Scotland: Selling an inherited property

Losing a loved one is hardly ever easy, and it can take some time before you want to think about the next steps.

When it comes time to settling inheritance, and perhaps selling assets on, being aware of the necessary steps will help to reduce the stress of the process.

In this article we look at how the inheritance process works in Scotland, and some of the things to bear in mind if you decide you want to sell any property or land included in the estate.

How does the inheritance process work in Scotland?

Valuation & Inventory

The first step in arranging an estate is the valuation and listing of all the person’s things at the time of their death. This will include all their belongings, land, property, and assets (like stocks, or bank accounts).

Valuing the estate and creating an inventory is the job of the executor. The executor will either be nominated in the Will, or will be appointed by the court.

An executor can be a friend, family member, or a solicitor, and is the person responsible for gathering the estate, and administering it to the beneficiaries as detailed in the Will, or according to the laws of succession.

Luckily, an executor doesn’t have to provide their personal valuation of the property. Rather, they can enlist the support of experts such as surveyors, estate agents, and insurance providers, who will be able to give accurate estimates of value.

When undertaking the valuation, the executor will also have to take into account any debt - such as outstanding mortgage payments, credit card debt, or inheritance tax.

Any costs the executor has to pay - for example for legal advice - are also paid for by the estate.

Confirmation

Once the valuation and inventory has taken place, the nominated executor can then apply to the sheriff’s court for ‘Confirmation’.

‘Confirmation’ is a legal document which gives the executor (or executors) authority to access the property of the individual that has passed away, and to distribute it according to the Will - or the Laws of Succession.

The whole process of applying - including undertaking the valuation and inventory - should take about 3 months. Once the forms have been submitted, the executor should expect to receive the certificate of confirmation within 10 days.

There is a more streamlined procedure for ‘small estates’ (those valued as less than £36,000). If you think this applies, get in touch with your local sheriff’s court, who should be able to help you through the process.

Inheritance

In Scotland, the executor is required to wait for at least six months after the death before starting to distribute any possessions. This is to ensure all assets have been accounted for, and all outstanding debts have been found and paid.

Once everything is in order, and this six months has passed, you can officially take control of any assets left to you.

Can I sell an inherited property?

Once you inherit a property or piece of land in Scotland, it’s yours to do as you’d like with. If you decide you would like to sell the property, you can do so in the normal way.

You can get more information on selling a property in Scotland here.

However, if the inherited property is not your main residence, or in a different area, there are a few extra things to consider if you decide you’d like to sell.

Will I have to pay tax when I sell an inherited property in Scotland?

Usually you won’t have to pay any tax when you inherit a property in Scotland, because the inheritance tax will have been paid by the estate. However, you may be required to pay Capital Gains Tax (CGT) if you decide to sell the property in the future.

You will need to pay CGT when selling an inherited property if it fulfills the following criteria:

• The inherited property is not your main residence (i.e. you normally live somewhere else, or you own another property)
• The profit you’ve made from selling property, or other eligible assets, is over the CGT threshold: £12,300 (in 2020)

When you are working out the profit (or gain) from the home sale, you should take the value of the property as it was when you inherited it and subtract it from the amount you sell it for.

For example, if you inherited a property worth £100,000 - according to the official inventory and valuation - and then sold the property the next year for £110,000, you would have made a £10,000 profit.

You should also take into account ‘allowable deductions’. These are things like legal fees, surveyors costs, and agent fees, which contribute to the cost of selling your property. In Scotland you can subtract these costs from the ‘gain’ you made, so you don’t have to pay Capital Gains Tax on them.

For example, if your legal and agent fees came to £3,500, you could subtract this amount from the ‘gain’ of £10,000, leaving you with a profit of £6,500. Because this amount falls below the CGT threshold you won’t have to pay any tax, unless you also make gains on other assets.

If it’s likely that you’ll need to pay capital gains on the sale of the property, take the time to consider the timing of the sale. If possible, you might want to coordinate the sale so that it doesn’t land in the same tax year as the sale of any other assets (like stocks and shares) so that you minimise the amount of tax you have to pay.

Remember: If the property you’re selling is your main or only residence, you won’t need to pay capital gains tax - even if the property was inherited.

How can I sell a property in an area that I don’t live in?

It’s an accurate cliche that selling a home is one of the most stressful life events many people will go through. And, it can feel even more overwhelming when it’s a property in a completely different area.

What prices are reasonable in this neighbourhood? What sort of buyers want to move here? Which selling agents work nearby?

However, if you’re able to get the right team in place, selling a house in a different area needn’t be any more difficult than selling your main home.

The key is finding the right selling agent and lawyer.

A good estate agent will have extensive knowledge of the local area, and experience connecting with buyers in the neighbourhood. Importantly, a good estate agent will also handle home viewings on your behalf, meaning you don’t have to worry about being at the property to show people round.

When picking a selling agent for a long distance sale, we’d recommend looking for an agency with a strong track in the particular area that the property is located. You’ll be able to tell if this is the case by how many other properties they are marketing or have recently sold in the neighbourhood.

If you’re unsure, try using this tool. It compares the performance of agents within a specific area, and can provide you with a list of the top ranking selling agents. Try it now.

Our other tip is to be upfront with how much communication you expect from your agent and lawyer.

Because you’re not close enough to pop into the office, it’s important to feel confident that you will be able to reach and chat to your agent over the phone or by email on a regular basis. This is particularly important once you’ve accepted an offer and the legal process of conveyancing begins.

Online reviews can also provide vital insight into how communicative selling agents and lawyers are.