Despite overwhelming opposition, the Government has now published a draft Statutory Instrument detailing changes to the Probate Registry fees, with the new charges due to come into force from May 2017.
Executors and personal representatives currently pay a fixed, flat rate for probate applications which is set at either £155 (if applications involve a solicitor) or £215 (if applications are made in person). The Government has previously acknowledged that the Probate Registry is self-funding with the current levels of probate fees.
However, from May onwards (the exact date is yet to be confirmed), the new charges will be linked to the value of the deceased’s estate as follows:
|Value of estate (before inheritance tax)
| Up to £50,000 or exempt from requiring a grant of probate
| Exceeds £50,000 but does not exceed £300,000
| Exceeds £300,000 but does not exceed £500,000
| Exceeds £500,000 but does not exceed £1m
| Exceeds £1m but does not exceed £1.6m
| Exceeds £1.6m but does not exceed £2m
| Above £2m
In short, this means that estates valued in excess of £2 million will pay a court fee 129 times greater than they would have done under the current system. For a married couple, with assets exceeding the top level, this will result in a further £40k in addition to any inheritance tax payable. Even small estates, of just over £50k, will pay nearly double the current rate. The "fee" is completely disproportionate to the service received, which is the same irrespective of the size of the estate.
This additional levy is, in reality, a new form of taxation. The Government’s justification has been money-centric; a means by which to plug the gaping hole in the current funding of other areas of the judiciary and courts system and a way to raise an extra £250 million per year. It has stated that, "we believe it is reasonable to ask those who use the services to pay more where they can afford to do so".
These significant charges could have an adverse impact upon vulnerable and elderly individuals who, in order to save this new probate tax, may be encouraged by family members or friends, to pass on their assets, including their house, before their death. Outright gifts to children or other family members could result in the individual being left without recourse to the funds needed to support their lifestyle or the costs to support their personal care needs.
It is also anticipated that there will be an increase in individuals seeking to transfer assets into trusts (so called "probate trusts"), from which they can continue to benefit, but which will not form part of their estates for the purposes of the probate fee assessment.
"Asset rich, cash poor" estates may also suffer because these hefty fees have to be paid upon applying for a Grant of Probate, at a time when the assets in the estate are typically frozen. This is likely to lead to an increased need for executors to borrow funds in order to pay the fees.
During the consultation phase only 7.5 per cent of respondents considered that linking probate fees to the value of an individual’s estate was fair. It is perhaps unsurprising that a petition has begun, with 100,000 votes needed to force a debate in parliament.
With careful and sensible planning it will be possible, in many cases, to reduce the fee payable on death and, in addition to the recent introduction of the residential nil rate band, this highlights the importance of Will structuring and estate planning advice.