Probate Fee Increase: Proposals could cause Financial Hardship

The Government trialed a proposal last year to increase the fees charged by the Probate Registry to obtain a Grant of Probate in a deceased’s Estate. At the time, there was huge opposition from the public and legal profession. The fee proposals are back again though and Andrew Titmus, Senior Associate Solicitor looks at the changes and what the cost implications are for managing an Estate

Currently, the fee for a Grant of Probate on application by a solicitor is £155 with a charge of 50p for each sealed copy of the Grant. If you apply directly to the Probate Registry, the fee is £215 with the same sealed copy charge. This increased cost is justified by the Probate Registry having to do more work in providing forms and the Oath.

In both cases, the fee is waived where the Estate is valued under £5,000.

The work undertaken by the Probate Registry

The importance of the Probate Registry should not be overlooked. When an application is made for a Grant of Probate, the Probate Registry considers the Will and Oath submitted to them. They ensure that the Will is in a form that is legal and able to be proven and that those applying to take out the Grant of Probate have sufficient standing to do so.

The Probate Registry also acts as a ‘gatekeeper’ for HM Revenue and Customs (HMRC) and prevents a Grant of Probate from being issued until the necessary return has been filed with HMRC to account for the assets within the Estate.

The proposed fees

When changes to the fees were proposed in 2017, they were based on a sliding scale, with higher fees payable for more valuable Estates.  Seven fee bands were proposed with no fee being charged for Estates valued up to £50,000. The highest fee, for Estates worth over £2m, was to be £20,000.

Following further consultation, the new proposed fee structure takes some of the sting out of the cost of probate fees at the higher end of Estate value, but it is still a substantial increase on where we are today. Critics have argued that the fee should reflect the true cost of the administrative task of issuing a Grant or Probate and not seen as a way of potentially raising funds for other purposes.

The changes are summarised in the table below:

Estate Value              Current Fee            Original Proposed 2017 Fees        New Proposed Fees

< £5,000                          £0                                        £0                                                £0

£5001 - £50000              £155/£215                           £0                                                £0

£50001- £300,000         £155/£215                          £300                                            £250

£300,001- £500,000      £155/£215                           £1,000                                         £750

£500,001 - £1 million        £155/£215                        £4,000                                        £2,500

£1m - £1.6m                       £155/£215                         £8,000                                      £4,000         

£1.6m - £2.0m                  £155/£215                           £12,000                                      £5,000

£2m +                               £155/£215                         £20,000                                      £6,000        

On launching these proposals, the Government said that by raising the Estate value threshold from £5,000 to £50,000, around 25,000 Estates annually will be lifted out of fees altogether.

However, those Estates below £50,000 are rarely going to require a Grant of Probate in the first place so to say that 25,000 Estates are being taken out of fees could be considered quite a misleading headline.

The Process of Obtaining a Grant of Probate

In order to obtain a Grant of Probate (or Letter of Administration), the Estate must be reported to (HMRC) in most cases. Any Inheritance Tax payable at that point must be paid, including the first instalment of any tax due in respect of land/property and business assets. The Oath is sworn and the probate fee is paid.

The assets of the Estate, including properties, bank accounts, etc, cannot generally be converted to cash and used to pay liabilities or legacies until the Grant of Probate is obtained. This can become a circular problem in that there is no cash available until the Inheritance Tax has been paid and the Grant of Probate has been obtained and likewise the Grant can not be obtained until the Inheritance Tax has been paid.

HMRC have a mechanism for breaking the deadlock which works in most cases – the banks may pay the Inheritance Tax directly to HMRC. No such mechanism exists for the probate fee but solicitors often lend this nominal amount to the client as part of the administration of the Estate.

New Financial Pressure

With the proposed fee structure, it is likely that solicitors will not loan the far greater sum, especially as there is no mechanism for paying the probate fee by installments.  It will fall to family members to pay the fee up-front.

Estates are increasing in value all the time, largely driven by property values. With equity release/deferred care fee arrangements, we may see more difficulty in obtaining a Grant of Probate at the outset. There may be a need to call upon banks for loans which is something that has become less common recently in probate matters.

What can be done?

It is difficult to avoid the probate fees except for perhaps making ‘deathbed’ gifts of many of one’s assets. This would leave less value in the Estate but depending upon the assets this would not necessarily be a practical or tax-efficient approach.

If the maker of the Will (testator) is ailing and where the executors of the Estate are professionals or not particularly cash rich, they may arrange to have an insurance policy in place or a low value bank account under £5,000. These could be accessed more easily following death to enable the fee to be paid. We may see an increase in the uptake of small life insurance policies for this specific purpose.

If not, we are in the hands of Parliament to impose a further levy on death that, hopefully, more reasonably considers the difficulties experienced by the bereaved.

The law has not been enacted and is currently being considered. Some further public outrage at what could be considered as another stealth tax may cause the Government to put this on the backburner once more or opt for a more modest and reasonable increase in probate fees to actually reflect the cost to the Court Service.

Andrew Titmus is a Senior Associate Solicitor based at our Storrington Office. He practices the full breadth of matters on trusts and estates, advising on tax and complex Estates.

To arrange a confidential discussion on your individual situation, call Andrew on 01903 745666 or email andrew.titmus@andersonrowntree.co.uk