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