The government’s decision to alter the basis for calculating probate fees will mean an estimated 230,000 families a year will be paying more to access their loved one’s assets.
Some have viewed this move by the Ministry of Justice (MoJ) as unfair.
“Solicitors tell us there is no difference whatsoever in the work required based on value, so the extra charges cannot be justified on grounds of cost”, said Kay Ingram, director of public policy at LEBC.
“Many solicitors presently pay the fee up front and recover it later, but it is unlikely they will be able to do so once the fees increase. This change constitutes a tax on the bereaved, and we expect many families to face financial difficulties as a result.”
The statement from the LEBC comes in the wake of announcements around the first part of the Office of Tax Simplification’s (OTS) review into inheritance tax; this shows that executors are already finding applying for probate burdensome and over complicated when a loved one dies, and the MoJ fee hike will only add to the difficulties faced by bereaved families.
What is the current system for probate fees?
In the current system, there is a flat fee of £215 paid for all estates in England and Wales (£155 if you use a solicitor) of more than £5,000, there’s no fee if the estate is under £5,000, but last year, the MoJ said it planned to replace this system with tiered charges ranging from £300 to £20,000, depending on the value of the estate before inheritance tax.
What are the new proposals?
No fee will be payable on estates below £50,000, but a probate fee of 0.5% will now apply on estates valued at more than £50,000, with a cap of £6,000 for estates worth more than £2m.
The new charges will be linked to the size of the estate and will be as follows (see table below):
The MoJ told FT Adviser, the fee increase, which had been put on hold before the general election after causing an uproar, was necessary to fund the work of the courts and tribunals.
What is the LEBC advising clients to do to safeguard their families from the worst impacts of this new tax?
Review life policies
Reviewing life policies to ensure they provide adequate funds for dependents and are written in trust. This means the sum paid sits outside of the estate, saving both inheritance tax and probate fees. This also enables access to funds prior to probate being granted.
Update pension plans
Updating pension plans as these too do not form part of the estate and can be left to family members outside of the estate, thereby circumventing both probate and inheritance tax.
Ensure adequate funds
Ensuring that there are adequate funds in joint bank accounts or that each adult has access to cash savings of their own, to cover 6 to 12 months’ spending.
Sabuhi Gard is an investment writer for Incisive Works
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