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HouseWorth
© GetAgent Limited 2024
  1. Blog
  2. How to leave a house to someone in a will
Advice about properties
06 July 2021

How to leave a house to someone in a will

Sam Edwards
Senior Writer & Researcher
Old grandmother holding flowers with her grandchildren

Table of contents

  1. 1. How do you leave your house to someone in a will?
  2. 2. How to leave your house to your child
  3. 3. Who should you never name as your beneficiary?
  4. 4. Step by step guide to leaving a house in a will
  5. 5. Step 1: How do you own your home?
  6. 6. Step 2: How do you want to split your property?
  7. 7. Step 3: Navigating inheritance tax
  8. 8. Step 4: How do you protect your beneficiaries?
  9. 9. Step 5: Writing your will
  10. 10. FAQs

No one likes to think about the end, but sometimes it's important to look forward, especially if you own assets you would like to leave to your loved ones. One of the most important assets you might own is property, which is why deciding who your property belongs to after you die is an important decision. To make sure you’re able to pass on your property, you’ll need to select a beneficiary and make a will.

How do you leave your house to someone in a will?

To leave your house to someone, you have to name them as a beneficiary in your will. To correctly add someone to your will, all you need to do is:

  1. Name the person you want to inherit your property in your will
  2. Detail what they will receive

If you bought your property with someone else (your wife or husband), you need to specify that you're leaving your share in the property to your beneficiary. Please read on for more details.

How to leave your house to your child

Leaving your house to your child follows the same process as leaving your home to anyone else: name them in your will and detail what they will receive. Children, however, cannot inherit property until they turn 18 years old.

One of the best ways to guarantee your child’s inheritance is with a trust account. Trusts allow both the share of your property, and the your life insurance policy, to be deposited into the account when you pass away. Your child will then inherit the contents of the trust when they turn a legal age.

Who should you never name as your beneficiary?

You should avoid naming minors, certain people with disabilities, and your estate as beneficiaries in your will:

  • Minors won’t be able to receive their inheritance until they come of age, which means the court will appoint someone to look after the funds. This process can be exhausting.

  • If you name someone who receives government financial aid for their disability, you might unintentionally end up disqualifying them from receiving their benefits. If you want to name someone like this as a beneficiary, you should seek out a solicitor who is experienced with creating supplemental needs trusts.

  • Any contents that go to your estate go through probate and are more limited in distribution. With an estate distribution, you only have two options: a lump sum that makes the entire amount taxable at once, or a distribution five years from the date of the decedent's death.

Step by step guide to leaving a house in a will

Learn the basics of leaving a property in a will using the following 'step by step' guide:

Step 1: How do you own your home?

How you bequeath a property to your friends, partner, or children depends on how you own it. There are several different types of ownership and each will influence the way your will is written.

  • Outright ownership

If you’re the sole owner of a property, you can simply name a new owner (or owners) in your will, and possession will pass over to them when you die.

  • Joint tenancy

If you and someone else share ownership of the property on an equal basis, you’re likely to be ‘joint tenants’. When you die, the person you currently share ownership with will automatically inherit your share. That means your home is no longer yours to bequeath, but you can still make a request in your will.

  • Tenancy in common (TIC)

If you own shares in your property with someone else, you are ‘tenants in common’. When you die, you can leave your share to someone else in your will. They will become the new tenant in common, along with any surviving shareholders.

If you live in Scotland, things work a little differently. In Scotland, there’s only one type of joint tenancy, which is called ‘joint ownership’. Like ‘tenants in common’, joint tenants own shares in their property, however the ownership structure is written on the title deed. This means owners should include a survivorship clause to say what happens when one person passes away.

Step 2: How do you want to split your property?

If you're the outright owner of your house, or a tenant in common, you'll need to decide who you pass your home's ownership or share onto. This includes your actual residence, investment properties, land, or even a parking space you own.

When you pass on a property after you die, you’ll also pass on any outstanding debts against it. If there's an outstanding mortgage on your property, your heirs will need to make new arrangements with the mortgage lender to either repay the loan, or remortgage the home.

There's a number of ways you can divide your property. We call these legacies, but only a few apply to property:

  • Specific bequest: You leave a specific item or property that you own.
  • Residuary bequest: You leave a percentage of the value of your estate (after debts)
  • Reversionary bequest: You leave your property to someone and create a conditional benefactor if they die too.

How do these bequests work with your type of ownership?

These bequests can be factored in with your type of ownership to create a personalised will that is tailored to your wishes. If you’re an outright owner, you may want to leave your home to your partner so that they may continue to live there. However, you also want to secure your child’s inheritance...so what do you do?

Owners could decide to make a reversionary bequest, where a partner is made the property’s owner after your death, while their child is named benefactor for your partner’s death. That way, your partner has the right to continue living in the house until they die, but the child will inherit after.

Step 3: Navigating inheritance tax

Inheritance tax is a government tax on the total value of your possessions after you die. The cumulative value of your possessions is called your 'estate'. Your property only counts towards the value of your estate under certain conditions.

  • If you leave your property to a spouse or civil partner, there's no inheritance tax to pay as your home doesn't count towards the value of your estate.
  • If you leave your property to children or grandchildren, it does count towards the value of your estate, and they must pay tax on anything over the value of £500,000.
  • If your home is left to anyone else, it will count towards the value of your estate, and they'll have to pay tax on anything over the value of £325,000.

