Pre-paid probate plans: unregulated and “risky”?

Following the announcement that funeral plans will become regulated from 29th July, experts predict that the emergence of pre-paid probate plans will be the next major product to dominate the unregulated marketplace.

In recent news articles by the Daily Mail and This is Money, reports suggest that these newly conceived probate plans, which work by asking for upfront payment for probate in return for peace of mind and protection from rising costs in the future, could prove to be a waste of money and that any benefits “could well outweigh the risks” for consumers.

Reports state that providers of such services also claim that by entering into a plan will help to reduce the administrative burden for families, as firms will deal with most of the paperwork. But experts are warning that customers will ultimately have no protection or means of redress because the market is currently unregulated by the Financial Conduct Authority (FCA), meaning that thousands of pounds could be lost if companies cease trading, additionally any delays or mishaps could mean that loved ones are unable to access funds.

Several firms offering the service are already advertising plans online, for example one reported by This Is Money, is the Manchester based Philips Trust Corporation which quotes £2,100 for a 70-year-old with a £350,000 estate. It reportedly compares this to a “typical low-cost solicitors’ probate charge” of 1.5 per cent fee plus VAT, which would be £6,300. On its website it promises to “provide you and your loved ones much-needed peace of mind”. Yet, says the report, “more than 90 per cent of customer reviews about the firm on Trustpilot are bad or poor”.

Some firms, such as Probate Protect, reportedly state that customer money is ringfenced in an independent trust until it is needed. The funds are then released upon death to pay one of its approved partner solicitors to handle probate. But because the industry is unregulated, there is no oversight of how these funds are run, says the report. Other firms do not include any information on their websites about where customer money is held but may provide this later in the sales process. Some organisations offering probate plans are also unclear on their websites about what extra fees and charges customers could face.

Today’s Wills and Probate asked experts in the field for their take on recent reports covering the emergence of pre-paid probate plans, in addition to their own perspective on the subject.

Ian Bond, Head of Wills & Estates, Thursfields, commented:

“It is an interesting article but surprising to see inference from some of the commentators that solicitors and law firms charge for probate and estate administration services solely by reference to a percentage value of the estate. The Law Society removed all guidance relating to charging for probate and estate administration by reference to a percentage value of an estate over a decade ago and all SRA regulated solicitors and law firms are required to give full and transparent details of costs for probate and estate administration work on their websites. Savvy consumers are able to compare law firm costs to shop around for the best deal for them but also able to compare the quality, expertise and experience of the law firm as many consumers don’t chose to purchase legal services on price alone.”

Emily Deane, STEP, commented:

“STEP believes that the few advantages that pre-paid probate plans can offer are far outweighed by their risks. The best way to ensure that probate costs are kept to the minimum is to appoint trusted executors, lay or professional, when making your will. This advance decision will provide you with the peace of mind that those nominated will retain some control over the probate process and the assurance that they will keep the costs and best interests of your loved ones in mind.”

Claire Davis, Director of SFE (Solicitors for the Elderly), the organisation that connects people with lawyers that specialise in later life planning, said:

“The issue with pre-paid probate plans is they don’t take into account the complexity of a person’s estate or family issues that can come to light after death. Have the right questions been asked? Is there advice about having a will in place or the consequences of not having one (intestacy)?

The issues with a lot of these plans and offers for fixed price probate are the same issues that arise with ‘cheap’ wills. They seem like a good deal but they are overly simplistic and costs mount up as soon as issues arise – things like additional assets and tax complications. The fixed fee then ends up costing much more than a specialist would charge.

On top of the financial risks, poor quality legal documents and advice cause havoc for families at a time when they are at their most distressed and vulnerable. It’s important to find a properly qualified professional to support you during a stressful and upsetting time.

Pre-paid plans and fixed fees are becoming more common. People just need to understand the risks of taking unregulated advice from companies simply looking at their profit margins.

We would urge people to take real care when choosing a firm to support them with things like wills, powers of attorney and probate. You wouldn’t go to a heart surgeon for a broken leg or a hairdresser for a wedding dress. It’s absolutely vital to go to a specialist to get the right support and the same applies to legal services.

That’s why we launched SFE in 1996 and now have 1,500 specialist lawyers who undertake additional training and exams so they are fully equipped to advise people on these kinds of issues. Always look for the SFE logo or visit www.sfe.legal to find one of our members.”

SFE member and Head of Private Client at Meadows Ryan Solicitors Jade Gani, adds:

“It’s really tricky for people because many unregulated and unqualified companies may have experience in an area like probate, but where your affairs aren’t super simple you always need a specialist. You should also always make sure the firm you go to is regulated by an external professional body or a regulator like the Financial Conduct Authority or Solicitors Regulation Authority.

It’s not just that these unregulated firms pop-up and then disappear with your money, it’s that the mistakes they make can cost you a lot of money in tax or could make your family personally liable for a loss.”