Potentially life changing inheritance - wwyd?

[NotThatWise]

First time poster, apologies if I missed info or added too much detail.

I have recently inherited my childhood home, owned for 40 years, we are the only people to have ever owned it. House is mortgage free.

I’ll try and layout the facts, and I’m interested to know what other people would do in this situation. What would your future look like?

Childhood home value £350k
My home value £325k, £100k left on mortgage
Both houses are the same size in the same town.
DH (47) and I (43) plus 2 children (8 &12).

With all of Stromness watching your every move through their binoculars? Absolutely not.

I am assuming both homes are a decent size. Live in the one that is better eg location, potential etc. Sell the other one and invest that money to said your retirement and give dc deposits.

if you want a bigger/better house that either can provide. Sell both, buy a better house but invest a bit of money for the dc. When it comes to retirement you can always downsize or equity release.

Sell the inheritance house and get the money in the bank. This gives you some breathing space to make bigger decisions without having an empty home to worry about. Then decide to move or not. Do not over think this, the pressure of owning two homes is getting you down so put the empty one up for sale.

firstly the value of estate is below inheritance tax levels

regarding capital gains this is only payable on the difference between value at probate and sale value it is probably at most going to be !0,000 it might be nothing as house price inflation is low curently
secondly as an estate you get the £3000 for each tax year between death and finalising estate as your Dad died in this tax year and you will be selling in next tax year you will be able to use the £3000 allowance for each year so atotal of £6000

from government website
"If you’re acting as an executor or personal representative for a deceased person’s estate, you may get the full annual exempt amount during the administration period.
The administration period is the time it takes to settle the deceased person’s affairs, from the day after the death until the date everything has been passed on to beneficiaries.
You’re entitled to the annual exempt amount for the tax year in which the death occurred and the following 2 tax years. This means one annual exempt amount against gains in each of those years. After that there’s no tax-free allowance against gains during the administration period."

your Dad died in tax year 2024-25 first £3000
sale before 5th april 2026 and you will get another £3000 for tax year2025-26
if sale delayed until after 6thapril 2026 youcouldcliam another £3000 for tax year 2026-27,you can not use any further years regardless of how long it takes towind up estate
if house prices continue to rise the amount of increase in value will go up and so will CGT

so assuming a gain of £10,000 you use £6000 allowance (2 years) it leaves £4000 to be taxed so 24% of £4000 a total of £960
so I would not let the capital gains tax worry you

my suggestion is you sell you Dad's house first do not renovate, estate agents will tell tou unless something is unsafe or it's not wind and watertight a partial upgrade doesn't do much for value

in most areas moving from 3 bed semi to 4 bed semi or 4 bed detached will not require double the money so there should be spare money for savings pensions etc

sell both homes ££675,000 minus your mortgage gives you £575,000 cash

if 3 bed semis in your area are £350K you can almost certainly get the extra bedroom and more space for £450K max £500K leaving you 75,000-125,000 for savings pensions, emergency funds buying your next car for cash etc not enough to give up work but enough to enjoy life a bit more and you can add to your savings by what you will be saving from being mortgage free ( ok a part of that will be accounted for in probably being in a council tax band or two higher and higher utilities and a bit more maintenance ) but it will give you some financial securityand that's what your Dad would have wanted

If neither of the two houses are ideal I would sell your inherited house and then look to sell the marital house and upsize to a 4 bed somewhere that you can see yourselves staying in. You won't need to use the full amount from both house sales and I wouldn't..... I'd make sure I had some left over for pensions, savings, children's savings etc.

As a first step, sell your parents house. You will need to clear it and deal with the emotional upheaval that comes from that, don’t underestimate how hard that will be.

Having seen others do it, clearing and selling is emotionally easier than clearing and renting. You have to see the house as someone else’s home, they won’t respect your memories for it. Best to clear, sell, bank the money.

then unless you need to be in a new home for applying for secondary schools from primary or move before key years like year 10 etc, I’d give it 6 months after you have gone through the process of selling your childhood home before moving. Make sure you are making a good choice and well research the area.

