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The Government is introducing a new fee structure that will affect the cost of accessing an estate when someone dies.

Fees for Applications for Grant of Probate – or Letters of Administration (when someone dies intestate – without a Will) – are due to change shortly, and will eventually impact you and your family…

At the moment, the fees are set at either £155 if probate is applied for by a Probate Professional, or £215 if applied for by family or friends, and there are no fees if the value of the estate is under £5,000.

The new fees are due to take effect from early May 2017. The first change is that estates below £50,000 will no longer have to pay any probate fee. This significantly increases the number of small estates exempt from the fees. Unfortunately, everyone one else will see an increase – with those with estates over £2m seeing an increase of over 9,200%!

The fees are tiered depending on the value of the estate:

  • £50k – £300k £300
  • £300k – £500k £1,000
  • £500k – £1m £4,000
  • £1m – £1.6m £8,000
  • £1.6m – £2m £12,000
  • Over £2m £20,000

These fees are in addition to inheritance tax (IHT), and are calculated on the net value of the estate before IHT is taken off.

When somebody dies, the Executors must apply for a Grant of Probate from the Probate Registry. This needs to be done to allow them to administer the estate – ie distribute the assets according to the terms of the Will.

These fees need to be paid up front, and it may be difficult for the Executors to be able to release cash from the deceased’s bank account and/or the Executor is on a low wage or benefits.  Previously they may have been able to apply to get help with the fees; however, the Government is also removing ‘probate applications’ from the general fees remissions scheme, so financial help will no longer be available.

There are things to consider which may reduce the amount of probate needing to be paid. In particular, partners, married couples or those in a civil partnership should review the nature of how they own their assets.

Many assets held in joint names – eg bank accounts & properties – will automatically pass to the surviving joint owner so will not need to pass through Probate.  Where there is no Trust in the Will, a property could be owner as ‘joint tenants’ – which will benefit from this scenario, however a jointly owned property passing into a Will Trust must be owned as ‘tenants in common’, which will not benefit.  Generally though, the benefit of asset preservation provided by the Trust will be of greater benefit than the savings to be gained from lower probate fees.

For lower value properties, one way to reduce the cost of probate is to consider setting up a Trust to hold the property during your lifetime, which would lower the value of the estate (from a probate point of view) and drop it from a higher tier rate to a lower one.  However this type of Trust can be expensive and complex, and might cause more issues that it is intended to avoid.

For a lot of people – particularly younger generations, advanced planning is crucial, and can be very cost effective.  By taking out a Life Assurance policy to pay out a lump sum on your death, you can cover not just you probate fees, but also possibly any inheritance tax liability on your estate, and provide an immediate lump sum for your family on your death that will not have to pass through probate.

Heir Tight Wills helps clients 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 estate planning provisions, contact Rachael Rodgers on 0845 519 7585, or CONTACT US via email.  

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