Losing someone close to you is never an easy thing. Whether a trusted friend, a loved parent or a close relative, bereavement is not a linear journey – and not something you can ever truly prepare for on an emotional level. It is unfortunate, then, that such a devastating loss can also bring with it the immense weight of managing the deceased’s estate, and all the logistics that follow.
Luckily, while you can’t emotionally brace for a personal loss, you can prepare for the financial and logistical tasks that come with being either an executor or beneficiary of a will. One such consideration is that of inherited property, where property often represents the largest ‘chunk’ of an estate’s estimated value. That value can have major consequences for your own financial liabilities, and in a few ways; what follow are some key ways of managing a new financial obligation in the wake of losing a loved one.
- Understand Your Inherited Property’s Liability Load
The specifics of your inherited property are important; no two inheritances are necessarily the same, owing to a number of variables including size, value and state. There are tax-based financial liabilities inherent to an inherited property, and we’ll explore these shortly, but they aren’t the only ones by a long stretch.
Taking a large-scale stately home as an outsized example, you may also have considerable running costs to consider – including ongoing maintenance and upkeep and staffing. For most though, inheritance is of a more common domestic residence; upkeep may not be as involved, but you would still be on the hook for council tax and related liabilities. Figuring out your liabilities in advance enables you to prepare for them properly.
- Evaluate Your Cash Flow And Short-Term Cash Demands
Here, it is important to note that inheritance tax (or IHT) is not something you need to concern yourself with unless you are an executor of the estate in question – and even then, that tax is not something that necessarily needs to be extricated from the property. It is paid from the estate, never by beneficiaries, meaning the property does not arrive with estate-based liabilities outside of its own inherent liabilities.
This means you can cleanly map out the short-term cash demands your inherited property will incur. Immediate costs include insurance, any required repairs, utility bills, and potentially letting management fees if the property is tenanted. This can be overwhelming, even if you have inheritance money wrapped up elsewhere in the estate. Short-term cash shortfalls before the inheritance is received can be plugged with an inheritance advance loan to release value prior to the estate’s settlement.
- Align Long Term Plans: Sell, Rent Or Hold
With short-term costs planned-for and potentially covered, it’s now time to think about the long-term. If the finances work, you may be in a position to keep the property – either as a personal domestic residence or as part of a property portfolio (i.e.: renting it out). Alternatively, you may want to sell it to extract its cash value. Bear in mind for the latter scenario that, due to the property not being your primary residence, any profits will be subject to taxation, namely Capital Gains Tax.
