If you're an executor of an estate, you'll appreciate that you are responsible for winding up the deceased’s estate and carrying out the terms of their will. More often than not the estate will include a house. Unless the beneficiaries under the will prefer to have the property transferred to them, it will need to be sold.
Bear in mind the following points to help the sale process go as smoothly as possible.
Grant of probate
If the deceased owned property in their sole name, a Grant of probate will be needed to enable you to sell or transfer the property. The Grant is a form of certificate issued by the probate court that confirms the validity of the will and gives you the authority to deal with the deceased’s estate.
You shouldn't underestimate how long it might take to obtain the Grant, particularly if you are intending to apply for the Grant personally, rather than through a solicitor or if inheritance tax (IHT) is payable. Even in a straightforward estate, it can take two to three months to obtain the Grant.
As part of the application process for the Grant, you will have to complete either a Return of Estate Information form (IHT205) or an IHT account (IHT400) depending on the value and nature of the estate. These list all of the deceased’s assets and liabilities, with date of death balances or valuations. You are best to obtain two or three estate agents’ valuations and take the average as the value of the property, or obtain a surveyor’s valuation.
Make sure that you check the title to the property. If the property is registered with the Land Registry, this should be a relatively straightforward process. You can buy and download a copy of the title entries and plan from the Land Registry website - https://www.gov.uk/government/organisations/land-registry. Check that the property is in the deceased’s name, and that the plan shows the full extent of the property.
However, the property may not be registered, particularly if it is in a rural location and the deceased has owned it for a long time. In this case, you will need to locate the paper title deeds, which may be held in safe custody by the deceased’s solicitor or bank, or they may be kept with the deceased’s papers at home.
Restrictions and defects
Once located, the executors should ask a solicitor to check the title entries and plan, or the paper title deeds, in case there are any restrictions affecting the property, or defects in the title, which may need to be dealt with before the property can be sold. It is not unknown to find that the property was never transferred to the deceased on the death of their spouse – and this is not the sort of thing to find out after a sale of the property has been negotiated!
When valuing the property, the estate agent may suggest that they have a potential buyer already, or that the property should be placed on the market immediately. While there is nothing to prevent you from instructing agents to market the property, or even accepting an offer on it, contracts can't be exchanged until the Grant has been obtained. The estate agent and the potential buyers must be given a realistic timescale for obtaining the Grant at the outset.
If you have accepted an offer on the property soon after the deceased’s death and before applying for the Grant, the sale price can be given as the property value in the IHT form.
Capital gains tax
Another area that you need to bear in mind is Capital Gains Tax (CGT). If the house is not sold until some time after the grant has been issued, the value of the property may have increased above the date of death value, and this could result in a CGT liability. For the year of death and the following two years, the executors have a CGT allowance of £11,100 (for 2016-17).
If the increase in value of the property after deduction of costs of sale exceeds the CGT allowance, you might be able to save tax by transferring the property to the beneficiaries before exchanging contracts on the sale. The beneficiaries’ own CGT allowances can then be set against the gain – if the beneficiaries are charities, it is important to do this, as charities are exempt from CGT.