1. Will and Intestacy

When handling the estate of the deceased, you must ensure that you’re following the wishes outlined in their Will (or, in the absence of a Will, following the intestacy rules).

Before you can think about selling inherited property, you must sort this out.

If you’re unsure where a Will is, consider contacting:

• The Principal Registry of the Family Division
• A care home or hospital (if the person passed away there)
• Professional will-writing companies
• Solicitors or accountants
• Banks or building societies
• The National Will Register

Check the Will is Valid

For a Will to be legally binding, the following rules must apply:

• The Will writer was over 18 years old at the time
• There is no evidence of undue pressure
• The person writing the Will was of ‘sound mind’
• There were two adult independent witnesses present
• These two witnesses also signed the Will
• The Will is dated

Wills put together professionally are more legally watertight, especially when the divisions of the estate are more complex.

If the Will is deemed not to be valid, the distribution of the estate will follow the rules of intestacy.

Note that there may also be a Codicil, a legally binding document written by the person who passed away to make changes to the Will.

Understand the Contents of the Will

When the contents of a Will lack clarity, you may need to consult legal advice.

This could be the case if:

• You are not able to understand the terms
• Parts of the Will seem confusing or open to interpretation
• The division of the estate is complex
• Part or all of the estate will pass to children under the age of 18
• Money or property is placed in some form of trust
• Part of all of the estate consists of foreign property, land or investments
• The estate or property was owned under a corporate entity with more than one other shareholder
• The person who passed away owned a business or had significant shareholdings
• People were financially dependent on the person who passed away (who are not immediate family)
• The terms of the Will are disputed

Intestacy Rules

If there is no evidence of a Will, intestacy rules apply to the inherited house.

This allows someone to inherit the estate if they were married, in a civil partnership, or beneficial joint tenants with the deceased. If there is a joint bank or building society account, the other partner will inherit its contents by default.

The partner will inherit all personal property and belongings, the first £322,000 of the estate, and half of the remaining estate.

If the estate is worth over £322,000 and the deceased has children, they will inherit the other half of the remaining estate.

Those who are divorced from the deceased cannot inherit under intestacy rules. The same applies to a previous civil partner or somebody who cohabited as a partner

Intestate Rules Related to Other Members of the Family

The following relatives can also inherit under intestacy:

• Children with unmarried parents
• Adopted children
• Grandchild or great-grandchildren (if their parent or grandparent has already passed away or dies before they reach the age of 18 years old without marrying)
• Siblings, nieces, nephews, and parents (only if there are no surviving spouses, civil partners, children, grandchildren, or great-grandchildren)
• Other relatives (in the following order: grandparents, uncles/aunts, half-uncles/aunts, cousins, and half cousins

If children are under 18, trustees will manage the inheritance on their behalf.

Close friends, cohabiting partners, carers, and relations by marriage cannot inherit any part of the estate if there is no Will.

Bona Vacantia

Under intestacy rules, the estate passes to the Crown when there are no surviving relatives.

This is known as bona vacantia.

What Happens to Jointly Held Property?

Inheritance of a property depends on whether you owned it through a beneficial joint tenancy or a tenancy in common.

Beneficial Joint Tenancies

In this case, joint owners of a property automatically inherit the other share of the property when the other owner passes away, becoming the sole legal owner.

Tenants in Common

Tenants in common own separate shares of a property, so a surviving tenant will not automatically inherit the other person’s share.

Instead, the share goes to whoever is named in the Will.

Probate or letters of administration are needed to ensure the Will or the rules of intestacy are followed.

2. The Probate Process

Probate is the legal process of organising the inherited estate of a person who has passed away, which is usually carried out by an executor.

If you want to manage the estate, you need to apply for probate unless:

• You have joint ownership of the estate with your spouse or civil partner
• You have a joint bank or building society account (and the estate owner had no other bank accounts)
• The sum of money left in the estate is less than £5,000
• There is no property, land, significant business interests, or shares within the estate

The Government guidelines (what to do when someone dies) can help you understand the process.  The HMRC Probate and House Inheritance Tax Helpline telephone number is 0300 123 1072 (for relevant forms and advice).

