Inheriting a property from a loved one can be an emotional experience.
During your time of grief, the last thing you want to be thinking about is paperwork and the legal implications of inheriting a property.
But it is not an unusual situation to be in, with 36% of people likely to inherit property in their lifetime. Roughly a quarter of people don’t know what they’d do if they inherited a property, and it’s not surprising. There’s a great deal to consider and it can be a lot to take on.
Take your time
After the death of a loved one, thinking about tax, mortgages, debt and money is probably the last thing you want to be doing.
Fortunately, for the majority of cases, you don’t need to deal with the property you’ve inherited immediately. You may choose to get it over and done with, but if you would rather take your time, that’s okay.
Many banks and lenders will be sympathetic to your situation and you’ll most likely be offered grace periods to make the necessary arrangements.
It’s also good to bear in mind that the probate service itself takes time. Probate is the process that confirms the will and transfers the deceased estate to the beneficiaries.
This is usually fairly straightforward, providing there is a will and it isn’t contested. The grant of probate usually takes about six to eight weeks to arrive, and the finalised issues can take another three to six months. It’s a good idea to contact a probate lawyer or probate solicitor to help in certain circumstances.
Consider who else is involved
Inheritance is rarely as simple as one person inheriting everything. If you’ve inherited a property, it’s worth considering who else will be involved in the process.
It can be a blessing and a burden to have inherited a property that’s left to multiple people. Having others around you can be great for support and mean that you don’t need to do everything yourself.
On the other hand, it can become a lot more complicated when you have members of your family or siblings involved. If you’re sharing the inheritance, you’ll need to be on the same page with the other inheritors; and if you’re not, it can get very tricky.
You may have a case where one person wants to live in the property and the other wants to sell it. Coming to an agreement with everyone can be difficult, but it’s important that it is dealt with fairly.
Take tax into consideration
Depending on where you are, there will usually be a variety of taxes to take into consideration. These are usually variations of:
- Inheritance tax. Usually paid before the property is released to the beneficiaries during the probate service with any debts in the deceased estate.
- Income tax. Only applicable if the property generates income such as rent.
- Capital Gains tax. Comes into place when the inherited property is being sold, is exchanged/given away or has gone up in value.
While not all these taxes will apply to your case, it’s worth being aware of the different kinds of tax that could apply to the property you have inherited. It’s also important to research the taxes in other countries and areas, as these may affect what you’ll need to pay.
Decide what to do with the property
According to a recent study, over half of the people who inherit property would not want to live in the property. There are three main considerations for what to do with the property you have inherited:
Live in it
You may decide to move into the property you have inherited. In this case, you’ll probably need to make this your primary residence and inform the appropriate authorities. If there are any outstanding mortgages on the property, then you will usually be liable for them.
Rent it out
You might decide to rent the property and use it as an investment. There are a few things to consider if you choose to do this. One is to check whether you need to pay income tax on the money earned from the rental and how you go about paying that tax. It’s also important to consider whether you will manage the property yourself or use a management company.
As a landlord, you’ll have legal obligations to your tenants, so it’s worth considering this before making your decision.
If you decide to sell the property you, then you will need to think about the taxes that are applicable. In many cases, if you sell the property quickly, then the value should still be the same as its probate value. This means you might not be liable for any tax.