The Daily Mail Online posted an article in July this year which indicates that up to 1.5 million people have been sold ‘rip-off Wills’ by high street banks.
During the 1990s and early 2000s some banks were offering their will writing services as an added extra to accounts and mortgage deals. Some Wills prepared by the banks had terms in the small print which would leave a lot less than was intended for your beneficiaries. Furthermore, one bank allegedly added a provision that meant they had the right to act as executors of your estate when you pass away. This bank would charge a hefty administration fee and then 2.5% of your total estate in return for acting as executors.
Those consumers who had similar provisions included were told by the banks that they will have been advised about the fees beforehand, but it does not seem to be the case for everyone.
Legal professionals discuss whether the banks were transparent enough about their role in their customer’s estate planning and in their experience what the pros and cons of a bank being appointed as executor….
Kylie Simmonds, Council Member of Institute of Professional Will writers (IPW) comments: “My thought of this, which may not represent the views of the IPW. There are many benefits to appointing a professional executor, whether this is the Bank, a Will writer, a Solicitor or any other person acting in a professional capacity. Such as the efficiency, skill, and knowledge provided by that professional, as well as the fact that they are liable and responsible for their actions and in the main they do a good job. Estates can be complicated especially with step-families, the rise of taxable estates and overseas assets and so the appointment of a professional can be an attractive proposition, especially to remove the burden from your loved ones.
It is vitally important that at the time of providing instructions for the Will to be produced that the professional is transparent, not only about the fees which will apply when the time comes but also what does this appointment actually mean to their loved ones; for example, loss of control. Often you hear that testators did not understand what the executor appointment meant, they had no knowledge of the appointment, or the executor appointment was a requirement in order to benefit from a “free” Will Writing service, which means that actually the appointment may not have been the testators wishes.
With consumers becoming more aware and self-reliant, especially in this digital age, firms and organisations need to have better internal renunciation processes, allowing the consumer to choose whether they would actually want the burden of being involved and responsible for the administration of the estate. Although, on the flip side, the testator may have appointed a professional due to family tension or conflict and in which case it may be better for the professional to continue to act as Executor, rather than renounce. This shows that a professional needs to base a decision on whether to renounce on a case by case basis rather than having a blanket ruling. I have heard too many stories about too many organisations that insist on acting and won’t even consider renouncing, the emphasis being on the fee that could be lost rather than treating customers fairly.
With the rise of personal probate application (around 40%), it is evident that some consumers do want to DIY. The issue with the Banks as well as many other professionals isn’t the fact that they have been appointed as executor but actually because the testators are often signing contracts alongside their Will Writing service which allows professionals to charge what are considered to be very high fees when administering the estate. The problem is, at the time the Will was written a charge of say 3% of the Gross estate may have been the status quo across the industry, however, it can be seen that the sector is becoming more competitive and as such; price sensitive and so these fees are no longer just in today’s climate. A satisfactory solution would be for the professional to charge a fee based on the scale of fees today, rather than at the time of executing the Will.”
The Society of Will Writers, Sales and Marketing Director, Thomas Stansfield further comments: “From our experience banks seem to be moving away from assisting clients with estate planning. From a probate point of view, banks have been criticised for charging higher fixed fees when it comes to probate. I’ve heard figures of between 4% being charged which a lot of practitioners and beneficiaries feel is unethical for the amount of work required.
Having said this, a client would always trust their bank. Historically, customers had more loyalty to their bank and they have always looked after clients’ money, so it may have been an easy sell to appoint a bank as an executor. Now, the position seems to be changing. The sorry state of affairs, which is common in our industry, is that if one practitioner/firm/bank is publicly criticised for ‘overcharging’ or a ‘lack of transparency’ then other practitioners are automatically guilty simply by working in the same arena.
From our point of view, as long as the professionals appointed are suitably qualified, experienced and insured then a fair and reasonable fee could be charged. The client should have the necessary information to be able to make an informed decision. ”
Emily Deane, Technical Counsel at The Society of Trust & Estate Practitioners (STEP) says “It can be stressful and daunting acting as an executor, so the testator may prefer to appoint a professional who is impartial and has specialist knowledge in addition to, or instead of, a friend or family member. Appointing a professional can speed up the administration process and ease the burden of family members, particularly where the estate is complex or taxable, and will give the family peace of mind that the estate will be administered correctly and efficiently.
However, the testator should check the charging method of the professional before appointing anyone. Most lawyers and accountants will charge an hourly rate or will provide a quote for probate work whereas most banks still charge a standard rate of up to 3% of the value of the estate. A pro-rated charging fee can result in an unexpected and significant fee being deducted from the estate to the detriment of the beneficiaries.
Ana Dilings of Kiteleys Solicitors shares her views. She said: “Are the banks transparent enough about their role in Estate planning? Apparently not. This summer we have seen various newspaper headlines highlighting this exact problem. Hundreds of thousands of people were caught in the late 1990’s and 2000’s because the banks were offering Will writing services for as little as £75 or even free and these services were included as a perk for signing up for insurance or fee-charging current accounts.
However, the Office of Fair Trading has previously criticised the documents because small print allows the banks to appoint themselves as Executors and claim up to 2.5 per cent of the Estate in legal fees. It is currently estimated that 1.5 million Wills have been written by banks over the past 20 years. Barclays has been labelled as one of the worst culprits and accused of failing to explain to its customers the true consequences of writing itself in as Executor.
There are of course many advantages of appointing a professional Executor instead of family and friends. It removes the responsibility of the job from loved ones and relieves them of the duty at a time when they will be grieving. In the event of any dispute or difficulties within a family, a professional Executor can remain impartial and fair and ensure that the administration is carried out with objectivity. With professional Executors there is also continuity where the Will results in a trust arising in favour of young beneficiaries or confers discretionary powers on the Executors, to be managed over many years into the future. They also have the expertise to ensure that complex or high value Estates are administered in the most cost effective and tax efficient way.
Banks are in the business of managing assets that their customers entrust to them, and their employees stay current on developments in tax law and Estate law. They also have checks and balances in place to ensure that an Estate’s assets are safeguarded against mismanagement and theft. BUT the banking industry has been through some difficulty lately. If a bank you have appointed as an Executor is no longer operating when you die, the Executorship will pass to their successors which could be in a faraway city or have much more onerous fees for dealing with the Estate. To put this 2.5 per cent into real terms it means that beneficiaries of £500,000 are at risk of paying out £12,500 – around six times the typical solicitors cost of £2,200. Barclays were charging a fee of 4.5 per cent before they sold their Will writing business in 2010 – this is exceptionally high compared with even the most experienced solicitors, which do the same work at a fee of less than a quarter of what Barclays was charging. Is it right that a bank closing a savings account with a balance of £50,000 will be earning itself a fee of up to £2,250?”
