Families who have lost a loved one during Covid-19 are postponing Probate (a general term for sorting out of the affairs of their late relative) without realising this could result in significant additional costs.
Probate applications down
According to a recent Daily Telegraph article the courts typically received between 5,000 and 6,000 applications a week for Grants of Probate or Letters of Administration at a time when death rates were between 10,000 and 15,000 per week.
By mid April the weekly death rate was as high as 22,000 but probate applications were as low as £3,300.
The reasons for the this drop may be because families are unable to obtain the necessary documents from their relative’s home, or delays with banks and lawyers. Families may also simply be waiting until the crisis is over to tackle the complex job of sorting out the estate of a loved one.
Postponing probate can be costly
Postponing probate could result in a number of unforeseen costs.
- Interest charges. Inheritance tax should be paid within six months of the date of death. If not, this will result in interest charges on the tax owing.
- Late filing fees. You should file your return within 12 months or face late filing fines.
- Forfeiture of loss relief. As part of the estate administration process you may wish reclaim overpaid Inheritance Tax on ‘qualifying investments’ that have fallen in value. This needs to be done within a year.
- IHT threshold exceeded. Pensions are commonly bequeathed free of tax, however, after two years they potentially form part of the value of the estate. If this results in an increase in the value of the estate over the Inheritance tax threshold, then the estate may be liable for Inheritance Tax at 40%.
- Income tax on withdrawals. Income tax may be payable on amounts a beneficiary has withdrawn if the two year cut off date is exceeded.
- Spouse exemption expires. A surviving spouse in entitled to inherit their late spouse’s assets without incurring tax – the spouse exemption – but this should be claimed within two years or this benefit is lost.
- Will variation ability lost. You may also lose the power to vary the will for tax purposes. This is known as the “deed of variation”. These changes can be applied to divert assets to Trusts or other beneficiaries.
Probate is complex enough
We know that dealing with the affairs of a deceased loved one is complex and often distressing, even at the best of times. With the current uncertainty we can understand why bereaved families are postponing probate. Now that things are gradually returning more to normality we urge you to move forward with probate before you incur significant unnecessary costs.
Our affordable probate and estate administration service is designed to give you peace of mind that all legal formalities have been completed, HMRC is satisfied at every stage and the funds released to the beneficiaries without delay.
Download our free Easy To Understand Guide to Probate & Administering Estates.
For free Probate and Estate Administration advice or to get the process underway, call our friendly team of Probate professionals today on 0208 568 9602 or email firstname.lastname@example.org