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What To Do When You Inherit A Property

UK House

Inheriting a property can feel a bit overwhelming, especially since, by definition, the inheritance comes along with bereavement. With that in mind, here is some guidance on how to approach the situation.

See if there is anything you need to do to safeguard the property

Technically it is the executor’s job to take care of any assets during the probate process. If this is you, then remember you don’t need to do everything yourself, to make sure that the necessary tasks are done.

If it is not you, then you can still offer to help the executor, and it may be in your interests to do so since you will be the one who ultimately ends up with the property. Just remember to agree on actions with the executor.

Check if the property has a mortgage (and if so whether the deceased had life insurance)

Mortgages are issued to named individuals; you cannot “accidentally” inherit one (there are some “generational mortgages”, but those are niche products and a separate issue), the amount owed to the lender, however, must be settled in some way before ownership can be transferred.

What this means in practice is that either the mortgage must be paid off through life insurance or other funds from the estate, or the beneficiary must take on a mortgage in their name and mainly buy the property from the lender for the amount outstanding on the mortgage.

Another option is for the property to be sold so that the lender can be repaid and the person who technically inherited the house actually “just” gets the value of the equity in it.

The UK has a high percentage of home-owners that mortgage lenders are used to dealing with in challenging circumstances and they will be compassionate, as long as they feel that you are treating them with respect.

Pay any tax owed to HMRC

Fairly similar comments apply here. In principle, any Inheritance Tax that’s owed should be paid within 6 months of the deceased’s death, and if it’s outstanding after this time, the Inland Revenue will start to apply interest on the amount owed. However, it’s unlikely they will start threatening to beat down your door and haul you away to prison if you need a bit of extra time to complete probate.

HMRC knows full well that nobody inherits anything until they get their money so can afford to be a bit flexible here, albeit at a price.

Double check what type of home insurance you might need

Yes, when you inherit a property, you will also need to consider home insurance and for this type of situation, there are a few options you can choose from.

Unoccupied insurance is required should your inherited property be unoccupied for more than 30 days. To proceed with this insurance, you will need to check over the property every seven days and ensure the property is maintained over time.

Second Home insurance is ideal if you decide to move into the inherited property but are keeping the property you already own.

Landlord insurance is suitable for those who decide to rent out the inherited property.

Remember that once the property is yours, you are legally responsible for it

Regardless of whether you decide to live in the property, sell it or rent it out, once you own it, any legal responsibilities associated with it now become yours. As a minimum, this involves taking all reasonable steps to prevent the property, creating a hazard for other people.

If you live in the property full-time or rent it out, this is unlikely to be an issue, but if the property is only used for part of the year, e.g. as a holiday home, then you may need to think carefully about how to secure it when you are not using it.

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