Everything you need to know about inheriting a property

When it comes to property inheritance, many people tend to look at it with different lenses. For some, it may come with a lot of emotional baggage which can be quite hard to overcome. While, for others it can be seen as a financial burden, especially if they need to pay Inheritance Tax before probate can be granted. For most, however, it is often seen as a gift – that can help support retirement planning, fund a new home, or fuel future investments.

If you’ve directly inherited a property, selling may not be an immediate concern. However, if you are the executor of an estate, you may need to sell the property to settle any debts or distribute assets to beneficiaries.

Fortunately, whether you’re an heir or an executor, The Property Buying Company specialises in buying inherited and probate properties. Once probate is granted, we can help you sell the property in as little as 7 days, covering all legal and selling costs for you.

If you're exploring your options for inherited property, we offer many guides on each step of the process: managing taxes, choosing the best sales options, and understanding how to sell an inherited house efficiently.

How property Inheritance works

In the UK, 36% of people are projected to inherit property at some point in their lives. Additionally, inheritance has become a vital financial support for many, with 9 out of 10 adults relying on it to help fund their retirement plans, pay off debts and achieve long-term financial stability. 

As house values rise, inheritances are increasingly seen not just as a windfall but as an essential part of financial planning for future generations.

If you have recently inherited a property, or about to, here is a brief outline of the property inheritance process:

How easy is probate?

Probate can be a complex and time consuming process. In 2022, there were 234,711 applications for probate grants, with 12,891 of these applications not being approved. By late 2023, the average wait time for a probate grant has risen to 14 weeks – an increase of 6 weeks from the previous quarter, which shows the potential delays in the system. 

Probate is the legal process required to manage and distribute someone’s assets (the estate) after they pass away. Here are some key terms to understand in this process:

• Grant of probate: This is the official document issued by the court that gives executors the legal authority to manage and distribute the deceased’s estate according to the will. It is essential for accessing the estate’s assets and carrying out the probate process.

• Executors: Individuals named in the will to carry out the deceased’s wishes. They manage the probate process, settle debts and distribute assets, including property, as specified in the will.

• Beneficiaries: Individuals who inherit from the estate. After debts and taxes are settled, they receive assets or funds as directed by the will.

• The will: This document outlines how the deceased’s assets should be divided, guiding the executors in distributing the estate to the beneficiaries.

Probate grants executors the legal authority to manage the estate, ensuring the will’s instructions are followed and that beneficiaries receive their inheritances. While necessary, probate can be challenging, especially if there are delays or complex assets involved.

Probate related guides

What documents are needed for probate?

When selling an inherited property, there are specific Inheritance Tax documents that may be required, especially if the estate’s value exceeds the Inheritance Tax threshold. 

These documents confirm that any due Inheritance Tax has been calculated and paid, ensuring they house sale complies with HM Revenue and Customers regulations, here are the key documents involved:

IHT400 - Inheritance Tax account

The IHT400 form is essential when the estate’s value surpasses the Inheritance Tax threshold (currently £325,000 in the UK) This form provides a detailed account of the deceased’s assets, including property, savings, and other valuables, to establish the estate’s total value.

The information submitted helps HMRC determine if Inheritance Tax is due and, if so, how much. Completing the IHT400 accurately is important, as mistakes could lead to delays in processing or even fines. Executors often work with a solicitor or tax advisor to ensure this form is correctly completed.

IHT405 - Property details

The IHT405 form is a supplementary document that provides detailed information about any houses, land or buildings that were part of the deceased’s estate. This form includes information on property valuations and any jointly owned properties.

By submitting the IHT405 with the IHT400, executors can give HMRC a full picture of the estate’s property holdings, which is particularly important if the house’s value has increased since the date of inheritance.

IHT - Claim for loss on sale relief

If the inherited property is sold at a loss within four years of the date of death, executors can claim relief for this loss using the IHT38 form. This form allows you to reduce the overall Inheritance Tax bill by offsetting the loss, which can be particularly useful if house prices have decreased since the date of death.

To qualify, the property must be sold at a price lower than its original value at inheritance, and the IHT38 form must be completed and submitted to HMRC. Claiming this relief can lead to tax savings for the estate, benefiting the beneficiaries.

