On 5 November 2018 the Government, via the Ministry of Justice (MoJ), announced the plans to increases probate fees to take effect from April 2019.
Currently, probate fees in England and Wales – the fees paid by the Executors when applying for the Grant of Probate during the administration of someone’s estate – are charged as a flat fee of £215 or £155 if a licensed probate practitioner applies for the Grant.
From April, estates in England and Wales under £50,000 will pay nothing but larger estates will pay more – up to £6,000 where the estate is valued at more than £2m.
This proposed increase has come in for a lot of criticism by various professional bodies including the ICAEW, the Law Society, a parliamentary committee and independent financial advisers.
It is considered unfair as the fee scale is applied to the whole gross estate, before inheritance tax is deducted, and it applies to all assets, including those in joint ownership.
It is also argued that the fees do not reflect the cost to the government of undertaking the administration work needed to issue the Grant. It appears therefore to be another tax on bereaved families.
The MoJ argues that this increase is necessary to fund the work of the courts. It issued proposals early last year which wanted much higher increases for larger estates, but these were dropped amidst widescale protests. It would appear, however, that the revised charges are still very unpopular.
The Probate fees that will apply in England & Wales from April 2019 are: –
|Estate Value||Probate Fee|
|Up to £50,000||Nil|
|£1.6m to £2m||£5,000|
So, an estate in excess of £2m sees a 38-fold increase in fees from April 2019!!
There is also no IHT relief on the fees so the actual cost of meeting these fees from the estate is a lot more.
There is currently a difference of opinion between the Parliamentary Committees and the MoJ as to whether the above increases need a change in legislation – with the MoJ believing they can introduce the increases via statutory instruments – if this is the case, it means there will be no debate by MPs.
It is estimated that this fee increase will affect around 250,000 families dealing with the estates of their loved ones.
There are also practical issues around paying the fees. Currently as the fee is a modest amount, many licensed probate practitioners pay the fee on behalf of their clients and claim it back when funds are available after the Grant of Probate has been obtained – with such a significant increase in fees planned, it is unlikely that this practice will continue so families will have to find a way to access cash to pay the fees in order to apply for the Grant. This can leave families in the Catch 22 position of having to find money to pay the fees before they can obtain the Grant of Probate that gives access to the assets of the Estate!
So, what practical steps can be taken by families to ensure these fees can be paid?
It may be worthwhile considering the following: –
- review life policies to ensure that they provide adequate funds for dependants and are written in trust. This leaves the funds outside of the estate, saving both inheritance tax and probate fees;
- update pension plans to make sure nomination forms are up to date and reflect current wishes. Pension funds remain outside of the estate and can remain in a tax-exempt wrapper for successors.
- ensure there are adequate cash reserves in a joint account. Joint accounts automatically pass by survivorship and don’t need the Grant of Probate to access the funds – so it would make sense to have a joint account that can meet the probate fees and provide funds for dependents whilst the probate process takes its course – which can be a 6-12-month process.
Raffingers Probate can help you manage your probate and estate needs efficiently, as well as help you to put plans in place to reduce your IHT liability. For further support contact Paul Dell at firstname.lastname@example.org.