When purchasing a property, most buyers will already know their intent behind the purchase. Whether this be for a family home, a buy-to-let investment or to renovate & resell at a profit. However, when you inherit the property, it may not be so clear for you.
Before being able to formally acquire the property, the legal process needs to be resolved. The executors of the will need to begin the probate process; including gathering & evaluating the assets before allocating these to the relevant parties. The executors or personal representative needs to ensure all debts and any tax due is paid before distributing the assets of the estate.
If the will dictates that the property should be received as a split ownership, executors recommend that the property is sold & the money is divided. Once probate has been completed, the ownership of the property will be transferred to the relevant parties.
If you decide to sell or rent the property, you may have to pay tax on any income or profit made. Also, consider that should you inherit a property with a mortgage, the payments will need to be made even if you don’t live there.
1. Selling inherited property
All of the belongings need to be organised & removed from the property. The space will most likely require some work, paint job & clean. Look into the current value of the property. Make an executive decision on whether any works can be conducted before selling to better this value.
If there is a tenant living in residence, their legal rights need to be considered if you wish to sell. The current resident may also be another owner of the property. There is also the possibility that their right to stay may be set out in the will.
2. Renting an inherited property
Rather than creating a one lump sum return on the property, you could retain it and rent. This way you will have a constant income stream whilst retaining the asset. Should you wish to change the purpose for the property later, this may be the best option. Although, you have to consider this could be more work from your side. To remove some of the stress from this, you can always hire a managing agent to locate a tenant and attend to their needs. However, in the long term, it could have a better return. There is also the added benefit that it won’t have to be dealt with instantly, which may be preferable so close to a loss.
3. Moving into the property
You can choose to move into the property, paying off any debts on it or getting a mortgage.
4. Gifting an inherited property
Should you be in a fortunate enough position whereby you already own property and do not require the income from selling or renting, you may be able to gift the property. Many find it suitable to hand over the asset to their children or close relative in this circumstance. By gifting to your children, your inheritance tax liability will be reduced when you pass away. If you live for another 7 years after gifting, your children will also not require to pay inheritance tax on it.
5. Changing the purpose of the property
There is always the option to change the purpose of the property. Currently it is used as a residence but should you wish, you can always utilise it for commercial space, work spaces etc. Really the options are endless as long as you have gone through the correct procedures.