Probate fees to rocket following Government consultation
The Government on Friday (24 Feb) published its response to a consultation on the reform of probate fees. Its response will see probate fees increase from a flat fee of just £155 to up to £20,000 in certain estates, says law firm Howard Kennedy.
The Government is proposing to introduce a tiered approach to probate fees, with, for example, the estates valued between £500 and £1m attracting fees of £4,000 and estates valued over £2m attracting fees of £20,000.
Nick Mendoza, a Senior Associate solicitor in the Private Client team at law firm Howard Kennedy said: “These proposals will cause the executors of estates real problems in some cases, as these fees will need to be paid up front."
"Whilst executors can access funds in frozen bank accounts of estates to fund those fees in most cases, this assumes that there are funds available. If no funds are available, or if funds cannot be accessed, the Government seems to expect executors or beneficiaries to fund the probate fees themselves.”
The HM Courts and Tribunal Service, which overseas probate, costs the exchequer close to £1bn every year, with the Government arguing that an increase is fees is needed to meet these costs. Of the 831 responses to the consultation, just 13 agreed with the government's proposed fee structure.
For estates between £50,000 and £300,000 the fee is still going to be almost doubled.
Nick adds: “The Government claim that it will ease cost burden on low-value estate – although for estates between £50,000 and £300,000 the fee is still going to be almost doubled. Whilst the scrapping of the fee for estates valued below £50,000 is welcomed, the reality is that probate is often not required for estates of that size.”
Where funds are not available to meet the probate fees, or where the cash cannot be accessed, the proposals recommend executors make either a personal loan, seek a bank loan, or a loan from beneficiaries.
Nick said: “These solutions seem to ignore the realities of many estates and the fact that executors and/or beneficiaries will often be unable or unwilling to come up with such large amounts. It is likely that banks and building societies will start to offer short term probate fee loans, something that has been discussed between the Ministry of Justice and the British Bankers' Association, although there is likely to be a disproportionate amount of cost and paperwork that goes with this.”
The government is proposing to bring forward legislation so as to try and implement the changes by May 2017.
“This is likely to result in considerable opposition as well as a rush to get probate applications in before the new fees take effect,” concludes Nick.
New probate fee structure – Ministry of Justice
Value of estate before inheritance tax
Up to £50,000
Between £50,000 and £300,000
Between £300,000 and £500,000
Between £500,000 and £1m
Between £1m and £1.6m
Between £1.6m and £2m
Howard Kennedy has 53 partners and numbers 350 people in total and works alongside national and international clients across many disciplines, including banking, corporate and commercial, family, finance, employment, dispute resolution, intellectual property, private client, real estate and tax. Howard Kennedy has particular focus on the Financial Services, Media and Technology, Real Estate, Retail and Leisure, Sports Individuals sectors, and, through HK One, the firm’s legal concierge service for high net worth individuals with complex legal needs.
Matt Baldwin, Coast
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