The Gov­ern­ment have indi­cat­ed that they want to change Pro­bate court fees so that the fees are based on the size of the Estate instead of the fixed fee sys­tem that is cur­rent­ly in place. A con­sul­ta­tion was held and opin­ions of inter­est­ed organ­i­sa­tions and mem­bers of the pub­lic were sought.

The results and the Government’s response were pub­lished last week. There were 829 respons­es to the first ques­tion which asked whether Pro­bate court fees should be charged in pro­por­tion to the size of the Estate. Only 63 respon­dents agreed with the pro­pos­al with 695 dis­agree­ing and 71 nei­ther agree­ing nor dis­agree­ing. Despite the over­whelm­ing feel­ing that the changes should not be imple­ment­ed the Gov­ern­ment have con­firmed that sub­ject to par­lia­men­tary approval the changes will go ahead. The new fees are expect­ed in May 2017.

The cur­rent fees for apply­ing for a grant of Pro­bate are as follows;

  • £0.00 — Up to £5,000 (or exempt)
  • £155.00 — Solic­i­tor Applications
  • £215.00 — Per­son­al Applications

The new rules would mean that the Pro­bate fees increase depend­ing on the size of the Estate as follows;

  • £0.00 — Up to £50,000 (or exempt)
  • £300.00 — £50,001 to £300,000 
  • £1000.00 — £300,001 to £500,000 
  • £4000.00 — £500,001 to £1,000,000
  • £8000.00 — £1,000,001 £1,600,000 
  • £12000.00 — £1,6000,001 to £2,000,000
  • £2000.00 — Above £2,000,000

Por­tion of all Estates in Eng­land and Wales by val­ue (before Inher­i­tance tax) 

  • 58% — Upto £50,000 (or exempt)
  • 23% — £50,001 to £300,000
  • 11% — £300,001 to £500,000
  • 6%- £500,001 to £1,000,000
  • 1% — £1,000,001 £1,600,000
  • 0.3% — £1,6000,001 to £2,000,000
  • 0.5% — Above £2,000,000

The Gov­ern­ment want to gen­er­ate more mon­ey for the Court and Tri­bunal Ser­vice and they feel that we have a court sys­tem that is envied around the world which needs to be pro­tect­ed. They argue that the new sys­tem will mean that now 58% of all Estates will not have to pay a fee and that 92% of Estates will pay fees of £1,000 or less. How­ev­er, is it real­ly fair to increase the fees so sig­nif­i­cant­ly when the ser­vice received will not change? The admin­is­tra­tion required is the same regard­less of the size of the Estate so effec­tive­ly the larg­er Estates are fund­ing the small­er ones.

With the increase in house prices, more and more Estates will be pay­ing larg­er Pro­bate fees in addi­tion to Inher­i­tance Tax (IHT) and you will notice that the fee is based on the val­ue of the Estate before IHT.

The fees are paid before the grant is issued so Execu­tors are faced with the prob­lem of fund­ing the fees in addi­tion to the IHT. The the­o­ry is that most Estates will have suf­fi­cient cash assets which the banks can release before Probate.

How­ev­er, there is cur­rent­ly no uni­for­mi­ty to the approach from the banks. What about Estates where the pri­ma­ry asset is the house which the Ben­e­fi­cia­ry lives in? It has been sug­gest­ed that the Execu­tors may get a short term loan but the inter­est rate are dis­pro­por­tion­ate­ly high and can depend on the Executor’s cred­it rat­ing. Does this mean that we have to think care­ful­ly about our poten­tial Executor’s cred­it rat­ing before appoint­ing them, per­haps exclud­ing those who are retired who are seen as a cred­it risk? Will Execu­tors refuse to act as is their right, or try and admin­is­ter large Estates them­selves with­out seek­ing legal advice think­ing they can save mon­ey elsewhere?

There are lots of con­cerns about the changes and the Government’s response does not real­ly address them, but mere­ly quotes sta­tis­tics to show that most Estates will not be affect­ed. Time will tell what impact this has on the admin­is­tra­tion of Estates.

If you would like to dis­cuss any of the above, please con­tact Nico­la Lloyd on 01625 523 988 or email mail@​JBGass.​com