Last week the government decided to proceed with the introduction of a dramatic increase in grant of probate fees, despite overwhelming opposition.
The new fees will be based on the value of an estate before inheritance tax and are due to take effect on 1st May 2017.
Parts of the UK have seen an increase in property prices in the past couple of decades. So even though the owners may not have many assets outside the family home, this could push the value of their estate into one of the new brackets.
Estates below £50,000 will pay nothing at all – this applies to 58% of all estates in England and Wales, according to the Government.
But all estates worth more than £50,000 will be forced to pay increased fees.
How much will probate cost your estate?
Value of estate (before inheritance tax)
|Up to £50,000 or exempt from requiring a grant of probate||£0|
|£50,000 – £300,000||£300|
|£300,000 – £500,000||£1,000|
|£500,000 – £1m||£4,000|
|£1m – £1.6m||£8,000|
|£1.6m – £2m||£12,000|
Some experts say that to avoid the charges – aside from applying for probate in the next two months – would be to consider writing assets into a trust.
‘We still have traditional families where the property is in the name of the husband, and one option for them is to own the property as joint tenants, where a grant of probate will not be required and the surviving spouse can avoid the new fee, but that may not always be the best solution,’ suggested Claire Carberry, a partner at DMH Stallard.
James Ward, head of private client at Seddons, concurred. ‘It will not work in complex family situations such as second marriages, and the result will be beneficiary dissatisfaction and a rise in disputes and litigation, straining the courts even further.’
Carberry also warned against the temptation to make lifetime gifts to children – a common solution in respect of inheritance fees which could now also help reduce or avoid the new probate fees. ‘Children may die, get divorced, or end up in financial difficulties that put the assets they’ve been gifted at risk. A better option would be to place these assets, especially property, in a trust.’
Sarah Phillips, partner at Irwin Mitchell, agreed, saying there was a risk that children who had been gifted the house by their parents may not always act in their parents’ best interests later on. ‘Will the new “owners” enable the parent to move to a suitable smaller property, or indeed stay at home if they still wish to when others feel they should move,’ she asked.
‘Older people may feel pressured to give away assets in their lifetime, to avoid these high charges,’ she added. ‘There may be ways of doing this effectively, without prejudicing the security of the persons living in the property, by using a trust, but many will not follow such safe avenues.’
Placing your assets in a Trust doesn’t mean you lose control. Far from it, because the Trust has Beneficiaries and Trustees, and you (aka the Settlor) will usually be both. You can even appoint extra Trustees such as your partner or adult children.
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For more information about Trusts and how they could help you, please visit www.talkingwills.co.uk/trusts or contact us at email@example.com