If you choose to move forward without legal advice, please make sure you are fully aware of the consequences of your decisions.

The Role of the Executor

The Will of the person who passed away specifies an executor. They are responsible for carrying out the wishes of the Will and paying outstanding debts, inheritance tax, and other costs.

An executor can be a relative, friend, solicitor, or accountant. In England and Wales, an executor may also be a Public Trustee or a solicitor.

They must apply for a ‘grant of probate’ before they can start the process.

If there is no Will, a relative or close friend can apply for a ‘grant of letter of administration,’ which gives them the same authority as an executor.

Legal Fees for Probate Cases

Many executors prefer to use a probate solicitor to handle the process for them, which can ease some of the hassle and stress.

Probate solicitor fees vary depending on the complexity and size of the estate.

To save money, some people fill out the probate paperwork themselves and use a solicitor to check through everything.

Starting The Probate Process

When you first start the probate process, you’ll need to understand the estate’s overall value.

Establish the Value of Assets

Assets within an estate include property, savings, stocks, shares, private pensions, jewellery, and investments.

If a property, shares, or bank account is jointly owned, the assets will not be distributed to any beneficiaries. Instead, the assets go to the surviving joint owner (unless otherwise stated in the will).

Find Out the Value of Any Gifts

If the person gave away any money or assets 7 years before they passed away, this must be declared.

Establish the Amount of Debt

We’ll discuss this in more detail in our chapter on dealing with debts.

Calculate the Value of the Estate

The total estate value is the value of the assets minus debt.

You or the solicitor working on your behalf will need to fill in the PA1 (probate application) form and either the Inheritance Tax form IHT400 (if the estate is worth over £325,000) or the Inheritance Tax form IHT205 (if the estate is worth under £325,000). If you don’t intend to sell the inherited house, you will need to have the property valued.

Send these to the closest Probate Registry Office alongside the Inheritance Tax form, death certificate, and three copies of the will.

Note that different rules apply in Scotland and Northern Ireland.

3. Settling Debts

Once there is a grant of probate, any unpaid debts must be cleared or managed before you think about selling the inherited property.

The total debt includes both unsecured and secured debts.

Unsecured Debts

Also known as individual debt, unsecured debt is a loan you take out in your name with no collateral.

Examples include credit cards, personal loan(s) from the bank and unpaid bills.

The bank stops payments after death and during the probate process.

Secured Debts

If you take out a loan against an item (such as a car, business, or property), it’s known as secured debt.

You will need to contact each lender individually and request statements for the outstanding debt balance.

To find out who the lenders are, you may need to go through the paperwork or use a service like Check My File.

The executor may do this if they have Power of Attorney (authorisation to deal with the financial affairs of the estate).

Dealing with Debts in Probate Cases

After checking the terms of each loan, the beneficiaries of the estate may take on the debts.

Or, it may make more sense to use the contents of the estate to pay the debts off.

Provided there is enough equity in any owned property or other assets, you may also decide to use the proceeds of an eventual sale to clear what is owed.

We advise prioritizing debts and costs as detailed in the infographic below:

It is also worth noting the following:

• If there is a guarantor responsible for any of these debts, they will be liable
• If there are joint debts, the loan contract will specify how to deal with the debts
• There may be an insurance policy is in place to pay off the debt in the event of death

Where to Find Support

Dealing with unpaid debts makes most people anxious.

Fortunately, most lenders will be sympathetic as long as you regularly communicate with them.

If you are still unsure about how to deal with the extra financial burden, the following organisations can help:

Free advice, support and guidance via a range of online resources. Shelter also has a helpline open 365 days a year (8am to 8pm on weekdays and 9am to 5pm on weekends). The regular number is 0808 800 4444. In emergency situations, you can call 0808 1644 660.

Search for information online or enter your postcode/town in the orange box to contact your local office directly.

