Executors concerned at probate fee changes
AMONG THE headline stories generated by the Budget, the Government passed new legislation changing the court fees for applying for probate, from a flat fee to a structure based on the value of the estate. The new structure, which applies from April 2019, will see the largest estates, worth more than £2 million, having to pay fees of £6,000, instead of the current £215 for personal applicants, or £155 for applications submitted by solicitors. There will be no application fee for estates of up to £50,000 (increased from the current limit of £5,000), but estates which exceed £500,000 — as many in the London area do — will face fees of £2,500, compared to £750 for those just below that mark.
The fee has to be paid before the Probate Registry will issue a grant of probate, but the assets of the estate are not usually available to cover the fee until grant of probate has been issued. The Government has indicated it will come up with a method to enable personal representatives to access some of the estate in order to pay the fees, as is done with inheritance tax. It has also said that in cases of hardship, the fee may be waived. However, we do not yet know what solutions will be proposed for estates with high value but little cash.
At Patron Law, we regularly advise on estates with an Israeli dimension, such as where the deceased emigrated to Israel from the UK, leaving some assets in the UK. Although Israel does not have inheritance tax, individuals moving from the UK to Israel still face UK inheritance tax on their worldwide assets for five years after emigrating. After passing the five-year mark, if they continue to hold assets in the UK, their estate is liable to UK inheritance tax on those assets and UK probate would be required. The good news for expats now living in Israel is that when calculating the probate fee, the value of assets held outside the UK will not be included.
The value of any share in joint property which passes automatically to the co-owner will also not be counted towards the estate value for calculating the probate fee, although it is counted as part of the estate for inheritance tax purposes. This means when one half of a married couple dies, the value of the marital home will not be part of the probate fee calculation at that stage, as long as the home is owned as joint tenants.
The Government promises to publish detailed guidance before April, but it is clear that planning for probate fees will now need to form part of general estate planning when drawing up a will.
Benjamin May is managing partner of Patron Law, in Holland Park, London. Patron Law focuses on business, private client, real estate and dispute resolution, benjamin@patronlaw.co.uk 0203 841 7470