Can you inherit your parents' house in the UK? A guide to the inheritance process

According to one study, over a third of people in the UK are set to inherit property at some point. Understanding the legal and financial implications is vital. This comprehensive guide explains the process of how and if you can inherit your parents' house in the UK, covering key factors from wills to tax.

Quick Summary

It is possible to inherit your parents' house in the UK, but your legal entitlement depends on whether they left a will, how they owned the property, and the country-specific intestacy rules. The process involves probate, potential tax liabilities, and updating property records with the Land Registry.

Key Points

• Will vs. Intestacy: A valid will outlines who inherits property. Without one, 'intestacy rules' dictate distribution, which may exclude unmarried partners.

• Joint Ownership: If the property was held as 'joint tenants', it passes automatically to the survivor. 'Tenants in common' allows a share to be left via a will.

• Probate is Necessary: For most properties, a legal process called probate is required to grant authority to an executor or administrator to manage the estate.

• Consider Inheritance Tax: While the standard threshold is £325,000, leaving a home to direct descendants can increase the tax-free amount. Capital Gains Tax may also apply later.

• Mortgages and Debts: You will be responsible for any outstanding mortgage on an inherited property, which must be settled before distribution.

• Deed of Variation: Beneficiaries can use a deed of variation within two years of death to legally alter their inheritance and manage tax implications.

The role of a will versus intestacy rules

The most straightforward way to inherit property is if your parents have left a valid will. The will is a legal document that clearly outlines how they wish for their estate, including their home, to be distributed. In this scenario, the individual appointed as the 'executor' is responsible for carrying out these wishes. If you are named in the will as a beneficiary of the house, the executor will manage the transfer of ownership to you after dealing with all debts and taxes related to the estate.

However, if a parent dies without a valid will, they are said to have died 'intestate'. In this case, the law of intestacy takes over, dictating a strict hierarchy of who inherits what. In England and Wales, unmarried partners have no automatic right to inherit under these rules, regardless of the length of the relationship. This highlights the critical importance of a valid will for ensuring your parents' wishes are met.

Inheriting property through joint or sole ownership

The way your parents owned the property is another major factor that affects your inheritance. Property can be held in two ways: as 'joint tenants' or 'tenants in common'.

Joint tenants

If the property was owned as joint tenants, and one owner passes away, the entire legal ownership automatically passes to the surviving owner. This is known as the 'right of survivorship'. A will does not override this rule, so the deceased's share cannot be passed on to a child or another beneficiary via a will. For example, if your parents own their house as joint tenants, and one dies, the other becomes the sole owner automatically, and you would not inherit their share at that point. To update the ownership at the Land Registry, the surviving owner simply needs to submit a form DJP.

Tenants in common

If your parents owned the property as tenants in common, each owner holds a distinct share of the property, which can be passed on according to their will. This allows for greater flexibility. For example, a parent could leave their 50% share of the home to you in their will, while their surviving spouse retains their own 50% share. If no will exists, the deceased parent's share would be distributed according to the intestacy rules.

Joint ownership comparison

Feature	Joint Tenants	Tenants in Common
Ownership	Owners have equal rights to the whole property.	Each owner holds a specific, separate share.
Transfer on Death	The property automatically passes to the surviving owner(s).	The deceased's share is passed on via their will or intestacy rules.
Probate	Not required to transfer property ownership to the survivor.	Required to deal with the deceased's share of the property.
Will Influence	A will cannot override the right of survivorship.	A will can dictate who inherits the deceased's share.

The probate process: a step-by-step overview

For most estates involving property, the probate process is necessary. This is the legal procedure that grants authority to the executor or administrator to deal with the deceased's assets. The probate process generally follows these steps:

1. Register the death: Obtain official copies of the death certificate, which are needed for all official dealings.
2. Find the will: If a will exists, the named executor will apply for a 'Grant of Probate'. If not, the 'administrator' (usually the closest relative) applies for 'Letters of Administration'.
3. Value the estate: All assets, including the house, must be valued as of the date of death.
4. Complete Inheritance Tax (IHT) forms: Even if no tax is due, forms often need to be submitted to HMRC.
5. Apply for the grant: The application for probate or letters of administration is submitted to the court. Once granted, this document provides the legal authority to act.
6. Deal with the estate: The executor or administrator pays any outstanding debts and taxes, including Inheritance Tax.
7. Transfer the property: The ownership is transferred to the beneficiaries using specific Land Registry forms, such as AS1 or TR1.

