Solicitor and member of MW's Estate and Trust Dispute Team, Jane Flaherty, discusses the Governments recently announced plans to increase probate fees.
Jane Amanda Flaherty
On 18th February 2016 the Government launched the Consultation - Fee Proposals for Grants of Probate canvassing public and professional opinion regarding an increase in fees when making an application for a Grant of Probate.
As a general rule, any estate which includes property requires a Grant of Probate, and most estates with shares require a grant of probate. The current fee is £155 where you obtain a grant through a solicitor and £215 where a personal application is made. Where an estate is below £5000 there is no fee.
The Result of the Consultation
Despite an astounding 97.5% of respondents expressing that they were against the proposed increases, the Government has announced its intention to proceed with its plans to increase the fees at some point in May 2017.
A date has not yet been set and any changes which come into force will effect applications in accordance with the date the application is lodged with the probate office and not by date of death.
What are the New Charges?
The fees will be charged in accordance to the size of the estate as follows:
|Value of estate (before Inheritance tax)||Proposed fee|
|Up to £50,000||£0|
|Over £50,000 but under £300,000||£300|
|Over £3000,000 and up to £500,000||£1,000|
|Over £500,000 and up to £1 million||£4,000|
|Over £1 million up to £1.6 million||£8,000|
|Over £1.6 million up to £2 million||£12,000|
|Over £2 million||£20,000|
The government claim that the majority of estates, those being valued at less than £50,000, will not be charged at all. In practice, most estates valued in that threshold do not include property and therefore would not require a Grant of Probate in any event.
The reality of the changes to costs is that most estates requiring a grant will see a huge increase in the probate fees. Beneficiaries will see costs escalate sharply between £300 and £20,000 despite there being no link between the value of the estate and the amount of work involved.
A really good analogy that has been put forward is to consider the cost of a passport. We all pay the same price for a passport because the same amount of admin is required for each application. Could you imagine the uproar if passport costs were based on each applicant's income?
When do The Charges Come into Force?
We have been informed that the changes will be in force in May 2017. The probate registry is set to raise £300 million pounds of revenue to support the costs of the wider Court and Tribunal services. The increases are being labelled as ‘stealth tax’ or a ‘death tax.’
Whereas the Office of the Public Guardian announced that their fees are going to be reduced from April 2017.
The cost to register a single lasting power of attorney or enduring power of attorney will fall from £110 to £82 pounds. The reason given for this reduction is that due to the increased amount of applications it is receiving it does not need to charge as much per application to be fully self funding.
What are the main objections to the proposals?
- The fees are disproportionate to the cost to the Court in providing the probate service.
- The cost to the Court does not vary depending upon the size of the estate. The same amount of work is required for most matters.
- The cost does not take into account any inheritance tax that also has to be paid. It is based on the gross estate.
- There will be no exemptions to this charge, whereas there are exemptions in place for estates passing to the surviving spouse or to charity or where the estate qualifies for business or agricultural relief. When you consider the value of property, particularly in areas such as London, some estates may be asset rich but cash poor and may have difficulty paying the probate fee. Families that hold their property as tenants in common because they want to provide for children from a previous marriage or want to ring fence the amount of capital going towards care fees may find themselves in financial difficulty.
- Solicitors will not be able to fund this payment for clients and that might lead to executors having to take out bridging loans, particularly if there are insufficient funds in cash to cover the cost.
- The legal profession feels that this is another form of death tax
- People may make unwise decisions about their assets, without seeking advice, to prevent the probate fees.
- Unscrupulous companies may miss sell products to vulnerable clients on the basis of probate avoidance. Such companies don’t give advice in the whole to enable you to make an informed decision as to whether their products are in your best interests because they are sales people not professional advisors.
Let the Government Know What You Think
We believe that parliament should reject this unreasonable tax by the back door and start again in its consideration of increasing the probate fees.
To sign the petition please click on the link below https://petition.parliament.uk/petitions/188175