Legal and Tax Implications of Inheriting a Home

publication date: Dec 10, 2009
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
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Legal and Tax Implications of Inheriting a Home


Losing a loved parent can be really tough and I know that one of the things I really struggled with when my father died, was dealing with all the paperwork and the legal bits and pieces afterwards.

So I thought it might be useful to write a quick Q&A on what you need to be aware of when inheriting a property – either as a single child or if you have brothers or sisters. Please note these answers have been given with the help of Bridge McFarland Solicitors.

Question One: Stamp Duty
If you are a lone child and inherit your parents' property, do you need to pay stamp duty if you move into what was their home? 

Answer
Stamp duty shouldn’t apply (as of December 2009), however, you will need to pay a Land Registry fee on the 'Assent in form AS1' which your legal company should organise.  However, Bridge McFarland Solicitors warn that if a deceased parent is a surviving Tenant in Common, you will need, in addition to a grant of representation, to appoint a second trustee to join in the Transfer (not Assent).  An AS1 will be treated by the Land Registry as an equitable assignment only. Your selling solicitor will often join in the Transfer.

Question Two: Buying the Inherited Property
If I am one of several children and inherit part of my parents’ property, I want to live in the property, but don’t know what to do.

Answer
If you inherit your part of a property you will be referred to as a ‘beneficiary’ and as such you can buy out the other beneficiaries (for example, a brother or sister) if everyone agrees, otherwise the property will have to be sold. The property will need to be valued ideally by three agents and an independent survey carried out to ensure a fair valuation is secured.

If you are an Executer or Administrator of the Will, you can only buy the property if all the other beneficiaries agree to it.

Question Three: How quickly could you sell, rent or buy the property following death?
Answer
As long as there is a Will in place, you can rent out or market a property for sale from the moment of death. However, if you want to complete on a sale or let the property long term, it is better to wait until a Grant of Probate is given.

Bridge McFarland Solicitors often suggest to their clients that subject to their circumstances (and everyone is different) you start marketing the property straight away, but do not exchange contracts until Grant of Probate.  This is because the Administrators of the Will only have authority from the date of the Grant of Letters of Administration and it’s not until Probate is granted that the legal ‘is’ and ‘ts’ have been crossed!

Question Four: Top Three mistakes to Avoid when Inheriting Property
Top Tip One: Take your Time

If you can, don’t clear the home too quickly or take too much stuff out. It’s better to sell the property part furnished than with nothing in it at all.

Top Tip Two: Don’t Overvalue
The main reason it takes two months or more to sell a home is that the vendors often over estimate what the property is worth. Buyers know what a property is worth as they have often looked around at many other properties.

If you want to get the best price, value the property fairly, or even slightly below the market average, this will attract more buyers and that gives you a better chance to have two buyers competing to purchase the property.
  
Top Tip Three: To do up or not?
Most people that buy a home fit into one of two categories. They either want to do it up from scratch or they want to move in immediately with no work. So you should either do up the house, making it easier to sell, but checking first whether you couldn’t sell it for less than it would cost you to do the property up in the first place.


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Glossary of Terms

Assent in Form AS1
- Land Registry Form AS1 - Assent of whole of registered title(s) by personal representative(s).

Beneficiary - One who receives anything as a gift; one who receives a benefit or advantage; especially one who receives help or income from an educational fund or a trust estate.

Equitable Assignment - An assignment which does not fulfil the statutory criteria for a legal assignment. The only significant difference between a legal assignment and an equitable assignment is that an equitable assignee often cannot bring an action in its own name against the third party contractor, but must fall back on the rules governing equitable assignments and join the assignor as party to the action.

Grant of Representation - A grant of representation is a document issued by the Court which enables the person(s) named in it to deal with the assets and belongings ['estate'] of the deceased. It allows the money in banks, building societies etc. to be collected, property to be sold or transferred and debts to be paid. There are three types of grant of representation:-

• Probate: granted to the executors named in the Will.
• Letter of Administration [with Will]: granted to someone other than an executor when the deceased left a valid Will.
• Letters of Administration: granted when the deceased did not leave a Will.

Tenant in Common - Joint ownership of property where each joint tenant owns a separate share in the property. On the death of one of the joint owners, their share passes to their beneficiaries by their Will or intestacy.

Trustee - A person (or institution) to whom legal title to property is entrusted to use for another's benefit

Will - A Will is a legal document in which a person (the testator) directs how his property is to be distributed after his death. Such documents must be executed in due form (i.e. in England, in accordance with provisions of section 9 of the Wills Act 1837) and must be duly witnessed.


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