A Masterclass In Probate Fees And The Options For Mitigation

Government announces increase in Probate Fees

The Government has announced changes to probate fees, effective from April 2019.

This means that there will be a huge increase in the fees for most clients.

In England and Wales, probate fees are paid when administering someone’s estate after they pass. These fees will now be based on a sliding scale that is dependent on the value of the estate, rather than a flat fee.

Currently, where estates are over £5,000, families pay a flat £215 for a personal application or £155 if a Professional Executor service is used. The threshold at which probate fees are paid is set to be lifted to £50,000, and therefore the Ministry of Justice estimate that an extra 25,000 estates per year won’t pay any fees at all.

Estates worth between £50,000 and £300,000 will be charged £250, while the maximum charge of £6,000 is applicable to estates worth £2 million or more. These changes will only apply to estates in England and Wales.

How will the fees be calculated?

On the following estate value, the fees will be calculated as:

Value of Estate before Inheritance Tax

  • Estates worth less than £50,000 are exempt from requiring a grant of probate (increase from £5,000). NEW FEE: 0
  • Estates worth from £50,000 up to £300,000. NEW FEE: £250
  • Estates worth from £300,000 up to £500,000. NEW FEE: £750
  • Estates worth from £500,000 up to £1 million. NEW FEE: £2,500
  • Estates worth from £1 million up to £1.6 million. NEW FEE: £4,000
  • Estates worth from £1.6 million up to £2 million. NEW FEE: £5,000
  • Estates worth more than £2 million. NEW FEE: £6,000

The Government believe that “these fees will never be unaffordable”, with the costs being recoverable from the estate.

Executors will have several options to fund this payment, however, it’s likely that many estates will be left struggling to pay the fee upfront when assets are tied up in frozen bank accounts or property. In the short term, it is likely that executors will have little choice but to fund these extra fees personally, whether by loan or from their personal assets.

Can you mitigate this charge for your client?

In order to reduce their estate values before death, clients could turn to gifting during their lifetime.

But what are the implications of doing so?

Clients could be left financially vulnerable by making outright gifts, not to mention the impact on the recipient beneficiary’s own estate.

Should the recipient beneficiary be in receipt of means tested benefits, go through a divorce or become bankrupt, there could be a further loss of assets – not what the client would have intended.

A deathbed gift prompted by a wish to slip into a lower band for probate fees may see money passing into the wrong hands with limited recourse, and be contrary to the wishes in the Will.

Jointly owned property (where the owners are joint tenants, not tenants in common) will automatically pass to the survivor on death, rather than via the Will, meaning the value is not included in the value of the estate at the grant application stage and therefore not included in the calculation for the probate fee.

This could have implications for children; particularly where multiple marriages have taken place, leading to inequality between children, misunderstanding as to who gets what, and a risk of disinheritance.

Most importantly it may mean that the deceased’s wishes are not truly fulfilled. Leaving assets to pass via survivorship may also put them at risk in the event that the sole surviving owner requires long term care, remarries, divorces, or becomes bankrupt.

Join on team of experts in this FREE webinar to find out the tips and tricks you can use to mitigate these charges and their implications for your clients.

All Webinars commence at 10:00am and finish at 11:00am.

Friday 7th December

Monday 10th December


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