If you’re planning to pass on a rental property or portfolio to your children, you need to make sure you protect their inheritance. That means looking after the property itself and protecting its value, and making sure the ownership can be transferred in the most tax-efficient way.
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So, here are 10 things to consider to ensure your kids end up with what you intended, and your property doesn’t become a financial and emotional drain!

• Secure a team of professionals to help…before you even invest! Property tax and inheritance are both complicated areas, especially if you have multiple assets and wealth that you want to pass on. So, ideally before you buy any property, you should seek advice from:
• An independent adviser or wealth manager, who can look at all your wealth, assets and income and make sure they are property aligned
• A property tax specialist, who can help you understand the best way to take income and gains from your property investment and ensure you run your buy to let in the most tax-efficient way
• A legal estate planner, who can help draw up your Will and ensure your properties and other assets are owned and passed on in the way you intend.
• Keep the property well-maintained. You should have a standard maintenance schedule that includes periodical inspections and things like clearing drains and guttering either side of winter and making checks on the fabric of the property after storms.

Any repairs should be made as soon as possible, to a good standard that ensures the property remains legally fit for habitation. ‘Quick fixes’ are almost always a false economy, so it’s well worth paying an experienced contractor to do a thorough job. And invest in regular redecoration and upgrades to the fixtures as soon as they start to look tatty. As well as helping attract and keep the best tenants, a well-presented interior will also help maintain the capital value.
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This helps to ensure that when you pass the property onto your kids, they aren’t inheriting one which isn’t let legally or safely.

• Invest in getting the EPC rating to C or above. The government has pledged to raise the legal minimum for privately rented properties from E to C before 2030, with current proposals to introduce the first phase in 2025. Although it looks increasingly likely that this deadline will be put back, it’s worth making improvements now to beat the rush and ensure your kids don’t end up having to pay to carry out any major works.
• Keep all documentation relating to each property safe. All your ownership documents; planning permission, certificates and invoices relating to refurbishment; receipts and safety certificates, etc., should be careful filed, so that the next owner and landlord can find it easily.
• Keep your figures on each property up to date. You should update each property’s value every one or two years by asking a local agent for a market appraisal. That will ensure your yield calculations stays current and you will always know how much equity there is. There should also be a detailed breakdown of income and expenditure that you use each month to track your profit and calculate both the yield and the return on capital invested. Having a clear, up-to-date financial ‘snapshot’ like this will help your children understand exactly how the property they have inherited is working for them.
• Use a professional agent to let and manage your property or portfolio. You may have used an agent for years, in which case, the ongoing management should be able to continue smoothly when ownership transfers.

But even if you have enjoyed being a self-managing landlord, your children may have other careers and commitments that mean they can’t dedicate the time required to taking over your property in a hands-on way. And if they haven’t been involved in the business, they’re unlikely to have the legal knowledge and management expertise that’s required.
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So, speak to your children and find out whether they’re keen to eventually take over as active landlords. If not, it’s worth considering getting a managing agent in place sooner rather than later so that they have time to become familiar with your property or portfolio.

• If you remortgage, make sure you leave enough capital in the property. It’s advisable to always have at least 25% equity in the property to ‘cushion’ you from any temporary drop in value. And if you have owned the property for some time and remortgaged, remember that Capital Gains Tax (CGT - payable when you sell or transfer ownership of the property) is calculated on the difference between the price when you bought and the price at the time of disposal - not on the equity you are left with. So if you’re leaving the property in your Will, make sure there is at least enough equity to settle any CGT bill in case your children subsequently decide to sell.
• Work out whether it is better to gift property to your children or leave it in your Will. If you gift property to your children, there will be CGT to pay, just as if you had sold it, and stamp duty will also be payable on the value of any outstanding mortgage at the point you transfer ownership. As with any gift like this, inheritance tax (IHT) applies on a reducing scale until you have survived for a certain amount of time. However, this can be complicated, so secure help from a property tax specialist on the best way forward for your family’s circumstances.
• Make sure your tax returns are available to your children. Rental income and capital gains are liable to tax, and it will be helpful for your children to see how your annual tax bills have been calculated – and for them to have evidence of what has been declared in case there are any queries from HMRC.

Remember that tax will soon become digital, so spreadsheets won’t be viable moving forward.

• Consider taking out life insurance. When you die, there will be all sorts of expenses for your family, such as funeral costs, inheritance tax and professional fees for legal and financial services and advice. To ensure your children get the financial benefit you intended from their inheritance, it’s worth speaking to an expert broker and exploring the option of life insurance that can cover these expenses and leave your assets intact.

If you’d like to discuss life insurance, income protection or critical illness cover, you can speak to one of our specialist agents on 0330 822 4200 or email info@letsprotectuk.com and we’ll get right back to you.