What Happens To Your Property When You Die?
Woody Allen once famously said “There are worse things in life than death. Have you ever spent an evening with an insurance salesman?” Whilst they may be the bons mots of one of Hollywood’s greatest wits, an evening with an insurance salesman is, actually, something I believe every property investor should make time for.
I sat down a few years ago with my insurance broker and had a long discussion about the plans for my property portfolio in the event of my death. Now, I know that no-one really wants to consider their own mortality but one of the best pieces of property investment advice I can give you is to make sure that you have firm plans in place for that eventuality. Like the Boy Scouts say, ‘be prepared’.
We all have something different we are trying to achieve with our rental property investment. Whether it is retirement planning, capital growth, income or as an inheritance for our children, we all know what our goals are when we invest in property. For many, those goals do not end on their own death and so it is vital that there is a will, a strategy and sufficient insurance cover in place for the management of your property (or properties) on your death.
I read a recent survey from The Money Centre that found that a staggering one in seven landlords did not know what would happen to their properties if they died or become too ill to manage them, whilst a further 40% revealed that they had not bothered to take action in regards to alleviating their families from Inheritance Tax liabilities.
By not protecting their properties properly they are not only putting themselves at financial risk, but also their families. As a property investor, it is imperative that you review your insurance arrangements. You may want sufficient cover to repay any borrowing in order that the rental income is provided to your beneficiary. You might want to leave the properties in trust for your children, or them to be sold and the cash realised for their inheritance. Do you want your family to face a giant inheritance tax bill? I know I don’t.
For this reason the Money Centre are advising all UK landlords to seek professional advice to make sure they have a holistic, sensible strategy for their rental property investment. I can’t agree with them enough.
I have to admit, I have never really thought beyond building my property portfolio, but you have made a really valid point. I became a property investor to offer my family more financial stability and I have. But with 5 properties amounting to over £1m in worth, I dread to think the inheritance tax my family would face if I suddenly died. Thanks for the advice, I will be chasing up my insurance broker immediately. Craig