The government has announced a significant probate fee increase from April this year, in England and Wales. This means the value of the inheritance you bequeath may be reduced, and your loved ones may be left with a hefty bill for probate fees which must be paid upfront, in full.
What is probate?
The money, property and effects remaining after a person’s death is known as their estate.
An executor is the person who has the authority to sort out the estate after a person dies. This requires the deceased’s holdings to be collected, bills to be paid and the remaining assets to be distributed according to the will.
The process of applying to the court to prove authority to administer the estate in this way is generally referred to as probate, and this attracts probate fees.
How much are the new probate fees?
Probate fees currently are simply a flat fee. After April 2019 probate fees will be based on a sliding scale according to the value of your estate before Inheritance Tax.
Fees will be calculated as follows:
- Estates worth less than £50,000 are exempt from requiring a grant of probate and will pay nothing, not even the current flat fee of £215.
- Estates worth from £50,000 up to £300,000. The new fee is £250, an increase of £35.
- Estates worth from £300,000 up to £500,000. The new fee is £750, an increase of £535.
- Estates worth from £500,000 up to £1 million. The new fee is £2,500, an increase of £2,285.
- Estates worth from £1 million up to £1.6 million. The new fee is £4,000, an increase of £3,785
- Estates worth from £1.6 million up to £2 million. The new fee is £5,000, an increase of £4,785
- Estates worth more than £2 million. The new fee is £6,000, an increase of £5,785.
How can the effect of the probate fee increase be lessened?
There isn’t a straightforward answer to this because it depends on an individual’s circumstances, however, here are some suggestions that you should discuss with your adviser to see if they apply.
Jointly owning assets
When a property-owner dies, what happens to that property depends on the type of contractual ownership they have.
Joint tenants (jointly owning the property) means that if one owner dies the interest in that property automatically transfers to the remaining owners. Tenants in common have no such rights.
Joint ownership may be beneficial when considering probate fees, but consideration should be given to the fact that the property may not then be passed to another beneficiary other than a spouse or equivalent.
“Death bed gifts”
Death bed gifts transfer ownership automatically so probate is not needed on these assets. However, there strict requirements needed to meet the “gifts” criteria, not least that the person is facing impending death. A discussion on probate fees, however sensitive, may not be appropriate.
The creation of an appropriate Trust is a good possibility. This would need to be examined in detail according to your circumstances to understand the implications for inheritance tax, for example. However, it is well worth exploring with your Adviser how this approach could help.
We suggest you seek advice from your adviser on how the increase in probate fees will affect you.
Your adviser will be able to give advice on the most effective way to lessen the fee increase impact for your particular circumstances, without incurring unforeseen consequences.
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