Inheriting a property from someone who’s died may sound like a dream come true, but in reality it can often be a complicated process to go through. We take a look at what’s involved with property inheritance and explain the jargon involved.
Before you’re able to fully take charge of the property ownership, the probate process has to take place, to determine all of the assets of the deceased individual. If inheritance tax needs to be paid this, and any other taxes and debts, need to be resolved before the property is granted to you.
Once you take ownership of the property, it’s not necessarily all plain sailing either, as you’ll then be responsible for the full upkeep and maintenance of the building. If it’s been left empty for a while – the probate process can sometimes take a while – then it may not be in the best condition.
If you weren’t expecting to suddenly have ownership of a property, especially if you already have your own mortgage to contend with, it can be an unwanted asset. Selling the inherited property is always an option, but with the current market situation, coupled with any issues involving the state of the property, you might be set for a long drawn-out sale process.
If you have inherited a property in London that you don’t want to keep and want a quick sale, we can help. Call us today on 0800 634 5892 and we can discuss the options available.
An A to Z of property inheritance jargon
If you’ve never had to deal with probate or property inheritance before, it can be a bit of a legal minefield. Suddenly there are all sorts of new terminology banded around and, unless you’re familiar with it, it can be confusing.
To help you get to grips with all the property inheritance and will-related jargon and understand what solicitors are on about, here’s a useful A to Z guide to the terms you’re likely to come across.
If someone dies without leaving a will, an administrator will be responsible for finalizing the estate (rather than an executor).
A beneficiary is someone who receives an inheritance from a deceased person’s estate.
When someone leaves a bequest, it means that have left money, property or other owned assets to someone else when they die.
The estate is the term used to describe everything someone leaves behind when they die, after debts and funeral expenses have been paid. This includes property, savings, investments, money in the bank, cars, jewellery, pets and all other personal possessions.
Estate administration is the process of winding up a dead person’s estate. It includes tasks such as paying off any debts, sorting out and paying taxes – such as inheritance tax, closing accounts, notifying relevant parties and distributing the assets.
A person who has been named in the will as the person who will finalise the estate. The executor is responsible for dealing with the probate and estate administration process.
Anything of value, such as money, possession or property that is given away before death is classed as a gift. Gifts can incur an inheritance tax charge (except for gifts to spouses or civil partners). See the Seven Year Rule and Taper Relief for more details.
IHT Threshold (or nil-rate band)
The IHT threshold, or nil-rate band as it’s sometimes also known, refers to the amount that can be passed on before inheritance tax is paid. The current IHT threshold is £325,000 per person. Anything over this limit is subject to 40% tax.
Probate is the legal process that needs to be completed when someone dies and involves dealing with their assets. During probate, all their assets, debts and taxes will be identified and paid. The remaining assets, including property, will then be transferred to the beneficiaries of the will. Discover more about what’s involved with probate by reading our Beginner’s Guide to Probate Property.
Seven year rule
If gifts of value (such as property, money or possessions) have been given seven years or longer before a person’s death, then they aren’t subject to an inheritance tax payment. Any gifts made in the seven years prior to their death are subject to tax, which is charged on a sliding scale.
Taper relief is the sliding scale of inheritance tax that is used for items gifted prior to death:
• Gifts made up to three years before death are taxed at the full rate of 40%.
• Gifts made three to four years before death are subject to 32% tax.
• Gifts given four to five years prior to death are subject to 24% tax.
• Gifts made five to six years before death are charged at 16%.
• Gifts given six to seven years before death are subject to 8% tax.
Inherited a London property that you don’t want to keep? Contact our quick house sale specialists today!