“In this world, nothing is certain except death and taxes,” is the Benjamin Franklin saying we return to time and time again.
The Probate Move team still find in unfathomable that, during an emotional time, the family and friends of the bereaved – usually those who are appointed executors/administrators - can be distressingly preoccupied by tax bills.
Sadly, death isn’t cheap. According to Farewill, the average funeral in the UK is around £4,800. In addition to this cost, asking a solicitor to manage the probate process typically costs between 1% and 5% of the estate, plus VAT. The total amount payable can, however, rise substantially if the Will is contested or the estate made up of complex parts.
Of course, the biggest bill of all will be inheritance tax. Currently the standard inheritance tax rate is 40%, and it’s charged on the part of an estate that’s above the £325,000 threshold. The threshold can rise to £500,000 if the property is left to a child or grandchild.
What expenses can you claim against probate?
Confident executors/administrators can take a DIY approach to probate and undertake all of the searches and complete the paperwork themselves, which does limit the upfront financial outlay. Those looking to cap costs can opt for a solicitor who offers a fixed-fee probate service. It’s worth noting that professional fees are expenses executors/administrators can claim back from the value of the estate.
How can I reduce my inheritance tax bill?
Many of the tax bill reduction strategies will need to have been implemented by the deceased before they died (such as leaving some of the estate to a charity or a community amateur sports club) but there are a number of things executors/administrators can do to minimise the bills associated with probate and inheritance tax.
- Pay any inheritance tax promptly
It is essential that executors/administrators pay the inheritance tax bill on time. The bill must be paid by the end of the sixth month after the person's death. If payment is not paid, HMRC will start charging interest and may issue financial penalties. Don’t forget, if the executors/administrators choose to pay inheritance on any assets, including a property, in instalments over 10 years, interest will also be charged.
- Minimise ‘fail to sell’ risks
Executors/administrators should plan ahead so they limit how much interest they are charged if the deceased’s assets fail to sell six months after their death and an inheritance tax bill remains unpaid.
If there is a downturn in the property market or a wider financial crisis, there is an increased chance = a property will fail to sell. If possible, the executors/administrators should make a ‘payment on account’ – an upfront payment to settle any tax debt – to reduce any interest that might be charged in the future. This payment, however, will have to come from the executors/administrators own pocket (this can be reclaimed back from the estate).
- Pre-plan to sell house fast
House sale delays can be avoided by selling to ProbateMove. Our probate property valuation and purchase service is designed specifically for the probate process. We buy directly from the executors/administrators in all market conditions, with no need to wait for an estate agent to find you a buyer. And unlike open market buyers – many of whom will have a mortgage offer for a limited time – ProbateMove buys with cash and won’t back out of a purchase.
- Opt for a fast-track exchange & completion
Once our free cash offer has been requested, executors/administrators can accept ProbateMove’s figure and exchange can be arranged for as soon as probate is granted, with completion following swiftly after. This ensures executors/administrators can settle the estate and reimburse themselves for any tax and fees they have paid upfront, or halt any interest charged on an unpaid inheritance tax bill. Cash is paid directly into the estate’s account, so there is no barrier to obtaining the funds.
- Plan ahead for rented properties
If the executors/administrators find one or a portfolio of properties in the estate are rented out to tenants, they need to be aware that the rent received may be considered a taxable asset.
- Sell quickly to avoid rental income building
If there is still a mortgage on the buy-to-lets, the rent can be used for repayments but if the property is mortgage free, the rent collected will build and increase the value of the estate. Unless the beneficiaries want to assume landlords status and take over the tenancies, any buy-to-lets should be earmarked for sale, and the tenancies terminated as soon as a Section 21 eviction notice is valid and probate granted.
If the thought of evicting tenants living in a probate property sounds daunting and time consuming, there is an alternative. ProbateMove will purchase any buy-to-let with renters in place. Our team of property managers will take on the tenancy so you can achieve a fast, hassle-free sale.
ProbateMove is here to answer any of your property-related questions. Don’t forget, we buy all types of probate properties for cash, including properties in a poor state of repair, properties in need of clearance, properties with short leases and properties where there are tenants in situ. Contact us to talk in confidence.
