Inheriting Property - Everything you need to know
What are your options?
When you inherit a property, there are decisions which have to be made. You may wish to sell it, rent it out, or live in it. You'll also need to know if there'll be any tax to pay on the property. If you inherit part of a property you'll need to make joint decisions with the other owner(s).
Ways of inheriting property…
There are three ways by which you might inherit a property:
1. If the property was held under 'joint tenancy', the surviving owner inherits automatically - it's not subject to the will or law of intestacy
2. If the property was owned outright by the deceased, or jointly by owners who have died, the terms of their will(s) determine who inherits.
3. If the property was owned as a 'tenancy in common', who inherits the deceased person's share is determined by the terms of their will.
If there is no will then who inherits the property in cases other than joint tenancy, is subject to the laws of intestacy.
Letting an Inherited Property…
An increasingly popular option is to let an inherited property out to tenants, as although house prices are increasing, they are still down from where they once were. Should you decide not to sell the property for a few years you will get a return in a monthly rental income and also as prices rise a better return from the sale of the property.
If you have no experience in letting out a property then seeking the advice and help of a reputable local letting agent would be advisable. They can give a rental appraisal of the property to help you understand what rental income it may achieve. They will also let and manage the property for you which helps take away all of the day to day strains of letting a property.
There are two common factors that you need to consider when renting out an inherited property;
1. If an elderly relative has lived in the property for a long time it is likely that some works will be required before attempting to attract a tenant into the property. Ask your local agent what works will be required and obtain several quotes from local tradesmen.
2. How emotionally attached to the property are you?
If you are letting it out it becomes a business venture and not a family home. How will you feel if a tenant caused damage to the property?
If you decide to rent the property out, you'll have to pay tax on any profit you make from the rental income. You'll also have to follow relevant laws on the safety of the property and its contents.
Tax and debts on inherited property
No matter how the property was owned, the value of the deceased person's share is counted as part of their estate. The personal representative or executor for the deceased person’s estate is responsible for dealing with the estate and settling all financial affairs. They must ensure that all debts and any tax due is paid before they distribute the assets of the estate.
If you decide to sell or rent out the property you’ve inherited, you may have to pay tax on the rental income or any profit you make when you sell it.
If you already own a home and decide to keep the house you inherited as a second home, you'll need to nominate one of your homes as your main home and let your tax office know, because you can only have relief from capital gains tax for your main home.
Inheriting a property with someone living in it…
If you inherit part of a property and another owner is still living there you'll need to agree with them whether they will continue living there and under what terms, or whether the property will be sold. Bear in mind that their right to remain may be set out in the will.
If you inherit a property that has a tenant, you have certain responsibilities as a landlord. Their legal rights will need to be taken into account if you wish to sell the property. If you are in any of these situations, it's advisable to obtain advice from a solicitor.
Registering the property in your name…
Once the property passes to you, you can register your ownership at the Land Registry.
You don't have to do this unless the property is sold or mortgaged, but it will give you the best proof of ownership. It will also make things more straightforward when dealing with the property in the future.
Where to get help and Advice
Inheriting a property can be complicated, so it's important to get legal advice from a solicitor and financial advisor.
You can also get free and independent advice from organisations such as Citizen's Advice Bureau (CAB).
Find out more at: www.nidirect.gov.uk/articles/inheriting-private-property