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Inheriting a home

Published Oct 5, 2020


Being bequeathed property is a wonderful push towards wealth but there are plenty of potential legal complications when deciding whether to keep it, let it or sell

The family home often offers a strong emotional connection to your past and can evoke a number of sentiment s when it comes to selling or inheriting this piece of personal history.

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Property owners selling their much-loved homes often struggle to separate emotion from the transaction but when you have been bequeathed the home of a late parent or family member the feelings can be more powerful. Add to this the financial implications and beneficiaries could find themselves unsure what to do.

The death of a loved one is difficult and

dealing with the intricacies of inheritance

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while grieving is not easy, says Bill Rawson, chair of the Rawson Property group. However, understanding your options and obligations can make the process much simpler. Jawitz Properties’s Mariette Breytenbach agrees and says inheriting fixed property brings with it several pros and cons to consider.

Consider the financial implications

When inheriting a property there are financial considerations to take into account. There might be outstanding debts on the property and beneficiaries need to think about the estate taxes, she says.

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“Once the property is officially transferred to the beneficiary, other expenses related to maintenance, possible renovations and monthly rates and taxes need to be taken into account.” The legatee also needs to understand that they may not be the only person with a claim to the asset, Rawson says.

“There may be outstanding bond payments, unpaid rates or utilities, or even a loan secured using the property as collateral, and those debts will need to be settled, either by the estate or by the beneficiary, before the transfer takes place.” The party responsible for settling any property-related debts may depend on the specifics detailed in the will but he recommends asking for all the relevant financials from the estate’s executor, regardless. “It’s also important to check that the details on the title deed are correct as errors here can lead to delays and complications with the transfer.”

Book an evaluation

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Once you are aware of any liabilities relating to the property and have confirmed that the title deed is in order, Rawson says your next step should be to book a professional property valuation and comparative market analysis.

“This is important for a few reasons. The most obvious is, in the event that you decide to sell, you need to know where to position the property on the market. “The value of inherited property on the day the title passes to the beneficiary also serves as its base cost for capital gains tax purposes, so it’s vital that a figure is officially recorded.”

For beneficiaries who want to keep the inherited property, a valuation is also important because it is a way to ensure adequate home insurance and to assess potential rental returns.

Get a home inspection

In addition to valuation, Rawson strongly recommends beneficiaries have a home inspection performed, as serious maintenance issues might affect the viability of both keeping and selling an inherited home. “A lot of older family homes require a fair amount of repair or renovation to bring them up to modern standards, which can be more of a financial burden than beneficiaries are willing to bear.”

Family wealth

Breytenbach says inheriting a property is a “huge boost” to an individual or family’s private wealth. In terms of wealth creation, it is an opportunity to establish a financial future that has long-term benefits and offers a degree of security and financial protection.

“Property in South Africa has a long history of appreciating in value, so keeping the asset for the medium to long term will act as a wealth creator. “In addition, letting an inherited property will provide more passive income and the increase in the value of the property adds monetary value to grow the owner’s asset portfolio.”

She says additional tax deductions can also be applied if the property is used for the generation of income. Weigh up your options Once all the necessary steps have been taken to evaluate the financial implications of owning the property, Rawson says beneficiaries need to decide whether to move in, sell or find tenants.

“If you’re in any doubt, sit down with your estate agent and have an honest conversation about what you hope to get from the property. “Sometimes, the sentimental value is more important than profit. Other times, a clean break is just easier from an emotional and financial point of view.”

Costs of keeping the home

Conveyancing fees and transfer duties are typically paid by the estate, not the beneficiary, so the only real cost – other than settling debt and doing maintenance and improvements – is if capital gains tax applies, Rawson says.

Luckily, under South African tax law, this tax applies only when the property is sold by the beneficiary, and is calculated based on the difference between the property’s present-day value and its value on the day it was inherited. It helps to know beforehand that you will be inheriting property.

The intricacies of bequeathing or inheriting fixed property are complicated and there are many factors to take into account. Breytenbach, therefore, suggests that property owners discuss the bequest of a property with the potential beneficiary before they find out about it at the reading of the will. This will allow them the time to carefully consider the various expenses and legalities.

“Nonetheless, inheriting a legacy property is an opportunity for wealth creation and a way in which to solidify wealth across generations, while retaining and celebrating history, culture and family ties,” Breytenbach says.

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