On 18 February 2016 the government announced proposals to dramatically increase the costs of applying for a grant of probate. Currently, the maximum fee payable to obtain probate is £215, but under the new proposals, couples could be looking at total fees of £40,000 with bereaved spouses/civil partners having to find £20,000 before they can access their deceased spouse's/civil partner's assets: a huge increase which has been met with opposition and disbelief in the industry. There is, however, a consultation process before any proposals are implemented, and Wedlake Bell has submitted its response.
The proposed new fees are:
|
Value of Estate (before the deduction of Inheritance Tax) |
Proposed New Fees |
|
Up to £30,000 (or not requiring a Probate) |
£0 |
|
Exceeds £50,000 but not exceeding £300,000 |
£300 |
|
Exceeds £300,000 but not exceeding £500,000 |
£1,000 |
|
Exceeds £500,000 but not exceeding £1 million |
£4,000 |
|
Exceeds £1 million but not exceeding £1.6 million |
£8,000 |
|
Exceeds £1.6 million but not exceeding £2 million |
£12,000 |
|
Exceeds £2 million |
£20,000 |
The proposed fees will be on top of any inheritance tax ("IHT") payable upon an estate at death. Subject to any reliefs and exemptions available, IHT applies at the rate of 40% on the value of the estate over and above £325,000 (the current nil-rate band). In a worst case scenario, if an estate is valued at £2,000,001, the executors will need to find £670,000 in IHT plus £20,000 in probate fees (in total 34.5% of the value of the estate).
Wedlake Bell's response to the consultation can be viewed here.
Our response includes the following points:-
- The proposed fees set out in the consultation are exorbitant.
- The value of the estate has no bearing on the work required by the Probate Registry. Probate fees should be linked to the work involved, not the value of the estate
- lf extra funding is required for the running of the courts, it should be raised openly through the tax system.
- Funding these higher levels of fee will add unnecessary personal financial burden on executors and increases the likelihood of them refusing to take on the role, restricting a person's fundamental right to appoint executors of their choice under their Will.
- It is unfair that fees for a simple application for a grant of probate will be dramatically higher than the fees imposed in other areas of the court system where vast amounts of the court's time and resources are required in comparison.
- The proposed probate fees discriminate against those who will not benefit from the additional inheritance tax nil-rate band for the family home from next April (broadly, those with estates above £2 million).
The consultation closes on 1 April 2016 and we will be monitoring any further announcements and the outcome. If the increases are introduced as proposed, those affected may need to consider funding strategies and how payment of the fees fits into their estate planning strategy as a whole.
For more information on our probate and trust administration services, please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.