inheriting the second property. If you don’t inform them, then sell one of the properties, HMRC will decide which property was your main home, which could mean paying more tax.

There are some circumstances when the estate won’t have to pay any inheritance tax:

• If the estate passes to the deceased’s spouse or civil partner, a charity, or a community amateur sports club
• If the estate has a value below the inheritance tax threshold of £325,000

You must pay inheritance tax on a person’s estate if this is worth more than £325,000. If the property is left to children or grandchildren, including adopted, foster, or stepchildren, this can rise to £500,000. This threshold only applies if the person’s estate is worth less than £2 million.

Who pays inheritance tax?

People that are executors or administrators of the will have to arrange the payment of Inheritance tax. They can use funds from the estate to make this payment.

What is the inheritance tax threshold?

The current standard Inheritance tax rate is 40% and only charged on the part of the estate that is above the inheritance tax threshold.

If 10% or more of the estate is left to charity in the deceased person’s will, inheritance tax can be reduced to 36% on some assets.

Can I live in an inherited property?

The short answer is yes, and this is something many people who inherit a property consider. As we mentioned above, if the property you have inherited will be a second property in addition to your main home, you will need to declare this to HMRC and pay inheritance tax.

If the property has an existing mortgage you have to deal with paying that too, unless the person who left it also left means or life insurance that can cover the costs. The mortgage will need to be put into your name and you must pass the usual affordability checks to get the mortgage.

Consider all your options before deciding to live in your inherited property.

Can I rent out an inherited property?

If you do decide to rent out the property you will need to become familiar with all the Government regulations surrounding operating rental property. Owning an extra house on top of your other responsibilities is something you might feel is too much to take on. Take a look at the lettings process to see if it’s something you might want to do.

haart can help you with becoming a landlord, from finding tenants to property management and protection.

The selling process for inherited property

Selling an inherited property can be slightly trickier, especially if the property is a long way from where you live. There may be a lot of emotions involved if it is a family home or was somewhere you lived growing up.

Here’s a breakdown of the process for selling the property, to help you prioritise:

Clear the property of its contents. Decide if you want to keep, donate, or sell items. If you can’t face sorting through everything straight away or there is too much to do at once, you could move everything into storage or hire a professional company to help you.

Decide if you want to renovate or decorate the property before selling. This is more common when the property was owned by elderly people who may not have kept it up-to-date. You may want to strip outdated wallpapers and carpets and redecorate the property so it is more appealing for potential buyers.

Before making any changes, however, invite an estate agent to value the property. They will be able to give you a guide to what the property is worth now, and how much you could add with renovations or decoration. Use haart’s demand calculator to find out how much interest is in the area.

The rest of the selling process is much like any other property, we have a complete guide here, so it can take time to complete the process. However, as you are selling without the need to find a property to move to, you are considered ‘chain free’, which could help speed things up.

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