Selling inherited property: an easy guide
Selling inherited property can be a difficult thing to organise, especially as it often happens in the wake of losing a loved one. There are formalities that can make this process tricky, but with the right advice and guidance, you can reduce the stress of selling a property you have inherited.
This checklist for selling inherited property will cover:
- Probate Sale of Property
- Applying for Probate
- What to do if you’re selling to pay inheritance tax
- If you’re a beneficiary
- Dealing with utilities
- Capital gains and inheritance tax
- Who will sell the property
Firstly, your relationship to the inherited property has to be established. Most people won’t know this, but even if you are mentioned on the will as someone who will inherit the property, you still need to apply for probate before you can legally sell the inherited property. Whereas if you’re a beneficiary – someone who has been handed a share of the estate by the direct inheritor – it is much more simple.
Probate sale of property
Before we get stuck in, let’s take a look at what probate is:
Probate is the process of applying for the right to deal with someone’s estate (i.e. property, car, money) after they have passed away. And as for whether you need one to sell inherited property – the answer is somewhat tricky.
If you are mentioned in the will as someone who can deal with their estate (an executor), you can apply for a grant of probate from the probate registry. This will prove that the executor has the authority to deal with the deceased person’s estate, allow them access their bank account, and share out any money or assets amongst beneficiaries (people that are entitled to a share).
If there is more than one executor on the will, the probate application form and guidance notes will explain what to do.
If no will was left, a relative or close friend can apply to the probate registry. However, in this case, they will apply for what’s known as a ‘grant of letters of administration’. If this is granted, they will be known as ‘administrators’ and have the same authority as executors.
You will NOT need probate if:
- You already a joint share of the property, meaning it will be passed onto you by survivorship from the other joint owner’s passing.
- You have a joint bank or building society account. If this happens, the bank should only need to see the death certificate to transfer the money to you. A grant might still be needed if there is money or assets held in other bank accounts, or for pay-outs from insurance policies.
- The sum of money left in the account was very small. For this you will need to check with the bank and find out whether they will release the assets without a grant. In general, anything under £5,000 will not require a probate to be released.
Applying for probate
You can apply for probate either by yourself or through a solicitor, if you prefer. Before you send off any forms though, there are certain things you need to check first.
Firstly you’ll need to go through the paperwork and establish the assets and liabilities left by the deceased. This essentially means tallying up property, bank accounts and building society accounts. Some can be more complex, and will include investments and personal effects. Anyone you want a final statement from will need to be sent a death certificate.
Now that you’ve got that all wrapped up, you’ll need to officially apply for probate, you do this by:
- Completing a probate application form
- Completing an inheritance tax form
You will need to know (or figure out) the estates worth, and then based on that you may need to pay inheritance tax. But even if there is no tax owed, you will still need to fill out an inheritance tax form.
- Sending your completed application
When completed, you’ll need to send your application to the probate registry. This will need to include:
- Probate application form PA1
- Inheritance Tax form
- The death certificate
- The original will and 3 copies – and any amendments to it
- The application fee of £215 (there’s no fee if the estate is under £5,000)
- Swear an oath
You will be sent an oath by the probate office, and for this, you will need to go to either; a commissioner for oaths (a solicitor) or a local probate office.
This oath will promise that all the information you have provided is the absolute truth.
Next, as mentioned above, dependent on your position to the will (i.e. executor or beneficiary) you might have to go through different procedures to sell the inherited property:
What to do if you’re selling the inherited property to pay inheritance tax
In order to do this, you will need to apply for probate as discussed above. You can put the house on the market before you have probate, but obviously, a sale won’t be able to go through until it is finalised. However, if you’d rather keep the inherited property but are worried about the costs of the tax, you can choose to pay it in instalments. This will be in instalments, once a year and will last for 10 years.
This also works in a similar way if you’re the executor and planning on selling the inherited property so you can split the fee amongst the beneficiaries. Just take into account that inheritance tax will be needed to be subtracted from the total of the house sale before it is split.
If you’re a beneficiary
As a beneficiary, you will not have to pay inheritance tax on anything you inherit from the deceased’s estate. However, don’t expect to receive your inheritance straight away; the executors need to make sure that any debts on the deceased person’s estate have been paid. If they start sharing out inheritance to the beneficiaries before doing this, they might end up having to pay for these out of their own pocket.
Once you’ve sorted out the particulars, there are other things you might overlook that are worth thinking about.
Dealing with utilities
When you are trying to sell your inherited property you will need to sort out a number of potential payments. These might include:
- Final bills for utility providers i.e. gas, electricity and water
- Bills or potential court action of unpaid council tax
- As the house is empty it will not be insured, therefore you’ll need to buy empty house insurance.
Capital gains and inheritance tax
You will need to pay inheritance tax on a person’s estate if it is worth more than £325,000. If they give their estate to their children or grandchildren, the threshold increases to £425,000. You will need to pay this if you are the executor or the administrator of the will, and you can use funds from the estate to pay this. You will have 6 months after the person has died to pay the tax.
The rate of inheritance tax is 40% on anything above the threshold (£325,000, or £425,000 if being passed to children or grandchildren). This can be reduced to 36% if 10% or more of the estate is donated to charity.
Whereas, Capital Gains tax is the tax of the profit you make from the sale of the assets you have acquired.
Who will sell the inherited property?
It’s best to go through an estate agent – or even better, an online estate agent who could save you thousands in fees.
If you’re looking for someone who will be able to sell your house quickly, for the price you want and for a small fee compared to high street estate agents – look no further than easyProperty. Click here to find out more.