Lorna McCarthy, Digital Marketing Assistant at Webuyanyhouse.co.uk provides an informative guide offering valuable insights to anyone who finds themselves inheriting a property and wondering what to do next.
When someone passes away, they often leave behind personal belongings and assets, including property, which is typically outlined in their will. If you’ve recently lost someone and have inherited a property, you might be wondering what to do next. To assist you, Webuyanyhouse.co.uk have put together a guide on navigating the process.
Exploring your options
Deciding what to do with an inherited property can be an overwhelming experience. To help you understand this decision and choose the best option for your situation, here are some possibilities:
- Sell the property: You might consider selling the property and benefiting from the proceeds. This can be a challenging decision, but it’s a practical option if you prefer to see the property put to use rather than remain vacant. It’s important to consider the property’s age and condition, as it may require some renovations before being sold.
- Rent it out: If you’re uncertain about your long-term plans, renting the property could be a good option. You can earn rental income relatively quickly with a few minor renovations and a thorough cleaning. This approach allows you to keep your ownership while providing time to decide your next steps.
- Live in it yourself: Moving in could be the ideal choice if you have a personal connection to the property and have always loved it. This option is especially appealing if you have strong sentimental ties to the home. You can also make any desired renovations to personalise the space while maintaining its emotional value.
Inheriting with multiple beneficiaries
If you inherit a property on your own, you have complete control over what to do with it and can make decisions based on your personal circumstances. However, things can become more complex if you inherit the property with other individuals.
In such cases, it’s important to consider everyone’s feelings and opinions to decide on the property’s future. If you get along well with the other beneficiaries, you can hopefully find a solution that suits everyone.
A common approach is to sell the property and divide the sale amount equally among all parties. However, if you can’t reach an agreement, seeking professional advice is a good idea. A solicitor can offer guidance on the best options available and advise you on any financial implications based on your decisions.
The implications of inheriting a mortgage
If you inherit a house with a mortgage, you might wonder about your responsibilities. Unfortunately, inheriting a property also means inheriting any associated debts, including the mortgage. Here are some options for dealing with the mortgage:
- Estate pays the balance: The estate of the person who has passed away can be used to settle outstanding debts before any assets are distributed. If the will specifies that the mortgage should be paid from the estate, then the mortgage would be covered in this way.
- Property covers the mortgage: If you cannot pay off the mortgage, selling the property can be a solution. The proceeds from the sale can be used to pay off the mortgage balance, settling the debt once the sale is complete.
- You pay the mortgage: If you are able, you can take on the mortgage payments yourself. If the deceased had life insurance and you’ve received a payout, you might use these funds to cover the mortgage. Alternatively, you can incorporate the mortgage payments into your budget until the debt is settled.
The financial implications
When inheriting a property, it’s essential to understand the financial implications, particularly regarding taxes in the UK. Here are the three main taxes to be aware of:
- Capital Gains Tax: If you sell the property for more than its value when you inherited it, you may owe Capital Gains Tax on the profit. The tax amount depends on various factors, including tax allowances, personal tax circumstances, and the profit earned.
If you would like to avoid paying Capital Gains Tax, selling the property as quickly as possible would be your best option to avoid potential value increases. We Buy Any House can help you secure a quick sale, potentially avoiding additional tax bills.
- Inheritance Tax: The assets people hold when they pass away, including property, possessions, and capital, are subject to Inheritance Tax. The executor or estate administrator must pay this tax before distributing the estate. It’s important to note that you cannot sell a property until all Inheritance Tax has been settled.
- Income Tax: If you choose to rent out the property, you will need to pay Income Tax on the rental income you receive. You can apply for a property allowance that allows you to earn up to £1,000 of rental income tax-free each year.
The transfer process
If you’ve decided that transferring the property to someone else is the best option, here’s a step-by-step guide to help you through the process:
1. Obtain ownership of the property:
- Begin by filling out a probate application form. Probate is necessary to transfer or sell the property.
- You will next need to fill out an inheritance tax form.
- You can send your finished application to the Probate Registry, including an official copy of the deceased’s death certificate. Once the application is submitted and you have sworn the information is accurate, you can proceed with the transfer process.
2. The transfer process:
- Once you have obtained ownership, the next step is the official transfer. This process begins with filling out an API Form, which updates the official record to reflect the new homeowner.
- The second form you will need to complete is a TRI Form. This form facilitates the property transfer.
- Then, you will need to fill out an ID1 form. This form verifies your identity and must be signed by a solicitor or licensed conveyancer.
- You will have to send the API, TRI, and ID1 forms to the Land Registry.
- If all goes well, the transfer of ownership should be finalised within 5-6 weeks of submitting these documents.
Inheriting a property involves considering both emotional and practical elements. You need to carefully evaluate your options, whether you choose to sell, rent, or live in the property. Seeking professional advice will help you understand the legal and financial complexities effectively. This approach will ensure a smoother transition and help you make well-informed decisions that best suit your needs.
This blog is intended as an informative piece and should not be construed as advice.
If you have any further questions, please don’t hesitate to get in touch with us here or by reaching out to your usual Equilibrium contact.
