Inheriting a house from your parents in the UK will mean a lot to you, especially if it holds all of your childhood memories. Moreover, it won’t matter if you grew up in the house or only went there as an adult. Your parent’s home was an important part of who they were. Inheriting a UK house from your parents could bring with it some sad memories, especially if you were so close.
Simply walking through the front door after they’ve passed away can cause sadness, frustration, and even uncertainty. And as you begin to make decisions regarding the house and everything it contains, all of those feelings may affect you. Here are some of the things you should do after inheriting a UK house from your parents.
Inheriting a House from Your Parents
The thought of inheriting your parent’s house may never have crossed your mind until reality finally stares you in the face. This is understandable. Plus, it may not really sit well with you. Nonetheless, it’s a topic worth considering because it could have a significant impact on your future. And if that does happen, you’ll have to make a lot of choices. You can’t afford to make any mistakes with these decisions
You can only inherit a house from your parents if there is a will or if you were officially adopted. If you do inherit your parents’ home, you’ll have to wait until you’re over the age of 18 to see it. Unless, of course, you marry while you’re younger. You only had a legal claim to it before that.
What you should do after inheriting a house from your Parents in the UK
You must first establish yourself as the new legal owner of an inherited property before you can do anything with it. The legal procedure of administering a deceased person’s or persons’ estate is known as probate (all their assets and money). Unless you and your parents jointly owned the property, you will need to petition for probate to be able to take ownership of it.
Whether or not your parents left a will has an impact on the probate process. You’ll need to apply to the Probate Registry for a “Grant of Probate” if they left a will and identified you as the beneficiary of their home or full estate. If there are no delays, this usually takes six to eight weeks.
The process can be a little more complicated and time-consuming if there is no will. You will need to apply for “Letters of Administration” instead of a Grant of Probate. When someone dies “intestate” — without leaving a will — their wealth is distributed according to the “laws of intestacy,”. This prioritises the offspring of deceased parents. You can do whatever you choose with the property once probate is successful. While you are on the probate process take the following actions to reduce the expense:
Cancel all Utility Accounts
By cancelling any utility accounts and notifying the council that the property is now unoccupied, you can avoid racking up costly costs. The council may cut the council rate if the property is empty for an extended period of time.
Obtain Insurance
When a homeowner passes away, whatever insurance policies they have on the property, such as buildings and contents insurance, are likely to be cancelled within 30 days. Unoccupied home insurance will cover the property until the probate process is complete. You will also have to make a decision on what to do with the house.
The Property’s Worth
You may estimate the value of the property by comparing the recently sold prices of similar houses in the region. Reading up on the current housing market, and looking at property heat maps to see how popular the local currency is with purchasers. Alternatively, get multiple appraisals from different agencies.
However, before selling or renting out the property, you must finish the probate process.
When Siblings Share a House, What Happens?
If you and a sibling or siblings are joint beneficiaries of your parents’ home, you must agree on what to do with the property. A house is considerably more difficult to share than money. Hence, if there is a dispute about what to do with it, the situation may quickly become complicated and unpleasant.
If each sibling obtains an equal portion of the property, you have the following choices:
- Keeping the property and living in it together is frequently impractical and undesirable. However, if all parties agree to refurbish and divide the house into two separate dwellings. Another option is to rent the house out on a timeshare basis.
- One sibling resides in the house; the other(s) is either bought out or the non-resident sibling(s) keeps a portion of the house, which they will recoup when it is sold.
- One sibling buys out the other(s), keeping the property as a second home or renting it out for extra money.
- Sell the house and share the money equally among the siblings.
- Rent out the house and share the revenues equally among the siblings.
- If the inherited property has an outstanding mortgage balance, many people choose to sell since they cannot afford a second mortgage, even if it is shared among siblings.
If the siblings cannot agree on what to do with the property, for example, because one of them is already living there and refuses to leave, the sibling who wishes to sell might seek the executors of the will to force a sale in court under the Trusts of Land and Appointment of Trustees Act 1996. This is not always successful, and it is likely to harm family relationships. So, here’s my advice, an amicable solution is much better for all parties concerned.
Is it necessary for me to pay Inheritance Tax on my Parents’ Home?
There is normally no inheritance tax to pay if the value of the deceased’s estate (property, money, and possessions) is less than £325,000. The tax-free threshold might rise to £500,000 if a parent transfers their home to a child or children. Adopted, foster and stepchildren are all included.
If the value of the estate exceeds the appropriate level, you will be subject to the ordinary inheritance tax rate of 40% on the excess. For example, if your inheritance is worth £650,000, you may be entitled to £500,000 tax-free and only pay inheritance tax on the remaining £150,000, which would be £60,000 at the 40% rate. You must pay the tax due before the end of the sixth month following the person’s death.
There would be no inheritance tax to pay if your parents passed the property on to you before they died. As long as they either paid the rent and expenses for seven years or moved out and lived elsewhere for seven years after that.
How Do I Avoid Capital Gains Tax on Inherited Property In the United Kingdom,?
Only when a property is sold, not when it is inherited, is capital gains tax due. If you decide to keep the property, you will not have to pay CGT.
Your primary residence is exempt from CGT. If you own your home and decide to sell your parents’ house, CGT will be charged on the amount the property has gained in value since you inherited it, minus your £12,300 (£6,150 for trusts) capital gains tax-free limit. For example, if you inherit a home valued at £250,000 and sell it five years later for £325,000, you will owe CGT on £62,700. (sale price minus the value at the time of inheritance and your tax-free allowance). CGT is levied at a rate of 28% on residential property.
Selling the property as soon as the probate process is complete is the greatest method to avoid paying capital gains tax or to reduce the amount owed. During probate, you cannot legally sell a property. However, you can put it up for sale, advertise it and negotiate a sale price with a buyer. The property’s value is unlikely to have increased much from when you inherited it — the “probate value” — to when you sell it. That’s if you sell it promptly after obtaining the legal authority to do so. CGT should be paid exclusively on the increase in value, therefore there should be none or very little to pay.
Is it Better to Rent or Sell an Inherited House?
This is a difficult decision to make. Do you sell and put the money in the bank? Or should you hold on to the property in order to reap the benefits of any future increases in value as well as a steady second income?
Although the latter is enticing, managing a rental property is both difficult and time-consuming. You’ll also need to make sure you have enough money to keep the house in good repair and pay the mortgage (if there is one) during the times when it’s vacant. Sharing the responsibilities of a rental property with siblings might be difficult. However, selling allows you to split the proceeds and end the relationship cleanly. This is especially true if you are inheriting your parents’ property, which is likely to hold some sentimental value for you – moving on may be difficult in the short term, but it will be less emotionally demanding in the long run.
Conclusion
Inheriting a UK house for your parents will come with a lot of responsibilities, till you decide what to do. Whatever you decide to do with the house you inherited from your parent your decision. Be careful to consider everything the house stands for and your siblings before making your decision.
Frequently Asked Questions
What happens when someone inherits a house?
You get more than just property or money when you inherit a house. Inheriting a home entails additional legal and financial obligations. It may necessitate discussions with siblings or other heirs, as well as an emotional reckoning.
What happens to the mortgage when you inherit a house?
You can either sell the house to pay off the mortgage and keep the proceeds as an inheritance, or you can keep it. If you keep the house, you’ll have to either maintain making mortgage payments or use other assets to pay down the loan.
How much does an estate have to be worth to go to probate UK?
If the deceased person’s estate is worth more than £10,000, probate is normally necessary. However, If the majority of the assets in the estate were jointly owned, It may not require probate.
