By Laura Walkley
If you are administering the estate of a deceased person and that estate includes shares, an interest in a property, or bank accounts containing more than a particular amount, you are likely to need to apply for a Grant of Representation before you can proceed very far with the administration. The Grant confirms your authority under the Will or the Intestacy Rules, and is required by many third parties (including banks and share registrars) before they will let you deal with the deceased’s assets. Under the current rules, the Probate Registry will charge you a flat fee of either £155 or £215 for this, depending on whether or not you use a solicitor to help you. These fees are set to change dramatically for Grant applications received after 1st May this year.
Despite vehement opposition from professionals and the public alike to last year’s consultation on the topic, the Government confirmed in last week’s Budget that it is pressing ahead with its sharp increase in Probate fees. Estates valued at between £50,000 and £300,000 will pay £300, which in itself is not immodest but is still almost double the current fee for solicitor-led applications. Estates of between £300,000 and £500,000 will be charged £1,000; between £500,000 and £1 million will pay £4,000 (twenty five times the current rate); between £1 million and £1.6 million will be charged £8,000; between £1.6 million and £2 million, £12,000; and the most valuable estates, exceeding £2 million, will be expected to pay an eye-watering £20,000 – an increase one hundred and twenty nine times the current fee.
Yes, these fees are recoverable from the estates themselves – but Executors commonly find themselves in an awkwardly circular dilemma: they can’t access the bulk of the estate funds without a Grant, and they can’t get a Grant without funds. Until now, the relatively modest Probate fees have not, in most cases, put Executors in too difficult a position. It is all too easy to see, though, how Executors of an estate containing even a relatively unflashy property might find themselves expected to find a huge sum upfront. The average price of a house in Surrey is £509,000, which puts us immediately in the realm of a £4,000 Grant fee, even if the estate contains no cash whatsoever – and even if there are no plans to sell the house in question, perhaps because the deceased’s widow or widower intends to carry on living in it.
What, then, does the Government expect Executors to do? Simply put: they must pay out of their own pockets, or seek out a commercial loan. Never mind that these are people who may very well be bereaved and vulnerable.
A further sting in the tale is the fact that these application fees are not deductible for Inheritance Tax purposes. So, the largest estates will potentially be paying £8,000 of Inheritance Tax on the value of assets which will in fact be going straight into the Government’s coffers.
What, then, can the public expect to receive in exchange for these vastly inflated fees? A hugely improved service, perhaps? Not at all (the Probate Registries will be doing no extra work whatsoever in exchange for these new fees). The Government has been quite open about the fact that the projected £1.5 billion windfall will be used to prop up other areas of the creaking Court system. Whereas you might have a choice whether or not to bring a legal action against someone whom you perceive to have wronged you, though, you will typically have no option but to apply for a Grant of Representation if you are named as an Executor and one of the institutions holding estate assets demands it. It is, to all intents and purposes, an additional tax levied against estates, brought in by the back door.
So, why are we worried? Why, when the Government launched its consultation last year, did well over 800 of the 840 firms and organisations which responded so violently oppose the change? Why shouldn’t the most valuable estates pay the most? The reasons set out above all form part of the argument, certainly. We are also hugely concerned, though, about the potential for abuses to the system. There will be elderly people now who will face pressure from nefarious relatives to hand assets over before they die, to save these fees. There will be lifetime gifts and assets which go undeclared, ironically meaning a likely drop in the Inheritance Tax take. There will be companies who dream up complicated, expensive ‘solutions’ which they then sell to concerned members of the public. The Government argues it is taking this step to allow greater access to justice; it seems to us only to increase the possibility of concealment and fraud.
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