Big Increase in Probate Fees SCRAPPED.
After pressure on the basis that the probate fees increase was a tax rather than recovery of costs (we suspect!) the Ministry of Justice says it has run out of time to pass the necessary legislation due to the snap general election in 2017. In our view, the prospect of probate fees of up to £20,000 has not gone away, but is has left a window of opportunity to set up more cost effective legal planning – see here.
Details of the former proposals – which could well rear their head again after the election follow.
After a recent consultation exercise, the Government intends to introduce the following Probate fee structure. This will inevitably, despite the Governments platitudes, lead to extra costs just to raise the increased fees. Far to many institutions demand a grant of probate before they will even consider releasing enough cash to pay for anything other than a basic funeral. Were the banks etc are willing to release cash to pay the much higher probate fees, and the estate has the cash, all well and good. But if the estate consists of property things get much more complicated.
Probate Fees Increase 2017.
Implementation to be advised. (We believe that if these vast increases in probate fees come in, there will be all sorts of problems. Imagine the cost of funding £20,000 over a year – it would comfortably be an extra £2,000 of pressure on the executor, and they could lose every penny if the estate turned out to be insolvent, or was delayed by Court action. Not a position I would want to be in!
Value of estate (before inheritance tax) /Proportion in England and Wales/ Amount
- Up to £50,000 or exempt from requiring a grant of probate 58% Fee: £0.
- Exceeds £50,000 but does not exceed £300,000 23% Fee: £300.
- Exceeds £300,000 but does not exceed £500,000 11% Fee: £1,000.
- Exceeds £500,000 but does not exceed £1m 6% Fee: £4,000.
- Exceeds £1m but does not exceed £1.6m 1% Fee: £8,000.
- Exceeds £1.6m but does not exceed £2m 0.3% Fee: £12,000.
- Above £2m 0.5% Fee: £20,000.
The report said: “In order for our courts and tribunal system to continue to provide access to justice in the long term, we must look at ways to make sure that HMCTS is funded adequately now and in the future. As part of this, we must consider the case for increases in court and tribunal fees. Whilst the Government understands respondents’ concerns over the level of the proposed fees, these increases are necessary.
Section 180 of the Anti-social Behaviour, Crime and Policing Act 2014 provides that the Lord Chancellor has the power to increase probate fees. Having considered the responses to this consultation, and in light of the overall running costs of HMCTS, we consider that it remains necessary and fair to use this statutory power to charge enhanced fees for those estates that can afford to contribute more. Furthermore, under our proposals, no estate will pay a fee that is more than 1% of its value. 92% of estates would pay £1,000 or less, 98% would pay £4,000 or less and less than 2% of estates would pay £8,000 to £20,000.
We have listened to the concerns of respondents who believed that the level of fees could contribute to executors being out of pocket or suffering financial hardship if financial resources could not be released early or were insufficient. The British Bankers’ Association and the Building Societies’ Association have engaged with the Ministry of Justice over the consultation period. Key points discussed included the ability to release funds from a deceased’s bank.
We believe that the standard ways that executors will pay the fee will include using:
• Cash in the deceased’s estate, if released by the bank or building society. HMRC data suggests that the average estate comprises 25% cash.
• Personal assets of the executor, bearing in mind they would only be out of pocket temporarily and would be able to reclaim the fee as a credit against the estate.
• Assistance from beneficiaries of the estate.
• A loan (depending on the executor’s credit rating).
• A solicitor or professional probate company could be appointed to act on the executor’s behalf, who may be willing to pay the fee up front.
• An alternative executor named in the will may have adequate funds available, or a better credit rating and therefore be better placed to act.
• If the deceased had a life insurance policy, particularly one held in trust, an advance of funds could be used to pay the fee assuming either the beneficiary of the trust was also the executor of the will, or that the trust beneficiary would be a beneficiary under the will and therefore willing to advance funds to assist;
• As happens with inheritance tax, NS&I or British Government Stock held in the estate of the deceased could be used to pay. The Ministry of Justice is investigating this option.
The British Bankers’ Association and the Building Societies’ Association’s bereavement principles encourage members to work to support the individual needs of the bereaved, to treat them with compassion and respect, and to allow necessary payments to be made where possible, within the law. This does not amount to a guarantee that funds will be released from a deceased’s bank account either without, or pending, a grant of probate – each case will always have to be considered on its merits. Nonetheless, we believe this is a helpful confirmation that banks and building societies want to help executors and the bereaved wherever they can and we expect in the majority of cases that this would be feasible to do so. Both organisations have agreed to assist the Ministry of Justice in producing guidance for executors applying for probate.
There will be some estates that are ‘cash poor, asset rich’, but we believe that executors of those estates will be able to access funds through one of the above methods. In the event that the estate is worth more than the nil rate band, or the new residential nil rate band, it is likely that the executor will already be in the position of seeking funds to pay the inheritance tax that falls due. We do not believe that the proposed probate fee will impede access to justice, and ultimately no one is forced to be an executor – they would always be able to refuse.
In exceptional circumstances where executors have been unable to access funds to pay the fee in any of these ways, the Probate Service will be able to provide limited access for executors to the assets of the estate for the sole purpose of paying the necessary fee, via a limited grant of probate.
We believe that the proposal to remove probate fees from the general remissions scheme is justified because it is not appropriate for a fee to be remitted when the issue is not one of affordability but cash flow. There may be, however, exceptional cases where the executor has made all reasonable efforts to finance the fee, where a limited grant is not available and the executor would suffer undue financial hardship by paying, or there may be other exceptional circumstances. In these cases, the Lord Chancellor’s discretionary power to remit a fee may be used.
In terms of the competitiveness of the legal services market, there are around 270,000 applications for a grant of probate each year, of which just under 40% are currently made by personal applicants. Therefore the majority of applications, at this time, are made by solicitors. Some respondents suggested that one way of paying the fee would be for an executor to appoint a solicitor to act as their representative, and for the solicitor to initially cover the fee. This may not in practice be universally popular with solicitors but it could lead to an increase in work levels.”
New Probate Fees Increase 2017.