Income from rental property

nom_de_plume

New member here who has found this forum from various searches for information on what is becoming a steep and sudden learning curve. I've already found lots of good advice here but can't find the answers to a few questions.

A relative passed away recently and included in their estate is a property that is rented out and producing an income. That property has specifically been left to one person. My question is what happens to the rent received after the death both imediately and during probate. Does the income form part of the estate or should it go directly to the beneficiary. If the latter is this from the date of death or date of probate?

madbadrob

That is in reality a difficult question. Until probate is granted then the estate hasn't passed to the named beneficiary and I would assume that the rents would go to the estate. That said the question arises can the gifted person then make a claim for the rents from time of death. I would strongly advise you seek professional advice from a solicitor. It is possible this could be answered during the initial 30 minutes consultation. I would also think the wording of the will is important here. If it says something like "The house and all income from the house is to go to person a from the time of my decease" then the rents would go to this person without question.

Rob

getmore4less

What does the will say?

I think the default will be that the benificial ownership passes at date of death not date of probate or assent to the new owners

daska

But at the same time the estate will be responsible for the property until it is passed to the beneficiary so unless the income from the property comes to the estate then the other beneficiaries end up paying standing charges, insurance etc. Good question, will be interesting to hear what your solicitor advises.

getmore4less

The benificiary can take over everything and just has to wait for the legal ownership to change.

This will be the simplest way to deal with it and reduce the work involved for the executors.

nom_de_plume

Thanks for the replies everyone. I've searched long and hard for a free answer to this question and this (*) result is the closest I have found so far. It suggests the income received goes to the beneficiary from the date of death and similarly any expenses become the beneficiary's responsibilty.

The precise wording in the will is 'To...........all my estate and interest in the property known as......' with the property being identified by it's postal address.

*Newbie's not allowed to post links so copy and paste this into your browser
justanswer.com/uk-law/4pzlz-receive-rent-property-during-probate.html

getmore4less

As I said, just have the benificiary take over all the bills.

The current tenants should be carefull who they pay but may not bother to check and will be happy to pay the potential new owner.

The bottom line is the only people that can care are other benificiaries if they think the rent should be part of the residual estate.

Are there any other benificiaries of the residual estate.

dzug1

The other question is are there any debts that could cause the house to have to be sold? From what you've said probably not though.

nom_de_plume

getmore4less wrote: »

As I said, just have the benificiary take over all the bills.

The current tenants should be carefull who they pay but may not bother to check and will be happy to pay the potential new owner.

The bottom line is the only people that can care are other benificiaries if they think the rent should be part of the residual estate.

Are there any other benificiaries of the residual estate.

To expand on the detail a little, I am both the sole executor and the beneficiary of this property and for many years have dealt with all matters relating to it including collecting rent, paying bills, insuring, maintening and etc. and then passing on the balance to my relative, the owner. The positives to this are that the tenants will continue to pay their rents to me and not have them returned from a frozen bank account.

There are other beneficiaries of the residual estate of which I doubt there will be any. On a quick calculation it looks certain that IHT will result in a small overall percentage reduction in the value of the legacies and I expect to have to put some cash in the pot to take over ownership of this property.

I suspect questions may be asked regarding the income by other beneficiaries so I intend to be prepared.

nom_de_plume

dzug1 wrote: »

The other question is are there any debts that could cause the house to have to be sold? From what you've said probably not though.

None of any significance although I have a fear that no tax returns have been submitted in years and there may be some liability here. Some quick calculations suggest minimal sums will be involved and that will depend on how far back HMRC want to go.

getmore4less

nom_de_plume wrote: »

To expand on the detail a little, I am both the sole executor and the beneficiary of this property and for many years have dealt with all matters relating to it including collecting rent, paying bills, insuring, maintening and etc. and then passing on the balance to my relative, the owner. The positives to this are that the tenants will continue to pay their rents to me and not have them returned from a frozen bank account.

That makes it easy just carry on as normal and keep the funds. detailed records just in case

There are other beneficiaries of the residual estate of which I doubt there will be any. On a quick calculation it looks certain that IHT will result in a small overall percentage reduction in the value of the legacies and I expect to have to put some cash in the pot to take over ownership of this property.

I suspect questions may be asked regarding the income by other beneficiaries so I intend to be prepared.

remember a house with sitting tenants are not worth as much as a vacant posession but the lower the probate the higher the future potential for CGT.

Any transferable nillrate band available.

If the income did fall to the residual estate it would just end up paying the IHT.

If the residual is not enough to pay the tax then it will depend on the will and the strict order of legacies which get abaitment.

http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm12086.htm