In this article, Chris Millward, CEO at the Institute of Legacy Management shared his views on the approved increase in probate fees and commented on the potential impact that the changes could bring.
The Ministry of Justice’s recent announcement that it will go ahead with proposed increases in probate fees from May, despite overwhelming calls to the contrary, has been met with criticism and concern by many in the sector.
The replacement of the fixed probate fee – reflecting the simple service performed – for a system whereby estates above £50,000 will be graded according to value, rising to as much as £20,000 for those worth more than £2million, has been criticised by many as unjust, as the cost of the probate work is largely irrelevant to the size of the estate. The move is therefore seen as introducing a ‘steal tax’ (on top of the inheritance tax already in force). Indeed, the proposed fee will result in so much more than is needed to cover the administrative costs for the court service to deal with probate applications that the resulting income will be classified by the Office for National Statistics as tax.
An online petition to ask the government to reconsider these fees has now reached over 17,000 signatures, and we are urging our members, and others, to take a moment to sign the petition https://petition.parliament.uk/petitions/188175
Impact on charitable income
The Institute of Legacy Management (ILM) is one of the organisations opposed to these increases. We are extremely disappointed that the changes are being pushed through despite the opposition of many and, alongside our 600 members (legacy professionals within charities and law firms specialising in legacies), we are greatly concerned that they will mean that charities will see a significant reduction in the income they receive.
We believe that charities stand to lose around £18million per year in legacy income as a result of this decision. Many of these organisations are reliant on legacy gifts to carry out their vital work, so a reduction of this magnitude, especially at a time of increased demand and pressure on other sources of funding, is deeply troubling.
When charities receive less money, it is their beneficiaries who suffer. Donors will also be affected, as the causes they have generously chosen to support in their will receive less of the money intended for them.
Executors under pressure
We are also concerned about the impact on families and executors, especially at such a distressing time. Increases in house prices mean that many people who inherit estates containing property will have much larger costs for a grant of probate than they would have under the current system. As in many cases the property is likely to be the primary asset, some will have difficulty funding these fees, which need to be paid, on top of other expenses such as funeral costs and inheritance tax, before they can access what they have been left by the deceased.
For executors, who are already undertaking a difficult task, the added financial pressure will impose a large burden. The impact of this awareness on donors, and potential donors, is of concern. It would be extremely detrimental if testators opted to leave less money to charities to compensate for the reduced amount received by family and friends, or simply to include no legacy gift at all.
Call for charity exemption
In light of these considerations, ILM submitted a response to the Ministry of Justice consultation on the proposed changes last year. Along with the majority of respondents, we opposed the changes: out of the 829 responses to the consultation document, 63 agreed with the proposals, 695 disagreed and 71 neither agreed nor disagreed. It seems the results of the consultation have largely been ignored.
Therefore we are now calling on the Ministry of Justice to urgently reconsider the proposal.
We would like to see an exemption from any fee where a charity is the applicant and where all of an estate is devolved on to charities. Or at most, a minimal fixed fee for charities.
We will be contacting the Ministry of Justice to outline our thoughts, with the support of our members, in the hope that the changes will be reversed in the interests of charities and those that are reliant on them.