Outrage as New “Death Tax’ Introduced
There has been mass outrage caused by the Ministry of Justice’s recent announcement that the Probate Court fee will be increasing, from May by as much as 12,903%!
This increase is being perceived by many as an additional tax on death. The fee is not inheritance tax deductible meaning that, for example, estates over £2m would pay a massive increased fee of £20,000 in addition to their existing £670,000 inheritance tax bill.
The proposed increases were first announced last summer. Until fairly recently the probate registry would charge a fee of just £45 for a grant of probate plus £1 for every copy required irrespective of the size of the estate. A couple of years ago this was more than tripled to £155 plus 50p for every copy. From May the probate registry fees will now increase substantially depending upon the size of the estate. The largest estates will pay the maximum £20,000 fee representing an incredible price hike.
The Ministry of Justice have gone ahead with the fee increases in the face of huge amounts of opposition and despite representations from numerous members of the legal profession, this writer included, that such an increase will lead to hardship and difficulties in a number of cases. The reasons cited by the Ministry of Justice are ““in light of funding restraints… we must look at ways to make sure that [the courts system] is funded adequately now and in the future.” It is likely, given the size of the increase that the Court service will be making huge profits moving forward and it is extremely disappointing that funding requirements are being put before people’s welfare during a difficult bereavement period.
It is expected that prior to May the probate registries will be inundated with applications as executors desperately scramble to avoid the price increase. There had been concerns however that even this opportunity might be closed to executors owing to a current 4 month backlog at the HMRC. Only this week however, Winchester District Probate registry have announced that so long as the application is submitted prior to May the current fee will be payable even if the grant cannot be issued until later because of an HMRC delay.
The biggest difficulty with the fee increase is that until the grant of representation has been obtained the family/executors cannot sell the property, close or use bank accounts or sell investments. In other words they cannot access the deceased’s money so will need to use their own funds to pay the probate fee and then claim it back. Whilst some people may be able to find up to £20,000 many will struggle to do so.
At present Banks have an option to release funds to pay for inheritance tax and it is hoped they will agree to do the same for probate fees. There are however concerns that as this would, deprive them of high interest rates charged on short term probate fee loans there might be a reluctance to help out in this way.
Faced with this dilemma families may take more elaborate and desperate measures but which, unless properly considered, could have severe implications for care home funding, inheritance tax and general living expenses and which could leave them open to risk.
The best advice currently available to alleviate some of this future financial burden is to seek professional tax planning advice. Some relatively simple lifetime planning steps taken now can help to pay or mitigate the increased fee.
Contact Michael Culver for a fixed fee appointment to find out more and to see how we can help.
You can also contact one of our other solicitors in the Wealth Planning team here.