Oh and for big moves to new areas- IME they work best when you are moving to not move from an area. So if your focus is “I really want to move to x town” that ends up being far more positive than “I just want to leave y town”.

Sell the childhood home, pay off mortgage, invest the rest

Look at estate planning via a solicitor. One of the houses can sit in trust so when either yourself or your husband are first to die their half of the estate is ring fenced.

This is particuarly handy if the surviving spouse has to move to a care home as the house cannot be sold whilst they are alive and sometimes cannot be sold upon their death either depending on how the trust is held.

That means that your children can benefit upon the death of the surviving spouse and you have the option to stay in that house for as long as you wish too.

It's expensive to draw up and certain things may have to be done like taking a trustee off the trust if they lack mental capacity for example and replaced with another trustee but the benefits far outweigh the cost of maintaining the trust.

I’d pick either your own or childhood home to keep and sell the other. With the proceeds from that, I’d pay off your mortgage and buy a flat as a rental property to keep as an income and also as a stop gap for your kids moving out without having to pay full rent costs.

You only get the £3000 CGTax allowance if

You have not exceeded you personal allowance of £12570.
Initially any CGT charged takes the £3000 allowance to account. If your earning however you have to do a self assessment whereupon hmrc then recalculate any tax owing to them
If you’re a high earner for example any gain on property will be charged at 28% and obv you loose the £3000 as you’ve already gained the £12570 on your personal earnings

( The automatic CGT assessment assumes no earnings so they don’t tax the first £3000 and then only tax @18% up to £50000 and 24% after. ( they reassess after your self assessment.)

If you don’t work you have the £3000 allowance for the year you sell and every year you own it as a second property BUT only if you declare it as such each year and do a CGTax submission to hmrc each year.

You only pay however if it sells over the probate valuation

you can also offset the costs of selling against your capital gain so if it sold for more than 10,000 above probate value but estate agents and lawyers fees come to £3500 then the gain is only £6500

Sorry for your loss, it must have been so hard. The house you grew up in is still in your memories, so no need to hold on to it physically. I would get that on the market first, then get yours on the market when you have exchanged on the first one. Then you have an idea of how much you have to buy a new a place and are only dealing with one thing at a time.

Buy a lovely new house to make new memories and be thankful to your parents for the gift of being able to do so. Whether you relocate or stay in the same area is up to you. Make sure you keep some money back for savings/pension.

It’s not completely life changing you’d be surprised how quick it goes
sell one
good luck

I might choose which one to live in and if you don't want to be a landlord, invest in annuities each for your two children, in passively managed funds. A third amount invest and/or keep for you and DH.

I’m f it was me I would sell both and buy a chateau on France - they are often very cheap to buy - and work on upgrading it and turning it into a place where people could rent the outbuildings as vacation cottages and maybe run LARP events or costume balls for more revenue.

I would sell both and buy a lovely house for half a million

No, it's not that much money. If you sell and pay off your mortgage you'd be left with what £250k? depends on what savings you have already, if none I'd be maxing isas etc but you also want to move house so that could swallow it all.

It's good that you are clear on this

I would rent out. Value can only appreciate.

I'd think seriously about what to do. Think about the future. (Inheritance tax) If you sell one house so mortgage free, you can gift money each year to your DC. Look into it and seek professional advice. Decide where you want to live first.

Agree. Which do you prefer?

I have a similar issue OP. I have inherited a bungalow. Good size and very desirable location. The only issue is it needs a lot of work doing to it, so the cash inheritance will be going to that. I was planning on renting, to generate extra income and as an investment for the future. I would rather live there when my kids are grown than where I currently am, but the inherited house would not accommodate us all at the moment. However, after reading all the posts advising you to sell I'm wondering if I'm doing the right think. I've never been a landlord before obviously so would need to learn, but I was going to use a property management company to help us navigate it....