From May this year, assuming the Government give the go-ahead, the probate registry fee will increase vastly for all estates worth more than £50,000.
The current fee payable to the Probate Registry to obtain a grant of representation to a deceased’s estate is £155 if a solicitor applies for the grant of representation, or £215 if anyone else is the applicant.
But if the new fee structure gets the go-ahead it could mean massive additional financial burdens on personal representatives who will need to find the cash up front.
Andrew Vidler, head of the private client team and director at Wake Smith, looks at whether the proposed increase is fair and proportionate or a stealth tax.
“The new fee structure will be based on the value of an estate before deduction of Inheritance Tax.
“For estates valued at over £50,000 and up to £300,000 it will be £300; for over £300,000 and up to £500,000 it will be £1,000; over 500,000 and up to £1m it will be £4,000; over £1m and up to £1.6m it will be £8,000; over £1.6m and up to £2m it will be £12,000 and over £2m it will be £20,000.
“Before reaching a decision on the issue, the Ministry of Justice carried out a consultation process.
“The vast majority (80%) of those responding disagreed with the proposal to link the fee to the value of the estate. Over 97% of respondents disagreed with the level of the proposed fees.
“The Government has admitted in parliament that the Probate Registry is currently self-funding based on the current fee structure. It is clear, therefore, that the new fees will be cross-funding other areas of the court and tribunals system.
“They certainly do not reflect the cost of the service provided by the Probate Registry as the task undertaken by the registrars and their clerks varies little regardless of the value of the estate.
“The Ministry of Justice has argued that the new system is fairer than the current one, as estates under £50,000 will not pay any probate fees, while the highest single proportion of estates, (from £50,000 up to £500,000), will pay between £300 and £1,000.
“However, this doesn’t alter the fact that the additional revenue from those estates that have to pay the increased fees will not go into improvements in the probate service, but will instead be used to shore up the cost of the rest of the tribunal and court service.
“Up to press, it has been the practice for many solicitors including Wake Smith to stand the cost of the probate fees until the estate in question is in funds.
“Clearly this will not be feasible once the new fees come into effect and there will be an added burden for personal representatives who will need to find the cash up front, either from their own resources, unlikely at £1,000 plus, or by means of a bank loan or by persuading the deceased’s bank to pay the fees from an existing account.
“There is also the danger that a person wishing to avoid this extra expense will take unwise steps to remove assets from their estate in lifetime, perhaps by giving assets to their children.
“Problems arise if the children or their partners prove untrustworthy or if there are unexpected financial or matrimonial difficulties. Placing assets in trust might be the answer but that, in turn, carries with it potential tax and other adverse consequences, requiring expert advice at the early stages to ensure the best outcome.
“The Law Society Gazette reported on the proposals in February 2016. The report said: “It is unfair and discriminatory to expect the bereaved to fund/subsidise other parts of the court and tribunals service. Court fees are a necessary source of funding but should not be charged over and above the cost of the specific service.
“We, amongst many others agree with this, and view the Government’s decision to carry on regardless of the views of the majority of respondents to its consultation as yet another tax on estates.”
For further advice on probate matters contact Andrew Vidler on 0114 266 6660.
