If you are reading this post as someone who has recently lost a loved one, please accept our condolences. Dealing with the financial issues of an inherited property sale is an extra burden we’re sure you do not need at the moment.

If the dust has settled somewhat, you may be thinking about your next steps.  This extended blog post aims to guide you through the most important considerations when handling property or land of someone who has passed away.

We have split this post into a number of sections.  Our aim is to run through some common issues we observe as fast private buyers of inherited property.  You may, however, want to skip certain parts that may not be relevant.  To do this, please use the contents menu below or scroll down.

Navigating through the probate process and dealing with an inherited estate can seem daunting. However, a little bit of research usually comes back with a simple solution – even to the most challenging problems.  This means that you will achieve the best outcome, despite the difficult circumstances.  Remember to take your time, ask as many questions as you need and never succomb to any pressure.

Property Solvers is also happy to help wherever we can – please feel free to call us 24/7 on 0800 044 3733, visit our probate / inherited property page or email us at info@propertysolvers.co.uk.

Getting the Right Advice

Whether you are speaking with lawyers, accountants, other private property buyers, estate agents or auctioneers, you should never feel pushed towards anything you are not 100% comfortable with.  Especially where there is property or other expensive assets, you may find that people throw different opinions at you.

Although the whole process appears confusing, there are certainly professionals who can help you in the right way.  Our advice is to always look for experienced legal advisors with no hidden agendas.  If a solicitor drew up the will originally, for example, it is usually a good idea to use that firm.   However, this is not an obligation.

The Government guidelines (what to do after someone dies) can also help you understand the process.  The HMRC Probate and Inheritance Tax Helpline telphone number is 0300 123 1072 (for relevant forms and advice).

If you choose to move forward without legal advice, please make sure you are fully aware of the consequences of your decisions.

What is Probate?

Probate is the legal process of organising the estate of a person who has passed away.  The estate usually consists of property, land, money, business interests, stocks, shares, investments and personal possessions.

Please note that, even if you expect to inherit part or all of the estate, you will still need to apply for probate unless:

  • You have joint-ownership of the estate with your spouse or civil partner;
  • You have a joint bank or building society account.  However, if the person had other bank accounts probate will be necessary;
  • The sum of money left in the estate is under £5,000;
  • There is no property, land, significant business interests or shares within the estate.

 

The Role of the Executor

When someone leaves a will, they normally choose a person to execute the process correctly.  This person is called an executor and can be a relative, friend, solicitor or accountant.  In England and Wales an executor may be Public Trustee or an Official Solicitor (if there is no one willing and able to act).

The executor must have a “grant of probate” to proceed.   His/her role is to ensure the payment of outstanding debts, taxes and other administrative costs.  They also make sure the payment of any financial gifts and the transfer of the estate to the beneficiaries happens in line with what is stated in the Will.

If there is no Will, a relative or close friend can apply for a “grant of letter of administration”.  As an adminstrator, they will have the same authority as an executor.

With no valid Will, the executor or administrator usually follows intestacy rules.  This means that the law decides how the estate is distributed.  This is based on the total value of all assets and belongings, minus any debts owed and the applicable tax.

Legal Fees for Probate Cases

In spite of the costs, many executors prefer to take on a probate solicitor to handle the entire process.  This can remove many of the headaches and ensure things are done correctly.

Probate solicitor fees usually vary depending on the complexity and size of the estate.  Professional firms will normally first spend some time undertaking a “fact-find”.  Providing everything is clear with regards to the estate, they should be able to give you an idea of the costs.

It is a good idea to make sure the solicitor also has a conveyancing department to assist with any property related matters.

Some also choose to fill out the relevant forms themselves, and then use a solicitor to check through everything.  If the estate’s affairs are fairly simple, then this can be a good way to do things.

Starting The Probate Process

Firstly, the value of the estate must be established.  This means undertaking the following:

Establish the Value of Assets

Assets within an estate include property, savings, stocks, shares, private pensions, jewellery, investments and other valuable items.  If a property, shares or bank account is jointly owned, then this will not be distributed to any beneficiaries.  Here, the asset goes to the surviving joint owner.

