Upon finding out you are due to inherit property you will need to consider the options for moving forward depending on the situation and your personal circumstances, usually coming about as the result of a death emotion can be high, clouding decision making.
There are three obvious options when it comes to inherited property; sell it, rent it out or move in, in reality it is not always this straight forward. We consider the various scenarios and potential options for those who have come to inherit property.
In many cases when inheriting property other people are involved, whether you’ve inherited a part of a property along with others or you have inherited a part of a property where another owner still lives there.
In the instance that another owner still lives in the property that you’ve inherited a part of it might be that their right to remain is detailed in the will.
If you’ve inherited a property that is rented out and has a tenant in situ you will have certain new responsibilities as a landlord and will need to consider their legal rights when planning what to do with the property.
When you inherit a property with others, usually siblings it’s important to consider everyone’s priorities and find an amicable solution. Whilst sentimental attachment can play a large part in decision making, there are many factors to consider past the emotional.
Selling an inherited property
Whilst Capital Gains Tax is wiped out upon death, should you decide to keep the property for now and sell further down the line tax will mount again so it is important to take professional advice and thoroughly consider your options.
In the instance that you have inherited a large property and you do not plan to live in it yourself you may choose to sell and then place the money into several different asset classes. It might be that you decide to purchase smaller properties more suited to work as rental investments.
Monitor the local property market before making any snap decisions, if it truly is an awful time to sell and you do not need to do so in a hurry perhaps consider if it would make financial sense to rent the property for a period before selling, being mindful of the tax implications.
Letting an inherited property
If you have decided that you would like to rent out the property which you have inherited it is important to take advice from your financial adviser and a property tax specialist as they will be able to help you establish the best way for you to own and manage the property and take profit.
If you’ve not rented a property before it’s useful to seek professional help with the accounting as you’ll need to file tax returns; income tax is due on profit you will earn from your inheritance, such as rental income.
You’ll need to consider who will be finding tenants and managing the property. Whilst you could do this yourself it is a large consideration. If you already have a job and fairly busy life it might be worth considering employing the services of a managing agent who can look after the property for a fee.
Other considerations to make are factoring in the costs in making the property ‘rental friendly’. Depending on the size of the property you might be required to obtain a HMO (House in Multiple Occupancy) license after meeting the requirements which are dictated by the local council. Rental properties require regular gas safe checks, you might need to install a new boiler or system to meet the standards necessary and you’ll need insurance which covers rental property specifically.
Keeping an inherited property
Unless you are planning to move into an inherited property and make it your main residence, choosing to keep it is making an investment for the long term, so it is important to consider this decision thoroughly.
If you decide to keep the property to serve as a second home then its important to let your tax office know as you can only have relief from capital gains tax on your main residence.
Unsure what to do?
The period following a death can be incredibly emotional and challenging, employing the services of professionals such as financial advisers, tax specialists and solicitors can help you to make well-informed decisions.
This article is only to provide brief commentary on the topic of inherited property and should not be relied on as legal advice. No liability is accepted for such reliance. We recommend that you obtain advice from a professional.
We can assist with the management of your sale if you wish to have a knowledgeable, unbiased party working with the selling agents, and should you be looking to purchase a more suitable property for investment or as your home or a property to be placed trust upon selling an inherited property our team of professional property finders are well placed to help. For a no obligation discussion regarding our services please, contact us.