Administering another ‘death tax’ will create problems for solicitors, who also question whether it is right for the bereaved to subsidise the courts and tribunal service.
A ‘death tax’ which is ‘shocking’ in its ‘ruthlessness’ and ‘impossible to justify’.
It is fair to say that huge increases in what was otherwise a routine fee for probate have not met with general approval.
The changes, which are still subject to parliamentary approval, will result in executors of estates incurring a charge of up to £20,000 – 129 times more than the current blanket fee of £215 (£155 when applying through a solicitor).
First floated in February last year, the consultation immediately met with widespread opposition. Just 13 of 831 responses agreed with the proposals.
Following last week’s news that the government would press ahead with its plans, solicitors have told the Gazette that, aside from the hikes being unfair, practitioners are likely to run into administrative problems.
Nick Mendoza, senior associate at London-based Howard Kennedy, was one of those who responded to the initial consultation. He said: ‘The probate fee always has to be paid in advance of obtaining the grant of probate and you can’t access assets in the estate until you have the grant. This obviously isn’t an issue at the moment, where the fee is £155, but it is likely to cause problems going forward.’
Sarah Roberts, senior associate at south of England-based Coffin Mew Solicitors, said the payment scheme would work in a similar way to how inheritance tax (the other ‘death tax’) works now. However, said Roberts, many estates that may not have to pay inheritance tax will still have to pay substantially higher probate fees.
‘In my experience, quite a lot of estates contain a property, and possibly investments such as shares which are not easy to realise, and not much cash,’ she added.
‘The consultation is quite vague about the percentage of estates which will not have enough cash, but the only real alternative the government offers is that the executor and/or beneficiary can [temporarily] put up the money. I don’t know about anyone else, but I certainly wouldn’t have £20,000 to devote to this, even if only temporarily.’
Value of estate Proposed fee
Up to £50,000 £0
Between £50k-£300k £300
Between £300k-£500k £1,000
Between £500k-£1m £4,000
Between £1m-£1.6m £8,000
Between £1.6m-£2m £12,000
More than £2m £20,000
Alison Morris, a partner at Salisbury-based Wilsons, joined in the criticism, describing the idea that solicitors pay the fee as ‘unworkable and naive’.
‘A lot of probate cases are handled by small firms that just wouldn’t have the cashflow to do that,’ she added.
Jenny Cutts, private client partner at London-based Wedlake Bell, agreed that it will be particularly difficult for people to pay fees unless there are sufficient cash assets in the estate, adding that it will only lead to additional administrative costs and delay.
The Ministry of Justice, meanwhile, insists that the plans will introduce a ‘fairer banded system’, in which more than half of estates will pay nothing and 92% will pay no more than £1,000.
The money that the fees generate will be used to fund the courts system and build a ‘world-leading justice system’, it stressed.
Others sympathetic to the move will also point out that the wealthy are hardly being ill-served by government policy in the round. Inheritance tax cuts to be implemented this year will benefit families with homes worth more than £650,000 – a handout worth £38,400 each for just 26,000 of them.
But Morris also pointed to the illogicality of the new banding arrangement, as there is ‘little if any’ extra work involved in granting probate on an estate of £5m than there is on a £50,000 estate.
Roberts agreed, adding: ‘More importantly, this could be highly disproportionate, since the new charges won’t fall only on rich individuals, but those who inherit, including young children and charities.’
Another critic of the initial consultation, the Law Society, said the charge may encourage more people to undertake probate themselves ‘when there are many good reasons why people should take legal advice or instruct a solicitor.
‘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,’ the Society added.
Sarah Phillips, a partner at Irwin Mitchell Private Wealth, said older people may feel the need, or be pressured by families, to give away assets in their lifetime to avoid the charges. The most effective way for families to avoid the new charge, she said, is to ensure couples own their homes in joint names or as tenants in common.
In its initial response to the MoJ’s consultation, published in April last year, the Law Society claimed that people could try and reduce fees by adding second names on a property or bank account, or holding assets offshore.
Morris added: ‘It’s more than likely we will see a rush to the probate registries for grants to be issued before the new fees come into effect, which could cause delays issuing grants.’
If approved by parliament the changes are likely to come into effect this spring.