The cost of inheriting is set to increase, thanks to a new government proposal to raise probate fees in line with the value of an estate.
The Ministry of Justice has confirmed it intends to massively overhaul the probate system and consequent charges. From May, 2017, subject to parliamentary approval, the MoJ will replace flat fees with a sliding scale fee system which could result in some estates being charged as much as £20,000.
Probate fees are what an executor or administrator must pay to obtain the grant of representation: such grants are normally an essential requirement for the executor or administrator to get access to a deceased person’s individual bank accounts, shares and other assets. Estate assets can be used to pay probate fees, however, as executors are unlikely to be able to access estate funds before a grant of representation is granted, these fees are invariable paid out-of-pocket by the executor.
The probate fee is currently charged at a flat rate of £215 (or £155 if the application is made by a solicitor). However, under the new sliding fee proposals, fees would be levied on the value of the estate before inheritance tax. The upshot of the changes is that estates valued at between £50,000 and £300,000 will thereafter pay £300, and estates valued at between £300,000 and £500,000 could be faced with a probate bill of as much £1,000. For estates worth more than £2m, the fee will increase to £20,000, an increase of almost 10,000 per cent for executors acting alone.
On the positive side the proposals will mean good news for estates worth less than £50,000, as there will no longer be a requirement to pay probate fees. The MoJ estimates that 30,000 more estates will benefit from the changes.
Why is the MoJ seeking to introduce the changes? Well, the ministry said that ‘fees are necessary to maintain an accessible, world-leading justice system which puts the needs of victims and vulnerable people first.’ What’s more a ‘fairer, banded system’ will mean more than half of estates will pay nothing and 92 per cent will pay no more than £1,000, the ministry added.
In February 2016, the Law Society Gazette reported that the MoJ was planning the increases as part of its plans to raise an extra £250m a year to fund the courts and tribunal service. The Law Society expressed criticism of the proposals at the time, saying they could encourage more people to undertake probate themselves rather than instruct a solicitor, adding: ‘it is unfair and discriminatory to expect the bereaved to fund/subsidise other parts of the court and tribunals service. Court fees are a necessary source of funding but should not be charged over and above the cost of the specific service.’
Speaking about the MoJ’s latest sliding fee proposals, Law Society President, Jonathan Smithers said:
“Many people would regard a progressive fee structure as a fairer way to charge for the service, but the fees proposed for high value estates do not bear any relation to the work or value involved.”