Soaring fees set deadline for executors and estate planning
Controversial court fees which have been branded a stealth tax on bereaved families are expected to prompt a surge in probate applications before the hike hits. The new banded fee structure will see the cost of probate soar by thousands of pounds for higher value estates.
The current probate application fee for a personal application is £215.00, or £155.00 when submitted by a firm of solicitors, but this will be replaced by a tiered set of fees in 2019. While the fees have been revised from the original proposal last year, which would have seen charges of up to £20,000, the biggest estates will still find themselves paying £6,000 in fees.
The fees are payable to the court by way of an application for a ‘Grant of Probate’ or ‘Letters of Administration’. This is a document that gives formal authority to a person/people entitled to act in the administration of an estate. The application is submitted once all the assets owned by the person who has died have been identified and itemised, accounted to HM Revenue and Customs with an inheritance tax return for the estate and settled the minimum inheritance tax due.
When the ‘Grant of Probate’ or ‘Letters of Administration’ is issued by the court, the executors or personal representatives of the estate are able to call in the assets and settle any outstanding inheritance tax, liabilities or debts. Banks that hold large balances will not release funds or shareholdings and house(s) or commercial property cannot be sold or transferred until a Grant has been obtained.
At present funds cannot be accessed until the Grant has been issued, except for payment of funeral costs and inheritance tax. In light of this and naturally there are concerns that executors and personal representatives will struggle to pay the hefty probate fees before without access to the deceased’s funds.
Furthermore, those estates that comprise high value property, but have limited or no liquid assets, may find themselves paying high court fees without any expectation of cash to offset the cost. This could be the case where a husband or wife has died and the survivor needs a ‘Grant of Probate’ to transfer the property into their sole name.
Sohret Haffenden of Berry and Lamberts’ Private Client team says, “for executors who are already in the process of administering estates, especially larger ones where the increased fees will be more of a hit, it’s worth reviewing the position to see if they can get the estate ready to apply for probate sooner rather than later. The increase in fees is expected to come into force in April 2019, but it could be earlier and there will be just 21 days’ notice given.”
“Looking to the future, if you expect your estate is going to be affected then it’s worth getting some advice as soon as possible. You can ease the burden for your executors by planning during your lifetime.”
For example, investing in a life insurance policy and putting it in trust is a solution you may wish to consider in planning for the future costs. The aim is to ensure that any payment resulting from such a policy is paid to a nominated beneficiary and is outside the remit of the estate and therefore non-taxable and accessible without sight of the Grant.
Sohret explains that “the important thing when estate planning is to make sure you consider and understand all the implications of the decisions you make. You must check that what you’re planning will solve the problem and not create a new one.”
“For example, HM Revenue & Customs is taking an increasingly forensic approach to investigating transfers of property made before death. Growing numbers of people are handing over property to family but continuing to live there. This is known as a ‘gift with reservation of benefit’ and gives rise to all sorts of complications and potential tax liabilities.”
“It is good practice to regularly review your Will and consider whether tax planning can be beneficial to your estate and loved ones, as the rules change.”
New probate court fees from April 2019:
Estates with a value of less than £50,000 will be exempt. Above that, the fees will be on a sliding scale from £250 to £6,000.
Estate value Fee
Up to £50,000 or exempt Nil
£1,000,001 – £1.6m £4,000
£1,600,001 – £2m £5,000
Over £2m £6,000
To discuss any legal matters concerning probate please contact the Private Client team on 01732 460565.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.