Dickensian ‘My probate nightmare cost ost me £100,000’
Sorting out your loved ones’ finances after they die can become a long and drawn-out affair, often taking up to a year to complete, and can cost several thousands of pounds if you choose to hire a professional to help. Sometimes, complexities can cause enormous delays. It took Telegraph Money reader Robert Barton, 61, about 10 years to unravel his late mother’s estate, and £100,000 in legal fees following a disagreement with HMRC about whether inheritance tax (IHT) was due.
The £2.5m estate, which Mr Barton’s mother left to her two children, was made up of a property, cash and a trust set up in 1985 comprising £2m of shares.
HMRC said that IHT, at a rate of 40pc, was due on the trust. But Mr Barton argued that the trust was taxexempt, as when his mother set it up she was not domiciled in Britain.
He said she had moved to the UK from Australia in 1969. Under historic tax rules, immigrants who intended to live here permanently had to be resident for 17 years before they were “deemed domicile”. Trusts set up within that period were tax-exempt, and Mr Barton’s mother set up her trust before the 17-year window closed. However, as his mother’s records were not well-kept, Mr Barton had to convince HMRC of the exact time his mother arrived in the country, using addresses on old bills and school reports as proof. He said HMRC eventually conceded after enough evidence had been put forward to prove his case, but only several years after his mother died in 2006.
“My mother did not keep very good records so things just dragged on and we were ping-ponging back and forth between our lawyers and the Revenue,” he said.
He added that the law firm he and his sister hired to help with the administration of the estate – Sewell Mullings Logie LLP (SML) – did little to avert the confusion and had a poor understanding of the tax implications of the trust. Overall, he paid about £100,000 to the firm in fees.
“My sister and I were endlessly correcting their information and things took so long to get done,” he said.
Mr Barton said: “Do not assume that because they are professionals the lawyers always know best, and be sure to consult more than one firm before you hire someone.”
Tim Thornton-Jones, a consultant and former partner at Irwin Mitchell, a law firm, said that dealing with HMRC over complex matters was one of the principal causes of delays in estate distributions. ons. He added that in recent years “delays ays have certainly got worse” which h he said could be put down to a lack ck of staff.
Martyn James, , of complaints service Resolver, , said dealing with the affairs of f people who had died all too often n took far longer than it should. He e said: “When you try to picture e what probate offices might look like, it’s hard d not to conjure up Dickensian images of dusty old rooms filled with legal papers and cobwebs.
“The process of probate is inherently associated with old rules, legal terms and complexity. But with the exception of some particularly complex estates, probate should be neither a time-consumer nor an industry unto itself.”
Mr James added that delays often caused considerable stress to families and that “time and time again” he dealt with complaints about financial services companies “unnecessarily dragging out the process”.
He said solicitors would often charge large sums of money to administer an estate and warned consumers to make sure their affairs were set out in a clear and concise way to avoid incurring needless costs.
As an example, Mr Thornton-Jones said trusts were not always the most efficient way of passing on a legacy and reducing your tax bill. Instead, he suggested a straightforward gift to cut your IHT bill.
When you die you have an IHT allowance of £325,000, plus a “family home allowance” if you are passing on your property to a direct descendant, which currently stands at £125,000 and will eventually stand at £175,000 after April 2020.
Spouses and civil partners can double up their allowances. This means couples will be able to pass on £1m of their wealth completely taxfree from April 2020.
Anything above these allowances is taxed at a rate of 40pc. You can reduce the overall value of your estate by making a gift.
However, you must do this at least seven years before your death in order for the gift to qualify for full tax relief.
Mr James said those thos who were unhappy with the ser service they received from a professional could complain complai to both the Legal Ombudsman Ombud and Financial Om Ombudsman.
You will fi first have to raise your concern concerns with the firm you are deali dealing with and give them eight w weeks to respond. If you are a still unhappy, you c can then take you your complaint to the omb ombudsman.
S SML said it could not comment due to clien client confidentiality.
H HMRC said it could not comment c on
ind individual cases.
To many, the issue of probate conjures up Dickensian images. Robert Barton, below, faced long delays and endless paperwork