Increased death charges

The Government issued a consultation document last week setting out proposals for the reform of fees payable on application for a grant of probate. A grant of probate is the document required by the executors of a Will to show that they are the executors appointed by a Will and is required in most cases to gain access to the deceased’s assets.

The application for the grant is submitted by the executors to the Probate Registry (part of the courts service) which considers the application and, if all is in order, issues the grant. The fee currently payable for this service is £155 when the application is made by a solicitor (personal applicants pay a higher fee). The experience of probate practitioners over the last few years has been that the time taken by probate registries to issue a grant has increased causing delay in the administration of the estate.

The consultation document proposals would increase the probate fees payable on a number of estates substantially. For example, an estate of £500,001 would currently pay a fee of £155 while under the proposals it would pay a hefty £4000. The new fees will increase in line with the value of the estate reaching a maximum of £20,000 for an estate exceeding £2 million and is a return to a similar system for probate fees that was in place until 1999.

The work required by a probate registry in checking the validity of the Will and the probate application remains the same whether the estate is worth £100,000 or £1,000,000. The £1,000,000 estate may be taxable but this increases the work of HMRC in agreeing the value of the assets and the inheritance tax payable, not the work of the probate registry.

The consultation document suggests that in illiquid estates the probate fees can be borrowed from a bank but this always increases the cost of administration and the time taken to obtain the grant. The argument is also made that many of the estates which will face an increased fee will benefit from an inheritance tax reduction from 2017 when the residence nil rate band is phased in. However, deceased persons without children, or who have never owned a house, will not benefit from the residence nil rate band (RNRB); single persons with an estate of £500,001 who have children may benefit from the RNRB if their Will is drafted in the correct way, but a widow or widower with the same value estate would have usually paid no inheritance tax even before the RNRB is introduced. Their tax position will not change but the probate court fee payable by their estate will increase by very nearly 2500%.

The consultation paper acknowledges that the probate registries are self-financing but states that the increase in fees is required to finance other parts of the court system where there is a deficit; which means that ultimately beneficiaries of estates will be subsidising other parts of the court system.

We will be responding to the consultation opposing the fees reform. The consultation document can be found here if others would like to do so.