IHT421 - Inheritance Tax clearance

The IHT421 form, also known as the “clearance certificate,” confirms that any due Inheritance Tax has been paid. Once HMRC processes the IHT400 and other relevant forms and verifies payment, they will issue this certificate, which effectively clears the house for sale.

This clearance provides peace of mind for buyers as it confirms there are no outstanding tax liabilities tied to the property. For executors obtaining this clearance is essential to move forward confidently with the sale, ensuring full compliance with Inheritance Tax obligations.

Identification

All executors or administrators involved in the sale need to provide valid photo identification, such as a passport or driving licence, along with proof of address (e.g. a recent utility bill or bank statement). This is essential for verifying the identity of those responsible for the estate and completing the property transaction securely.

Grant of Probate or Letters of Administration

These documents authorise you to manage and sell the deceased’s estate. If there is a will, you’ll need to apply for a Grant of Probate using form PA1P. If there is no will, Letters of Administration are required, and you’ll use form PA1A for the application. 

Both documents establish your legal right to handle the property’s sale, and the process can take weeks to months, so it’s best to apply as early as possible.

Death Certificate

A certified copy of the death certificate is a key document when selling an inherited property, as it legally confirms the passing of the home owner. This document is often the starting point for the probate process and is required by various parties involved in handling the estate such as probate courts, solicitors, banks and mortgage companies.

In the context of selling an inherited property, the death certificate provides official proof that the home owner has passed away, allowing the executor or administrator to proceed with the necessary legal and financial steps. 

This document is required to apply for probate, which grants authority to manage and transfer the deceased’s assets, including property. Typically, you’ll need multiple certified copies of the death certificate, as it’s often required by multiple institutions during the settlement process. For instance, if there is an existing mortgage, the mortgage provider will need to see a death certificate both discussing settlement terms or releasing funds.

Title Deeds

Title Deeds are fundamental documents in the sale of inherited property as they establish legal ownership and provide a historical record of property transactions.

Here are a few additional documents you may need to ensure a smooth sale:

• Property Information Form (TA6)

• Fittings and Contents Form (TA10)

• Energy Performance Certificate (EPC)

• Mortgage details

Paying tax when you inherit

In 2022/23, over 41,000 people were liable to pay Inheritance Tax - the highest number in over 20 years. This increase is largely due to historically rising house prices and a frozen Inheritance Tax threshold, which has not kept pace with house values.

Here’s a quick overview of the taxes involved when inheriting a property:

Sales process and options

Traditionally, selling an inherited property involved listing it on the open market with an estate agent. However, in recent years, especially the past five, there has been a significant rise in people choosing to sell inherited properties to cash buyers. 

One main reason for this shift is the lengthy probate process. By the time the property is ready to go on the market, it may have been tied up in probate for 6 to 12 months. Selling through an estate agent can extend this timeline further, potentially keeping the property on the market for another 6 to 12 months, adding to the wait and uncertainty.

Selling to a cash buyer on the other hand, provides a faster solution, allowing the property owner to complete the sale in as little as 7 days. Additionally, cash buyers often cover legal and estate agency fees, making this option both time efficient and cost effective for those looking to settle estates quickly.

1.Obtain probate & value the property:

If the deceased owned the property in their name, probate may be needed to transfer ownership. During this process, get a professional valuation of the property for accurate pricing and tax purposes.

2.Clear debts & prepare the house for sale:

Ensure any outstanding debts on the estate, like mortgages or bills are cleared. Clean, repair and stage the property to make it attractive to potential buyers.

3.Choose your sale option

Sell your inherited home

Most people who inherit a property ultimately choose to sell or rent it out rather than use it as their primary residence, with only 12% opting to live in the inherited home. Selling can provide immediate financial relief, especially since the probate process can be costly, and many beneficiaries need to recoup expenses, including Inheritance Tax.

If you’re considering selling your inherited home, working with The Property Buying Company offers a fast and hassle free option. We can help you complete the inherited sale in as little as 7 days, covering all selling and legal costs to ensure a smooth process.

It’s important to note that we buy inherited properties Below Market Value, which allows us to speed the sale and offer the quickest turnaround possible, which can be particularly beneficial at the end of a long probate process. This trade off provides you with certainty and efficiency at a challenging time.