Justice Minister, Lucy Frazer, announced on 5th November 2018 that new legislation has been put before Parliament to introduce a new, banded structure for a grant of representation – often referred to as Probate.
Under these proposals, the probate court fee would be raised from its current level of £215 for a personal application, or £155 for applications made through a Solicitor, to a scale fee based on the value of the estate. This scale would be:
- Up to £50,000 – no charge
- £50,000 to £300,000 - £250
- £300,000 to £500,000 - £750
- £500,000 to £1 million - £2,500
- £1 million to £1.6 million – £4,000
- £1.6 million to £2 million - £5,000
- Above £2 million - £6,000
This is the first time that the government have put forward proposals for reform of probate fees since they withdrew previous proposals that would have increased the highest fee to £20,000 in 2017.
Frazer said, 'We have listened closely to concerns around early proposals. Fees will never be more than 0.5 per cent of the estate's value, and are recoverable from the estate.
'Fees will be set at a level to ensure that they will only be paid by those who can afford them, with all income going directly to our courts and tribunals – ensuring justice is done, and protecting victims and vulnerable people.'
The proposed increase has however raised questions about how the fees, which must be paid upfront, before access is granted to the estate assets, are to be funded, with worries that executors will have to look at taking out a loan to cover the cost. This would be recoverable from the estate in due course, but would cause extra difficulty and stress at an already difficult time.
It is expected that some 25,000 would benefit from the raise in the level of exemption from £5,000 to £50,000 before the fee becomes payable, but an estate worth £500,000 would end up paying a fee of more than 10 times the current level, whilst the top tier under the new proposals would pay more than 3,771%.
The Ministry of Justice has insisted the fee was not a tax and will be used for the running of the courts and tribunals service and that they will publish guidance on ways to pay, but the proposals do seem very like a tax, with larger estates paying more for an administration service – with the most being paid by estates that are likely to already be chargeable to inheritance tax.
The proposals also may cause significant difficulties for those families who are asset rich, but cash poor – for example, a widow whose property is in the sole name of her deceased husband. She would not have to pay any inheritance tax, but would need to pay a significantly higher fee in order to transfer the home into her name.
This proposed rise in probate fees therefore brings into the spotlight the question of whether steps can be taken to minimise the value of your estate that needs to go to probate. Star Legal has a team of specialist lawyers who can discuss matters with you and advise you on what steps you can take to ensure that your estate works as efficiently as possible for the benefit of your beneficiaries on your death.