The usual tax rate is 40%. This means if you leave a home worth £550,000 to your child, they will have to pay inheritance tax on the portion of the property over £500,000. This is 40% of £50,000 in tax, equalling £20,000. It’s important to remember that you’ll have to pay inheritance tax on any assets of the estate worth over £500,000. For example if your child inherits the £550,000 property and other assets, such as stocks, they’ll have to pay inheritance tax on a lot more.

How do you avoid inheritance tax on property?

There are a number of ways you can reduce the amount of inheritance tax your beneficiaries have to pay. For example, if you give away legal ownership of your home before you die, move out and live for another 7 years, your beneficiaries won’t have to pay inheritance tax. This is even the case if you continue to live in the property, as long as you:

  • Provide evidence that you pay rent to the property's new owner at a going rate
  • Provide evidence that you pay your share of the bills
  • Live there for at least 7 years

If you die after the 7 year deadline has passed, your beneficiaries won’t have to pay inheritance tax on your property. However if you pass away within 7 years of giving away legal ownership of your property, your home will be treated as a 'gift'.

Taper relief

Gifts, unfortunately, are subject to inheritance tax. If your property was gifted less than 3 years before your death, the receiver will have to pay inheritance tax at 40%. Property gifted between 3 and 7 years before your death, are taxed on a sliding scale known as ‘taper relief’. Taper relief is measured by the years between passing and the day the gift parted hands. Each period is affixed with a tax rate percentage.

  • Properties above £325,000 or 1 - 2 years: 40%
  • 3 - 4 years: 32%
  • 4 - 5 years: 24%
  • 5 - 6 years: 16%
  • 6 - 7 years: 8%

As mentioned earlier, another way you can avoid inheritance tax is by bequeathing your property to your living partner. However, if you’d like to protect your children’s inheritance from taxation, you might decide to set up a property protection trust.

Step 4: How do you protect your beneficiaries?

When you leave property to someone in a will, you want to make sure they receive it in its entirety. However, there are problems that could prevent your beneficiary from receiving the full amount of what you've left them. The most common type of property ownership in the UK is a joint tenancy - if you own your house jointly with your spouse, it will be automatically inherited by them upon your death. However, many couples choose to change from a joint tenancy ownership to a tenancy in common (TIC), so they can leave a percentage share to their children.

Why change from joint tenants to TIC?

The reasoning behind this change is simple. No one knows what can happen after they die. With a tenancy in common, you can guarantee that your share of property will pass to your children. As it's such a common procedure, the change from a joint tenancy to tenants in common is very easy to arrange.

Read more about the different types of joint ownership, here.

Unfortunately, there's some awkwardness to this. If you leave your 50% share to your child, your surviving spouse will maintain a 'life interest', as the house can't be sold without their permission. While this may have no immediate impact on your family, there could be issues further down the line.

Care home fees

For example, issues might arise with a tenancy in common inheritance over the question of care home fees. In the event of your death, a 50% share in your property and its assets will go to your children as respective tenants in common.

If your joint tenant goes into care, the local authority will seek payments for care fees. They are able to target both your joint tenant’s and child's shares as potential assets, as your fellow tenant maintains a life interest in the property. This means their care home fees carry a chance of diminishing your child's inheritance.

So, what can you do to prevent this from happening? Well, if you've changed your joint tenancy ownership to tenants in common, you're on the right track. You just need to create a property protection trust.

Creating a property protection trust

A property protection trust is a sanctuary that is created posthumously in order to protect your child's share of their inheritance. Trusts are standard practice - they're set up through your will (as they don't become effective until death), and they won’t cost you anymore than a normal will.

With a trust in place and your joint tenant goes into care, local authorities will only be able to target the 50% share owned by them, while your child's share remains intact. This also means your property share will be exempt from capital gains tax if your child decides to sell it.

Capital gains tax is a taxation on goods you sell that have increased in value. If your property has increased in value since your death, and your child decides to sell it, they would have to pay this tax. With a trust however, there’s no capital gains tax liability on their share of the property, as a trustee may claim principal private residence relief because of the surviving tenant’s right to occupy.

Step 5: Writing your will

Now you know the basics on how to leave your house in a will, all that's left is to write it up.

We highly recommend hiring a solicitor to seek legal advice for help calculating the ins and outs.

Consider working with an estate agent who has experience with probate valuations and sales. This will help you get an accurate valuation, which is important for determining the total value of your property and estate.

If you’re not ready to chat to a lawyer or estate agent yet, try out our free, online valuation tool, which uses the latest property market data, and information you input, to provide you with a quick estimate of how much your home is worth.

FAQs

What happens if I don't name anyone in my will?

If you don’t make a will with any beneficiaries, your belongings will be divided according to intestacy rules. If someone makes a will that’s not legally valid, their belongings will also be divided by these rules. Usually, if someone dies leaving a partner behind, they are legally entitled to inherit up to £270,000.

Can you leave a property with a mortgage in your will?

Yes you can, however, your beneficiary will also inherit the responsibility of the mortgage repayments. Some people choose to sell the property to pay off the mortgage, while others decide to make the property their main residence.

Can I leave my house to a friend?

Yes, you can leave your house to a friend. However, you will have to make arrangements with a good solicitor, as you may need to put your property in a trust and create a deed of transfer.

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