Let’s discuss the other side of the coin — selling an inherited home after the original owner passes away. You could do that, but it opens up a whole can of worms tax-wise and logistically.
For starters, you’re likely looking at the frustration of applying for probate if you wait until after death to sell. Depending on the estate and how airtight the Will is, that process can easily drag on for several months or more. Almost a whole year of limbo for the family, just twiddling thumbs waiting to settle the estate. As if grief isn’t enough on its own!
Even once probate finally wraps up, you’re not out of the woods. Those probate and estate fees will have already taken a nice bite out of any inheritance before the family sees a penny. Probate is a money pit.
However, the real kicker may be the tax situation for the unlucky child who inherits the family home. If they sell after Mom or Dad’s passing, they could be on the hook for a huge capital gains tax bill—a proper kick in the teeth on top of everything else.
The smart play is often to have the parents sell that property themselves before kicking the bucket. That way, they potentially avoid any capital gains taxes and don’t pass that mess onto the kids later. The family inherits cold hard cash instead of a tax headache.
So yeah, as unseemly as it sounds to talk money so soon after a death, it’s something to really consider. Settling an estate through probate while also paying out the nose in taxes? No thanks, I’ll take the easier inheritance route!
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Is It Better to Sell a House Before Death?
There are a few potential capital gains tax benefits to selling a house before one’s death:
Avoid Inheritance Tax on the Property Value
By selling the house before death, the proceeds from the sale will not be included in the taxable estate for inheritance tax purposes. This can help reduce or eliminate inheritance tax owed on the estate.
Utilise Personal Capital Gains Exemptions
When an individual sells an asset like a house, they can take advantage of their annual capital gains tax exemption (£12,300 for the 2022/23 tax year). By selling before death, the owner can utilise this exemption to reduce capital gains tax owed on the sale proceeds.
Avoid Double Capital Gains Tax
If the house is inherited and then sold by the beneficiaries, capital gains tax may be owed both when the house transfers to the beneficiaries at market value upon death and again when the beneficiaries sell it. Selling before death avoids this potential double taxation.
Beneficiaries Receive Cash Instead of Property
Selling the house turns the asset into cash before transferring it to beneficiaries. This provides liquidity and avoids the beneficiaries having to sell the property themselves and potentially owing capital gains tax.
Sell with certainty & speed
What is the 7 year rule in inheritance tax in the UK?
The 7-year inheritance rule is a crucial aspect of inheritance tax planning that savvy families should know. It provides a neat little loophole for avoiding inheritance tax when gifting assets like property.
We’ve covered how selling the family home before the homeowner passes can help avoid capital gains tax and inheritance tax headaches later on. But what if Mum and Dad want to go the gifting route instead? Maybe do one of those irrevocable trust setups to gift the property to the kids while they’re still around?
Normally, that would trigger some hefty gift taxes upfront. However, the 7-year rule provides a workaround. Essentially, if the parents survive 7 years after making that gift of the house, it becomes completely exempt from inheritance tax when they ultimately do pass away. Boom, a tax-free transfer is complete!
Now, if the grim reaper comes calling before that 7-year period is up, there is still some inheritance tax due on the gift, but at a tapered rate:
| Years between gift and death | Tax paid |
| Fewer than 3 | 40% |
| 3 to 4 | 32% |
| 4 to 5 | 24% |
| 5 to 6 | 16% |
| 6 to 7 | 8% |
| 7 or more | 0% |
The key is just being aware of that 7-year clock. Any substantial gifts within that window must be meticulously recorded and reported to HMRC. You don’t want the taxman thinking you tried to improperly avoid inheritance tax.
Of course, some gifts are immediately exempt no matter when they happen – transfers between spouses, charitable donations, regular gifts out of income, etc. But for biggies like funding the kids’ inheritance early by gifting a property, that 7-year rule is pivotal for families to understand.
So, in summary, selling the house pre-death avoids capital gains and potentially inheritance tax altogether. Do it right, and that family home can transfer tax-free. Proper planning means proper tax savings!
Are there any catches?
Selling up could potentially impact any means-tested benefits you’re currently claiming. That’s definitely something to look into properly and factor into the decision.
But at the same time, if we’re being blunt, you don’t want to be penny-pinching so much that you can’t actually enjoy your twilight years, you know? Especially if you’re dealing with a critical illness or something.
At that stage, having a bit of financial freedom and breathing room from selling the family home could be an absolute godsend. Splurge a little, treat yourself, and make happy memories without constantly stressing over the purse strings.
Because let’s face it, what’s the point of leaving a massive inheritance behind if you didn’t actually get to live a bit towards the end? The kids will understand if you sensibly dip into that pot to make your final years more comfortable.
Of course, you don’t want to go crazy and completely drain the estate either. Leaving something behind for your loved ones is still important. It’s all about striking that balance between covering your own needs first and not going so wild that you risk landing the family with a whopping great inheritance tax bill afterwards.
So, by all means, look into how selling up could impact your benefits situation. But don’t let that put you off enjoying your golden years properly if you’ve got the means. Your well-being has to be the priority when you’re staring down the barrel of a serious health condition. The finances can be figured out, but you only get one life!
Can Property Saviour Help?
Selling an inherited house can be a real headache. But there’s an easy option that’ll put cash in your pocket fast – sell it to a cash buyer!
Here’s why it makes perfect sense:
First off, we’re talking about a lightning-quick sale. No messing about on the open market for months. We can wrap it up in just a few weeks.
Secondly, you won’t have to lift a finger on repairs or renovations. We’ll take the property exactly as it is, no questions asked. Save yourself the hassle and expense.
Speaking of saving, there are no pesky estate agent fees to worry about, either. You keep every last penny of the sale price for yourself. The whole process is dead simple from start to finish. There are no mountains of paperwork or legal rigmarole. We’ll make it nice and straightforward.
Most importantly, when you accept our cash offer, the sale is 100% guaranteed. No buyers dropping out or mortgage issues to derail things at the last minute.
Finally, we’re totally flexible on the move date. Want to complete in two weeks or two months? That’s not a problem; give us the nod. So don’t get saddled with the stress of selling an inherited property. Take the easy way out with a quick cash sale. More money in your pocket, faster. What’s not to love?
Sell with certainty & speed
Property Saviour Price Promise
- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
We'll Pay £1,500 Towards Your Legal Fees
- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
- If you don’t have one, we can ask our solicitors for recommendations.
- We share our solicitor’s details and issue a Memorandum of Sale.
Sell With Certainty & Speed
- Our approach is transparent and ethical, which is why sellers trust us.
- 100% Discretion guaranteed.
- If you have another buyer, you can put us in a contracts race to see who completes first.
- Complete in 10 days or at a timescale that works for you. You are in control.
