Race to thwart the death tax R.I.P. OFF
As experts rage at ‘ridiculous’ rise of up to 3,771% in death fees, here’s how – if you’re quick – you can escape it
TENS of thousands of grieving families are locked in a race against time to avoid a huge hike in an official fee for settling their loved one’s estate – to as much as £6,000.
At present they can apply for a grant of probate, in England and Wales, a legal document which allows an appointed person to sort out the funds, for a fee of just £215 or £155 if they use a solicitor. But from next month – the date is still to be confirmed – the probate fee will rocket in changes condemned by critics as a cynical tax disguised as an administrative fee.
While low value estates will escape the fee altogether, larger ones face a sliding scale of increasing charges, which are expected to raise an extra £185 million a year for the Exchequer by 2022-23.
In the meantime, solicitors are facing a deluge of cases from clients rushing to complete the process before the cost increases by up to a staggering 3,771 per cent.
In Scotland there is a more modest rise of 2 per cent for those paying ‘confirmation’ costs. Confirmation is Scotland’s equivalent of probate.
From April 1, relatives pay £261 on Scottish estates worth between £50,000 and £250,000. Above this threshold, the charge is £522.
In Northern Ireland applicants will pay £249 on estates worth more than £10,000, plus an additional £62 if done without the help of a solicitor.
Here, The Mail on Sunday outlines how the 60,000 families who have been dealing with a bereavement since the beginning of this year and are estimated to be facing the tax on grief can escape it. And, in the box on the right, what the rest of us can do to maximise inheritance sums and minimise fees and taxes.
What is probate?
Probate is handled by an executor, a person who is appointed in a will to deal with the estate of a relative or friend after their death. When there is no will, relatives must apply for ‘letters of administration’ but the process is the same. The exercise can take months to complete, or longer if the will is contested.
What will it cost?
Fees will start at zero for personal wealth up to £50,000, rising to £6,000 for estates worth more than £2 million. One in five grieving families is expected to have to pay £2,500, the fee for estates worth between £500,000 and £1 million.
The current flat fee of £215 or £155 if using a solicitor applies to all estates worth more than £5,000.
It is cheaper with a solicitor because their applications are considered easier to process.
Can you avoid it?
The probate application fee must be paid up-front. As a result, solicitors are being bombarded by applicants trying to submit forms before the new fees come in. They are warning that timing is tight and success in beating the hike is not guaranteed.
There are fears that those dealing with complicated financial arrangements will be unable to escape the increase. One solicitor told The Mail on Sunday the fee change is ‘ridicu-
lous’ because there is no extra work involved for the courts to register probate on a larger estate. Experts say the fees are akin to a stealth tax sneaking through the back door.
If it were a fresh tax, it would need to be introduced as a new law – subject to full debate by members of Parliament. Instead, the fees are being waved through as an amendment under existing legislation. Critics argue it harms grieving families, dents inheritance or charitable donations left in wills, unfairly penalises homeowners whose property prices have risen and demands money be paid upfront by relatives who might not be able to afford it.
What should families do?
Family members handling simple estates, with no inheritance tax to pay, and who file straightaway stand the best chance of avoiding a higher charge.
Sophie Rowe, probate solicitor for law firm Cripps, says: ‘If someone is recently bereaved and hasn’t yet thought about probate, we would encourage them to apply as soon as possible.’
Individuals can apply without legal help – which saves on solicitors’ fees. For guidance visit gov. uk/wills-probate-inheritance. Being highly organised helped Sarah Harrison, 60, from South-West London, narrowly avoid facing the soaring probate fees, which were announced shortly before her father’s death late last year at the age of 91.
Acting swiftly means she paid £155, rather than the £2,500 she could have been charged later.
She enlisted the help of a solicitor charging £200 an hour who was familiar with her dad’s estate, because it included his property being held in a discretionary trust. Such trusts are complex and treated differently by the taxman. To keep fees under control she did much of the preparatory work herself. She says pre-empting delays is key to sorting probate quickly, adding: ‘Get plenty of copies of the death certificate. It is cheaper and quicker to do this when you register a death. I got six copies because banks and building societies all require sight of an original copy.’ The cost of death certificates has trebled since last month to £11 in England and Wales. But anyone requesting extra copies in a hurry could face double the cost again for next day delivery. Being too quick to close a relative’s bank account can slow the process, too, if financial companies try to pay rebates, refunds or interest into it. Sarah says she was not aware, until asked, that a solicitor will also need details of final utility bills. The more organised executors can be, the less they will need to pay to solicitors charging by the hour. Helen Clarke, tax partner at Irwin Mitchell Private Wealth, says: ‘Executors cannot just apply for probate before the higher fee kicks in until all your ducks are in a row. This includes completing inheritance tax forms, making any necessary searches, and gathering and sending original documents to the Probate Registry – all of which takes precious time.
‘If any of this is wrong it just creates more delays.’
Solicitors’ fees can be anywhere between 1 and 5 per cent of the estate’s value. If using a solicitor, ask multiple firms for quotes, whether they charge hourly rates or percentage fees, whether VAT is included and remember to factor in probate fees on top.
Online solicitors should also be considered. Look at comparison websites such as comparelegalcosts.co.uk and thelawsuperstore.co.uk.
Find a solicitor via lawsociety.org.uk or by calling 020 7320 5650.
For legal help in Scotland visit lawscot.org.uk/find-a-solicitor and in Northern Ireland lawsoc-ni.org.
Fixed-fee services are also offered by probate specialists, for example online company Beyond.
Anyone dealing with smaller estates should delay applying for probate.
The starting threshold for probate fees is higher under the new system, with no fee on estates valued up to £50,000, compared to £5,000 now.