Find Out the Value of Any Gifts

If the person gave away any money or assets 7 years before they passed away, this must be declared.

Establish the Amount of Debt

This includes both mortgages (secured debt) through to personal loans and credit cards (unsecured debt).  See the dealing with debts sections below for more detail on this issue.

Calculate the Value of the Estate

This is the total value of the estate minus the total value of debt.

You or the solicitor working on your behalf will need to fill in the PA1 (probate application) form, the Inheritance Tax form IHT400 (if the estate is worth over £325,000) or the Inheritance Tax form IHT205 (if the estate is worth under £325,000). These will be sent to the closest Probate Registry Office alongside the Inheritance Tax form, death certificate and 3 copies of the Will.  You must also swear an oath once this is done.  Please note that different rules apply in Scotland and Northern Ireland.

Finding the Will

If you are unsure of the location of the Will, you may want to look into the options below:

  • Speaking to the Principal Registry of the Family Division.  There may be a certificate of deposit which means that you can access the Will.  However, if you cannot find this, it is worth asking the Registry if they have a copy.  The Probate Helpline number is 0300 123 1072 (lines are open Monday to Friday 9am to 5pm);
  • If the person passed away at a care home or hospital, it can be worth checking with them;
  • Professional Will writing companies often send letters to beneficiaries.  There may be a paper or digital copy on file which you can use to track down the Will;
  • Speak to any solicitors or accountants that the person who passed away used previously;
  • The bank / building society sometimes holds a valid copy of the Will;
  • The Will may be registered with a commercial organisation such as Certainty – also known as the National Will Register.  Note that there is a fee to search for a Will on their database, however the organisation can contact solicitors on your behalf.

Check that the Will is Valid

For a Will to be legally binding, the following rules apply:

  • The Willwriter was over 18 years old at the time;
  • There is no evidence of undue pressure.  For example, if there was force or influence to pass a property on to a specific person / group of people then the Will may be invalid;
  • The person writing the Will must be of “sound mind” (i.e. fully aware of its contents and what they signed);
  • There were two adult independent witnesses present when the Will was signed;
  • These two witnesses also signed the Will.  The witnesses cannot be partners or beneficiaries;
  • The Will should be dated.

 

Most specialist firms will make sure the above is done correctly.

However, some wills are not drawn up by a solicitor or a Willwriter registered at The Institute of Professional Willwriters.  You may find, for example, that a Will is handwritten on a piece of paper. There are also templates available from online stationers.  As long as the document is appropriately witnessed as described above, there is a good chance it will be deemed as valid.  This is usually the case if the terms are simple.  For example, there are usually no problems when all the estate goes directly to a wife, husband or immediate family.

Generally speaking, however, Wills put together professionally are usually more legally watertight.  This is especially the case where the divisions of the estate are more complex.  If the Will is deemed not to be valid, the distribution of the estate will follow the rules of intestacy.

Note that there may also be a Codicil.  This is a legally binding document written by the person that passed away to make changes to the Will.

Understand the Contents of the Will

If you are a beneficiary (i.e. someone written in the Will as an inheritor) and had close conversations about the contents of the Will, the process should be fairly simple.

However, where things may not be so clear, it is important to fully understand how the Will was written.  Despite the extra costs, we always suggest seeking proper legal advice especially if:

  • The terms of the Will are unclear;
  • There are parts of the Will that seem confusing and open to intepretation;
  • The estate affairs are complicated (for example, if the estate is split between many people);
  • Part or all of the estate will pass to children under the age of 18;
  • Money or property is placed in some form of trust;
  • Part of all of the estate consists of foreign property, land or other investments;
  • The person who passed away owned a business / businesses or had significant shareholdings;
  • There were people who were financially dependent on the person that passed away that are not immediate family;
  • The terms of the Will may be disputed.

 

What to Do If There is No Will – Intestate Rules

After exploring all the avenues discussed above, if there is still no evidence of a Will, the rules of intestacy will apply.  Although this does tend to complicate matters, it is still a common occurrence.

