Inheriting a House After Death
Losing a loved one is a difficult time. On top of that, you might have to deal with the legal and financial process of managing their estate, including property. To help you navigate this challenging period, this article will cover:
- Your immediate steps and an essential checklist to get started.
- How to legally transfer or sell the house.
- What key legal terms like probate and administration mean.
- Which taxes may be involved when inheriting a property.
Your first steps: An immediate checklist
The time immediately following a death can be overwhelming. There is no rush to deal with a property, but there are a few important steps you can take in the first few days to get a clear picture of the situation.
This will help you feel more in control of the process without feeling rushed. Here is a brief checklist of what you should do right away:
- Locate the Will: Find out if the deceased had a will. This document is crucial as it names the executor and specifies who inherits the property. If there is no will, the law of intestacy applies.
- Secure the Property: Check that the property is secure. You may also need to inform the house insurer of the owner's death, as this can affect the policy.
- Find Key Documents: Locate important legal documents, such as the title deeds, mortgage statements, and insurance papers. This information will be needed later on.
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The legal process: Probate vs Administration
Before you can legally transfer or sell an inherited property, you need to be granted the legal authority to do so. This authority comes from the court and is known as a Grant of Representation.
The type of grant you need depends on whether the deceased left a valid will or not.
Probate (if there is a will)
If the deceased person left a valid will, it will name one or more executors. The executor's role is to carry out the wishes in the will.
To get the legal authority to act, the executor must apply for a Grant of Probate from the court.
The Grant of Probate is a legal document that confirms the will is valid and gives the executor the power to manage the deceased's assets, including the property.
Without this document, you cannot proceed with the sale or transfer of the house.
Letters of Administration (if there is no will)
If a person dies without a valid will, they are said to have died intestate. In this case, there is no executor to manage the estate.
Instead, the law sets out a strict order of who can apply for legal authority, usually the next of kin. This person is called the administrator.
The administrator must apply for a Grant of Letters of Administration. This document gives them the legal right to manage the estate and distribute the assets according to the rules of intestacy.
The process is similar to probate, but it is necessary because there is no will to follow.
How long does the process of inheriting a house take?
The time it takes varies widely. The probate application itself can take several weeks or months, and complex estates can take over a year to resolve.
Once probate is granted, the speed of selling or transferring the property depends on the housing market and the conveyancing process, which typically takes between two and four months.
How to transfer or sell an inherited property
If the deceased was a sole owner
If the property was owned outright by the deceased, you will need to transfer it out of their name.
The method you use depends on what the beneficiaries want to do with the property:
- Transfer to a Beneficiary: If the property is being passed on to someone named in the will, the executor will transfer the legal ownership using a Land Registry form known as an Assent (Form AS1). This registers the new owner on the title deeds.
- Sell the Property: If you are selling the property to a third-party buyer, the conveyancing process is largely the same as a normal sale. The Grant of Probate or Letters of Administration proves you have the legal right to sell. You will use a Transfer of Whole (Form TR1) to complete the sale.
If the deceased was a joint owner
If the property was owned with another person, such as a spouse or partner, and they are still alive, the legal ownership automatically passes to the survivor.
In this case, you do not need probate to deal with the property itself.
The surviving owner needs to notify HM Land Registry of the death using Form DJP (Deceased Joint Proprietor).
This form, along with an official copy of the death certificate, will remove the deceased’s name from the title deeds.
Are you liable for tax on an inherited property?
There are three main taxes to consider when dealing with an inherited property: Inheritance Tax (IHT), Capital Gains Tax (CGT), and Stamp Duty Land Tax (SDLT).
Inheritance Tax (IHT)
IHT is a tax on the deceased person's estate, not on the beneficiary. It is calculated on the value of the estate and is paid by the executor from the estate's funds before the property is transferred or sold.
The current threshold is £325,000, but reliefs such as the Residence Nil-Rate Band can increase this. This is not a tax you, as a beneficiary, pay directly when you sell the property.
Capital Gains Tax (CGT)
You may be liable for CGT if the property's value has increased since the deceased died and you sell it. The gain is calculated as the difference between the sale price and the property's market value at the date of death.
If you sell the property immediately, any gain will likely be minimal, so no CGT is due. However, if you keep it for a long time and the value goes up, you may have to pay CGT on the increase.
Stamp Duty Land Tax (SDLT)
You do not pay SDLT when you inherit a property. However, if you inherit a share of a property and decide to buy out the other beneficiaries, you must pay SDLT on the value of the share you are purchasing. This is because HMRC views the transaction as a property purchase.
For example, if you and two siblings inherit a house worth £300,000, and you decide to buy their two-thirds share, you would have to pay SDLT on the £200,000 you pay them.
- Get up-to-date property tax advice on SDLT, CGT, IHT, personal vs partnership vs company structure.
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Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
