Mon 05 Aug 2019
Property Inheritance Explained
Property inheritance is perhaps the most common way that wealth is transferred down through generations of family. And, whilst the circumstances in which this occurs are of course not the most pleasant, this event does often have a positive effect for the beneficiaries of this inheritance.
Most commonly, irrespective of whether the decision is made to live in, or sell the property, it can be most beneficial for those who are perhaps finding it difficult to purchase their own home. And, with the average age of first-time buyers on the rise, it is easy to think that more and more people will find themselves in this situation.
But, inheriting a property is, thankfully in most respects, not an everyday occurrence. And the gaining of an asset usually goes hand in hand with the other thing associated with any inheritance – tax.
So, what do you need to know if you’ve inherited a property?
First off, inheritance tax is not a government stealth tax designed to duplicate the amount of money that is owed. There is an inheritance tax due to the government, this is true. However, this tax is normally paid by the deceased’s estate. It is not a duplicate tax that the beneficiary then needs to pay as an extra amount. This is often confused with capital gains tax
Capital gains tax is an amount of money you may need to pay to the government if you decide to sell the property you have inherited. This is calculated based on the difference of the property value when you receive it, and the point in time at which you decide to sell it.
What if I Rent the Property Out?
The usual laws regarding renting out a property will, of course, apply. Namely that you will need to comply with all current legislation regarding gas and electric safety. You will need to have a mortgage in place (if necessary) that allows you to rent out the property. You will also need to pay income tax on any profit that you make as a result of renting it out.
What if There is an Outstanding Mortgage on the Property?
It is of course a likely scenario that there is some remaining mortgage on the property that you have inherited. In this case, you might find:
· The deceased’s life insurance might pay off the remaining balance;
· The mortgage payments will need to be made; however, many lenders are understanding and will put a hold on repayments throughout the probate period.