In such circumstances, you have the legal right to inherit the estate if you were married, in a civil partnership or closely related to the person that passed away.  Note that if you were divorced, the civil partnership has legally ended or you were cohabiting as a partner, then you cannot inherit under intestacy rules.  Provided the estate is worth over £250,000, children, grandchildren and great grandchildren will also have the right to inherit part of the estate.

The partner will inherit all the personal property and belongings, the first £250,000 of the estate and half of the remaining estate.  The estate will include the value of the property (determined using a professional Royal Institute of Chartered Surveyors valuation).  There will also be a deduction of tax once everything is processed.

As stated below, even if there is no Will, where the partners were beneficial joint tenants at the time of death, the other partner will automatically inherit the share in the property.  Similarly, if there is a joint bank or building society account, the other partner will inherit all of the money within it.

Observing Intestate Rules Related to Other Members of the Family

In relation to intestacy rights for children, grandchildren and other relatives it is worth noting the following:

  • Children that have unmarried parents or have not registered a civil partnership can inherit from the estate of a parent who dies intestate;
  • Adopted children can also inherit the estate under the rules of intestacy;
  • If the children are under the age of 18, trustees will manage the inheritance on their behalf;
  • A grandchild or great grandchild can only inherit if their parent or grandparent passed away before the intestate person.  They can also inherit if their parent is living when the intestate person passes away but dies before reaching age of 18 years old without having married or entered into a civil partnership.  Here, grandchildren and great grandchildren receive an equal share of the proportion that their parent or grandparent would have been entitled to inherit;
  • Brothers, sisters, nieces, nephews and parents may also have intestacy rights.  However, this will only be the case if there are no surving spouses, civil partners, children, grandchildren or great grandchildren.  The amount of the estate may effect the right to inheritance in these circumstances.  Note also that in the case of nieces and nephews, if the parent (i.e. brother or sister) directly related to the person who has passed away is also passed away, then there may be an issue with intestate inheritance;
  • The process gradually filters down through to other members of the family. Other relatives will then have a right under intestacy rules in the following order: (1) grandparents, (2) uncles / aunts, (3) half-uncles / aunts, (4) cousins and (5) half cousins;
  • Close friends, cohabiting partners, carers, relations by marriage cannot inherit any part of the estate if there is no Will.

 

Bona Vacantia

Under the rules of intestacy, should there be no surviving relatives, then the estate passes to the Crown.  This is known as bona vacantia and more information can be found on the government website.

Dealing with Debts – Understand the Different Types

Once there is a grant of probate, any unpaid debts will need to be cleared or managed.  Every situation is different and much will depend on the amount owed.  Therefore, firstly, you will need to get an understanding of whether the debts are unsecured or secured:

Unsecured Debts

Also known as individual debts, these are where someone has taken out a debt in his/her name. Examples include credit cards, personal loan(s) from the bank and unpaid bills.  The bank stops payments after death and during the probate process.

Secured Debts

Where someone has taken out a loan against an item (such as a car, furniture or other household goods) or an asset (such as a business or, more commonly, a property via a mortgage). See the section below on dealing with mortgage debt.

You may need to go through the paperwork or you can use a service like Check My File where you can see who the lenders are.  You will then need contact each lender individually and request statements for the outstanding debt balance.  Note that the executor may do this, provided they have Power of Attorney (authorisation to deal with the financial affairs of the estate).

Dealing with Debts in Probate Cases

After checking the terms of each loan, the executor may advise that you will need to take on the debts yourself or use any savings left in the estate to pay the debts off.  Provided there is enough equity in any owned property or other assets, you may also decide to use the proceeds of an eventual sale to clear what is owed (see below for what options you have when selling your inherited property).

There is an order of priority for the payments of debts / costs:

Debt priority in probate cases - Selling your inherited property (Property Solvers)

It is also worth noting the following:

  • If there is a guarantor(s) for any of these debts, then he/she/they will be liable;
  • If there are joint debts, the loan contract will specify how to deal with the debts;
  • There is also a chance that an insurance policy is in place to pay off the debt in the event of death.  The lender(s) or a solicitor should be able to advise if so.

