Government announces significant overhaul of Probate Fees from 1st May 2017
Last February, the Government launched a consultation into probate fees and how much families should be charged for extracting the Grant of Probate, and although just 13 of the 831 respondents to the consultation were in favour of the proposal, they are intending to bring it in.
Their proposal outlined a move away from the current application fees; of £215 for an individual and £155 for a professional application, to a new tiered fee system based on the value of the estate:
- Estates valued at less than £50.000 – No probate fee
- Estates valued at £50,000-£300,000 – £300 fee
- Estates valued at £300,000-£500,000 – £1,000 fee
- Estates valued at £500,000-£1m – £4,000 fee
- Estates valued at £1m-£1.6m – £8,000 fee
- Estates valued at £1.6m-£2m – £12,000 fee
- Estates valued at more than £2m – £20,000 fee
The implementation of these punitive charges is likely to hit property owners the hardest, particularly rural families who own small farms, as the relatively high value of farmland often goes with limited income. Even if a working farm benefited from 100% Agricultural Property Relief from Inheritance Tax (IHT), this backdoor tax would still have to be found.
The new fee system could result in consequences which although unintended, might impact people in a negative way.
One major risk is that older people may feel the need – or be pressurised by families – to give away their home in their lifetime, to avoid the high charges. This may result in them living in homes now owned by their children who may not always act in their best interests… Will the new “owners” enable the parent to move to a suitable smaller property, or indeed stay at home if they still wish to when others feel they should move? In addition, some children may get divorced or end up in financial difficulties, and the home is then at risk in court proceedings. Giving up personal control can be extremely risky.
The changes amount to a new form of Tax, as the existing £215 fees fully meet the cost of the Probate service. Probate is a largely administrative function, but it’s a vital one as without it Executors can’t obtain the Grant of Probate which enables them to administer the deceased’s estate. Fees up to £20,000 are totally disproportionate.
Estates over the tax-free allowance will also be unfairly affected as they will have to pay IHT on the fees as well, which are not deductible from the value of the estate when calculating the tax payable.
Individual beneficiaries who are asset-rich but cash-poor, will be badly affected by the need to raise considerable sums to obtain probate. Many will have no alternative but to go to the expense of a bank loan to pay the fee, and unless the house is being sold, it then leaves a problem as to how the loan is repaid.
One way families might be able to avoid the impact of the proposed charge increases could be to make sure couples own their homes in joint names. Ensuring assets are written into Trust may also be an option.
Heir Tight Wills helps clients plan, and put in place robust provisions to protect their loved ones and their assets, both during their lifetime and after their death. For a FREE Consultation to discuss writing or updating your Will & estate planning provisions, contact Rachael Rodgers on 0845 519 7585, or CONTACT US via email.