It was announced this week that the Government intend to continue with their earlier proposed introduction of increased Probate Fees, from April 2019.
In March 2017, we reported on the intended hike in Probate fees from a flat rate of £215 (£155 if the application for Probate is submitted by a Solicitor) to a sliding scale depending on the value of the deceased person’s estate. The 2017 proposals were dropped however, prior to the 2017 General Election.
Whilst we are pleased to report the fees announced this week are on a reduced basis from those initially proposed by the Government in February 2017, they are still to be on a sliding scale and are still being widely regarded as a ‘stealth tax’ – giving rise to concerns in the legal industry on the practical repercussions for those hoping to pass their assets on without undue difficulty or cost.
Although the new rules will apply only to those estates valued at more than £50,000, with the historical increase in house values, homeowners still stand to be hit the hardest, with probate fees rising to a possible £6,000.
A Guidance document will be produced when the new fees come into force, but there is a real risk that people may increasingly look to gifting property during their lifetimes or may rely on the right of survivorship, deciding not to pass their assets under appropriately constructed Wills.
Bereaved family members/Executors may also have to bear the cost of obtaining Probate at a time when there may not be readily available cash in the estate. The potential mismanagement of estates is therefore a grave concern, especially where one or combined estates bear an Inheritance Tax liability and there is need to rely on the increasingly complex system of Inheritance Tax exemptions.
As well as adding another level of apprehension to the Probate process, there is also the prospect of increased misunderstanding amongst intended beneficiaries if estate planning is not conducted appropriately.
We strongly reiterate our earlier advice that restructuring an estate to avoid or minimise the Probate fee is not a catch-all solution, although the fee, and how it is to be paid, does clearly now need to be considered. This additional charge cannot be taken in isolation when considering estate planning, whatever the value of the assets. There are a number of additional considerations to be taken into account when deciding how best to administer a person’s estate and a little bit of forward planning during lifetime can assist greatly in the sensitive period after death.
Below is a list of anticipated fees. There is no current indication as to whether the fees are to be increased periodically but they may stand to be if the costs of funding the comprehensive reform of the Courts and Tribunals system, which is what these increased fees are intended to cover, cannot be met. Watch this space.
Value of Estate (before Inheritance Tax) Proposed Fee 2019
Up to £50,000 or exempt from requiring a grant £0
£50,000 – £300,000 £250
£300,000 – £500,000 £750
£500,000 – £1million £2,500
£1million – £1.6million £4,000
£1.6million – £2million £5,000
Above £2million £6,000