LEBC group critical of MoJ probate decision and offers practical tips for clients
27 November 2018
National adviser LEBC Group has condemned the Ministry of Justice’s decision to alter the basis for calculating probate fees, which it called a “tax on the bereaved” and warned families could face financial difficulties as a result.
On 5 November the Ministry of Justice (MoJ) announced it would abolish the current flat rate probate fee of £215 (£155 if a solicitor applies) and charge a percentage of the deceased’s assets. The charge will be calculated on the whole estate, prior to inheritance tax being levied, and will include jointly owned assets.
The MoJ said no fee will be payable on estates below £50,000 but a fee of 0.5% will now apply on all estates valued at more than £50,000, with a cap of £6,000 for estates over £2 million.
The MoJ has said the new fee system, which will affect approximately 230,000 families a year, is required to fund the work of the courts and tribunals.
However, Kay Ingram, director of public policy, LEBC Group, said: “Solicitors tell us there is no difference whatsoever in the work required based on value, so the extra charges cannot be justified on grounds of cost. Many solicitors presently pay the fee up front and recover it later, but it is unlikely they will be able to do so once the fees increase. This change constitutes a tax on the bereaved, and we expect many families to face financial difficulties as a result.”
LEBC has warned that unless the executor of a will obtains a Grant of Probate, they will be unable to access the assets of the estate. Without ready cash to pay these fees, many will be unable to access their inheritance until they can raise funds, resulting in families failing to collect savings owed to them or taking on debt to do so.
Where joint assets such as property of investment are owned on a tenancy in common basis, the remaining owner will not be able to sell, let out or borrow money against the property until probate is complete.
In an effort to help clients mitigate the worst impacts of the new tax LEBC has set out four key steps.
It recommends clients review life policies to ensure they provide adequate funds for dependents and are written in trust. This will ring fence the sum outside of the estate, saving both inheritance and probate fees. Clients are also urged to update pension plans as they do not form part of the estate and ensure that there are adequate funds in joint bank accounts or each adult has access to cash savings of their own.
For younger families under state retirement age, LEBC suggests making a claim for State Bereavement Support as soon as possible. This benefit changed in 2017, allowing increased upfront payments but reducing the period for which they are paid from up to 20 years to just 18 months. According to LEBC, it is likely that this benefit will be used by many families to pay the probate fees.
Origo is to launch Unipass Letter of Authority (ULoA) at the end of November, a service aimed at simplifying...
Professional Paraplanner’s publisher, Research in Finance (RiF), is a leading research company in the financial services sector. On occasion our readers...
While the aggregated costs and legacy trail commission regime remains far from perfect, some clarity can be gleaned, says...