Stealth tax introduced via the back door from May

Stealth tax introduced via the back door from May

Probate fees are due to change from May 2017, despite a Government consultation to which 97.5% of respondents were against the increase. Probate fees are the fees payable to the Probate Registry when someone dies and their estate needs administering in accordance with their Will or intestacy. For over 62% of estates that use a solicitor, the Probate Registry performs a purely administrative job, "rubber-stamping" their application; the value of the estate has no bearing on the work undertaken by the Probate Registry, which is why these new fees are exceptionally unfair, payable at a time when families have suffered a bereavement.

Currently probate fees are £155 for estates over £5000 only; the new scheme will introduce a sliding scale according to the estate value as follows:

  • £300 for estates worth more than £50,000 and up to £300,000
  • £1,000 for estates worth more than £300,000 and up to £500,000
  • £4,000 for estates worth more than £500,000 and up to £1 million
  • £8,000 for estates worth more than £1m and up to £1.6 million
  • £12,000 for estates worth more than £1.6m and up to £2 million
  • £20,000 for estates worth more than £2 million

These fees are in addition to inheritance tax of 40% and in some cases constitute over a 9000% rise.

So what are the consequences?

For most people who have property, their estate may be worth more than £500,000, therefore the fee increase from £155 to £4,000 is extreme. Worse still for those larger estates who – in addition to inheritance tax at 40% - now face an additional charge of tens of thousands. This is likely to hit charities worst of all, as statistically they are the group which receives the largest single legacies (after family members) and many rely heavily on legacies to fund the charity's work. A charity which may be left a large estate worth £2 million will now be facing a "fee" of £20,000 before the estate is even given to them, and people may be more circumspect with their donations to take into account the additional stealth tax the estate will need to pay. The fees will apply irrespective of who inherits, unlike inheritance tax, so widows and charities will be hit under the new rules. For example, a widow who inherits her husband's share in the family home worth £100,000, and who may be on limited income will have to pay £300 for the privilege of inheriting, even though inheritance tax is not payable.

The Solicitors for the Elderly forum have commented, "The increase in probate fees will place a burden on families at a sensitive and distressing time and is likely to put people who are vulnerable and/or elderly at risk. Our fear is that such clients might be persuaded to take steps to avoid probate fees, even if the effect is to leave them with insufficient assets to provide for themselves for the rest of their life."

There is a real concern for us elderly client and dementia specialists that clients will now be under increased pressure from their children to transfer or gift away property to reduce the value of the estate (and so the probate fee), or to give away assets they need. These clients risk being found guilty by the Local Authority of depriving themselves of assets to avoid care home fees or risk having given away the security of residence in their home when they fall out with their children or those children divorce or are made bankrupt. All clients will now need to review their financial positions and consider whether the inheritance tax planning they have done is sufficient, and whether their Wills are correct, to take into account this additional fee which will be levied on the estate.

In essence, the introduction of massively increased fees for an administrative body which already covers its fees and doesn't run at a loss is nothing more than a stealth tax and an unfair form of taxation on the elderly, who have no way of avoiding these fees.

The Solicitors for the Elderly forum which includes many lawyers nationally are understandably very angry about this change and have set up a petition.

To reconsider the proposed significant and unreasonable increase in probate fees, please follow the link below and join us in signing this petition:

Clapham & Collinge Solicitors provide an extensive range of private client services including Wills, Trusts and Probate. For more information or to discuss your individual circumstances in further details, contact us on 01603 693500 or email us using 'Make an enquiry' form. Appointments available at our Norwich, North Walsham, Sheringham and Brooke offices.