Money Matters
Margaret Dibben
Just five days before the cost of probate for large estates was due to rise by 3,770 per cent, the Ministry of Justice postponed the start date.
It conceded that its controversial plans had to be delayed because discussing Brexit is taking up so much parliamentary time.
The new rules, applying in England and Wales, should have come into effect on 1st April and will still happen at a future date, despite opposition from the Law Society, the Labour Party, the Lib Dems, charities, and Commons and Lords committees.
The proposals change the whole way the probate fee is calculated. Under the existing system, there is a flat fee of £215, or £155 if you use a solicitor, which applies to estates worth £5,000 or more. This is pretty much what the service costs to administer.
The new fee will be a sliding scale linked to the size of estates, even though there is no extra work involved in granting probate on a £5,000 estate or one worth £5 million.
Estates worth less than £50,000 will pay no fee at all. Between £50,000 and £300,000, the fee is £250 and it rises
again at £500,000, £1 million, £1.6 million and £2 million, when the charge is £6,000. The same fees apply whether or not you use a solicitor.
The extra money raised – an estimated £145 million in the first year – will be used to subsidise the cost of running the courts and tribunal service as well as paying for the probate service.
Opponents claim that this new structure turns probate fees into a tax, a ‘stealth death tax’, as it will bear no relation to the cost of providing the service. The Lords regretted what it called a misuse of fee-levying power. The Government denies this.
The difference is significant because new taxes require an Act of Parliament and scrutiny in the Lords and Commons. Increases to fees need only a change through a statutory instrument approved by a committee of MPS. This one squeaked through the committee stage by nine votes to eight.
Statutory instruments are then put to MPS and usually go through on the nod unless anyone shouts, ‘Object,’ in which case there has to be a vote. The probate issue might not enjoy the usual smooth progress, as Labour is likely to oppose the plans.
Probate fees have to be paid before probate is granted, and probate is needed before executors can legally take control of a deceased person’s estate. Until then, executors cannot distribute legacies, bequests and inheritances to the beneficiaries.
Inheritance tax at 40 per cent on estates worth more than £325,000 also has to be paid in advance – but this rule has been suspended until the new structure starts. This means that, while waiting for money to be released, some executors will have to take out loans to pay the new high fees. And there is a danger that elderly people will be tempted to give away assets in their lifetime to save money.
Charities worry that they will lose £10 million a year through pricier probate fees, because donors will reduce their legacies to pay the higher charge. The Government denies this will happen.