Yorkshire Post - Property
Probate advice when inheriting a home
Inheriting a residential property comes with its fair share of legal responsibilities and bureaucracy. In this helpful guide, the process is explained. Sharon Dale reports.
JUST over half of UK adults expect to inherit at least one residential property during their lifetime, but many are unaware of how the probate system works. Here, probate lender Tower Street Finance helps to explain the process.
If you were named as the executor in the will, then you will be responsible for sorting out the estate of the person who has died. That means gathering and evaluating their assets, paying any outstanding bills and distributing what’s left. A solicitor can help with this.
As executor, you will need to get unoccupied property insurance while the house is empty and you may also need to cover standing charges for gas, electricity and water supplies.
If you have difficulty paying interim costs, you can use a probate lending service and pay back the money with interest when the will is settled.
If you were named as a beneficiary in the will, you will be given the asset after probate has been granted, which usually takes four to seven months.
If you were left a share of a house, then you and any other beneficiaries will need to decide how best to divide it up. Selling the property is considered the simplest option as once it is sold you can split the proceeds.
However, you cannot sell until the Grant of Probate has been obtained and you will only get the proceeds once the entire probate process is complete.
If the property has a mortgage, the executor may be responsible for paying it during the period before probate is granted.
Most mortgage providers will have a grace period during which repayments are suspended but this may not last for the duration of the probate process.
Once the property is granted legally yours, you will need to pay the mortgage, even if you don’t live there.
Sometimes a life insurance policy will cover the cost of an outstanding mortgage, but if not you can either sell it and use the proceeds to pay off the mortgage or take out a new mortgage in your name.
If inheriting a home means you now have two or more homes in your name, you should also contact HMRC to tell them which is your main home.
You don’t need to pay stamp duty on an inherited property unless you sell it or have bought out someone else’s share, but you may need to pay inheritance tax. This is organised by the executor and is usually taken from the estate before assets are distributed.
If there isn’t enough cash or other assets to cover the tax bill then any beneficiaries may be asked to contribute if they don’t want to sell equity in the property they have been left.
The tax rules can be complicated and a financial advisor can be helpful. There is no inheritance tax due
on an estate that is worth less than £325,000 in total and if the property is left to children or grandchildren, including adopted, foster or stepchildren, then the tax threshold increases to £500,000.
If the property is abroad then that adds another layer of complication as the estate may also be liable to pay taxes in the country where the property is located, as well as in the UK.
However, the UK government
has signed many double taxation treaties, which should allow you to claim back any double payments. Again, a solicitor can help with this.
The typical time from the will being read and being able to move into a property you’ve inherited is around six months. If there is a mortgage, then it could take longer.
If you sell the property and its value has increased since you inherited it, then capital gains tax is due on the profit you make but only if you didn’t live there and named it as your main residence.
You get a capital gains tax allowance of £12,000 per year, and then the tax is 18 per cent on any profits above this if you are a basic-rate income taxpayer.
If you are on a higher rate then you may pay more.
If the profit on the inherited property is less than £12,000, you won’t have to pay capital gains tax unless you have already used up your annual allowance.
Tower Street Finance calculates that, on average, anyone who is left a property in a will should expect a bill of around £20,000, not including inheritance tax, stamp duty or capital gains tax.
This cost is made up of expenses such as house clearing, basic redecorating, standing charges for energy and water, insurance and solicitors’ fees.
Solicitors who regularly deal with probate can be very helpful in answering questions for those who have not inherited property before and are new to the process.
The Government also has a raft of valuable and up to date information on its website, visit www.gov. uk/tax-property-money-sharesyou-inherit/property