 

Please remember to deal with these issues as a priority, especially if the amount of debt is high.

Struggling to Pay off Debts After Someone Has Passed Away?

Dealing with any unpaid debts makes most people anxious and, with the added loss of a loved one, the stress may seem too much.

Please do not worry, help is at hand.

Most lenders will be sympathetic as long as you regularly communicate with them.  If, however, you are unsure about how you can deal with any extra financial burden the following organisations can help[1]:

Before selling your property fast - always contact debt organisations.

Jointly Held Property – What Happens When the Spouse / Partner Passes Away?

There are two ways of you can jointly own a home: as a beneficial joint tenancy or a tenancy in common.

Beneficial Joint Tenancies

If you were the joint owner of a property with a person that has passed away, then you will automatically inherit the other share of the property.  You become the sole legal owner, even if there is no Will or the Will states anything different.  There is no need for probate or letters of administration unless there are other non-jointly owned assets. The property might have a mortgage (see below on how to deal with a mortgaged inherited property).

Tenants in Common

Each joint owner has a separate share of the property.  This means that the surviving partner / spouse does not automatically inherit the other person’s share.  When either of the joint owners passes away, that share goes to the person named in the Will.  This may not necessarily be the spouse / partner, but could be a child from a previous marriage, for example.  Probate or letters of administration are needed so that the executor can pass the share of the property to whoever inherits according to the Will or the rules of intestacy. Again, the property might have a mortgage (see below on selling an inherited property with a mortgage).

Inherited Property – Your Options Moving Forward

If you have inherited a property, once the legal and tax processes have gone through (i.e. there is a grant of probate), you will need to start thinking about your options.  Here are some ideas worth considering:

  • If the property is your family home already, staying on is a fairly simple choice for most.  However much will depend on whether there is a mortgage. Provided there is a sufficient amount of equity, and you can afford the mortgage, then this is usually the best course of action;
  • If you have inherited a second home, renting out your property can be a good idea.  Here it will be necessary to understand your responsibilities as a landlord.  If there is a mortgage, you will also have to obtain a “consent to let” (this usually lasts for about 12 months);
  • If you have a mortgage, it is often worth talking to the lender or a qualified mortgage broker to see if you can get a competitive deal.  Again, provided the remortgage debt is not too high, this is often a good option;
  • Selling the property may be an idea, especially if the home is now too large or unfit to your requirements.  Note that you can put your house on the market any time you wish, however a sale cannot complete until you have a grant of probate.  Please also be sure you understand your obligations regarding inheritance tax.

 

Selling an Inherited Property – The Estate Agent and Auction Route

If you decide it is better to sell up the property, using an estate agent is the most common way to get the best price.  Please note that the process often takes longer than many expect.   There will a number of associated fees to pay and you may find difficulties to sell if the property needs refurbishment and/or modernisation.  However, if the property is in a desirable area, and you are in no particular rush to sell, then there are usually no major problems.

Selling your property at auction is another option you may want to look into. Note, however, that the process can take just as long as an estate agency sale. On the positive side, these days auction houses are attracting all sorts of buyers and sold values of property are sometimes higher than with estate agencies.  The added benefit is that sellers have more certainty of sale.

Remember to take your time with any decision you make.  Please do not let estate agents or auctioneers pressure you into something you may regret down the line.

Selling an Inherited Property with a Mortgage

If you have inherited a property with secured debt against it, the mortgage company may:

  • Request for full redemption – i.e. pay back the mortgage immediately.  This may mean you will need to sell the property, although most lenders will be sympathetic to your situation as long as you are keeping up with the mortgage payments. They will also be aware of the applicable probate / intestacy laws;
  • Wait for proceeds of the estate to come through, the funds of which can pay down some or all of the mortgage debt.  If you take out another mortgage, there may be a requirement to sign new terms;
  • Request for the clearance of any outstanding mortgage debt using an endowment, life insurance or mortgage protection policy;
  • Ask you to take over future mortgage payments.  Again, the lender may request new mortgage terms.

