Inheriting a property can be a confusing and emotional time. You may be dealing with the loss of a loved one while also trying to get to grips with the legalities of transferring the property into your name and deciding what to do with it.
You probably have lots of questions — What is probate and how does it work? What taxes will I have to pay? Should I rent the property out or sell it?
In this blog, we’ll provide the information you need to make the process as stress-free as possible and help you decide what the best options are for you.
What Should I do First?
- Secure the Property. An empty house is vulnerable to criminal activity. Make sure that windows and doors are locked, remove valuable items and if there is one, set the alarm system for homes.
- Make Sure the Property is Insured. Any insurance the deceased had on the property may have expired upon their death. Many companies allow a 30-day grace period. If the property is likely to be empty for longer than this, you will need to take out “unoccupied home insurance”.
- Inform the Council and Utility Companies. The council may offer a reduced council tax rate if the property is likely to be vacant for an extended period. By contacting the utility companies, you will avoid expensive bills creeping up while the property sits unoccupied.
Once the property is safe and secure, the next step is to address the legalities of transferring it into your name.
What Is Probate?
Probate is the name given to the legal process of administering a deceased person’s estate. If you inherit a property, it is a “probate property”. You cannot sell an inherited property until ownership has been transferred to you and the probate process is completed.
The legalities of handling an inherited property can seem complex and daunting. However, many people navigate the red tape successfully without the help of a legal professional.
Do I Need to Apply for Probate?
Not everyone who inherits a property has to go through the probate process, although most do. If the property was solely in the deceased’s name, you’ll need to apply for probate.
An exception is if you jointly owned the property with the deceased, then ownership will automatically pass to you.
How Do I Get Probate without a Will?
Before you can do anything with the property — complete home improvements, rent it out or sell it, for example — you must establish yourself as the new legal owner.
If the deceased left a will, this process should be relatively easy as you will be named as the beneficiary. The will should also name at least one executor. This is the person who is responsible for making sure that the wishes of the deceased, as laid out in the will, are met.
If a person dies without a will — “intestate” — the process can be a little more complex and time-consuming, but not impossible. The estate will be divided and distributed to beneficiaries according to the “rules of intestacy”. If there are no surviving relatives, the estate passes to the crown. Generally, only spouses and close relatives can inherit under the rules of intestacy.
How Does Probate Work?
If there is a will, you must apply to the probate registry for a “grant of probate”. In England and Wales, it takes on average between nine and 12 months to obtain this document.
If the deceased died intestate, you will be sent “letters of administration” instead of the grant of probate. This is also likely to be the case if the will is deemed not valid or there are no executors (either because none were named in the will or because those named are unable or unwilling to fulfil this responsibility).
Can Probate Be Done without a Lawyer?
Many people handle the probate process without a professional legal representative. If there is a will, the estate is small and the deceased’s wishes are clear, it may be unnecessary to engage a lawyer.
However, if the estate exceeds the minimum threshold for inheritance tax and/or the will is complex — for example, it names multiple beneficiaries — hiring a probate specialist may be advisable.
The benefits of using a probate lawyer include:
- Access to legal advice throughout the process.
- Probate will probably be completed more quickly.
- There is less chance of mistakes that can cause delays and stress.
- It could save you money; for example, by ensuring that you pay the right tax.
What Happens If I Inherit a House with a Mortgage?
If the probate property has an outstanding mortgage on it, you will need to contact the lender to find out what you need to do to clear the balance.
The deceased’s life insurance policy could be used to pay off the loan. If there is no insurance, the mortgage lender will explain what they expect from you. Typically, repayments will be put on hold until probate is completed, but the interest will continue to accrue.
The outstanding balance may be paid using any other assets the deceased had before ownership passes to you. If this is not the case — for example, there are no other assets — you may need to take on the mortgage. This can be problematic for those who already have a mortgage on another property.
Should I Sell or Rent My Inherited House?
Once the probate process is complete and you are the legal owner of the property, you are free to do with it what you will.
Assuming that living in the property yourself is not possible or desirable, you have two options — rent or sell.
Many people are keen to achieve a quick house sale. The benefits of selling include:
- You can move on emotionally.
- Cash is easier to share between family members than a property.
- You could clear your existing mortgage and live debt-free.
- The proceeds could be used to fund a dream project or renovate your home.
- There are no ongoing responsibilities for maintaining the property.
- Investing the proceeds could provide a healthy income.
Of course, where there are pros, there are cons. When selling an inherited property, there may be tax implications, and you will lose a potentially lucrative source of income.
Alternatively, you can keep the inherited property and rent it out. This will provide a secure source of income, and you will benefit from any future house price rises. There will also be no inheritance tax to pay.
However, you will have the ongoing responsibility of maintaining the property, responding to tenants’ needs, chasing overdue rent and finding new tenants when people move on. All of which can be time-consuming and stressful. There are property management companies that will take this burden off your hands, but their fee will eat into your income.
There is no “right” answer to the question, “What should I do with an inherited property?” It will depend on your personal circumstances and lifestyle choices. Your priority should be to secure the property and establish yourself as the new owner by completing the probate process. Once this is complete, you can take your time to decide what is best for you.