What to do with an inherited property
Inheriting property is not as unusual as one might think. About a third of us will experience being left a house or flat in a will at some point in our lives. It should feel like a gift, albeit one that’s bound to be accompanied by feelings of sadness and loss. What’s more, according to recent research, 70% of those who inherit property have no intention of living in it. Grandma’s house, then, can easily turn into a millstone that needs sorting out.
Dealing with the paperwork
Before anything can be done with the property, you will need to obtain probate. This is the process to confirm the will and to transfer grandma’s estate to the beneficiaries. A grant of probate normally takes 6-8 weeks, and considerably longer if there is no will, or if the will is being contested. Depending on the size of the estate, and the number of assets to be dealt with, you should expect the entire process to take around 6 months under straightforward circumstances.
Legal fees can be expensive and it’s tempting to deal with all family issues yourself to save on costs. However well you get on with your family, it is advisable to get everything agreed in writing and done professionally. Inheritance disputes have the potential to cause long-term family fallouts.
If you are keeping the house, it should be registered in your name as part of the probate process, and with the help of a solicitor. If you’ve decided to sell the probate property, you can skip this step as the deceased estate essentially sells to the new owner.
What taxes are due?
Inheritance tax (IHT) is payable on estates above the nil rate band of £325,000 at a flat rate of 40%. This will be taken from the estate itself, meaning you will either have to find the money from other assets or the tax will be taken from the house sale proceeds. IHT is due within 6 months of the person’s death, otherwise interest will be charged on top.
In some cases, inheriting a property can cause a Capital Gains Tax (CGT) event. Depending on whether the property has risen in price in the time between inheriting and selling it, CGT above the current allowance of £12,000 might be payable at the standard or higher rate of tax.
Sell, rent or keep?
Once the property is legally yours, you need to decide what you would like to do with it. This can be a difficult decision to take, especially if there is more than one heir. If you are sharing your inheritance with a sibling, you will both have to agree on how to proceed.
Do you want to sell the house, or rent it out? If one of you decides they want to live in it after all, how should this be dealt with? Should they buy the other sibling out or pay rent? The more siblings there are, the greater the potential for family strife.
If you decide to rent out the property, this could bring in a steady income that can be shared between the siblings. And if the property market is not buoyant, and no-one is desperate for the money, then renting can be a good solution. Don’t forget to factor in any maintenance and refurbishments as well as letting agents’ costs, plus the fact that any profits made from renting out the property will be subject to income tax.
Preparing for sale
The decision to sell an inherited property can be an emotional and difficult experience after the death of a loved one. Some people prefer to just get on with it regardless of whether they get the market price, while others find it hard to let go of a house filled with happy memories and mementoes.
Clearing out the house is a necessary step, whichever way you decide to go. Make sure that you discuss with your family what to do with Grandma’s things – it’s surprising which objects may hold sentimental value for others. If you choose to instruct a house clearance company, be warned that most operators won’t tell you if there are valuables, preferring to pocket the profits themselves. A better solution is to instruct a company that will “visit to determine the value of any items that can be resold and then offset this against items that incur a disposal charge at the commercial tip, passing the savings onto the customer.” – (Samco Services)
Next comes the questions of redecorating. Many inherited properties were lived in by the same person for a long time. They may have been adapted for mobility or disability requirements such as bathroom rails or stair lifts, or simply be hopelessly outdated for the demands of modern living.
When thinking about renovating, decide whether it’s worth doing]. Would you recoup the outlay? Would it be better to achieve a quick sale ‘as is’? If you do decide to make improvements, focus on where you can make the greatest impact for the least money and time spent. A good clear out, new coat of paint in neutral colours and taking out old-fashioned threadbare carpets can make a world of difference. Tidy up the garden, jet wash the drive and get the windows cleaned, so that light can stream in.
Dealing with probate property for sale can seem like a never ending task. But if you commit time to getting all the paperwork in order, clear out the home and make it look appealing, there’s no reason why a competent estate agent shouldn’t be able to achieve a sale within a reasonable time frame for you.