If you have recently inherited a property, the list of things that are required of you can seem high, with a number of legal issues you are required to become familiar with. However, it can be helpful to identify the main and pressing matters that you are required to take care of, before you can consider the options in front of you when dealing with an inherited property.
It is important to be aware of the nature of your inheritance – i.e. whether you alone have inherited the property or share the ownership with others and are thus ‘joint tenants’ or ‘tenants in common’. If the ownership is shared, rules may be slightly more complex and decisions must be jointly made and decided upon. This may also affect the granting of Probate.
You also need to consider whether any Inheritance Tax due on the estate has been taken care of. New rules introduced in April 2017 have slightly changed the amounts of non-taxed allowances; most notably in the area of property inheritance. Additionally, if you wish to sell the home, you may need to consider applying for probate in order to have the necessary permissions to do so.
If the deceased left a will, then it is likely that any Inheritance Tax due on the estate – including any property – has already been paid and taken care of by the person who died. They will have worked out, for example, if Inheritance Tax is even owed by the property – as no tax is required if the value of the estate is beneath the current threshold. This threshold was, up until recently, at £325,000 per individual, with anything over this value taxed at 40%. However, in some circumstances, this threshold is changing with the dawn of the new tax year.
The new ‘family home allowance’, explained by the Financial Times, means that the non-taxable property value has risen by an extra £100,000 (and will rise further by April 2020), and means that an individual may be able to pass on £500,000 worth of property and assets without having to pay Inheritance Tax.
Applying for probate
Next, a decision will have to be made regarding what you intend to do with the property. There are a few options; you can choose to live in the property, for example, or to rent it out. You may also wish to consider selling the property. It is worth bearing in mind that tax may apply on your rental income, as the UK Government’s website explains, and any profit you make on the sale of the inherited property, you may be required to pay a Capital Gains Tax on. Exceptions such as Private Residence Relief apply if you are selling your own home. Living in the property is affected by whether you already have a home and taxes may therefore apply if inheriting a property means that you now own a ‘second home’.
To calculate whether you must play Capital Gains Tax when selling a home, you will need to have an idea of what the property is worth. If the deceased produced a will and paid their Inheritance Tax, then a property valuation may already have been performed. However, these valuations can be done by a Chartered Surveyor or by using 3 separate estate agents to estimate how much the house is worth. A Capital Gains Tax calculator like this on the UK Government’s website can help you to estimate how much you may be required to pay in the event of selling the property.
Selling a house
If the decision is made to sell the house, it can be advantageous to deal with the matter with speed and efficiency, with the aim being a quick house sale. In this case, it may be best to go with a company that are experienced in the sector, such as Probate Purchasers.
In this case, you will need a Grant of Representation (or ‘probate’), which you can download an application form for from .gov pages. This gives the holder legal permission to deal with the estate, and can be applied for by an executor. This may be more complex depending on the content of the will and how many people the property was passed to. Along with basic information, details of the deceased’s assets and worth, a death certificate, and copy of the will will need to be sent to the relevant Probate Registry. A certificate of Probate may take a minimum of 2-3 months to process, so it is worth beginning this process as early as possible.
Inheriting a property can be daunting in terms of the legal issues you may come across when exploring your options. It is therefore important to keep yourself updated, give yourself time to effectively plan your timeline, and be aware of the different options available in dealing with inherited properties.