The organisation provides education, information and advice aimed at simplifying money matters. Call 0808 808 4000 Monday-Friday 9am–8pm and Saturday 9:30am-1pm (their offices are closed on Sundays).

If the person was a business owner or shareholder and has outstanding debts, this organisation can provide you with some useful advice. Call 0800 197 6026 Monday-Friday 9am–5.30pm (offices are closed at the weekends).

A charity that provides confidential support and advice to anyone worried about loans or debt issues. Call 0800 043 4050 Monday-Friday 8am–8pm and Saturday 9:30am-3pm (their offices are closed on Sundays).

5. Selling Inherited Property 

Once the legal and tax processes have gone through (i.e. there is a grant of probate), you will need to start thinking about your options regarding the sale of the inherited property.

Here are some ideas worth considering:

• If the property is your family home already, staying on is a fairly simple choice to make.  However much will depend on whether there is a mortgage. Provided there is a sufficient amount of equity, and you can afford to pay the mortgage, then this is usually the best course of action;
• If you’re inheriting property as a second home, renting out your property can be a good idea.  Here it will be necessary to understand your responsibilities as a landlord.  If there is a mortgage, you will also have to obtain a ‘consent to let’ (this usually lasts for about 12 months);
• If you have a mortgage, it is often worth talking to the lender or a qualified mortgage broker to see if you can get a competitive deal (by remortgaging).  Provided the remortgage debt is not too high, this is often a good option;
• Selling the property may be an idea, especially if the home is now too large or unfit for your requirements.  Note that you can put your inherited house on the market any time you wish, however, a sale cannot complete until you have a grant of probate.  Please also be sure you understand your obligations regarding taxes.

4. Selling Inherited Property

After clearing the debts, you can finally think about what to do with an inherited property.

There are a few possibilities:

• Keeping the property. This may be appealing if the property is your family home already, there is a sufficient amount of equity, and you can afford to pay the mortgage.
• Renting out the property.  In this case, if there is a mortgage, you will have to obtain a ‘consent to let’ (this usually lasts for about 12 months).
• Selling the property. It may be a good idea to sell an inherited property if the home is unfit for your requirements. You can put your inherited house on the market at any time, but a sale cannot complete until you have a grant of probate.

If you have a mortgage, it is often worth talking to the lender or a qualified mortgage broker to see if you can get a competitive deal by remortgaging.

For those who want to sell a property, there are three main options: Estate agents, auctions, and house buying companies. Note that selling could result in you having to pay inheritance tax and capital gains tax, which we’ll cover in the next section.

Estate Agents

If you decide to sell the inherited property, using an estate agent is the most common choice.

There are some potential drawbacks here. The process often takes longer than many expect, there are estate agent fees and other charges involved, and you may find it difficult to sell the property if it needs refurbishment or modernisation.

However, if the property is in a desirable area, and you are in no particular rush to sell, it can be a good option.

For those who want to take the traditional route without the fees, consider PropertySolvers’ express home sale service. This helps you achieve a quick sale at the best price possible, with no up-front fees.

We believe the best time to sell a house is in the first two weeks of the house going on the market since this is when the interest and excitement are highest. So, we take our 16-year knowledge of buying and selling homes to get you an offer within just 28 days.

What’s more, have no tie-ins whatsoever on our sales contracts.  If you’re not happy with our service, you’re free to leave with no questions asked.

Further benefits include:

• Floorplans and professional photography
• A high-impact FOR SALE board
• Access to all major property portals (including Rightmove, Zoopla, Prime Location, the House Shop, Home.co.uk)
• Accompanied viewings (including weekends)
• 24/7 chat service to organise a viewing or receive an offer
• Weekly sales reports (with up-to-date information from Rightmove and Zoopla)
• Complete sales progression
• No sale, no fee

Please feel free to contact us 24/7 (freephone from your mobile) on 0800 044 3733 or email us at info@propertysolvers.co.uk.

Selling your property to an auction house is another route you may want to consider. This may result in a faster sale as a buyer legally commits to the purchase once they make a winning bid, and a bidding war can result in a competitive price.