Financial considerations and tax implications

Inheriting a house is not without financial implications. A crucial consideration is Inheritance Tax (IHT). IHT is levied on the deceased's estate if its total value exceeds the tax-free threshold, or 'nil-rate band', which is currently £325,000. However, the rules are more favourable when a house is involved:

• The Residence Nil-Rate Band (RNRB): An additional allowance of up to £175,000 is available if the property is passed on to a direct descendant (e.g., children or grandchildren).
• Transferred allowance: Spouses and civil partners can also transfer any unused nil-rate band from the first to die, potentially increasing the tax-free threshold to £1 million.

Capital Gains Tax (CGT) is another potential cost. While you don't pay CGT on the inheritance itself, you will be liable if you later sell the property for a profit. However, the value is reset to the date of inheritance, so CGT is only on any profit since that date. You are not required to pay Stamp Duty Land Tax (SDLT) on an inherited property.

If the inherited property has an outstanding mortgage, you become responsible for the repayments. It is essential to contact the lender and review all options, such as paying off the mortgage, remortgaging, or selling the property.

Can you change the inheritance? The deed of variation

In some cases, beneficiaries may wish to alter how an estate is distributed, perhaps for tax efficiency or to include someone not mentioned in the will. A 'deed of variation' is a legal tool that allows beneficiaries to redirect their inheritance to another person or charity within two years of the death. This can be particularly useful for passing on assets to the next generation in a tax-efficient way or providing for a long-term partner not covered by intestacy rules. It's crucial to seek expert legal advice when considering a deed of variation to ensure all legal and tax requirements are met.

Conclusion: Seeking professional advice is key

Navigating the process of inheriting your parents' house in the UK can be complex, involving wills, probate, property ownership types, and various tax considerations. While this guide provides a clear overview, every family's circumstances are unique. For complex estates or for definitive advice on your specific situation, consulting with a legal professional such as a solicitor specialising in wills and probate is highly recommended. The UK government provides guidance on the probate process, including applications, on its website, which can be an excellent starting point for understanding the legal formalities involved.

For more detailed information on inheritance and probate rules, visit the official GOV.UK guidance on what to do when someone dies.

Frequently Asked Questions

How long does it take to inherit a house in the UK?

The duration can vary significantly. A simple estate might be dealt with in 6-9 months, while a more complex one with multiple assets or disputes could take a year or more. The probate process itself can take several months, after which the property can be transferred.

Do I have to pay Inheritance Tax on my parents' house?

Inheritance Tax may be due if the total estate value exceeds the tax-free threshold. However, leaving a home to direct descendants (children or grandchildren) can raise this threshold. You should value the estate to determine if any tax is owed.

Can I inherit my parents' house if they did not leave a will?

Yes, but your inheritance is governed by the 'rules of intestacy'. These rules dictate a specific order of inheritance, typically favouring a spouse and children first. Unmarried partners and stepchildren not formally adopted do not inherit under these rules.

Is Stamp Duty payable on an inherited property?

No, you do not pay Stamp Duty Land Tax on a property you inherit. This tax is only payable when buying a property, not receiving it via inheritance.

What happens if there's a mortgage on the inherited house?

If you inherit a property with a mortgage, you become responsible for the repayments. The executor must contact the lender. Options typically include selling the property to clear the mortgage or taking out a new mortgage in your own name.

Can I sell the house immediately after inheriting it?

You can begin the process of putting the house on the market, but you cannot legally sell it until probate has been granted. This document gives the executor or administrator the legal authority to transfer or sell the property.

How do I change the name on the title deeds of an inherited property?

This is done through the Land Registry. If you are the beneficiary, the executor or administrator will complete the necessary forms, such as an AS1, after probate has been granted. For joint tenancies, a form DJP is used to remove the name of the deceased.