 

If you do not know who the mortgage lender is, you may need to download the Title Register from the Land Registry or ask a solicitor to find out.  You should also read the mortgage contract closely – especially the “payment after death” section – seeking legal advice where necessary.

Note that, when selling a mortgaged property, you will normally have to pay early redemption penalties (as the terms of the loan are ending before the stated mortgage termination date).

Make Sure You Pay All Taxes Before Selling an Inherited Property

Please speak with a tax advisor / accountant who will make sure you comply with your obligations.  The main ones are:

Inheritance Tax

You must pay this tax on estates valued at more than £325,000.  The tax must be paid before distribution of the estate to the beneficiaries.  If you received a gift in the seven years before the person passed away, there is usually some additional tax to pay (depending on the amount).  Note that it is possible to pay Inheritance Tax in installments.

Income Tax

This usually derives from employment, self-employment, stock / share dividends, investments, business income, residential / commercial property rental income.  Make sure the HM Revenue & Customs (HMRC) are notified so the tax calculation can be adjusted accordingly.  You may have fill in a Self-Assessment (SA) tax return on behalf of the person that passed away.

Capital Gains Tax

This is due if you sell the property or asset during the probate process, and the value increased since the person passed away.  The amount of increase determines the amount of tax owed.  If you keep the inherited property and live in it as your own home (and not rent it out), then you will not be subject to Capital Gains Tax.

Remember, the HM Revenue & Customs (tax authority) will run through the details of the estate carefully.

Inheritance Tax Scams

Please also be aware of so-called inheritance tax “specialists” that will not give the full facts, make false promises and ultimately could end up duping you.  Alarm bells should ring if you are offered a lump sum cash payment in the future, fast release of the estate’s equity or some kind of sell and rent back scheme.

You can check if legal professionals are regulated by the Law Society by clicking on this link.  If a property sale is mentioned, check whether the company is registered at the Property Ombudsman, the National Association of Property Buyers, Anti-Money Laundering regulations and the Information Commissioner’s Office (the government’s data protection agency).

Using Property Solvers to Sell Your Inherited Property

If you decide to simply sell the inherited property, we would be happy to have a no obligation conversation.

We know that this is a very stressful period and our aim is to find the best solution. Before discussing any kind of sale, we will start by exploring all of your options.  There is often a very simple solution to what may seem like a complicated situation.  Where our clients really want to keep the inherited property, there usually is a way – even if the debts exceed the estate’s value.

However, many people do not want the extra burden of keeping the property they have inherited.  In such circumstances, a quick sale through Property Solvers can be the most appropriate choice.

How Property Solvers Work As Fast Home Buyers

We will start by undertaking some research and coming back to you on the same day with a preliminary offer.  Should this be acceptable, we will then organise a viewing to confirm the offer.  The advantage of using our service is that we are private cash buyers of properties in any condition.

We can also exchange and complete on the sale within as little as 7 days.   The added benefit is that you will not need to incur empty property council tax, insurance and other bills.  You may also avoid additional probate solicitor fees.  Furthermore, we guarantee our purchases, there are no unncessary viewings or hassles and we pay all your legal costs.

For more information, please visit our inherited / probate property page, call us any day and time of the week (freephone from your mobile) on 0800 044 3733 or email us at info@propertysolvers.co.uk.

Disclaimer

Please note that the Directors at Property Solvers Limited are not solicitors, accountants or inheritance tax specialists.  Although we make every effort to provide complete and accurate information, Property Solvers makes no warranties, express or implied, or representations as to the accuracy of content in this blog post.

You should always seek professional advice before making any decision, especially when it relates to a property or other assets of significant value.

[1] Citizens Advice Bureau (www.citizensadvice.org.uk) – Shelter: 0808 800 4444 (no immediate risk) or 0808 164 4660 (emergencies) – National Debt Line: 0808 808 4000 (www.nationaldebtline.org) – Business Debtline: 0800 197 6026 (www.businessdebtline.org) – The Money Charity (www.themoneycharity.org.uk) – Debt Advice Foundation: 0800 043 40 50 (www.debtadvicefoundation.org).