Estates over £1m face 1% ‘stealth tax’ as probate fees rise
The UK government will replace the current flat fee system for grants of probates with a new tiered levy, which could see estates over £1m ($1.24m, €1.17m) tens of thousands of pounds worse off. Probate is the legal process whereby a Will is “proved” in a court and accepted as a valid public document that is the true last testament of the deceased. The Ministry of Justice confirmed that the rise in probate fees will be introduced from May 2017.
The flat rate fee of £215 (or £155 if using a solicitor) will change to one which is tiered based on assets. The change will mean lower value estates are exempt from any charge, but the charge on estates which exceed £50,000 will increase quite dramatically. Those with assets of over £1m will have to pay probate fees of between £8,000 and £20,000.
The table below shows the new fee structure.
Given the rise in house prices in the UK, the move is likely to impact a growing number of people. In England and Wales, the probate system deals with around £81bn of assets each year through transferring ownership of, and in many cases liquidating assets. Critics have blasted the new system arguing that creating a fee structure based on estate value will lead to a system where higher value cases fund the probate service for low value cases.
Greg Pogonowski, financial planning expert, said “at its crudest” the rise in probate fees is “yet another stealth tax” as it can add up to 1% in fees on the value of an estate. It is disappointing the UK government plans to press ahead with the new fee structure for grants of probates despite wide-scale concern from the industry.
The move from a flat rate fee structure to one which is tiered based on assets could, in theory, have been an acceptable model, but the level of fees imposed are arguably unjustified. These changes will add further complexity to estate planning. Using trusts can help reduce the value of an estate for Inheritance Tax (IHT) purposes, meaning a lower charge will apply.
People concerned about how beneficiaries will pay the probate fees could leave sufficient funds in a Life Insurance policy, and provided the policy is written in Trust, it can be accessed immediately on death, without the need for probate.
Are you British? Do you have property (etc) worth more than £500,000 in the UK? Let me know if you need help…………