The UK government allows citizens to pass on a home to husband, wife or civil partner when they die without being liable for the tax.
However, if the home is left to another person, it does count towards the value of the estate.
There is inheritance tax to pay if the estate is worth more than £325,000, and the government allows up to one year from the date of death to pay any money that is due.
However – for those in the know – there is a way to pass property on to family members without them paying inheritance tax.
Homeowners must either move out and live for another seven years in another property.
Or, if they wish to stay in the property, they must pay rent at the going rate, pay bills and live like that for at least seven years. It’s worth noting the rental aspect of this rule does not apply if only part of the property is given away and the new owners also live at the property.
If homeowners give away their home, move out but die before the seven years is up, the property will be subject to the ‘seven year rule’.
This means inheritance tax will instead be charged at 40 per cent on three years before your die. Gifts made three to seven years before death are taxed on a sliding scale known as ‘taper relief’, which is laid out on www.gov.uk/inheritance-tax/gifts.
Inheritance tax explained: What you should do with inherited property
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Once the tax issues have been dealt with, there are then decisions to be made about what to do with the inherited property.
Elliot Castle, founder and CEO of We Buy Any Home, gave advice on how to make the process of inheriting a property run as smoothly as possible.
Keep and rent the property
If the property is in a good area, for example in a highly-populated university student area or inner city, and in good condition, renting it out is a beneficial way to keep the property as part of your estate, pay off the mortgage and even provide yourself some extra cash.
If you are considering renting out the property you must be willing to commit to rent it out for six months or more, keep the house in good repair and make necessary updates and fixes when required also have a full understanding of the legalities of being a landlord.
You will have to pay tax on any profit you make from the rental income and make sure the property is in full possession of energy, gas and electrical safety performance certificates.
There are two options available for managing a rental property – appoint a letting agent to handle the legal process of moving your tenants in and managing any issues that occur, but you will need to pay them a retainer fee.
The other option is landlord management, which means you are in charge of managing the property and the potential midnight calls about broken boilers.
Inheritance tax explained: What you may owe is explained on the Gov.co.uk website
If you share the inherited property you will have to seek legal advice to draw up an agreement to ensure that all parties are compensated for their part ownership of the property
Live in the property
If the property is desirable, you may decide you would like to inhabit the property yourself. If you are the sole inheritor this is slightly more straightforward, as it is your decision alone whether to inhabit the property. However, if you share the inherited property you will have to seek legal advice to draw up an agreement to ensure that all parties are compensated for their part ownership of the property.
Again, you will need the agreement of your joint inheritors so it is best to discuss this with them before any decisions are made. In either case, there are a few questions you need to ask yourself before you going ahead:
Does the property have any debts? The value of the deceased person’s share is counted as part of their estate. The personal representative or executor for the deceased person’s estate is responsible for settling all financial affairs. They must ensure that all debts and any tax due is paid before they distribute the assets of the estate.
Does the property have a mortgage? If you inherit a property which has a mortgage, you’ll be responsible for the monthly payments even if you don’t live there. If you are unable to pay these, there is a risk the property could be repossessed. An advisor will be able to help you work out your options or negotiate with your lender.
Are there any tenants in the property? If you inherit a property that has a tenant you will have to take their legal rights into account. Giving them proper notice is important and it’s important to seek legal advice to help you negotiate their contract if you don’t understand the agreement.
Inheritance tax explained: You may wish to keep and rent out any property you inherit
Sell the property
If you already own an existing property, or the property you have inherited is not right for you to live in, you may decide that you want to sell it. If you are selling the property with joint inheritors you will need to agree who is going to manage the sale of the property and agree the minimum price you will all accept.
When you are ready to proceed with the sale you then have two options; put the house on the market and sell through estate agents, try your luck at auction or sell the property with a Private House Buying Company which can guarantee a quick and easy sell.
If you prefer to put the house on the market with an estate agent you will need to prepare the property for sale – applying a fresh coat of paint and repairing any damage. It is important to choose your agent carefully to make sure you trust their valuation and desire to sell the home, and you are happy for them to enter the property and conduct viewings if you can’t be there yourself.
However, if it is in your interest to sell the property very quickly due to mortgage arrears, it is located far from your home, or the property is in disrepair, you may be reluctant to invest the time and money to put it on the market.
In this case, you can opt to sell the property through a Private Buying Company such as We Buy Any Home. We will provide you with an initial offer within 24 hours of contact – enabling completion on a house sale in as little as seven days. We will also pay the solicitor’s fees for property sales, so beneficiaries can be assured that the offer made to them, is the full amount they will receive.
Source : EXPRESS