By Isobel Mann
Solicitor
Borneo Martell Turner Coulston
THE Government have confirmed their plans to introduce a massive increase in probate fees which will be applicable from May 2017.
The probate fee is the sum payable to the court to enable the Grant of Probate to be issued. The Grant of Probate is a document issued by the court that allows the executors of a deceased’s estate to close bank accounts sell property and distribute assets in accordance with a will. Most assets over a certain value cannot be dealt with unless a Grant has been issued.
The current fee for applications made on behalf of the executors by a solicitor is £155. The Government wants to introduce a new scale for fees:-
Up to £50,000 – £0; over £50,000 but below £300,000 – £300; over £300,000 but below £500,000 – £1,000; over £500,000 but below £1m – £4,000; over £1m but below £1.6m –
£8,000; over £1.6m but below £2m – £12,000 and over £2m – £20,000.
For estates between £50,000 – £300,000, the fee will increase by 40 per cent and for an estate in excess of £2 million the court fee will be 129 times greater than if the probate application had been made in April.
The process of issuing a Grant by the Court is the same regardless of the value of the estate. This rise will not give a more efficient probate service, but will go towards the general running of the courts and tribunals service as a whole, effectively creating an unfair tax on death, particularly on larger estates.
The concession that estates with a value of up to £50,000 will incur no fee is of little comfort. Most estates of this size do not require a Grant of Probate in any event because the assets can be released without one. For example, most banks and building societies will release up to £30,000 without the need for a Grant.
Asset heavy, cash poor estates will be hit hard by the changes. How will executors raise funds upfront to pay this fee? Many executors already struggle to raise funds to pay any inheritance tax due which must be paid prior to a Grant being issued. Currently banks and building societies will assist executors by releasing funds for this specific purpose prior to a Grant. However, no such agreement has been put in place to allow for the funds to be released for the payment of the new increased fee prior to death. The official line is currently that, each case will be considered on its merits.
In the short term executors may have little choice but to fund these extra fees personally, whether by loan or from their personal assets. If executors are forced to borrow the fee, any professional costs or interest will add a further cost to the administration of an estate.
The Government suggests that professional executors (such as solicitors or accountants) may be willing to pay this fee upfront on behalf of the estate. However, this would be a large liability and would have a dramatic effect on their cash flow as the fee would only be recovered many months later once monies are received in an estate. The Government’s position is therefore unrealistic.
There is the suggestion that an impact of these fee increases maybe to pressurise people to give assets away during their lifetime to avoid leaving an estate which has to pay a probate fee. This could result in many people giving assets away for the wrong reasons and leaving them with insufficient assets to provide for themselves for the rest of their lives. There is also the risk it could also increase their Inheritance Tax liability. There is concern that this could lead to some elderly people being vulnerable to pressure to put assets into joint names so assets pass automatically to the surviving owner rather than under the terms of their will. Families could end up divided as money ends up in the wrong hands. All in all, it remains to be seen how the changes in May will play out if the Government does in fact go ahead.
For more information, contact Borneo Martell Turner Coulston on 01604 622101 or visit the website www.bmtclaw.co.uk
