Probate fees do not, on the whole,
cause much consternation. After someone
dies, an application to the Probate Registry is often needed to obtain a grant
– proof acceptable to English financial institutions that they can safely pay
over the deceased’s assets to the personal representatives (PRs) named on the
grant. This exercise, one of the few
occasions when PRs can swear at a lawyer without anyone getting upset (swearing
the oath), is usually fairly straightforward and the application to the Probate
Registry for the grant currently costs £155 if done through a solicitor. However, in its recently published
consultation, the Government states that it would like to raise probate fees to
£20,000 for some estates. Yes, £20,000
just to get the grant! No wonder some
quarters of the press have dubbed this another death tax.
The Government proposes to return
to a pre-1999 system of probate fees reflecting the value of the estate. The biggest losers will be estates worth £1
million or more:
|
Value of estate (before inheritance tax)
|
Proportion of all estates in England and Wales
|
Proposed Fee
|
|
Up to £50,000 or exempt from requiring a grant of
probate
|
57%
|
£0
|
|
Exceeds £50,000 but does not exceed £300,000
|
27%
|
£300
|
|
Exceeds £300,000 but does not exceed £500,000
|
10%
|
£1,000
|
|
Exceeds £500,000 but does not exceed £1m
|
5%
|
£4,000
|
|
Exceeds £1m but does not exceed £1.6m
|
1%
|
£8,000
|
|
Exceeds £1.6m but does not exceed £2m
|
0.2%
|
£12,000
|
|
Above £2m
|
0.4%
|
£20,000
|
(Source: UK Ministry of Justice’s Consultation on
proposals to reform fees for grants of probate: Feb 2016)
The reason given for the huge
increases is to reduce public funding of the Courts and Tribunals system (by
placing the burden on a small sector of the public instead, it would seem) and
to find funding to take the probate application process online. The proposed changes will generate an
additional £250 million, according to the consultation.
Should these changes come to
pass, it is likely that HNW families will routinely require advice on how to
plan for and fund probate fees. They
will not want to lose £20,000 twice on the passing of both parents. Couples should be able to avoid higher
probate fees after the first death by owning assets jointly as beneficial joint
tenants. A death certificate may be all
that is needed to get the assets transferred over into the surviving spouse’s
sole name without the need for a grant.
However, will-based Inheritance Tax planning often requires couples to
own assets jointly in the alternative manner, as tenants in common. The solution may be to own as beneficial
joint tenants and then retrospectively change the ownership into tenants in
common after the first death through the use of a deed of variation within the
two year time limit permitted. Ownership
of family assets via a corporate, whose articles could permit transfers of
shares without requirement for sight of a grant, may also offer another
alternative.
The consultation contains an
intriguing attempt to justify the increased probate fees for HNWs by pointing
out that those families most significantly affected by probate fee increases will
be better off overall after the introduction of the Inheritance Tax Residence
Nil Rate Band in 2017 (which hints that the introduction of the proposed
changes could coincide with this date).
This, it is stated, means that these families will be paying
significantly less Inheritance Tax and, as a matter of fairness, they should not
mind using some of the tax saved to put towards increased probate fees!
“An estate of a surviving spouse worth just over £2 million could see
its inheritance tax bill fall from £540,000 to £400,000, while their probate
fee would rise to £20,000.” (para 39, MOJ’s Consultation)
