Clear way needed to navigate the probate maze

THE probate system in the UK remains a mess.

You will recall that the Government ditched a controversial new probate fees regime due to come into force last May.

Branded variously a stealth tax and a death tax, it hasn’t so far re-appeared, a reflection of the initial opposition and the Conservative Party’s thin working majority in the House of Commons. How then does everything work? When someone dies in England and Wales, banks and building societies will typically freeze their accounts until the person in charge of dealing with their will, known as the executor or someone acting on their behalf, applies for an official document known as a grant of probate.

It can be a lengthy process.

The associated fee to gain court approval for the distribution of the deceased’s property, money, and possessions is currently set at a flat rate of £215 (or £155 through a solicitor) on estates worth more than £5,000.

Under the proposed changed system, bands were to be brought in relating to the value of the estate – under £50,000, no charge; £50,000£300,000, £300; £300,000-£500,000, £1,000; £500,000-£1 million, £4,000; £1 million-1.6 million, £8,000; £1.6 million-£2 million, £12,000; and more than £2 million, £20,000.

It was estimated that more than half of estates would pay nothing and 92 per cent no more than £1,000. However, for some, it was going to mean 129 times the current level.

So, a couple with an estate of £1.5 million, owning their own home, already potentially liable for up to £260,000 in inheritance tax (IHT), could have faced an extra two x £8,000 in probate fees.

The proposals created uproar and many MPs were deeply unhappy.

The government acknowledged that probate, involving the estates of around 270,000 people every year, was self-financing and made no bones about the rise representing a cross-subsidisation of other parts of the courts system.

The aim was to help offset the £1.9 billion a year spent on the courts service. The new higher fees would have provided £320 million. Fees in other areas contribute about £700 million.

Thankfully, though, all this bit the dust.

But that does not mean the current system is perfect. Far from it.

The problem is that every financial institution seems to have a different level at which probate is required.

The limit varies from around £20,000 to £50,000.

Let me give you a real example of someone caught up in the probate merry-go-round.

The wife dies suddenly aged 66. The house, with the mortgage paid off, was in joint names, so that automatically went to the surviving husband. So did a joint bank account used to pay utility and other household bills.

But she had some £40,000-plus in savings, shares and current accounts in her own right.

The Halifax, part of Lloyds TSB Group, coughed up in a week on production of the death certificate and were extremely efficient.

Standard Life, where she had a tiny number of shares, offered a small estates package but wanted £70 in administration fees.

The Yorkshire Building Society did not require probate as the amount she held with them was just under their £30,000 limit.

But Credit Suisse, with around £4,500 committed, wanted probate if the whole estate, not just their bit, was more than £30,000.

So that snookered it – probate was required.

It cost her husband around £900 in legal costs, fees and travel expenses to go through a lawyer and obtain probate, money he regarded as wasted.

What particularly irks in all of this is the lack of consistency between institutions.

It is all unnecessary hassle and stress at a time of great trauma.

Something needs to be done.