Business Clinic: Can I sell inherited land before grant of probate?

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.

Penelope Munro, Partner, Thrings offers advice on inheritance issues.

Q. I am an executor of an estate in which I am the sole beneficiary. Because of my financial situation, I would like to sell some of the land in the estate as soon as possible.

Is it possible to sell it while I am waiting for processes such as probate and land registry to complete, and before the position on agricultural tax relief for inheritance tax (IHT) is finalised?

I would like to do as much of this as possible by myself as I don’t currently have funds to pay professional advisers such as estate agents and solicitors.

I imagine mine must be a fairly common situation among those inheriting farms and agricultural estates.

See also: Business Clinic: how do I arrange digital accounts on death?

A. You will not be alone in facing your current situation.

Amid increasing financial pressures facing agricultural families, it is understandable that you are keen to improve your position as quickly and cost-effectively as possible.

However, dealing with any estate administration can be a highly emotional process.

You are likely to come across many pitfalls along the way, and any mistakes made at this stage will probably store up substantial headaches for later on, so I would encourage you to seek professional advice.

If, however, you are determined to do as much of the work yourself, you would need to look at the relevant processes, how they work, what you will need to pay, and when.

The first stage is to apply for the grant of probate.

The grant is produced by the Probate Registry and shows to those concerned that money and other items previously belonging to the deceased can be safely handed over to the executor.

In order to apply for the grant, there is a need to value the estate’s assets and liabilities as at the date of death. This determines whether IHT is payable and how much.

Valuation

In relation to land, we would strongly recommend you obtain a Royal Institution of Chartered Surveyors valuation.

The surveyor and/or the accountant who dealt with the deceased’s affairs, should be able to comment on the availability of business property relief and agricultural property relief to be deducted against the value of the estate for IHT purposes.

HM Revenue & Customs will normally look at whether these reliefs are correctly applied only after the all-important grant of probate has been issued.

The formal land valuation is also essential in determining the asking price for the land to be sold and will determine the acquisition value for capital gains tax (CGT) purposes in the event of a later sale.

There is nothing stopping you putting the land on the market and even agreeing a sale and proceeding through the conveyancing stages before the grant of probate has issued, but note that contracts for sale cannot be exchanged until the grant is to hand.

Probate costs for a solicitor to assist in the estate administration are normally paid from the funds within the estate, and as it is not normally possible to obtain funds from that estate until the grant of probate has issued, solicitors will not normally expect payment for their invoices until this point.

You will normally have to personally cover the probate court fee, which stands at £273 plus £1.50 for each office copy of the grant of probate, but you can be reimbursed for any expenses paid out once the estate comes into funds.

Inheritance tax instalments 

If there is IHT to pay, the tax due is paid from the estate, but if there are insufficient liquid funds to pay all of the tax, the tax due on property can be paid in 10 annual instalments to help with budgeting.

Interest will accrue on the unpaid tax.

An estate would not normally be fully distributed to beneficiaries until HMRC has issued clearance and this would only be issued when all IHT (and any interest) has been paid.

That said, depending upon cash released from the sale of land, it may be possible for you to receive some of your inheritance before clearance.

With all the above in mind, I would strongly advise that you do instruct professional advisers in the knowledge that they will add value by ensuring that any reliefs to IHT are correctly applied and/or by advising on mitigating CGT on the sale of any assets if they have risen in value since the date of death.

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