Charities Plea To MoJ For Alternative Proposal On Probate Fees

Charity bodies have written to the Ministry of Justice urgently seeking an alternative proposal on the probate fees by asking for a reduced or discounted rate on fees for estates that include legacy gift.

This month, The Institute of Fundraising (IOF), Remember a Charity, the Institute of Legacy Management (ILM) and NCVO wrote to the Ministry of Justice to express their concerns about the proposed Probate Fee Order, and called for a meeting to discuss a new approach that could reduce the negative impact the fee changes could have on charities.

All four charities wrote that they “are deeply concerned that the changes to probate fees will severely disrupt a promising lifeline for good causes” and have sought “urgent action” from the government by confirming that the proposed changes to probate fee structures could be “detrimental to charitable giving”.

Their suggestion that a reduction in probate fees for estates and wills that include legacy gifts “could result in a positive and welcome opportunity to promote and encourage charitable gifts in wills”.

“If a reduction or discounted rate on probate fees were introduced for estates that include a legacy gift, this would have the effect of both reducing the financial impact on charities, as well as creating an incentive to leave a charitable gift in a will,” they said.

The Non-Contentious Probate (Fees) Order which was passed last month, and could become law in just a few weeks once the statutory order is laid before parliament, will eradicate the existing current flat fee of £215 (or £155 if an estate uses a solicitor to apply for probate) to be replaced with fee bands – with estates of more than £50,000 paying between £250 and £6,000.

Charity leaders are deeply worried that when people leave a percentage of their estate to charity, the amount the charity is bequeathed will be greatly reduced due to the increases in probate fees. They have said that 87% of legacy income presently comes in this form, and not as a fixed sum. “The proposed fee structure has unintended consequences that could be detrimental to charitable giving,” the letter said. “While we understand that probate fees are an essential element of judicial funding, we are concerned that the cost is disproportionate.”

In an interview earlier this year, Solicitor and Chair of the Institute of Legacy Management, and Head of Legacy Professional Partnerships at Cancer Research UK, Maria King, talks about the damaging effects that the planned increases in probate fees will have on the charitable sector.

The ILM has been campaigning against the probate fee changes for the past 2 years and “have calculated that the proposed changes will cost the charity sector £10m annually in legacy income. If the proposal is implemented, Cancer Research UK’s income will be reduced by £600,000 per annum, Maria King warned.

King added: “The Institute of Legacy Management is concerned that to save money people may choose not to instruct professionals to carry out Probate, might renounce their executorship, or simply not apply for Probate in order to avoid the fee.

“This causes us concern, as residuary charities may need to divert funds away from their charitable objectives to pay for upfront Probate Fees when they step in as administrator. Additionally, anything that could deter the probate process is a risk to vital legacy income.

“We have not yet given up hope that the Government will think again on this issue and are asking whether they will consider implementing an exemption for estates that are largely or wholly left to charity.”

A spokeswoman for IOF also said: “We continue to urge the Ministry of Justice to review this for a fairer cost that is proportionate to the work involved and includes a charitable exemption.”

Speaking in parliament earlier this month, Lucy Frazer, parliamentary under-secretary of state at the Ministry of Justice responded by defending the changes. She said: “Fixed sum charitable donations will be unaffected by the increase probate fees.”

She added that estates will pay no more than 0.5 percent of their value in probate fees and that the changes will only affect estates where the deceased has left an entire estate or a percentage of their residuary estate to charity.

Frazer said that the government does not collect data regarding charity donations left in wills and so could not make an assessment about the overall loss for charities. However, she added that the ministry would “consider this assessment” if the body shares its data with them.

Furthermore, the OBR report has now classed the changes as a ‘tax’ instead of a fee. Rob Cope, director of Remember a Charity said: “This significant change could mean that any changes will need to go before a vote in the House of Commons. We hope that a vote in the Commons will defeat the changes altogether.”

Matthew Lagden, chief executive of the ILM, also said it had always regarded the changes as a tax too “because the new charges will be significantly higher than the costs of delivering the service”.

Lagden said he hoped the OBR report’s use of the word “tax” would “cause the government to take stock and either reconsider or bring forward legislation so it can be debated properly”.

He further added: “We understand that the House of Lords shared this view, which is why they felt unable to vote it down because by convention they do not vote down taxation measures.”

Nevertheless, the Probate Fees order has definitely missed the parliamentary timetable which was supposed to be on 1st April. As it stands, this deadline has been missed which means both the start of the calendar month and the start of the next financial year, April 6, will retain the current probate rules. However, the Bill could still be implemented into law sometime next month, with 15th April looking like the earliest possible time it could materialise.

But the charity bodies, along with The Law Society will continue to campaign against the changes – and hope the Government will reconsider and decide not to implement the changes or at best implement the new approach suggested to lessen the impact on charities despite overwhelming widespread opposition.

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