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Government Proposals for an Increase in Probate Fees

Government Proposals for an Increase in Probate Fees

As you may have read, the government is currently undergoing a Consultation regarding Probate fees.
Although the fine detail is yet to be thrashed out, it is feared that any changes could affect farming families and business owners in particular.

This is a complex subject, and so it is worth taking a few minutes to familiarise yourself with the proposed changes if you are worried that you might be affected.
For an Executor or Personal Representative to obtain a Grant of Probate there is a current flat rate fee of £155 on the application to the Probate Registry, if the application is made by a solicitor. If the application is made by an individual the fee is £215. The proposal is for that to be increased on a sliding scale.

The proposed new probate fees before Inheritance Tax are as follows:
• £300 for estates worth more than £50,000 and up to £300,000
• £1,000 for estates worth more than £300,000 and up to £500,000
• £4,000 for estates worth more than £500,000 and up to £1m
• £8,000 for estates worth more than £1m and up to £1.6m
• £12,000 for estates worth more than £1.6m and up to £2m
• £20,000 for estates worth more than £2m
Any estates under £50,000 would escape probate fees altogether. This would come as a relief for many families, where the current £155 fee is yet another expense at a time where money is needed most.

The Fallout

There has, unsurprisingly, been a lot of opposition to the Consultation. If it does come to fruition it would impact many individuals in the South West.
As we highlighted earlier, those who would be particularly affected are farming families and business owners.
With agricultural land often valued at £10,000 an acre it is not uncommon for an estate to reach £2m, even though there may be little in the way of cash assets to pay the £20,000 fee.
The Consultation is scarce in detail on this matter, and it will undoubtedly have political ramifications.
Last year the government made good on their promise to increase the Inheritance Tax nil-rate-band. The nil-rate-band will increase from £325,000 to £500,000 by 2021. However, this increase will only benefit individuals who own a main residence. This is in effect a double-whammy for people who do not qualify for the increased nil-rate-band, but who have estates above the Inheritance Tax threshold.

 What Next?

Until there is something more concrete than the ambiguous Consultation Paper we would not advise clients to panic. There is the concern that many will take rash decisions and transfer assets to their intended beneficiaries during lifetime to reduce the value of their estates.
However, our concern is that this will leave many individuals unnecessarily exposed.
Clients may instead turn to Trusts to transfer assets out of their estates. The use of protective Trusts can ensure you still retain control of your property, investments, farm or business, though the ownership is in the hands of others –  the Trustees. Most importantly, it is not necessary to obtain Probate to deal with Trusts.  
Unsurprisingly, the law regarding Trusts has become complicated over recent years, not least due to the tax structures introduced to make the use of Trusts unattractive. However, the associated complexities may be preferable for many individuals over the increased Probate fees.
Furthermore, many married couples already have Discretionary or Life Interest Trusts in their Wills.  This can ensure that a surviving spouse has the benefit of the estate of their deceased spouse, while at the same time guaranteeing that the assets do not fall into their ownership. That would effectively decrease the value of the surviving spouse’s estate, and therefore the associated Probate fees.

If this legislation does come to pass then Everys will be on hand to guide you to the safest and most efficient means of managing your estates.  As we have highlighted, this is still only a consultation and may not progress. Please continue to watch this space for further developments. Meanwhile, if you have any queries regarding your Wills or Inheritance Tax please contact your local Everys office.


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