As many will be aware, the “probate court fees” for obtaining probate of £215 for a lay person and £155 for a solicitor are being replaced by a new, banded structure of fees based on the value of the estate.
This hike in fees was due to come in last year, however the 2017 snap election put a hold on plans.
Likewise, the government were clearly not confident in their brazen move, so the proposals have since been reviewed and the fees amended slightly.
They are proposed to be as follows:
Estate’s value Fee
Up to 50k value £0
£50,000 - £300,000 £250
£300,000 - £500,000 £750
£500,000 - £1m £2,500
£1m - £1.6m £4,000
£1.6m - £2m £5,000
Above £2m £6,000
Whilst this is still, arguably, an unjustified additional death tax, it’s not half as bad as it might have been, had the government not bowed to pressure: the top whack was set to be a £20,000 fee for obtaining probate on an estate worth over £2m.
Justice Minister Lucy Frazer has released a statement which purports to explain the reasons behind the hike in fees and she stresses that “all the money will be spent on running the courts and tribunals service”.
However, the courts and tribunals services’ current outlay on probate services is extremely small in comparison to other services.
Whilst the probate service does intend to finance a reform introducing ‘digital’ Grant applications, the large majority of their services will still be focused on areas in which victims and users do not pay.
In other words, this is a taxation on wealthier users where the user is not even opting to use the service.
Frazer has stated that executors will have “several options to fund [the fee]”, however it is not clear what these will be.
For many estates, the bulk of the assets are tied up in illiquid form (e.g. property) and it can often be a struggle simply finding funds to pay the funeral cost. Additionally, the executors have no authority to access estate funds until they can show the Grant of Representation – yet the Grant will not be released until the aforementioned court fees have been paid.
It can be very difficult obtaining funds to pay the initial inheritance tax bill (again, in order that the Grant is released) so this merely adds to the pressure. Are we going to see a rise in private funding outlets who could potentially use this financial pressure on executors to their exploitative advantage? Are the government going to extend the use of the Direct Payment Scheme – currently from banks to HMRC – towards the probate registry?
Lakshmi Turner, chief executive at Solicitors for the Elderly, said the ‘stealth tax’ is unjustifiable as the probate process will not require additional work or resources no matter the size of the estate. Indeed, many practitioners agree that this measure amounts to an additional, indirect, inheritance tax.
There may be a very narrow (and often not appropriate) ‘way out’: Joint assets passing by survivorship, whilst likely taxable for inheritance tax purposes, pass regardless of the will and executors do not need the Grant of Representation for these particular assets. Therefore, as the assets do not ‘pass under the Grant’, the value of the asset in question is not included in the value set out above.
Gifting assets away before death may, if legal title is transferred correctly, effectively reduce the estate for the purposes of the grant. However, that we don’t have a crystal ball predicting the date of our death renders this quite a risky option. Likewise, this can cause huge confusion and fallout where you have multiple beneficiaries, thus potentially increasing the costs to the estate tenfold! Not to mention the issues surrounding mental capacity in deathbed financial planning…
Amending title to your assets in order to reduce probate fees could have extremely detrimental consequences to your financial position. It is extremely important clients seek independent legal and financial advice tailored to their personal circumstances.
We are well placed to advise clients on how best to hold joint assets (or indeed, a change in ownership of solely-held assets) in order to reduce the punitive and discriminatory probate fees imposed on an estate.
If you would like any more information about this article, please contact Georgina Sinha who will be able to assist.
 Applicable to estates worth more than £5,000
This paper is intended to be a brief note for clients and other interested parties. The information is believed to be correct at the date of publication but should not be relied upon as a substitute for professional advice. Please speak to a member of our team.