Now bereaved face taking out loans to pay new death taxes

GRIEVING relatives may have to take out bank loans to pay for the cost of a new probate ‘death tax’, ministers have admitted.

The cost of securing legal control over an estate after a loved one dies is due to spiral next year from the current flat fee of £215 to up to £6,000.

Official documents published quietly in Parliament on Monday reveal many executors are expected to use cash from the deceased’s bank account or get a loan to cover the higher fees.

The detailed Ministry of Justice policy analysis also reveals the fees hike will be pure profit for the department.

It says the existing fees for administering probate already more than cover the cost, and generate a surplus of £50million to pay for the courts.

The proposals, which are a watered-down version of an earlier plan which proposed fees of up to £20,000, sparked a backlash from Tory MPs yesterday.

Leading backbencher Jacob Rees-Mogg said: ‘It is still a tax rather than a fee for a service. It is just a slightly smaller one.’

Tom Clougherty, head of tax at the Centre for Policy Studies, said: ‘The suggestion that grieving families might have to borrow money to pay probate fees is extraordinary.

‘It is fair enough that probate fees should reflect the cost of the

From yesterday’s Mail service provided, but that doesn’t appear to be what the Government has proposed. On the contrary, this looks suspiciously like a stealth tax on death. That isn’t right, and I doubt it will prove very popular either.’

Signed by Courts minister Lucy Frazer, the policy impact assessment says the fees are designed to reduce the ‘taxpayer subsidy’ for the courts service. It also says the policy is ‘fair’ and ‘progressive’ because ‘users of court services who can afford to pay more should do’.

The courts in England and Wales currently raise about £740 million in fees, and cost £1.6 billion to administer.

The legislation needed to bring the new fees regime into force was laid in Parliament on Monday. MPs have until the end of the month to consider its implications, and could force a vote when it comes before the House of Commons.

Probate must typically be granted before families can release any money from an estate – for example by selling a house. Bereaved families must apply for probate to administer their loved ones’ finances when they die. Currently there is a fixed fee of £215 – or £155 for families who use a solicitor.

But from April, the Ministry of Justice wants to link the scale of the charge to the size of the estate.

The levy will range from £250 to as much as £6,000 for estates estimated to be worth more than £2million.

Inheritances of less than £50,000 will be exempt – compared with the current and less generous threshold of £5,000.

The department insists the fees will never be more than 0.5 per cent of the value of an estate and says 25,000 more families will escape the fee each year.

But for wealth estimated at £500,001, the new bill will be £2,500. One in five families who pay fees are expected to need to find at least this amount.

Executors will have to pay the fee up front before reclaiming it from the estate once probate has been granted.

THE relentless cycle of life means that at some point every family will suffer the trauma of bereavement.

The agonising sadness is bad enough, but as I discovered for myself recently — having lost my own dear father Michael and my mother-in-law Jacqueline — there is an avalanche of hidden costs that only exacerbate the grief.

Funeral expenses for even the most modest of events can reach several thousand pounds. But it’s the mountain of bureaucracy that can feel truly overwhelming.

Nothing quite prepares you for the ghouls who make their living out of death.

Unrelenting

From the moment you hand over cash to the registrar of birth, deaths and marriages at the local town hall, to the point when you have to engage a solicitor to see you through the complexities of selling property or liquidating savings, the drain on the family finances — often already taxed earnings, judiciously saved over decades — is unrelenting.

don’t forget that the department for Work & Pensions loses no time in cutting off benefits when someone dies, while utility companies demand that outstanding bills are paid.

As if all of this expense is not enough of a strain even for relatively well-off families, they now face the ghastly prospect of paying fees of up to £6,000 per estate to the Ministry of Justice.

As the Mail reported in its front page story yesterday, the probate fees must be paid and the labyrinthine bureaucracy tackled before any inheritance can start to be distributed.

Never has the aphorism of the American politician-philosopher Benjamin Franklin — ‘In this world nothing can be said to be certain, except death and taxes’ — seemed more depressingly relevant. But then perhaps never have the two been so inextricably linked.

If a Conservative government values anything, it should be thrift, prudence and self-reliance.

Couples who have worked hard and paid their taxes for decades should be allowed to keep as much of their savings as possible in the hope of passing that money to their children and grandchildren. Otherwise, why bother to save at all?

Back in 2015, then Chancellor George Osborne wowed the Tory heartlands with a promise to exclude estates valued at up to £1 million from inheritance taxes.

That said, even if that lavish promise had become reality — which it hasn’t — such is the inflated nature of the housing market in London and many other areas of the country that estates worth more than £ 1 million are evermore common, even where the family home is far from grand.

That housing bubble also means many elderly people with little disposable wealth — but perhaps a comfortable family home bought several decades ago — will be caught in the net of the new probate fees.

Under the Ministry of Justice scale, many families who would previously have paid a flat fee of £215 will now face higher probate charges, rising from £2,500 on an estate valued between £500,000 and £1 million, to £6,000 on estates worth more than £2 million.

These are the kinds of families already stymied by prohibitive stamp duties which have paralysed large swathes of the property market thanks to today’s inflated prices. Not only that, since probate has to be done on every individual estate, the descendants of a couple who die in relatively short order could find themselves hit twice.

What is particularly disturbing about the revelation of the hike in probate fees for most of middle Britain is the subterfuge surrounding the Government announcement.

Instead of the new scale of charges being laid out at the time of the last week’s Budget, either in Chancellor Philip Hammond’s speech, or in the small print of the ‘Red Book’ financial guide released by the Treasury, it was contained in a separate announcement laid before the House of Commons by Justice Minister Lucy Frazer QC on Bonfire Night.

did Mr Hammond agree that a government department could produce such a cynical money grab — which targets despairing families at their most vulnerable?

Bereaved

The proposed legislation is misleadingly portrayed as part of a £1 billion effort by the Government to ‘modernise and upgrade’ the courts system. Indeed, the Ministry of Justice press release begins with the news that thousands of bereaved families — some 25,000 extra estates a year — will become exempt from probate fees if their value is below £50,000. No doubt those families will appreciate that saving.

But the real change is that much of home-owning Britain will be caught by surging probate fees, to be paid out of the taxed incomes of grieving family members, and before they have any ability to access the resources locked up in an estate. The pretence that this is anything other than an additional death tax is laid bare by the fact that the new scale of probate fees is expected to rake in an extra £ 185 million a year by 2022-23.

Inevitably, some people who read about the new fees will be inclined to offset them by saving money on a solicitor and undertaking the probate themselves. But this can be extremely unwise.

Even when the deceased person has made a will, the lack of an independent arbiter such as a family solicitor could potentially lead to bitter family rifts which can last for decades. That’s why most families use a solicitor, especially when the main asset in the estate is the home of the person who’s died.

Here, again, grieving relatives find themselves caught in a costly Catch-22.

Anguish

The property of the deceased cannot be sold until probate has been completed. But in the meantime, as was the case for our family, all the expenses of managing the property, from regular inspection of the boiler to ground rent and service charges (in the case of my father’s apartment) must be met.

In addition, even family solicitors are no longer as trusting as they once were.

Many require a downpayment on the conveyancing, in case the transaction is never completed. That’s another £1,500 or so of expense before there is any prospect of inheriting a penny.

This latest attack on middle-income people, coming at a moment in their lives when they already face distressing costs and emotional anguish, is an insult to those who have striven to help the next generation.

In fact, the lesson in all this seems to be quite simple: don’t die!

And if you do, be prepared for the Government to steal the pennies from your eyes.