Inheriting a House: Things You Should Know

Of everything that you can inherit, perhaps the most difficult to wrangle is property. Not only can property carry the most sentimental and nostalgic value, but it’s also the most complicated to transfer over. Making good decisions by putting emotional attachment to the side is one thing, but even so, you need to go through the transferring of ownership to working out taxation and everything in between.

If you’ve found yourself in a position to inherit a house, these tips are here to highlight some of the most important things that you should know before you start any process.

The Steps Before You Inherit a House

Before you actually get to inherit a house, but after the person you’re inheriting from passes away, there are several steps to complete. The first is to find the will. Doing this will establish your legal relationship with them and hold your ties to the inheritance.

Should you find yourself in a situation without a will, as the next of kin, you can apply to make the case that you have a legal right to the inheritance via a grant of administration. Once all of this is ironed out and your right to the inheritance is established, any property set to be inherited goes into probate. This is an integral part of the process that many people overlook.

En route to and while the property is in probate, you can’t do anything with it. You’re better off enjoying a day in the sun than starting to redecorate or renovate. During probate, the property technically isn’t yours, so you need to wait for the process to complete.

While probate goes through the motions, it’s also worth getting guarantees on the state of the property’s mortgage. If it doesn’t have a mortgage, it’s all good. If it does, it’d be wise to contact the lender and kick in a grace period on repayments. After probate, you can register the property as your own with Land Registry.

Weighing Up the Sale and Ownership

When you take an inheritance, property or otherwise, there’ll be taxation to consider. There are changes coming to inheritance tax for some corners, such as for agricultural property, but for most people, the number to keep in mind is £325,000. This is the threshold for tax-free inheritance. Above that, you’ll get a 40 per cent tax.

This isn’t to say that, were you to inherit £330,000 worth of an estate, you’d be subject to a tax bill of £132,000. Rather, in this case, the bill would be 40 per cent of that additional £5,000 – so, £2,000. However, if you don’t decide to sell the property, you’ll fall into different brackets of tax.

For many people, the goal is to sell the property quickly, so as not to incur any additional costs or taxes. This is why inheritance is the fourth-biggest reason why it makes sense to sell your house fast for many people. Doing so also sidesteps the quagmire that is selling on the market. Instead, a quick sell avoids strenuous legal fees.

Selling the property quickly extracts the primary value of an inherited property. Holding onto a property for other means will require further considerations. Not only will you need to consider inheritance tax, but you’ll also need to consider capital gains tax if you choose to milk it for rent money and then likely additional income tax.

When inheriting a house, it’s key to be patient in following the steps to ownership and to then work out what taxes you’ll incur if you sell or keep the property. Doing this will make the whole process as straightforward as it can be.