When siblings inherit a property, the best case scenario is that they agree on what to do next.
Unfortunately differences of opinion are common.
Read on to learn more about the probate process and whether siblings can force the sale of inherited property.
The probate process
When someone dies without a spouse to inherit their assets, a probate process takes place.
An executor (often a close friend or family member appointed in the will) carries out the following tasks:
- Settle their affairs
- Pay taxes
- Distribute inheritances.
They may hire a solicitor to help them do this.
During probate the executor will transfer ownership of a home to those inheriting it.
Ownership of an inherited home
If there is a will it will usually state what kind of ownership those inheriting a home will have.
It will either be as joint tenants or tenants in common.
(If a will doesn’t say, or there isn’t a will, the default ownership is tenants in common.)
The nature of ownership has implications on what you may want to do next.
Joint tenancy
A joint tenancy means siblings will jointly own the whole property, if one dies the others will inherit their share.
That means the final surviving sibling will own 100% of the property and be able to pass that on to whoever they choose.
Tenants in common
By contrast, as tenants in common each sibling has a defined share of the property.
They can pass their share on to anybody they wish in their will. It is not automatically inherited by their siblings.
Options when you inherit a property
The easiest option is to sell an inherited home and divide it equally. Or as stipulated in the will, between siblings.
If one or more siblings does not want to sell the others can apply to court for partition and an order to sell.
It requires a compelling argument for a court to force a sale. And it can be a costly and divisive process. It is a last resort.
It is even less likely to succeed if the sibling lives in the home, especially if they have children.
In many cases siblings will come to another arrangement such as:
- Renting the home out and sharing the profits
- One sibling renting the home off the others
- One sibling buying the other siblings’ share of the property.
- Delaying the sale until a higher price can be obtained.
Less commonly:
- If the home owners are tenants in common, one sibling could sell their share to a trusted third party.
- Siblings share the property as a main residence.
Inheriting with a mortgage
Lenders of mortgages on inherited homes usually freeze payments until after probate. But they may add interest to the mortgaged amount.
If the owner had mortgage protection insurance or life insurance, these can be used to pay off the mortgage.
If not, you’ll probably need to get a new mortgage in your name. This means you will be subject to the usual affordability checks.
If you already have a mortgage or a poor credit rating this may prove difficult. In which case there is little choice but to sell the home to cover the money owed.
Tax implications of your decision
Inheritence tax
Homes are part of a person’s estate. They are subject to inheritance tax unless a surviving spouse is the beneficiary.
A person can pass on £325,000 tax free or £500,000 if their estate includes a home.
This threshold is passed onto a spouse. So they could pass on up to £1million to their children or grandchildren tax free. Inheritance tax is applied at 40% to anything beyond this figure.
As part of probate a home will be valued.
Keeping the property
If siblings hold onto the home, and the following is true, certain conditions it must meet:
- It doesn’t become their main residence
- It has risen in value when they come to sell it
hey will have to pay capital gains tax on that rise in value. So if it rises from £300,000 to £400,000, they will have to pay the tax on £100,000.
Stamp duty
Although there is no stamp duty to pay on an inherited property. If one sibling buys another sibling’s share there maybe, depending on their circumstances.
If you decide to rent the property out you will have to pay income tax on the profits it generates.
Other costs
It’s also worth factoring the costs and hassles that come with being a landlord into your decision. Are you willing to take those on?
Whatever you decide these are complex matters, so it’s always worth getting advice from a tax expert or solicitor.
Selling an inherited home quickly
You may want to realise the value of an inherited home sale as quickly as possible, perhaps to pay an outstanding mortgage or simply so that you no longer have it weighing on your mind.
If you would like to speak to a specialist regarding probate, Laurelo are a family run probate advisor who can run through the whole process with you. You can find out more about the services they offer here.
