Selling a property after someone passes away can be a complex and emotionally challenging process, particularly if the people involved are mourning the loss of a loved one. The administration of a deceased’s estate is known as probate, which involves the validation of the will, paying off debts, managing assets, and distributing the residue to the beneficiaries.
This article will guide you through when probate is necessary, and the subsequent process involved in a probate sale, highlighting how it’s different from a standard house sale and why it can be challenging to take on.
What is a probate house sale?
A probate house sale occurs when a property is sold as part of the administration of someone’s estate after they’ve passed away. The sale of a house usually happens either to settle debts that need to be paid first, or to divide the value of the estate between beneficiaries. This is dealt with by the executor of the estate, who is named in the will. If there is no will, someone else can apply to the courts to be appointed as the personal representative of the estate, this allows them to manage the estate in accordance with the laws of intestacy. This will usually be a close family member.
Before the probate process can start, the death must be registered with the local registry office, and a death certificate must be issued. After this has been addressed, the total value of all assets can be identified, as well as any liabilities or taxes.
Can you sell a house before probate?
No sale of the house can be completed before a Grant of Probate, or Letters of Administration has been issued. The Grant is the official document issued by the court, which confirms the validity of the person acting and gives the executor or personal administrator the authority to administer the estate of the deceased, and it is not until this Grant is issued that contracts can be exchanged.
Can you sell a house whilst waiting for probate?
The beginning stages of a property sale can take place during the probate process. For example, the house can be cleared and listed on the open market ready for sale. Whilst waiting for probate, the buyers have the opportunity to raise any queries they may have in connection with the property, organise their survey and any other inspections. Whilst the groundwork for the conveyancing process can be dealt at this stage, the sale can only move forward once the Grant has been obtained from the courts giving the executor or administrator the authority to deal with the estate. It is important to let the estate agent know from the outset that the sale is subject to a probate application, so that the estate agent can manage the buyer’s expectations.
Do you have to sell a house when someone dies?
Selling the house is not the only option when someone dies. The property can also be transferred into the names of the beneficiaries. Probate would still be required in order for the house to be transferred into the beneficiary’s name.
On houses owned as ‘Joint Tenants’, probate is not required. The principle of survivorship means that the deceased’s assets would automatically pass to the surviving owner(s). In this scenario probate is not required as the house never forms part of the deceased’s estate. If the surviving owner wished to sell the house, they could do this without a Grant of Probate.
How much inheritance tax has to be paid?
This will depend on the value of the estate and to whom the estate passes too. The basic allowance is known as the ‘Nil Rate Band’ and this allows any individual to leave an estate of £325,000 without any tax implication. If an estate is worth more than £325,000, inheritance tax will need to be paid at a rate of 40% on anything over the threshold. If the estate has been left to the deceased’s children, the tax free threshold can qualify for up to an additional £175,000. This is known as the ‘Residence Nil Rate Band’. There are certain qualifying conditions that must be met in order to gain the additional allowance. If the value of the property is worth more than £2 million, that additional tax free allowance begins to diminish by £1 for every £2 that the estate is worth over £2 million. If the estate is worth more than £2,350,000, the additional allowance is lost.
It is important to note that if the deceased has left any assets to a spouse or civil partner, these gifts will be free of tax. In the event the property passes to a spouse or civil partner, there is no inheritance tax to pay on the property.
Inheritance tax will need to be considered during probate, and may need to be paid out of the money received from the property’s sale, potentially having a significant reduction to the residual amount left to the beneficiaries.
How long does an executor have to sell the house?
There is no strict legal deadline for selling a property after probate, but a commonly accepted guideline is known as the ‘executor’s year’. This suggests that over a 12 month period, the executor should have sufficient time to manage the estate and assets, sell the property if needed, locate beneficiaries, and pay any debts and taxes due.
Although the ‘executor’s year’ is a guide that many like to follow, in practice this can vary and the overall process is likely to take between 12 and 24 months.
How to sell a property after someone dies
1. Get a valuation for the house
It is important that the property is valued as soon as possible, and that the value reflects the market rate of the home at the date the owner passed. An estate agent will be able to value the property for free. The valuation will need to be obtained before applying for probate as the executor/administrator will have to value the estate.
2.Get a lawyer to help you check title and deeds
If the property is registered with the Land Registry, all title documents will be electronically stored with the Land Registry. Your lawyer will be able to obtain copies of the title documents and review these, identifying any restrictions, mortgages or other matters which need to be considered.
If the deceased owned their property for many years, it is possible that the property may not have been registered with the Land Registry. In this case, the title deeds are crucial documents which prove ownership of the property. The title deeds may be easy to locate, perhaps kept in the property itself, other times these may still be held in safekeeping at a bank or law firm.
Once located, your lawyer will be able to examine the deeds, identifying any further matters which should be investigated.
3. Apply for probate
Once the executor has valued the estate, the next steps are to complete the inheritance tax return and apply for probate. The executor/administrator will need to apply to the courts for the correct type of Grant. If there is a Will, a Grant of Probate will be obtained by the executor by completing the PA1P form. If there is no will a Grant of Letters of Administration will be obtained by the personal administrator by completing the PA1A form. Applications can be made online on the HMRC website. For estates valued at over £5,000, there is an administration fee of £300.
Once a Grant is issued, the executor/administrator now has the legal authority to deal with the property and assets of the deceased.
4. Put the property on the market
Once probate has been granted, the executor now has the authority to sell the property. The process of putting the house on the market is straightforward and can be undertaken by the estate agents who valued the house previously. At this point, viewings can begin and the journey of selling the house is underway. This step can be taken at the same time as making the application for the Grant but any potential buyers should be made aware that a sale cannot complete until the Grant is issued.
5. Clear the house
Once the house has been sold, it is the job of the executors to clear the house of all its belongings. If the executor/administrator is a close relative or friend of the deceased, it is understandable that this would be an emotional task, and you can appoint a house clearance company who will do this for you. Once the sale is completed, the house is no longer under the executor’s control and they can distribute the money in accordance with the will/intestacy laws.
How Goughs can help
At Goughs, we understand the emotional role of becoming an executor, as well as the legal complexities involved during a probate house sale, from obtaining probate to handling the sale of the property and its distribution. Our expert probate solicitors can help guide both executors and beneficiaries to minimise the stress placed on you, and to help to reduce common mistakes, ensuring the process is as smooth as it can be.
Whether you need full assistance during the probate process, or simply just advice, Goughs are here to help and we prompt you to get in contact if this is something that we can assist you with.
