Clarity Needed Over How Probate Fees Will Be Claimed

Following the government’s announcement that they will increase probate fees, the backlash from the majority of informed specialists has been overwhelming.

The cynical charge that has been dubbed as a ‘Stealth Death Tax’ has been seen as a way of skimming off the top and increasing inheritance tax. Primarily, the problem lies in the fact that a probate application is the same cost, regardless of the estate’s value, so the tiered fee can only be viewed as an additional tax.

A major consideration that the government are yet to elaborate on concerns how the fee will be claimed. In 2017, many financial institutions have said they would be unwilling to release funds for any perceived tax of this kind, which leaves many questioning how the money will be charged.

Presently, the legal service provider usually pays for the application and amalgamates this into their fee; they will be unwilling to do this in the future given the huge fee on some estates. Similarly, an executor or beneficiary will be unwilling and quite possibly, unable to pay for these fees.

In 2017, many financial institutions have said they would be unwilling to release funds for any perceived tax of this kind on the deceased’s funds.

The justification that the money will be used to improve the court system has also been questioned by the Law Society that claimed the government had an opportunity to improve the courts and tribunals system in the budget.

 Christina Blacklaws, Law Society of England and Wales president, said: “The last time the government proposed a change in fees there was widespread condemnation from both the legal profession and consumers.

“To make it worse, the government is proposing to avoid the scrutiny of parliament by introducing the changes via statutory instrument.

“They can call it a service charge or a graduated fee, but what it amounts to is an additional inheritance tax.

“The cost to the courts for providing a grant of probate does not change whether the size of the estate is £10,000 or £1 million. Making those who have larger estates pay more is essentially just increasing the level of inheritance tax by stealth.”

“The government had an opportunity at the budget just last week to increase funding for the justice system after almost a decade of austerity.”

“Instead they chose to continue cuts which have seen thousands denied the ability to access justice.”

James Beresford, Partner at leading commercial law firm BLM and wills expert, said: “The key piece of information here is that regardless of the size of the estate, the work undertaken by the probate registry is the same. A higher value estate does not require additional resources to a lower value estate. This can therefore only be seen as a stealth tax.

“As the probate fees have to be paid up front, the question arises of how the fees are going to be funded. In 2017, banks and financial institutions said they would not allow funds to be released for this purpose from the deceased’s bank accounts. It is difficult to see executors being willing to use their own funds. Solicitors, who currently pay for the probate fees on estates they administer, will certainly not be willing to foot the bill for the increased fees either, which leaves some very important questions unanswered.”

Natalie Payne, a highly-ranked associate within the Private Client Department at Mackrell Turner Garrett, added: “Although the new banded structure is lower than before, the new probate fees for estates of more than £2m is still considered to be unjustified and a ‘stealth tax.’

“In most cases the work undertaken by the probate registry is the same whatever the size of the estate.  It is unclear how many families will pay probate fees of up to £6,000 when for a majority of estates, the wealth is tied up in property; we await guidance from the Ministry of Justice.”

When the majority of an estate value is wrapped up in property, the government will need to consider how they will fairly extract the fee before the regulation is enforced in April.

Do you foresee huge problems with probate fee changes? Who will be the real victims?