Bare probate trust benefits

When dealing with an individual’s assets following their death, a specific process must be followed.

Rather than simply distributing assets of the deceased, probate (or confirmation in Scotland) is required. This enables an individual to take legal control of any assets left behind; prior to the granting of probate, nobody possesses legal title to them.

From the deaths which occurred from 2012 to 2013, around 49% required a grant of probate – a total of 279,301 estates.

Although it depends upon the estate’s complexity, probate may take up to nine months, although some may take a couple of years to deal with.

Solicitors charge an average of around £5,000 for probate and estate administration, although prices vary. In 2015, there was an announcement for a review of Her Majesty’s Courts & Tribunals Service. Consultations on proposals to reform grant of probate fees and application within England and Wales made up part of the review. This was published in February of this year. Included in the consultation was an outline for a progressive and new regime for grant of probate application fees, where the fee is based on the estate value.

If the estate amounts to less than £5,000, since 2014 no fee will be charged. There is a flat fee of £155 for estates above the value of £5,000 if a solicitor seeks the grant. If however, the grant is sought by an individual, the fee is £215.

The proposals put forward currently aim to increase the fees significantly. Where the value of an estate is above £500,000 but below £1 million, the fee is set to increase by 1760.47% to £4,000. Fees for estates over £2 million will increase by 9202.33%.

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In light of the potential changes, many clients may therefore seek ways in which the cost of obtaining probate can be reduced.

A potential option available is placing an investment bond into a probate bare trust.

As the bond is in a trust, it means it is not part of the estate and can therefore be obtained in absence of estate costs and minimal formality.

There are no inheritance tax (IHT) implications for probate bare trusts as the donor is the absolute beneficiary. For this reason, during their lifetime they possess all rights to surrenders and withdrawals. Following their death, the beneficiaries automatically become the beneficiaries of the estate.

Providing there is at least one remaining trustee, on death the company will need to be provided with a death certificate copy as well as a completed claim form signed by trustees. This is so the bond can be paid out.

Due the potential rises in probate fees from April next year, the investment bond’s ability to be separated from an estate using a bare trust may be of great use.

Before probate can be granted, any IHT which is due on the estate must be paid. Coupled with the potential increase in probate fees, this can financially burden executors to a much greater extent.

If written under a probate bare trust, an investment bond is distributed among surviving trustees who are then able to utilise the funds to assist in paying probate or IHT.

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