If you have recently inherited a property, then you are likely to be going through a difficult time. After all, this usually coincides with the loss of someone very close to you. It is, therefore, easy to feel overwhelmed or confused about what to do and how to do it.
When you inherit a house, not only do you need to comply with all the legal requirements, but you will also be weighing up your emotional ties. For example, do you feel attached to the property and therefore want to keep it in the family – or is it an eyesore that you want to get rid of as soon as possible?
If you do not own the house entirely on your own, but jointly with other people, then this can add further layers of decisions to be made.
Don’t worry: we are here to help. There are a few key steps you should take when you inherit a house that can get the ball rolling. This blog is designed to guide you through an otherwise challenging time. Please keep reading for all the details you will need.
What is an Inherited House?
An inherited property is a house that you receive from someone who has passed away. It will either have been automatically left to you because you are the closest living relative or passed over to you via a will.
Once you have inherited the property, you will be the new owner. It is then up to you what you do with it – for example, sell it, rent it out, live in it, or otherwise.
Sometimes, you might inherit a property alongside other people (for example, your siblings if you have received the house from a parent) and will, therefore, need to work together about the best route forward. Sometimes, the co-owner of an inherited house can disagree, which we have covered further below.
Firstly, you need to get confirmation about the house’s legal owner. Just because it seems ‘logical’ in your mind that it should pass over to you, that doesn’t necessarily make it the case.
Get ‘Confirmation’ about who owns it
‘Confirmation’ is the legal document that gives you the right to administer a deceased person’s estate. This is usually achieved through the probate process, which a solicitor can carry out.
If the property has been left to you in a Will, this may provide details on who the house is to be passed to. In some cases, you may inherit it alongside other people, in which case, you will need to communicate with them on the path forward.
What are my options when I inherit a house?
When you inherit a house – either by yourself or alongside others – you have a few main options about what to do with it. These include:
- Sell it
- Live in it
- Rent it out
- Leave it empty
While the fourth option may seem counterintuitive, some people with a strong emotional tie to a house cannot bring themselves to see someone else live there – or sometimes even themselves. After all, it may feel inappropriate to move in too quickly after your loved one has passed away.
Each of the first three options has advantages and drawbacks, and your personal circumstances will make a big difference. If the property is far away from where you live, for example, then renting it out or living there may be too difficult—in which case, selling remains the only option.
On the other hand, if you want the property to stay within the family and be passed down through the generations, then renting it out can turn into a useful income stream without losing ownership.
You may choose to live there yourself if you do not have a fixed abode or if it would improve your living circumstances (e.g. it’s an upsize from your current property).
These are just a few scenarios that may affect your choice. Many people choose to consult a financial advisor in this position, as it can feel like an overwhelming decision that they want support with.
What happens if the co-owners disagree about what to do?
If you own the inherited property jointly with someone else, you may disagree about the best way forward.
Firstly, you may choose to reach a compromise, especially if your relationship with the co-owner is essential to you and you do not want to fall out.
Secondly, one of you can buy the other person out of the property. By successfully doing this, the entire house would then belong to you. This is quite an expensive option, though, as you would usually need a lump sum to pay out the entire share of the co-owner(s). An agreement can also be made between the two parties if someone wants it to be at a higher or lower rate.
Calculate how much inheritance tax needs to be paid
In the UK currently, the Inheritance Tax rate is 40%. This is only charged on the part of your estate above the tax-free threshold, which is currently £325,000.
In the UK, inheritance tax must be paid within six months of the person’s death.
You should speak to a solicitor who can provide support with calculating the amount of inheritance tax due on the estate you inherit and making sure all relevant tax is paid.
Preparing an Inherited House for Sale
To prepare your inherited house for sale, you need to take a few key steps to make it ready ‘for the market’.
First of all, you should decide how you want to sell the house. Selling on the market is only practical if the property is in livable condition and isn’t unsafe (which can sometimes be the case with outdated buildings). You may wish to spend the money fixing the house so it is up to standard, or you could sell directly to a cash house buyer who will purchase it in any condition. This latter option can save you lots of money on repairs, which may counteract the below-market offer you receive.
If you decide to sell on the open market, your next task will usually be to clear out the house. There will often be lots of items cluttering the house—which may also include mould, asbestos, or other dangerous elements on a particularly old house—that need to be taken care of.
Once your property is in sellable condition, you can contact an estate agent to value it. A valuation will likely have already been completed in the probate process. Still, an estate agent may have insights on similar properties within the area and buyers they know who could be interested. They may also take market conditions into account.
From here, selling your house is just like any other. The most time-consuming and expensive part is usually bringing your property up to ‘modern standards’—especially if it is very old and has been in poor condition for a very long time.
