Inheriting property often comes during a period of grief, which makes it a challenge having to go through the many legal and financial requirements that follow.
According to Statista, inheritance tax receipts reached £7.5 billion in 2023-24, which highlights the financial implications that can accompany property inheritance.
- Understand the legal process of inheritance
When someone passes away, their estate—including any property—must go through probate before assets can be distributed to beneficiaries.
Probate is the legal process that validates the will (if one exists) and authorises the executor to distribute the deceased’s assets according to their wishes.
If the deceased didn’t leave a will, the rules of intestacy determine who inherits the property. These rules follow a strict order of priority, starting with spouses and civil partners, then children, parents, and other relatives.
The process usually takes between six months to a year but can extend longer for complex estates.
- Assess the value of the property
Once you’ve established your legal right to the property, getting a professional valuation is essential. This valuation establishes a baseline for inheritance tax calculations and informs your decisions about the property’s future.
For inheritance tax purposes, the valuation must reflect the property’s open market value at the date of death.
According to the Office for National Statistics, UK average house prices have fluctuated in recent years, which means making accurate and timely valuations very important.
- Consider your financial position
Inheriting property comes with financial responsibilities that need your consideration. These may include:
- Inheritance tax liabilities (typically 40% on estates valued above £325,000, though various exemptions and reliefs may apply)
- Ongoing maintenance costs
- Insurance premiums
- Mortgage payments (if the property has an outstanding mortgage)
- Council tax
- Utility bills
You have to analyse your current financial situation to determine whether you can afford these additional expenses or if selling the property would be more prudent.
- Decide what to do with the property
With a clear understanding of the property’s value and your financial position, you can make an informed decision about its future. Your main options include:
Living in the property: This may need adjusting your current living arrangements and potentially selling your existing home.
Renting it out: Becoming a landlord generates income but brings responsibilities regarding property management, tenant relations, and tax obligations on rental income.
Selling the property: This provides an immediate financial benefit, but you have to go through the property market and potentially pay capital gains tax on any increase in value since the date of death.
- Seek legal and tax advice
The complexities of property inheritance often need professional guidance. Probate solicitors can give you assistance in navigating the legal aspects of inheritance, guaranteeing compliance with all requirements and protecting your interests throughout the process.
Tax advisors can help minimise your tax liabilities through legitimate exemptions and reliefs, potentially saving significant sums, especially for higher-value properties or complex estates.
- Manage the transfer of ownership
The final step involves formalising the change in ownership. This needs:
- Updating the property title at the Land Registry
- Informing the local authority about the change in council tax liability
- Notifying utility companies
- Updating insurance policies to reflect the new ownership
If the property was jointly owned, the transfer process depends on how it was held—as joint tenants (where the property automatically passes to the surviving owner) or as tenants in common (where the deceased’s share passes according to their will or intestacy rules).
If you follow these steps, you can go through the inheritance process seamlessly, honouring both your legal obligations and the legacy of your loved one while making decisions that align with your own financial and personal circumstances.
