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Brother Lives In Inherited House

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When a sibling inherits a property, and a brother lives in the inherited house, it can create a complex situation for all beneficiaries involved. 

If you find yourself in this scenario in the UK, it’s important to understand the legal considerations, tax implications, and potential way forward.

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Can a Brother Live in an Inherited House Before Probate?

If a property is inherited by multiple beneficiaries, allowing one beneficiary, like a brother, to live in the house before probate is completed can be problematic. The executors have the authority to decide how the estate is handled during probate.

While it may seem practical to let a brother occupy the property to handle maintenance, it could later create issues if the house is meant to be sold and the proceeds divided.

Transferring Ownership and Registering the Property

Once probate is completed, ownership of the inherited property is transferred to the beneficiaries. If multiple siblings inherit the house as joint tenants, they have equal rights to the property. The property can be registered with the Land Registry to establish legal ownership, but this is not required unless the property is sold or mortgaged.

Deciding What to Do With the Inherited Property

The beneficiaries must collectively decide whether to sell the inherited house, rent it out, or have one sibling, like a brother, live in it. The other beneficiaries must agree if the brother wishes to remain in the property.

Selling and dividing the proceeds is often the simplest solution. If the brother buys out the other beneficiaries’ shares, he could take sole ownership.

brother lives in inherited house
If a property is inherited by multiple beneficiaries, allowing one beneficiary like a brother to live in the house before probate is completed can be problematic.

Deciding What to Do With the Inherited Property

The beneficiaries must collectively decide whether to sell the inherited house, rent it out, or have one sibling, such as a brother, live in it. The other beneficiaries must agree if the brother wishes to remain in the property.

Selling and dividing the proceeds is often the simplest solution. If the brother buys out the other beneficiaries’ shares, he could take sole ownership.

Dealing with an Inherited Mortgage

If the estate’s value exceeds the tax-free threshold, inheritance tax may be owed on the property. The brother living in the house doesn’t pay this directly, as it comes out of the estate, but the tax must be paid by the end of the sixth month after the death.

If the brother remains in the property without buying out the other beneficiaries, he may owe them rent, and the rental income would be taxable.

Paying Inheritance and Income Taxes

If the estate’s value exceeds the tax-free threshold, inheritance tax may be owed on the property. The brother living in the house doesn’t pay this directly, as it comes out of the estate, but the tax must be paid by the end of the sixth month after the death.

If the brother remains in the property without buying out the other beneficiaries, he may owe them rent, and the rental income would be taxable.

Inherited properties in the UK may be subject to various taxes, including:

TaxDescription
Inheritance TaxPaid on estates valued over £325,000 (or £500,000 if leaving to children/grandchildren)
Capital Gains TaxPaid on profits from selling inherited property that has increased in value
Income TaxPaid on rental income if the property is let out

 

It’s essential to consult with a tax professional to understand the specific tax implications for your situation.

Ways of Inheriting Property in the UK

There are several ways a property can be inherited in the UK:

  1. Through a valid will, where the deceased specifies their wishes
  2. Via intestacy rules, if no valid will exists
  3. As a joint owner, where the property automatically passes to the surviving joint owner(s)
  4. As a beneficiary of a trust, where trustee ownership converts to the beneficiary
  5. Through lifetime transfers, where the property is gifted before death

The Role of the Executor

The executor plays a vital role in managing the estate and ensuring the deceased’s wishes are carried out. Their main responsibilities include:

  • Applying for the grant of probate
  • Valuing the estate and paying inheritance tax, if applicable
  • Distributing the estate according to the will or intestacy rules
  • Communicating with beneficiaries and resolving disputes

Resolving Disputes Amicably

When a brother lives in an inherited house, disputes may arise among beneficiaries regarding the property’s future. To resolve these disputes amicably:

  • Open communication is key – all parties should express their wishes and concerns
  • Consider mediation with a neutral third party to facilitate discussions
  • Explore options like selling, renting, or buyouts to find a mutually agreeable solution
  • Seek legal advice to understand rights and obligations and to draft any necessary agreements

Selling the Inherited Property

If beneficiaries decide to sell the inherited property, the process typically involves:

  • Obtaining a grant of probate
  • Valuing the property and agreeing on a sale price
  • Appointing an estate agent and solicitor
  • Completing necessary paperwork and legal requirements
  • Distributing sale proceeds among beneficiaries according to their inheritance shares

 

Throughout the selling process, the executor must maintain transparency, communicate regularly with beneficiaries, and seek professional advice as needed.

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