28 FEB 2017

Probate charges set for overhaul

Probate charges set for overhaul
Probate charges are to be overhauled, with some estates set to be charged up to £20,000.

Following a year-long consultation with law firms, professional bodies, the Senior Judiciary and members of the public, the Ministry of Justice has confirmed that it intends to replace the current flat fee for applications for a grant of probate (£215, or £155 for those applying through a solicitor) with a banded structure where the fees increase in line with the value of the estate.

Although some estates could now be charged up to £20,000, the threshold below which no fee is payable has been increased from £5,000 to £50,000. In addition to these changes, probate fees will be removed from the statutory help with fees remissions scheme.

The new fee structure is set out below.

Value of estate (before inheritance tax)
Proportion of all estates in England and Wales
Proposed fee

Up to £50,000 or exempt from requiring a grant of probate
58%
£0
Exceeds £50,000 but does not exceed £300,000
23%
£300
Exceeds £300,000 but does not exceed £500,000
11%
£1,000
Exceeds £500,000 but does not exceed £1m
6%
£4,000
Exceeds £1m but does not exceed £1.6m
1%
£8,000
Exceeds £1.6m but does not exceed £2m
0.3%
£12,000
Above £2m
0.5%
£20,000

Under the new scheme, no estate will pay a fee that is more than 1% of its value; 92% of estates would pay £1,000 or less, 98% would pay £4,000 or less and less than 2% of estates would pay £8,000 to £20,000.

However, of 831 respondents to the consultation, only 13 agreed with the proposed fee structure, with some arguing that the new fees would not reflect the administrative costs to the Probate Service of issuing a grant.

The government said:

'In order for our courts and tribunal system to continue to provide access to justice in the long term, we must look at ways to make sure that HMCTS is funded adequately now and in the future. As part of this, we must consider the case for increases in court and tribunal fees ... these increases are necessary.'
Sarah Roberts, Senior Associate at Coffin Mew Solicitors:

'This is a shocking example of ruthlessness from the Ministry of Justice. This policy preys on individuals at a time they will be extremely vulnerable following a bereavement, to subsidise other users of the Court service (who may be very wealthy). There is no justification for basing Probate fees on the value of the estate – the work for the Probate Registry is exactly the same, whether the estate is worth £1 or £10 million. More importantly, this could be highly disproportionate, since the new charges won’t fall only on rich individuals, but those who inherit, including young children and charities. In asserting that this is ‘fairer’, our government seem to be taking their lead from the US with ‘alternative facts’!Executors are often going to have a hard time finding these fees, as estate assets are frozen until after Probate is obtained. It was disappointing that the consultation response was so flippant in its disregard of this very serious problem, when raised by so many.

Not only is this a tax by the backdoor, it may lead to more errors and penalties for inheritance tax, as people accidentally misdeclare estates to reduce fees, especially when combined with the new inheritance tax rules on residences.

I also anticipate an increased appetite for trusts and transferring assets to others. This could leave vulnerable people exposed to the risk of losing their home later in life as well as reducing transparency and increasing the societal divide between rich and poor, in direct conflict with other government objectives.'

Click here to view the draft Statutory Instrument.
Modern Approach to Wills, Administration and Estate Planning (with Precedents), A

Modern Approach to Wills, Administration and Estate Planning (with Precedents), A

A guide to the tax efficient drafting of wills, administration and estate planning

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Elder Law Journal

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