When someone leaves you a house in their will, you might feel a mixture of emotions.
It’s a generous gift, but it can also bring questions and responsibilities. Let’s walk through what happens when you inherit a property in the UK.
Table of Contents
What Happens if I Am Left a House in a Will?
The first step in the process is the reading of the will, which outlines the deceased’s wishes regarding the distribution of their estate, including any properties. If you’re named as a beneficiary of a property, the executor of the estate, who is responsible for administering the will, will inform you.
To transfer the property to you, the executor typically needs to obtain a Grant of Probate, a legal document that gives them the authority to manage and distribute the deceased’s estate according to the will. This process involves valuing the estate, paying any debts or taxes owed, and then distributing the assets.
The Probate Process
First things first: probate. This legal process confirms the will’s validity and gives the executor the right to manage the deceased’s estate. It can take several months, sometimes even a year. During this time, you can’t officially own or sell the property.
If there’s no will, the process is called ‘administration’. The rules of intestacy then decide who inherits.
Key Steps in the Probate Process:
These are key steps to take after a death of a loved one:
- Notification of Death: The executor notifies relevant authorities, including the local council, utility providers, and financial institutions.
- Probate Application: The executor applies for probate, which is the legal process of administering the deceased person’s estate.
- Valuation and Assessment: The value of the deceased person’s estate, including the property, is assessed.
- Inheritance Tax: Inheritance Tax may be payable on the estate if its value exceeds certain thresholds.
- Transfer of Ownership: Once probate is granted and any Inheritance Tax liabilities are settled, ownership of the inherited property can be transferred to the beneficiaries
Mortgage Matters
If the house comes with a mortgage, don’t panic. Most lenders offer a grace period where payments are paused during probate. Once the property’s yours, you have options:
- Pay off the mortgage if you have the funds
- Take over the payments (you’ll need to pass affordability checks)
- Sell the property to clear the debt
Tip: Contact the bank early to discuss your situation.
What to do with an inherited property?
Once probate is complete, you have three main choices:
- Move In: If you decide to live in the property, you’ll need to transfer utilities into your name and possibly update the insurance.
- Rent It Out: This can provide a steady income. You’ll need to prepare the property for tenants and possibly get a buy-to-let mortgage.
- Sell It: Many people choose this option. It’s straightforward, but remember you might pay Capital Gains Tax if the property has increased in value.
Tax Talk
Inheritance Tax might be due on the estate if it’s worth over £325,000. The rate is usually 40% on anything above this threshold. However, if the total estate is left to a spouse, civil partner, or charity, there’s typically no Inheritance Tax to pay.
• Inheritance Tax: If the total value of the estate exceeds £325,000, Inheritance Tax may be due. This is usually paid by the estate before assets are distributed.
• Capital Gains Tax: If you sell the property and it has increased in value since you inherited it, you might owe Capital Gains Tax on the profit.
• Income Tax: If you decide to rent out the property, you’ll need to declare the rental income on your tax return.
If you decide to sell the inherited property later, you might face Capital Gains Tax on any increase in value since you inherited it.
Managing the Property
Owning a property comes with the responsibility of maintenance and upkeep. Whether you decide to live in it, sell it, or rent it out, ensuring the property is well-maintained is essential. This can involve regular repairs, property taxes, and insurance.
Insider’s Tips
- Seek Professional Advice: Each inheritance scenario is unique, and the laws surrounding wills, estate administration, and taxes can be complex. Seeking the advice of professionals is not just a recommendation; it’s a necessity.
- Register Your Ownership: Registering your ownership at the Land Registry provides the best proof of ownership and makes things more straightforward when dealing with the property in the future.
Inheriting a Property with a Mortgage
If you inherit a property with a mortgage, you automatically become responsible for meeting the mortgage repayments, even if you don’t live there. In some cases, the deceased may have a life insurance policy, which can be used to cover the cost of the outstanding mortgage. If there’s no policy, or their life insurance policy isn’t enough to pay the mortgage off in full, you generally have two options:
- Sell the property: Use funds from the sale to pay off any remaining mortgage.
- Take out a new mortgage: Take out a new mortgage on the inherited property in your name.
Inheriting a Share of a House
What happens if you are left a house in a will along with other beneficiaries? In this case, you’ll need to agree on how to proceed.
You could:
• Sell the property and split the proceeds
• Buy out the other beneficiaries’ shares
• Rent out the property and share the income
If you have inherited a property with other people, this means that you all own equal shares of the property, unless stated otherwise. You now must all decide how best to divide things up between you.
There are two types of joint ownership:
- Joint Tenants: Everyone has equal rights to the property, and it’s split equally between the number of beneficiaries.
- Tenants in Common: Each person has a share of the property, but the percentage doesn’t have to be equal.
If you can’t agree, you might consider selling to a property buying company like Property Saviour, we offer a quick and hassle-free sale.
Inheriting a Property in a Trust
A trust is a way of holding and managing money or property for people who may not be ready or able to manage it for themselves. If you’re left property in a trust, you are called the ‘beneficiary’. The ‘trustee’ is the legal owner of the property and is legally bound to deal with the property as set out by the deceased in their will.
This table shows some of considerations that you will need to tackle as an Executor:
| Consideration | Description |
|---|---|
| Probate | Legal process of administering the deceased person’s estate. |
| Inheritance Tax | May be payable on the estate if its value exceeds certain thresholds. |
| Transfer of Ownership | Ownership of the inherited property can be transferred to the beneficiaries once probate is granted. |
| Mortgage | If the property has a mortgage, you become responsible for the repayments. |
| Maintenance | Ensuring the property is well-maintained is essential. |
What happens if i get left a house in a Will?
When you’re left a house in a will, several key steps typically occur:
- Probate process: The executor of the will must go through probate, which legally transfers ownership of the property to you.
- Property valuation: The house will be professionally valued as part of the probate process.
- Inheritance tax assessment: The value of the property is included in the deceased’s estate for inheritance tax purposes. You may need to pay inheritance tax if the total estate value exceeds the threshold.
- Transfer of ownership: Once probate is complete, the property’s ownership is officially transferred to you.
- Mortgage considerations: If there’s an existing mortgage, you’ll need to decide whether to take it over, pay it off, or sell the property.
- Decision on property use: You can choose to move in, rent it out, or sell the property.
- Ongoing costs: You become responsible for property taxes, insurance, and maintenance costs.
- Potential capital gains tax: If you decide to sell the property later, you may be liable for capital gains tax on any increase in value since inheritance.
Can I refuse to accept an inherited property?
Yes, you can disclaim an inheritance if you don’t want to accept it. This decision is irreversible, so consider it carefully. You might consider selling the property to us and donate proceeds to a charity of your choice.
What happens if there is no will?
If there is no will, the next of kin can apply for a ‘grant of administration’ to prove they have the legal right to deal with the estate. The law decides who inherits what.
How long does the probate process take?
The probate process can take up to a year to complete, but typically takes 4-8 weeks if there are no issues.
Do I need to pay Inheritance Tax?
Inheritance Tax may be payable on the estate if its value exceeds certain thresholds. The executor or administrator is responsible for calculating and paying any Inheritance Tax due.
Do I have to pay stamp duty on an inherited property?
No, you don’t pay stamp duty when you inherit a property. However, if you later sell the property, the buyer may have to pay stamp duty.
How long do I have to sell an inherited house?
There’s no time limit for selling an inherited house. However, if you’re not using it as your main residence, you might want to sell within 24 months to avoid potential Capital Gains Tax.
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