A new “Death Tax”?

When someone dies, quite often it is necessary for their executors or administrators to apply to the Probate Registry for a Grant of Probate to that person’s will (or Grant of Letters of Administration if there isn’t a will). The issuing of the Grant gives the executor or administrator the authority to then deal with the deceased person’s assets and administer their estate either as per their will or under the intestacy rules if there is no will.

That can be quite daunting in itself.  There is a lot of information that needs to be gathered about the deceased person especially their finances, debts, lifetime gifts and assets owned with someone else.  This information has to be supplied to H M Revenue & Customs either before (primarily if there is Inheritance Tax to pay) or if not then, definitely when the application for a Grant is submitted to the Probate Registry. At that time the executors or administrator also send an Oath they have sworn confirming who they are and how they are entitled to apply for the Grant, details of the deceased and confirmation they will administer the estate correctly.

The Probate Registry’s role is then to check the Oath and any will to ensure that everything has been completed correctly, the will is valid and that any Inheritance Tax that is due has been paid or that there is none to pay.  They do not check any of the figures or raise queries on any aspect of the estate’s financial information that has been supplied.  That is the role of HM Revenue & Customs.

Since April 2014 the fee for this with a solicitor applying is £155 or £215 for someone applying personally without a solicitor regardless of the size of a deceased person’s estate (unless it is under £5000 when there is no fee) because the role of the Probate Registry is precisely the same, regardless of the size of the estate.

All that is about to change. The Government announced in February 2016 a consultation to reform the fees for grants of Probate (and Administration). The proposed changes were staggering and of those that responded to the consultation (which included mainly firms of solicitors but also charities, the Law Society and even the Welsh Government) less than 2% were in favour according to national firm Irwin Mitchell as reported in the Law Society Gazette.

Last month the Government announced its response to the consultation and subject to a Statutory Instrument being passed the increases are going ahead sometime in May.  A new sliding scale will be introduced rather than a flat fee.  This has been justified by the government saying it is fairer as more estates will pay nothing but as many Banks and Building Societies these day will pay out fairly large amounts without the necessity of Probate (way above the Statutory limit of £5000) then this justification isn’t entirely plausible.

These are the new fees subject to the statutory instrument being passed:- 

Estate up to £50,000                           no fee 

Exceed £50,000 but not exceed £300,00  £300 

Exceed £300,000 but not exceed £500,000        £1,000 

Exceed £500,000 but not exceed £1m £4,000 

Exceed £1m but not exceed £1.6m          £8000

Exceed £1.6m but not exceed £2m £12,000 

Exceed £2m £20,000

This fee has to be paid before the Grant is issued.  So before the executors or administrator have the right of access to the deceased person’s assets.  Many financial intuitions will now advance money directly to HMRC to pay Inheritance Tax and the Government are assuming that they will also be prepared to do so for Probate Court fees but although the banks and building societies have said they want to help the bereaved, they have not yet issued guidance on this.  The Government are also assuming that if that is not possible the executors or administrators themselves (or the beneficiaries) would advance the monies and be refunded later, or have to go to the expense of obtaining a loan if their credit worthiness allows.

So be aware that there is yet a further consideration when acting as an executor and applying for a grant. At what is already a difficult time at the loss of a loved one this will only be a further burden and worry.  At any point, we at Lawson Lewis Blakers are here to try and help you through the stresses and concerns when applying for Probate.  Just contact one of us in the Private Client Department.

But why is this a “New Death Tax”?  Because the extra revenue these increases will generate are not being used to improve the Probate Registries which is already self funding but to fund or subsidise all the Courts and Tribunal Services!

For more information please contact Jackie Alexander on 01323 720142