Guide to Selling An Inherited or Probate Property

Should you find yourself needing to sell an inherited property with speed, ease and certainty, Spring’s home buying service can help find the right solution that suits you.

 

What is probate?

Probate is a legal document that is required to deal with the estate of someone who has died. An estate is classed as property, possessions, and money (minus any debts, such as a mortgage, loans, and bills).

Selling An Inherited House – The Process

Dealing with practical matters whilst grieving can be a difficult and stressful process. Before you can sell an inherited house, there are legal, administrative and tax responsibilities that must be dealt with prior to being able to sell a property from an estate. You can either do these yourself or instruct a solicitor to do it for you.

Examining the will

If there is a will, an executor/s would normally be named in the will, and they have a legal responsibility for ensuring the wishes of the deceased are followed. The executor would also need to apply for a ‘Grant of Probate’ via the gov.uk website.

If there is no will, someone must apply to be an administrator and obtain ‘letters of administration’ before legal authority is granted. This application can only be made by post.

Getting the probate

The are some circumstances where you do not need to apply for probate, but in most cases, a grant of probate application must be made.

When applying for a grant of probate you must estimate the value of the deceased estate. This is an important task where the executor, or an appointed solicitor, must calculate the value of all the assets, which include but not limited to; property, cash, pensions, the value of any monies given away as ‘gifts’, any joint assets and also the value of any debts owed. There is a complete guide on how to value an estate on the government website.

The process of probate can take several weeks or months, sometimes much longer, so it is important to remember this will not happen overnight. Depending on your circumstances, you may also be charged a fee when applying for probate and this is determined depending on the final value of the estate.

Paying the taxes

Before probate can be granted, and whether probate or letters of administration are needed, HM Revenue and Customs (HMRC) must be notified of your loved one’s death as inheritance tax on a property may be due. There are thresholds and some circumstances where inheritance tax on a property, or an estate, are not payable. Even if the estate value falls under the threshold, by law you still must report it to HMRC.

Paying all taxes and debts owed by the deceased is very important. Failure to do so could be a costly mistake as the executor of the will, or administrator of there is no will, is financially liable.

Inheritance tax

There is normally no inheritance tax to pay on estates, if:

• The value of the estate is less than £325,000
• You leave everything above the £325,000 threshold to your spouse, civil partner, a charity organisation or a community amateur sports club
• If you choose to leave you estate to children or grandchildren, the threshold of inheritance tax increases to £500,000

The inheritance tax rate is 40% and is charged on anything above your threshold rates. Any tax owed must be paid within 6 months of the death, after which time you may be charged interest on the amount of inheritance tax due.

The government have a full guide that can help and advise on how HMRC inheritance tax is applied and how it is to be paid. The Citizens Advice bureau can also provide assistance and guidance.

What to look out for when selling an inherited house

Inheriting a house comes with great responsibility to ensure all taxes, debts and fees are paid. It is also important to remember that as many inherited homes are left unoccupied, this doesn’t mean that bills won’t start adding up. Council tax would still need to be paid and any mortgage payments would need to be met if the property is not being sold.

Capital gains tax

You don’t pay Capital Gains Tax (GTC) when you sell your home, but if you solely inherit a property, it means you own two properties. Therefore, you need to decide which is your main residence and advise HMRC of your decision within 2 years of inheriting the property. You can then either sell the inherited property and pay GTC, or rent it out and pay income tax on the rental income in your annual self-assessment for HMRC.

The rate of CGT is calculated dependant on your own income tax rate.

The role of the executor and solicitors

It is wise to seek the services of a solicitor as they may hold important information on the will and the beneficiaries. A solicitor will also help the executor carry out all the key actions to be taken upon the death of a loved one and will ensure that the wishes of the deceased are met, especially when there are multiple beneficiaries (ie: siblings or other family members).

What to do before you sell

A property that has been inherited can often require modernising prior to sale or renting. You will need to make time to clear the house, but if this feels like a process you are not ready for it may be advisable to hire a storage facility so you can sort sentimental possessions at a time when it feels right. Another option is to pay for a specialist house clearing company to remove the larger or unwanted items. But remember to factor any storage or clearing costs into your finances.

Seek professional advice

If you decide to modernise, it is advisable to seek professional advice from a builder, chartered surveyor to know the associated costs to bring the home up to date.

Prepare for expenses

Be aware that you would need to find the funds to pay for the modernisation, ongoing maintenance costs, plus also pay the ongoing bills at the property; - gas, electricity, water, council tax, during the renovations and until the property is sold. It is a worthwhile exercise to contact the local council as they may apply a discount to council tax rate on an inherited property.

Insurance

If the property is left unoccupied for more than 30 days, particularly relevant if the inherited home is not local to you and located elsewhere in the UK, you would also need to purchase unoccupied home insurance.

FAQs

What is a probate house sale?

The sale of an inherited property from someone who has died once a grant of probate has been obtained. It is estimated that 1 in 10 homes on the market are probate properties.

Do inherited properties have to be sold?

No. You may decide to keep the inherited property and make it your own home or rent it out. Be aware that if you have never owned a home before and decide to live in an inherited property, you are no longer considered a ‘first time buyer’ and do not qualify for the bonuses in a ‘help-to-buy’ ISA and/or qualify for any stamp duty relief on first time properties.

Can I sell my inherited house without a Grant of Probate?

No. Legally, you cannot sell a property without the competition of a Grant of Probate unless you are named on the deed of the property already, ie: the spouse of the deceased.

Spring are experts in selling probate properties, with dedicated property advisers who are there with you every step of the way. For more information on how we can buy your probate property with ease, speed and certainty, get in touch with us via email at [email protected] or on 020 8629 7877.