Banks, Building Societies & Grants of Probate
All practising lawyers understand the sensitivities and difficulties for family members when administering a loved one’s estate. However, over the past couple of decades, we’ve seen the way in which banks and building societies allow access to frozen assets dramatically change.
Under the proviso of the Administration of Estates (Small Payments) Act 1965 (“the Act”) an authority is allowed to pay over sums up to £5,000 on death to those entitled without the need for a Grant of Representation (commonly known as “probate”). Instead, alarmingly, we’ve seen the institutions release larger and larger amounts of money to individuals without Probate
Prior to 2010, the limit imposed by the Act was strictly applied (even by banks and building societies to whom the provisions of the Act were only persuasive, meaning they do have authority or discretion to release larger amounts). This meant that smaller estates, would have access to funds without needing to go through the probate process, in order to ease the financial burden.
Since 2010, this policy has become more and more relaxed, and we’re now seeing funds between £100k – £125k being released without Probate or indeed any proof of executor / administration authority.
At Solicitors for the Elderly (SFE), our founding mission is to support and make a difference to older and vulnerable people. When our membership alerted us to this issue, we instantly recognised the consequences it could have – not just for the older and vulnerable community, but also for the general public.
As a result of the informal waving of probate requirements, occurring on a consistent basis across the UK, the system is now open to abuse. Meaning anyone can claim to be an estate executor or administrator if proof of status has not been requested, or if an old will is shown. Not only will this have the ability to significantly impact the deceased’s wishes, it could cause a number of practical issues:
Large amounts of money could end up falling into the wrong hands, as a result of relaxing the rules. With significant sums of money up to £125k being released, this is extremely concerning. If someone is able to take the estate funds from the beneficiary, this also presents an issue when it comes to attempting to recoup those funds. Especially if the beneficiary doesn’t have enough financial liquidity to challenge the attribution without access to the deceased’s estate.
- Inheritance Tax
If funds are released erroneously it’s difficult to keep track of the exact amount of money in an estate, this could result in problems with Inheritance Tax claims.
- The Legal Profession
The move by banks and building societies to allow the unauthorised release of large sums of money will seriously impact lawyers’ work when carrying out the deceased’s wishes. Not only could it mean that the will has been incorrectly administered, we’ve also seen cases where the lawyer has been required to consistently pressure banks / building societies into disclosing the actual sum of the released asset(s), as well as having to challenge release of funds. This can also lead to issues with creditors being misled accidently about the size of the estate (especially in insolvent or smaller estates). Further, charities could receive less entitlement from an estate due to withdrawals occurring but not necessarily coming to light.
Practical issues aside, the impact on clients is huge. Losing a loved one is an emotionally raw and incredibly arduous time for all the family. However, when an individual has set out their wishes in a will, clients will often take solace in knowing that they are following a loved one’s guidance and, in doing so, are honouring their memory. Actions that go against these wishes can make an individual feel powerless, and we’ve seen examples where clients don’t have the energy to build a complaint in order to recover money that is legally theirs. This is why it’s so important that the legal community uses its voice to speak up against this.
At SFE, we are incredibly concerned by this trend, and believe there needs to be a universal policy that reinforces the limit for unfreezing bank account assets. It is vital that this is investigated, so that later life wishes are honoured, and the heartache of families that have lost their loved ones isn’t added to as a result of illegal administration of their estate.
We hope to work with the banks and building societies to help safeguard against the significant risk this poses, and are calling on others in the legal profession to put actions in place to help stem this issue and protect families across the UK. This will then allow us to move forward with the reassurance that legally binding later life wishes will always be honoured.
By Michael Culver, Chair of the Board at Solicitors for the Elderly and Partner at Bolt Burdon Solicitors