So you’ve inherited a house. What happens next?
You probably have a lot of questions at this point. So in this post we’ll cover all the things you should expect, along with some of the steps you should take to protect your inheritance.
If you have any specific questions about your newly inherited house, particularly regarding risk management or home insurance, our friendly team is always happy to help. Get in touch by calling 0208 290 9086 or emailing personal@anthonyjones.com.
What Does Probate Mean If You’ve Inherited a House?
After a person passes away, the executors of their will need to spend time settling all debts and setting all affairs in order. This process is known as probate, and beneficiaries cannot access anything they’ve inherited until the process is completed.
This means that, if you’ve inherited a house, you won’t be able to make any decisions about your inherited property until probate’s complete. Unfortunately, probate can be a lengthy process.
There are a few of things you can do while you wait for probate to complete, which might make things more straightforward for you once you can access your property.
Probate Insurance
Ensure the house has adequate insurance to cover it throughout the probate period. Dedicated probate house insurance is vital regardless of whether or not the home will be occupied during this process.
It should be up to the will’s executors to ensure this insurance is in place. But even if you’re not an executor, you could still do all you can to make sure there’s adequate cover to protect your inheritance. Read our full guide to probate house insurance.
What If Your Inherited House Has a Mortgage?
You can spend the probate process ensuring everything’s sorted out regarding the home’s mortgage.
First, get in touch with the lender and let them know what’s happened – the original mortgage holder’s passed away, and you’ve inherited their property. Most mortgage providers have grace periods, so you may not have to worry about any repayments until probate’s complete.
What happens next will depend on the specific circumstances. There may be a life insurance policy in place which could clear the mortgage. Sometimes, a property’s mortgage can be viewed as a debt that needs to be settled using the deceased’s assets before the property can be passed on.
But if not, you’ll have to talk to the lender to find out what they want to happen next. They’ll advise you on the terms of the mortgage, and you can discuss putting the mortgage in your name so as to arrange for a new repayment plan.
This could prove difficult if you already have a mortgage for a different property. You’ll have to pass affordability tests, and your existing mortgage payments could complicate matters. For this reason, your best course of action might be to sell your inherited property so as to pay off the mortgage. Here’s a good guide from the Home Owners Alliance on the steps you’ll need to take.
What Tax Will You Need to Pay On Your Inherited House?
If someone leaves you a home in their will, then you may need to pay some inheritance tax. This will depend on the value of the house you’ve inherited, along with the overall value of the deceased’s estate. If their total estate comes to more than £325,000, then there’s a 40% inheritance tax on everything over that amount.
However, if you’re a direct descendent of the deceased – such as a child or a grandchild – and if you’ve inherited a “main residence”, then your inheritance tax may be reduced.
The “main residence nil-rate band” tends to change every tax year. But at the time of writing, it stands at £175,000, which is added to the main £325,000 nil-rate band. So in theory, you may be able to inherit a property worth up to £500,000 without having to pay any inheritance tax.
You’re also exempt from inheritance tax if you inherit a property from your spouse or civil partner.
If any inheritance tax is due on the property, you may be able to set up a payment plan. This way, you shouldn’t have to worry about selling the property so as to settle your tax bill.
Getting Insurance For Your Inherited House
Above we covered the importance of getting adequate insurance to cover the house during the probate process. But you’ll also have to think about your insurance needs once probate is complete, and the house becomes yours.
This will largely depend on what you decide to do with the house – whether you intend to live in it as your main residence, treat is as a second home, sell it, or let it.
Whatever you decide to do with your inherited house, our personal and property insurance experts can advise you on your insurance requirements. We can help you understand the risks you might face and support you in finding cover that meets all of your needs.
For a friendly chat, get in touch by calling 0208 290 9086 or emailing personal@anthonyjones.com.
