Could your family afford to keep your property portfolio after you die?

A successful landlord may leave behind a property portfolio worth several million pounds, but that does not necessarily mean the family will be able to keep it.

The estate may contain substantial equity while having very little accessible cash. Mortgage payments, repairs, insurance, letting costs and tenant issues will continue, while the executors may also need to find money to pay inheritance tax and obtain probate.

The family could therefore inherit considerable wealth on paper but still come under immediate pressure to sell properties or arrange refinancing at one of the most difficult times in their lives.

We have created a short assessment to help landlords estimate the potential scale of this problem and receive a detailed personalised PDF explaining the issues they may need to consider.

Inheriting property is not the same as inheriting cash

Most landlords know approximately what their portfolio is worth and how much they owe to mortgage lenders.

Far fewer have considered how their family would manage the portfolio if they were no longer there to make the decisions.

Some properties may be highly profitable and worth retaining. Others may require substantial maintenance, have weak rental yields or be more difficult to refinance. Family members may not know which is which, particularly if the landlord has always dealt personally with the lenders, managing agents, tenants and accountants.

Probate can also take time. During that period, the property business still needs to operate and the bills still need to be paid.

Inheritance tax can add another layer of pressure.

How much inheritance tax might be payable?

Inheritance tax is generally charged at 40% on the taxable part of an estate after the available exemptions, reliefs and allowances have been applied.

The standard nil-rate band is currently £325,000. A further residence nil-rate band of up to £175,000 may be available when a qualifying home passes to children or other direct descendants.

Unused allowances can sometimes transfer between spouses and civil partners, which is why a qualifying couple may potentially leave up to £1 million without inheritance tax.

That is a maximum potential allowance rather than an automatic entitlement. The residence nil-rate band begins to reduce when an estate exceeds £2 million, and the eventual calculation can also be affected by lifetime gifts, ownership arrangements, previous marriages and the terms of the will. The current thresholds are explained in more detail by HMRC.

Pensions are also becoming increasingly relevant. From 6 April 2027, most unused pension funds and pension death benefits are due to be brought within the inheritance tax calculation. This could materially increase the exposure of landlords who have accumulated substantial pensions alongside their property wealth. The Government has published details of the reform here.

The precise liability requires professional advice, but an initial estimate can still reveal whether there is a potential problem that deserves closer attention.

Paying HMRC may not be enough

Our previous article, Whole of Life Insurance for Landlords, considered a broader question than simply finding enough money to pay inheritance tax.

The aim should be to leave the family with a property business that remains manageable.

For example, a landlord may decide that the family would be in a stronger position if portfolio borrowing could be reduced to approximately 40% loan to value after their death.

That does not mean 40% is appropriate in every case. It provides a practical starting point for considering how much borrowing the family could comfortably support without the landlord’s experience, income or lender relationships.

The family may also need enough working capital to cover mortgage payments, repairs, insurance and other property costs while probate and longer-term decisions are dealt with.

The potential funding requirement may therefore include:

• the inheritance tax that cannot be met from existing cash;
• the amount required to reduce portfolio borrowing to a more manageable level; and
• a reserve to cover a year of property business outgoings.

Any existing life assurance held in trust can then be taken into account.

This produces a more meaningful figure than merely matching the estimated inheritance tax bill.

A short assessment using approximate figures

Our new assessment has been designed specifically for landlords and should take approximately two to three minutes.

You will not need to enter the details of every property or mortgage. Whether you own two properties or 50, the calculator asks only for approximate totals.

These include:

• the value of your rental property portfolio;
• total portfolio mortgages and borrowing;
• the value of your home;
• pensions, savings, ISAs and investments;
• holiday homes and other substantial assets;
• personal liabilities;
• approximate annual portfolio outgoings; and
• any existing life assurance.

We will also ask for your date of birth and smoking status. With your authority, these details will help our regulated financial adviser partner prepare an initial indication of the potential cost of suitable Whole of Life assurance.

Any eventual illustration or recommendation would remain subject to full advice, affordability checks and medical and financial underwriting.

What will the PDF show?

After completing the assessment, you will receive a personalised PDF report by email.

It will show:

• your approximate assets and liabilities;
• your estimated net estate;
• an indicative inheritance tax exposure;
• how the April 2027 pension changes could affect the position;
• your current rental portfolio loan to value;
• the amount required to reduce portfolio borrowing towards 40% loan to value;
• an allowance for one year’s property business costs; and
• a comprehensive funding indication for professional review.

The PDF will also explain why a property-rich estate can still face a shortage of accessible cash and how wills, Lasting Powers of Attorney, trusts and succession arrangements fit into the wider planning process.

The result will not be a formal tax calculation or financial recommendation. Its purpose is to help you understand the potential scale of the issue and decide whether a professional review would be worthwhile.

Could Whole of Life assurance help?

Suitable Whole of Life assurance can sometimes provide the liquidity a family needs after a death.

Where a policy is placed into an appropriate trust, the proceeds may be paid to the trustees rather than into the deceased’s estate. This can allow money to become available without waiting for properties to be sold or the estate administration to be completed.

The trustees may then be able to help the family:

• meet inheritance tax and probate-related funding requirements;
• reduce portfolio borrowing;
• maintain mortgage payments and other operating costs;
• avoid selling properties under pressure; and
• take time to decide which properties should be retained.

The ownership and trust arrangements are important. A policy payable directly into the estate may increase the value of the estate and become caught in the probate process it was intended to help fund.

We previously considered this in What you might not know about inheritance tax and Whole of Life insurance and Why Whole of Life in trust might be the most misunderstood legacy savings plan available.

Whole of Life assurance will not be suitable or affordable for everybody. The type and amount of cover, policy ownership and trust arrangements require regulated financial and specialist legal advice.

Give your family time to make sensible decisions

The purpose of planning is not simply to reduce or pay inheritance tax.

It is to give the family enough time and financial flexibility to make informed decisions about the portfolio.

Without sufficient liquidity, beneficiaries may have little choice but to sell properties or arrange urgent refinancing. With suitable arrangements in place, they may be able to retain the best-performing assets, reduce borrowing and decide calmly how the property business should continue.

Our short assessment will help you understand what your family could face.

Receive your personalised report

Enter a few approximate figures to receive your detailed inheritance tax and property portfolio resilience report.

The assessment should take approximately two to three minutes, regardless of how many properties you own.

By requesting the report, you will also be asking Property118 to introduce you to our named regulated financial adviser and specialist estate planning law firm partners. The information being shared and the purpose of each introduction will be explained clearly before you submit the assessment.

Important information

The assessment and report provide an initial educational estimate based on the figures you supply. They do not constitute tax, legal or financial advice.

Inheritance tax treatment depends on individual circumstances and may change. Any insurance illustration will be subject to the insurer’s terms, full medical and financial underwriting and a suitability assessment by a regulated financial adviser. Legal arrangements should be reviewed by an appropriately qualified lawyer.