The government has announced proposals to dramatically increase the costs of applying for a Grant of Representation ("Probate"). Without Probate your estate is "frozen" and, subject to limited exceptions, applying for Probate is obligatory if your personal representatives ("PRs") are to collect in your assets and distribute to your beneficiaries.
Currently, the maximum fee payable to obtain Probate is £215. Under the new proposals, couples could be looking at total fees of £40,000 with bereaved spouses/civil partners having to find £20,000 before they can access their deceased spouse's/civil partner's assets.
The proposed new fees are:
|
Value of Estate (before the deduction of Inheritance Tax) |
Proposed New Fees |
|
Up to £30,000 (or not requiring a Probate) |
£0 |
|
Exceeds £50,000 but not exceeding £300,000 |
£300 |
|
Exceeds £300,000 but not exceeding £500,000 |
£1,000 |
|
Exceeds £500,000 but not exceeding £1 million |
£4,000 |
|
Exceeds £1 million but not exceeding £1.6 million |
£8,000 |
|
Exceeds £1.6 million but not exceeding £2 million |
£12,000 |
|
Exceeds £2 million |
£20,000 |
The Probate Registry is already self-funding and the government has attempted to justify these increases on the basis that the extra income will be used to invest in improvements in the Probate Registry and contribute to other areas of the court system which are not self-funding and are in deficit. Interestingly, the maximum court fee imposed in these other parts of the court system, where claimants do have a choice whether they take court action, is £10,000.
Subject to any reliefs and exemptions available, the value of your estate will already suffer a charge to inheritance tax at 40% on the value over and above £325,000 (the current nil rate band). In a worst case scenario, if your estate is valued at £2,000,001, your PRs will need to find £670,000 in inheritance tax plus £20,000 in Probate fees (in total 34.5% of the value of your estate). If these fees increases are introduced, you will need to consider how the payment of these fees fits into your estate planning strategy as a whole.
The government has suggested that, if your estate does not hold sufficient liquid assets to cover the inheritance tax and Probate fees prior to Probate being obtained, your PRs take out a bridging loan. This will all add to the cost and time it takes to obtain Probate and administer your estate.
Having your say
The government has issued a consultation for these proposals. The deadline for responses is 1 April 2016. We will be responding to the consultation making it clear that we oppose the fee increases, and that we consider them a stealth tax on our clients.
If you would like us to incorporate your views into our response please email us by close of business on 18 March 2016 at probate@wedlakebell.com. Alternatively, if you would like to respond to the consultation personally, please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.