The Ministry of Justice has confirmed that the Government’s plans to increase non-contentious probate fees from May 2017 will go ahead.
Currently, the fee paid to apply for Probate is £215 on estates worth £5,000 or more.
Subject to Parliamentary approval, the fees will increase from May 2017 as follows:
|Value of estate||New probate fee|
|Up to £50,000 or exempt from requiring a grant of probate (58% of estates)||Nil|
|£50,000+ to £300,000 (23% of estates)||£300|
|£300,000+ to £500,000 (11% of estates)||£1,000|
|£500,000+ to £1 million (6% of estates)||£4,000|
|£1 million+ to £1.6 million (1% of estates)||£8,000|
|£1.6 million to £2 million (0.3% of estates)||£12,000|
|£2 million+ (0.5% of estates)||£20,000|
In addition, probate fees will be removed from the general fee remissions scheme but provision will remain for exceptional fee remissions to be granted at the discretion of the Lord Chancellor, in particular, where the Executor shows that they have exhausted all reasonable means of funding the grant of probate application fee and would be caused undue hardship unless a fee remission is granted. The Probate Service will also be able, via a limited grant of probate, to provide limited access for executors to the assets of the estate, for the sole purpose of paying the necessary fee.
The hike in fees follows a Consultation by the MoJ which received 853 responses. Of these, just 63 respondents agreed with the Goverment’s proposals, 695 disagreed and 71 did not agree or disagree conclusively, or agreed or disagreed with particular aspects.
Many lawyers have pointed out that the issuing of probate is a purely administrative function and there is no additional work for larger estates. However, the Ministry of Justice has said that the fees are necessary to fund the Court system and current fees simply do not cover costs. The Law Society’s response stated:
It is unfair and discriminatory to expect the bereaved to fund/subsidise other parts of the court and tribunals service. Court fees are a necessary source of funding but should not be charged over and above the cost of the specific service.
Although the Law Society recognised a graduated fee could be necessary, they noted that the top end of the proposed fee structure becomes excessively inflated and amounts to a significant tax imposition.
Lawyers have raised concerns about the Consultation Response, highlighting that for asset-rich, cash-poor estates, the executors or beneficiaries could have difficulty paying the fees. The Ministry has put forward a number of proposals to address this concern which include:
- Releasing cash early to pay the estate – according to HMRC, the average estate comprises 25% cash. Executors could be allowed early access to the cash purely for the purposes of paying the probate fees. However, the consultation does note that one firm of solicitors analysed 40 of its client case files and found that 10 would not have the funds to cover the fees.
- The Executor pays the fees from personal assets – the Ministry notes that they would only be out of pocket for a short period. However, again, this does not assist for an asset-rich, cash-poor estate where the main asset is the family home.
- The Executor gets a loan – this would depend on the Executor’s credit rating and an executor may be unwilling to do this on an cash-poor estate, i.e. if the only way to recoup their money was to sell the main asset – i.e. the family home. The beneficiary could perhaps get a loan, subject again to their credit rating and ability to repay.
- A solicitor could be appointed to act on the Executor’s behalf, who may be willing to pay the fee up front – this might be an attractive proposition if the solicitor knew they were going to act for the Executor in the full administration of the estate and the estate funds were substantial.
Respondents to the consultation proposed some alternatives means of funding the probate – these included early access to life insurance policies where the Executor was also the beneficiary under the Will or access to National Savings or British Government stocks if these were held in the estate. However, none of the proposals really deal with what happens where the deceased left the property to the surviving spouse without any cash.
Another concern is that property owners may explore alternative ownership and inheritance arrangements but not all solutions will be appropriate and some could present unnecessary financial risk compared with the level of fee at stake. For example, where the property is in the name of the husband, a couple may consider changing ownership to joint tenants to avoid the probate fee. However, if there are other assets in the estate, a grant may still be necessary. This form of ownership also has other implications, such as putting the full value of the estate at risk for care fees should the surviving spouse need care after their partner’s death.
A feasible option which could be suitable asset-rich cash cash-poor estates facing probate fees of between £8,000 and £20,000 is to set up a discretionary trust that contains a life assurance policy. The individual would pay a modest monthly premium for the policy which has been written in trust. The payments are classed as “normal expenditure out of income” and are therefore not subject to inheritance tax. When the person dies, their executor can use the death certificate to cash in the policy with the proceeds falling outside of the estate for inheritance tax purposes. The cash is therefore available to cover probate fees together with inheritance tax, funeral bills and legal fees.
Speak to us
April King Legal offers both contentious and non-contentious probate services. Get in touch with our team on 0800 788 0500 or email firstname.lastname@example.org for an affordable quote. We can also offer advice if you are concerned about how the new probate fees will affect your own arrangements.