In February last year the Ministry of Justice published its proposals to change the current fee structure for grants of probate.
The change moved the charge away from a flat fee for applications for a grant of probate to a fixed fee dependant on the value of the estate; sweetened by a rise in the current £5,000 threshold where no fee is levied.
On Friday the 24th February it has been announced that following careful consideration of the 853 responses to the consultation and discussion with the British Bankers’ Association, the Building Societies Association and the Society of Trusts and Estates Practitioners, it had decided to proceed with the changes outlined.
The necessary statutory amendments are now being arranged so that the following will be introduced — anticipated to be May this year:
Probate fees will be banded and aligned to estate values:
Value of estate (before inheritance tax)
Up to £50,000 or exempt from requiring a grant of probate
Exceeds £50,000 but does not exceed £300,000
Exceeds £300,000 but does not exceed £500,000
Exceeds £500,000 but does not exceed £1m
Exceeds £1m but does not exceed £1.6m
Exceeds £1.6m but does not exceed £2m
Whilst a, if not the, key driver for the changes has been the need to ensure the HM Courts & Tribunal Service is adequately funded both now and in the future; it is anticipated that some additional £320m per annum will be raised from this initiative alone, there is no doubt that the impact will be felt by some.
What does this mean for the general public?
Undeniably there will be a number of people that benefit from the changes; particularly through the increased value threshold where no fee will be payable. It has been calculated that some 58% of estates have a value of £50,000 or less.
A further 23%, where the estate’s value exceeds £50,000 but is below £300,000, are estimated will feel a ‘small’ increase to what they would have paid previously. They will be asked to pay £85.00 more (assuming they are doing it themselves) than the £215 currently charged.
The real impact starts to be seen where the estates value exceeds £300,000. On top of any Inheritance Tax obligation Executors/Personal Representatives will now have to pay a much larger probate fee, before they potentially have access to the estate monies. This means paying anything up to £20,000 from their own money for probate purposes alone.
Electing to use professional services to obtain the probate may not provide the solution to this; many firms may feel that to pay such a size of fee from their own cash flow is asking too much and may as a result demand payment of the probate fee in advance from the Executor/ Personal Representative.
Whilst the BBA et al have all indicated to the Ministry of Justice that they will assist these changes by producing guidance to help Executors/Personal Representative with information on probate and payment of the new fees, they have at this time fallen far short to formally agreeing to enable these fees being be met from the deceased’s account before the grant of probate has been issued (as they generally do for funeral arrangement costs).
Indeed it is our experience that the financial institutions are far from consistent in the way they deal with deceased’s accounts; at times it can be very challenging to merely obtain the financial information you need for the probate application itself — let alone obtaining a release of funds.
In the event that the financial institutions do not release funds from the deceased’s accounts, the responsibility is highly likely to rest with the Personal Representative/Executor; paying it themselves, arranging for short term financing or looking to a professional service to fund it as part of their client engagement terms.
In its formal response to the consultation the Ministry of Justice does acknowledge these challenges so it will be interesting to see what developments are made, if any, to financially support those private individuals taking on such responsibility, at a time when they are likely to be grieving, experiencing much upheaval and emotional trauma.
Be aware is our message
This is something any prospective Executor, existing Executor or Next of Kin in intestacy cases will need to consider very carefully when agreeing to act in this capacity.
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