Probate is "the legal process whereby a will is "proved" in court and accepted as a valid public document that is the true last testament of the deceased."
Probate fees are due when the estate’s executor applies for a grant of probate; enabling them to collect the estate’s assets and distribute them to the beneficiaries as outlined in the deceased’s will.
Probate fees set to rocket
At present, probate fees are charged at a flat rate of £215 per personal application (£155 for applications made through a solicitor), regardless of the size of the estate. Fees can only be avoided when assets pass in their entirety from one partner to another, or the value of the estate is less than £5,000. However, under new rules proposed by the government, they intend to scrap the current flat fee and base the charge on the value of the deceased’s estate. See table below.
|Value of Estate
||Proposed Probate Fee
|Below £50,000 or Exempt
|Exceeds £50,000 but does not exceed £300,000
|Exceeds £300,000 but does not exceed £500,000
|Exceeds £500,000 but does not exceed £1m
|Exceeds £1m but does not exceed £1.6m
|Exceeds £1.6m but does not exceed £2m
As you can see; for larger estates, the proposed changes are enormous. Not forgetting that, in all cases, the fee is in addition to any inheritance tax (IHT) due.
According to the consultation document, the proposals are intended to redesign the probate service to make the experience of the bereaved as easy and hassle-free as possible. Increasing the threshold for probate fees from £5,000 to £50,000 will result in approximately 30,000 more estates being exempt from fees. However, for the remainder, the proposed fee changes is set to raise an additional £256m a year for Her Majesty’s Courts and Tribunal Service.
One of the main issues with the way inheritance and probate works is; firstly, you are not able to secure probate until IHT and other taxes have been paid. This can be a big problem when beneficiaries are relying on the proceeds of inheritance to pay the IHT bill which they are unable to access until they receive probate; causing more stress and upset.
Assets held as joint tenants transfer automatically to the survivor upon death. It must be noted, however, that joint assets removes the individual’s choice over who the beneficiary of the asset will be on death.
Another possibility is to use a life assurance policy (subject to a trust) to cover the IHT bill and also avoid the need to apply and pay for probate. The policy can be set up either on an own life or, alternatively, with husband and wife as lives assured on a joint-life, last death basis with the sum assured set at the amount of IHT liability concerned. Placing the policy in trust whereby the settlor is not set to benefit from the proceeds, means that the sum assured can be passed to the beneficiaries without any liability to IHT. That means that the proceeds would be paid out without the need to apply for probate or borrowing funds to settle any taxes owed by the estate.
The consultation period for proposals closed in April this year; however, final details of when the changes will be introduced have not yet been confirmed.