However, the process can take just as long as an estate agency sale.

Our post on selling your house at auction explores this option in depth.  We cover how the process works, fees, tips on getting the best outcome from the sale, and more.

Quick Home Buyers (7-Day Fast Sale)

If you’re an inherited property owner looking for a quick cash sale, opting for a property buying company may be preferable. In this case, a third party will buy the house directly from you in a guaranteed sale.

Below are some of the key benefits of a house buying company:

• No need to deal with the hassles of estate agents and an open market sale.
• Suitable for properties in any condition, even those in need of refurbishment
• No estate agency or solicitor fees
• Complete the sale in 7 to 28 days – or in line with your own timeframes
• Cash advances possible
• The sale is 100% guaranteed
• No empty property council tax, insurance and other bills
• Chance to avoid additional probate solicitor fees due to a quick sale

Please feel free to call us 24/7 on 0800 044 3733, visit our probate / inherited property page or email us at info@propertysolvers.co.uk.

5. Tax on Inherited Property

When selling inherited property, you may need to pay taxes, including capital gains tax.

Note that there’s no need to pay stamp duty on inherited properties.

Inheritance Tax

The inheritance tax threshold is £325,000, meaning you must pay tax on estates with a market value above this. Currently, the standard inheritance tax rate is 40%.

The tax must be paid before distribution of the estate to the beneficiaries.

There are some cases where it’s possible to avoid inheritance tax, such as the case of a spouse inheriting the property.

If you received a gift in the seven years before the person passed away, there is usually some additional tax to pay (depending on the amount).

Note that it is possible to pay Inheritance Tax in installments, which can be useful if you land a hefty inheritance tax bill.

Income Tax

You will only have to pay income tax on an inherited property if you derive residential or commercial property rental income from it.

Notify HM Revenue & Customs (HMRC) so the tax calculation can be adjusted accordingly.

You may have to fill in a Self-Assessment (SA) tax return on behalf of the person who passed away.

Capital Gains Tax

You will have to pay capital gains tax if you sell a property and its value increased since the person passed away.

The capital gains tax owed depends on the amount of increase.

You can avoid capital gains tax if you keep the inherited property and live in it as your own home (and not rent it out).

Disclaimer

Please note that the Directors at Property Solvers Limited are not solicitors, accountants or inheritance tax specialists.  Although we make every effort to provide complete and accurate information, Property Solvers makes no warranties, express or implied, or representations as to the accuracy of content in this blog post.

You should always seek professional advice before making any decision, especially when it relates to a property or other assets of significant value.

Frequently Asked Questions

Can I Sell the Inherited Property if I am a Beneficiary and Applying for Probate?

There should not be any issues with you selling the property in this scenario, but it’s worth verifying your position with the probate solicitor to ensure there are no restrictions. Things could get complicated if other beneficiaries have legally shared ownership of the property. Also, please note that you will have to wait for full probate to be granted before you can sell the house.

Where Can I Find a Good Solicitor to Help with Selling an Inherited Property?

Most probate solicitors have colleagues or associates within the firm who will be able to deal with the inherited property sale. It makes sense to move forward with the same firm as the solicitors can work together to ensure things move forward smoothly. However, it’s worth noting that you will probably need to instruct a separate solicitor to undertake the conveyancing process.

What Should I Do if the Will Says Some of the Inherited House’s Value to Charity?

As the terms of the Will must always be met, the probate solicitor may place a legal charge on the property (registered at HM Land Registry) until it’s sold. At completion, the stated percentage of the property’s value (post-tax) that goes to charity will be deducted from the sale proceeds. Charities are exempt from capital gains tax.

When Will I Have to Pay Inheritance Tax after the Property is Sold?

You must pay inheritance tax by the end of the sixth month after a person dies. However, there’s also the option of applying for a grant on credit or in installments.

Will I Have to Pay Capital Gains Tax or Income Tax when Selling an Inherited Property?

You only have to pay capital gains tax if the property rises in value after you inherit it, and you will only have to pay income tax on rental income if you rent the property out.