Have you inherited a home, now that your beloved family member has passed away? If so, this article should help you to figure out what to do next…
When a family member passes away, the grieving process is extremely difficult as it is. That said, the added stress of the Will reading, any potential disputes, and figuring out what to do with everything left behind is a lot to deal with. So, what happens when you inherit your family member’s property on their death bed?
The truth is that inheriting their property, and figuring out what to do with it, can be overwhelming. From family members challenging the validity of a Will, to figuring out what you’re going to do with the house and its contents, there’s plenty to think about.
In this article, we hope to break all this down for you so it’s all a bit less overwhelming. Take a look…
The First Steps of Inheriting a House
If you’ve inherited a property from a deceased family member, the likelihood is that you’ll discover this in the reading of the Will. This is when all the family members and beneficiaries gather together and hear the last wishes of the person. The Will executor, who will have been appointed by the deceased, will do the honours.
The Executor, who could be a friend, family member, or solicitor, is responsible for clearing debts, paying any taxes, and distributing the estate. Especially with any properties, there are various taxes that may be due, including:
- Inheritance Tax: if the deceased’s estate (savings, shares, property etc.) is over £325,000, then inheritance tax will be due.
- Capital Gains Tax: if you decide to sell the inherited property, you may be liable to pay this.
- Income Tax: if you decide to rent out the property, or inherit a buy-to-let, you will have to start paying this tax when you start receiving rental income.
The process of sorting all of this can take several months. So, if you’ve been named as the beneficiary of the deceased’s property, it won’t be technically yours until the probate period is up. Then, the Executor will be able to hand over the property to you by transferring ownership via the Land Registry.
Keeping or Selling the Inherited Property
Now that the property is yours, you’ll need to make a decision about what to do with it. There are a few options, and these are:
Selling the Property
Selling the property can be a time-consuming and difficult job. This is especially the case if it’s far away from where you live, as you’ll have to spend a lot of time toing and froing.
First and foremost, you’ll have to find somewhere to put all the items in the house, which can take a huge amount of time. You’ll need to decide whether to keep, sell, donate or bin anything and everything. There are companies who you can hire to help you deal with all this and make your life a little easier.
It also means potentially making changes to the house to make it more sellable, which will cost time and money. Whether this be stripping old-fashioned wallpaper, knocking down walls, and redecorating, there’s lots to think about. It’s best to get some advice from a local estate agent beforehand to see if they can provide their thoughts on the renovations worth doing.
Keeping the Inherited Property
You may, instead, decide to keep the property. Of course, this is a job in itself, as you may equally have to remove the home contents and make renovations. Then, you’ll have to decide what the new purpose of the property will be…
- Renting it out: you could firstly rent out the property, helping you to gain a new income stream, which is always a positive. We mentioned earlier about some of the things you need to consider before doing this, so don’t forget to bear this in mind.
- Moving into it: you could also move into the property yourself. You’ll just need to put the mortgage in your name, which you’ll have to pass any affordability and credit checks for – more on this later…
Inheriting a Buy-to-Let Property
Things might be a little different if you inherit a buy-to-let property, rather than a simple residential home. The buy-to-let, after all, might currently have tenants living there, so you’ll need to make a decision as to what to do with them.
Of course, you could keep the tenants there and become the landlord. If that’s the case, you will have to start paying Income Tax on any earnings, as mentioned previously. You’ll also need to draw up a new contract with the tenants with your name as the landlord.
However, if you want to sell the property or live there yourself, you’ll have to check the rental contract terms to see if it’s possible. Be sure to seek a financial expert to help.
Inheriting a House FAQs Answered
Now we know the basics, let’s answer a few frequently asked questions about inheriting a property. Hopefully we leave minimal stones unturned, so you know what you’re dealing with…
What Happens When You Inherit a House with a Mortgage?
Inheriting a property is one thing, but the mortgage will also need to transfer over to you. For starters, it might be a good plan to get in touch with the mortgage lenders to let them know about any issues with payment. They’re usually quite sympathetic, and may allow for a grace period for arrangements to be made.
There may be life insurance from the deceased, which could be used to pay it off. The Executor will be able to sort all this out during the probate period. However, if this isn’t enough to pay it all off, you’ll need to find out if you’re eligible to take it over, based on your credit etc.
Similarly, if you inherit a buy-to-let property, you can either get the mortgage moved into your name, or remortgage the property to get a better deal. It’s best to speak to a mortgage broker to work out the best option for you.
What if the Property Has Other Outstanding Debts?
When the Executor runs a title check on the property to ensure it’s transferred into your name, there may be debts still attached to it. This could include unpaid contractors, bills, and mortgages. When the property is transferred to you, you will then own these debts, so it’s best to liaise with the Executor to see if anything can be done about this.
What Happens with the Stamp Duty of the Inherited Property?
Stamp duty is not levied on inherited properties, but it may be involved if you inherit the house with other beneficiaries. Then, if one of you buys the other out, stamp duty could be due. It’s best to speak to a Financial Advisor to help you out in this regard.
What if This is the First House I’ve Ever Owned?
If you inherit a property, and it’s the first property you’ve ever owned, you are now no-longer a first-time buyer. This means that any government incentives you may have been entitled to before to get on the property ladder will no longer apply. This includes Help-to-Buy ISAs, and other grants and loans.
It also means that you will now have to pay Stamp Duty on any new property you buy.
Do I Need to Sort Out Home Insurance?
When you’re deciding what to do with the property, it is unlikely to be occupied during this time. So, you will have to take out unoccupied property insurance to cover yourself during the probate period to cover any potential damage and theft costs.
Once probate is complete and the property is yours, you will have to take out standard home insurance or second home insurance, depending on the situation. Again, speak to a Financial Advisor to help you out.
Inheriting a Property Can be Pretty Complicated…
…but that doesn’t mean that it’s not an exciting opportunity. After all, this could be just what you need to get on the property ladder and make a bit of extra income.
Although this will certainly be an overwhelming and emotional time for you, it’s important to seek support from those around you. It’s also paramount that you seek legal and financial advice from various experts to make sure no stone is left unturned.
Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained financial professional. Be sure to consult a financial professional if you’re seeking advice on an inherited property. We are not liable for risks or issues associated with using or acting upon the information on this site.