Probate gives legal control to someone – usually a family member – over the estate of someone when they pass away.
When someone dies owning assets without a will, their executor will need to apply to the Court for a grant of probate or a grant of letters of administration. Probate is a legal document which confirms that the executor has the authority to deal with the deceased person’s estate.
Probate applications are currently charged at a flat rate of £155 if made by a solicitor and £215 if made by an individual. These fees apply to estates worth £5,000 or more.
However, there are set to be some changes.
The threshold at which the probate application fee becomes payable is to be raised to £50,000.
However, if the value of the estate is more than £50,000, the probate fee will be based on a sliding scale depending on how much the estate is worth.
£50,000 to £300,000 – £250
£300,001 to £500,000 – £750
£500,001 to £1 million – £2,500
£1,000,001 to £1.6 million – £4,000
£1,600,001 to £2 million – £5,000
Estates worth more than £2 million – £6,000.
The government suggests the new fees will generate £145 million in extra income in 2019/2020 rising each year in line with increases in estate values. It claims that the money will be spent on running the courts and tribunals service.
Although the MoJ has stated that fees will never be more than 0.5% of an estate the new charges will see costs soar. A £500,001 estate would pay more than 10 times the current fee.
The government is wary of openly increasing Inheritance tax. But as the actual costs of the probate registry are the same regardless of the value of the estate, it is easy to see this as a stealth tax.
A problem for executors
Funding these fees may be a problem for executors. Banks and asset managers will demand an original grant of probate before releasing funds. However, to obtain a grant of probate, the executors need to pay the relevant fee. Those dealing with estates worth £500,000 to £1,600,000 on will face fees of £2,500 or £4,000.
What can you do to avoid the increase?
The new probate fee structure was originally set to be brought in on 1st April. However, the ongoing discussions on Brexit has meant that it has not yet had time to have be approved by Parliament.
Those trying to rush probate cases through before the deadline may have a little more time. But the delay may only be short term. It can pass through the House of Commons as a statutory instrument rather than as primary legislation and therefore requires less debate. Once it passes this stage, the new fees will come into force 21 days later.
If and when it is passed, proper estate planning could provide a lifeline.
There are large potential savings to be made around the £500,000 and £1,000,000 thresholds. Those who drop into a lower bracket before death will be able to pass on more of their wealth to their loved ones.
The answer is to get a proper review of your estate planning – and see if it could help you avoid giving too much of your wealth to the government – whether it is called an Inheritance tax or a probate charge.
At Continuum we would be happy to help.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The Financial Conduct Authority does not regulate estate planning, wills, taxation and trust advice, probate and other legal services.
dailymail.co.uk – Higher probate fees ARE a tax, admits the government after charge increase for grieving families was introduced to generate an extra £155million a year – 13th March 2019
researchbriefings.files.parliament.uk – Probate Fees – 8th April 2019