What you should know about inheriting property
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There’s much to consider when inheriting property, writes Fiona Brandhorst
Many of the younger generation, the so-called “millennials”, are now banking on an inheritance to hop on the property ladder and according to a recent report they may not have to wait that long. For an astonishing 18 million plus people in the UK are expecting to inherit all or part of a property worth almost £350,000.
The research by bridging lender MFS also reveals that 67 per cent of those surveyed had no intention of living in the property and would be looking to sell it as soon as possible, either re-investing the money or handing it down to the next generation.
However, selling an inherited property can be a fraught experience dealing with clearing the house, the complexities of inheritance tax and dividing the proceeds with relatives. When Lydia King’s father died leaving the family home to her and her brother who lives in Australia, she felt mixed emotions when it came to selling up. “My father wasn’t well before he died so we wanted to make the house look more liveable. We kept the gardener on and refreshed the hallway so that it could be sold with dignity,” she adds. “I’m going to use my share of the money to help my daughter on the ladder which is what he wanted, so that helped me to deal with the sale.”
Probate must be granted before the sale can take place. As part of the process you will need to value the “estate” of the person who has died including any property, and that can take six to nine months. At present, the Inheritance Tax rate is 40 per cent and is charged on the part of an estate that’s above the £325,000 threshold and may be payable before the sale is completed. Chris Gooch, Partner of Carter Jonas, Winchester, says: “We recommend that the vendor’s estate has its grant of probate in place in advance of marketing a property, which should allow the sale to progress quicker.”
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To avoid an empty property becoming musty during the selling process, it should be regularly heated during the winter and aired during the summer, with lights coming on at night for security. “Keep paying the building’s insurance even if there is no-one living there. You will need recourse if there is significant damage or a burglary takes place,” adds Nick Leeming, Chairman at Jackson-Stops. He also advises to address any issues with damp or cracks which can really put a buyer off. “First impressions count; however, there is little point in doing extensive redecorations given the new owner will very likely wish to put their own stamp on the home.”
If the sales market is slow, refurbishing and renting could be the answer. “It’s a good way to obtain a regular income while you wait for the market to go up,” comments Senior Lettings Negotiator Kerry-Anne Holland from Sawyer & Co, Hove, East Sussex. “Some people want to keep the property in the family and some see it as a pension pot for their own old age.”
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One or two bedroom flats are most likely to get good rental returns over a long period suggests Kate Eales, National Head of Lettings Strutt & Parker. “Victorian terraced properties in city centres that have been family homes can be converted into flats. If you’ve got the budget, these can make great investments.”
Alison Standen recently inherited her parents’ home in Cambridge and recommends being vigilant for little treasures when clearing the house. “I found the love letters that my dad had written my mum when they were younger – they are part of our family’s heritage. We gave a lot to charity, but we also had an open house so that people who knew my mum could come into the house and take away a little memory of her. It was a nice way not to feel sad about what we were doing.”
Inheriting a property opens up a range of possibilities, not least for the next generation, and by taking the time to assess the options along with valuable advice from the professionals, you’ll make sure you end up making the best decisions.
Property Inheritance Checklist
Get three valuations from estate agents who know the local market. Do your own research online to compare prices especially if you aren’t familiar with the area
Seek legal advice on inheritance tax from a specialist such as Solicitors For the Elderly (www.sfe.legal)
Be aware you may have to borrow money to pay inheritance tax in advance of the sale or for any refurbishing costs
Probate and Inheritance Tax helpline 0300 123 1072