Handling inherited property
When someone passes away who owns a property, they will normally leave it to a loved one, often their children. Finding yourself in possession of a property can be a daunting prospect. Selling it is normally the first thought and converting that property into cash doesn't have to be a lengthy process with cash buyer companies becoming an ever more popular option.
Inheriting a property
Inheriting a property can be stressful in and of itself. Often it is the direct result of the loss of a loved one, most frequently a parent. So not only have you just gone through the loss of someone dear but you now have the headache of dealing with the probate process, as well as deciding what to do with the property, which can be a beloved family home or even a distant property you've never even been to.
Probate and how it affects things
Normally the deceased will have a will, which will have an executor named. This is the person, normally a solicitor, family member or friend (if a family member, they'll normally appoint a solicitor to do the work anyway, as it can be complex) who takes responsibility for paying any taxes, clearing debts and distributing the estate. This normally takes several months. The property remains the property of the ‘estate' until such times as this process is completed meaning you won't be able to do anything with the house until it's done.
What if there's still a mortgage on the house?
If there is a mortgage on the property, the lender will normally suspend payments until the probate is granted.
What if the deceased didn't make a will?
If the person didn't make a will or doesn't have a spouse, then you will need to apply for a ‘grant of representation', also called probate. Once you have this, you will be allowed access to their bank accounts to pay for a funeral and arrange for any assets to be sold, debts to be paid and taxes settled.
Inheriting a house with a mortgage
If there's still a mortgage on the property you've just inherited, this can be a complicating factor. If they had life assurance, this may be able to be used to clear the mortgage or any outstanding debt.
If there isn't a life assurance policy, you'll need to speak to the lender to see what they are expecting of the estate. It may be that you can stop making mortgage payments temporarily, although the interest will probably still be applied and added to the total due.
If there are other debts, these will also need to be settled from the proceeds of the estate.
After Probate - once the property is yours
Now the probate is done and the property is yours. The first thing you need to consider are the possible tax implications of your inheritance.
Depending on the value of the value of your inheritance, you may be liable for inheritance tax. The basic rule is that if the total estate, including property is worth more than £325,000 then 40% of everything over that amount, will go to HMRC.
There is an exemption to this for main residences that are passed on to a direct descendant. This applies to parents or grandparents, so if you've inherited from either of those, your inheritance tax bill will be reduced.
In the tax year 2020/21 the main residence nil-rate band is £175,000. This is added onto the main nil-rate inheritance tax allowance.Therefore, depending on the value of the rest of the estate, you could inherit a property worth up to £500,000 without having to pay any tax!
Things get more complex when it's a buy to let property or second home, or if the property has risen in value between when you inherited it and when you decide to sell it.
Selling an inherited property
More often than not, when somebody inherits a property, they'll want or need to sell it to release the cash, either to pay off the deceased's debts or simply to have the money in their account to do as they please with it.
There are a few ways to do this as I've covered in other articles (insert link here), the quickest and easiest being to sell to a cash buying company. To compare the best cash offers from cash buyer companies across Britain, visit offerpal.com to find out how much you can get for your inherited property in just a few hours.