According to some statistics, more than a third of people will inherit a property at some point in their lives. While it is usually exciting news to hear that you have inherited a property, there are several issues that need to be resolved before you can become the legal owner. From reviewing the will and waiting for the probate period to end, to dealing with the mortgage and tax payments, we go into more detail about what you need to do once you have inherited a property.
Not everyone leaves behind a will, but it is the first place to start when it comes to inheriting a property. If there is a will, check whether you are the executor (who organises the deceased person’s estate or beneficiary (someone with legal rights to your share of the estate). If no will exists a ‘grant of administration’ can be applied for by the next of kin to prove they are legally entitled to manage the estate. The law will determine who inherits what if no will is left.
When assets (money, property etc.) are gathered and evaluated, this is done through a legal process called probate. Any outstanding bills or tax owed by the deceased is first paid and the remaining amount is given to the estate. This can take some time – up to 12 months in some cases.
If a property has been left by the deceased, it is a good idea to check whether there is a mortgage attached. Get in contact with the lender if there is a mortgage and update them on the situation. There should be a grace period that will suspend the payments until the estate has been finalised. When the probate has ended, and the property is legally yours you will become responsible for any outstanding mortgage payments.
You may have to pay some taxes on your inherited property, although this depends on a few factors. If you sell an inherited property and it is not your main residence, then you may be liable to pay capital gains tax. This will depend on your personal income and how much profit you get from the sale. Any profit made is added to your income by HMRC which will determine which tax band you fall into for the tax year, which will determine the level of capital gains tax you need to pay.
In terms of stamp duty tax, you will not have to pay this if you have inherited a property. Instead, you will have to pay inheritance tax, which is taken directly from the funds of the deceased’s estate. However, if you don’t want to sell equity in a family home you have the option to raise funds or use your own savings to pay inheritance tax.
There are some rules to be aware of that could affect how much inheritance tax you pay:
Once the property is legally yours and you have paid any relevant taxes, you have a few options to choose from when it comes to deciding what to do next:
Taking care of another property can be difficult and expensive in the long run. If you decide to sell you should declutter the house, so it is ready for sale. The process works in the same way as any other property sale and if it is some distance from your own home, working with a local estate agent can make things much easier to manage. Stadium Residential provides a complete property sales packaging, including marketing and the management of viewings, helping you to maximise the full value of your new asset.
Becoming the owner of a new property also presents the opportunity to create a reliable source of income by letting it out. Being a landlord offers a lot of upsides, although it does require you to invest time and money into the property. Alternatively, you could use a lettings service like the one we offer at Stadium Residential. We ensure you remain fully compliant, market the property, screen tenants and if needed we can also take care of the entire tenancy while you reap the financial benefits.
Of course, you always have the option to keep the property for yourself. This could be helpful to help your children or grandchildren get onto the property ladder without having to find the money for a deposit and the associated costs. If there is a mortgage attached, you will become responsible for the payment and will have to pass the usual affordability and credit checks.
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