Probate Fees Consultaion
  • 15th Jun 2016

Since 2014 the probate court fee for applying for a grant of probate or letters of administration has been £155, plus 50p for each sealed office copy required.  This fee was increased in 2014 from the previous £50 fee, and prior to this between 1981-1999 a banded system was in place.  It is this return to a fee structure based on the value of the estate that the Government are proposing.

On 18 February 2016 the Government announced a Public Consultation on changes to the probate fee regime.

The preamble to the consultation states, “The proposed fee regime will move from a flat to a banded fee approach, proportionate to, and rising with, the value of the estate, and at the same time will increase the value of the estate below which no fee is payable from £5,000 to £50,000, lifting some 30,000 estates out of paying any fee.”

The main reason for this apparently is to raise additional revenue, to reduce the burden on the Treasury of the Probate Service, to enable investment to be made in the service, such as IT upgrades.

 

Proposed fee structure

 

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

 

It is clear that the level of fees, if implemented as above, will be significantly more than under the current regime.  There has been a lot of discussion and concern within the industry as to these proposals, and the repercussions of it, which could have serious and unintended consequences.

For example, we often advise vulnerable clients, who at times may face pressure from relatives to transfer assets to them during their lifetime.  These large probate fees could be another argument put forward by unscrupulous relatives, as a reason why such a lifetime transfer is beneficial, and a vulnerable relative may not be able to resist such arguments.  Those people who don’t take advice are even more vulnerable to this type of fraud.

How are these fees to be funded?  Currently executors have to fund upfront, the funeral costs and inheritance tax.  It is often possible that the bank/building society will release money for these items, but it is by no means certain that probate fees will similarly be released.  And what if clients do not have liquid assets which can easily fund such fees?  It is obvious from the above table, that it wouldn’t take much for an estate to contain a family home, but little in the way of cash to have to fund fees of £4,000 - £8,000, before a grant of probate can be obtained.  Now, inheritance tax on property isn’t all due upfront, executors can pay in annual instalments, not the case as far as we know with the proposed probate fees.

So, then the government’s proposal is that executor’s take out bridging loans to finance the fee, not always an option, and by no means guaranteed, and what if the idea is that the house is to be transferred in specie to a beneficiary so no cash is realised to repay the loan?

Clients may also be advised and more likely to transfer assets into trust, to avoid probate fees, which may not be in theirs or their family’s best interests, and this will defeat the government’s revenue raising objectives in any event.

People may simply avoid probate altogether, which could leave assets languishing, and particularly in an intestate estate, the rightful beneficiaries may not receive what they are entitled to.

The size of the fee will often be disproportionate to the work involved and goes against the government policy of linking fees to the work involved.  We know from experience that it isn’t always the value of an estate which makes it complex.  Likewise with probate applications, you can have a straightforward high value case, which involves little work by the probate service, netting a disproportionate level of fees, against a relatively low value, but complex estate, with competing claims for a grant and lost Wills to name but a few potential issues.  None of this is taken into account when the probate fee is set.

The consultation closed on 1 April 2016 and we await the government’s response.