It is becoming increasingly common for individuals to inherit property from family members or close friends who pass away.
Once you have grieved their passing, you’ll be required to make a number of decisions regarding the property you’ve inherited; from taking on the mortgage repayments to considering a cash house sale.
It’s likely you will have inherited a property in one of three ways:
• In the event you held a property under a ‘joint tenancy’ with a friend or partner, you will automatically inherit their half of the tenancy.
• If a loved one or close friend owned a property outright they will have outlined who they want the property to be given to within the terms of their will.
• In the event a property was owned as a ‘tenancy in common’, the deceased will have been required to outline who inherits their share within their will.
If you inherit a house, you won’t be required legally to pay tax on it at the time you inherit it. However, if the property holds too many memories and you’d rather make a swift cash house sale, you will be required to pay Capital Gains Tax (CGT) on any profit made on the property.
One way around this is if you make your inherited property your main place of residence. If you sell the property down the line you will not be required to pay CGT as it will be regarded your primary home. You must nominate your main place of residence within two years of inheriting a property to HM Revenue and Customs (HMRC).
Additionally, if you decide to rent out the property, you will be liable for Income Tax on earnings made on any rental income.
In the event you inherit a property which has an existing mortgage to pay, you will be responsible for maintaining the monthly repayments. It’s important to note that this is applicable even if you don’t live at the address. If repayments aren’t made, the property will be repossessed by the mortgage lender.
One final way you might inherit a property is in a trust, which manages and maintains money or property for beneficiaries who may not be old enough or responsible enough to look after it yet themselves. Money and property held in a trust may become available to a beneficiary when they reach adult age.