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Probate Court fees under Review
A consultation was launched on 18th February 2016 setting out the governments proposals for reforming the fee payable for an application for a grant of probate. The consultation runs from 18th February to 1st April and can be found at:
The consultation seeks to review the way in which the Probate Court is funded at present, with a view to reducing the burden placed by it on the tax payer. In 2014/15 the courts and tribunals administered by HMCTS cost, overall, £1.8billion, bringing in only £700 million in income. This deficit has been placed under scrutiny by the Ministry of Justice, which is seeking to reduce this by a proposed restructure of court fees applicable to probate applications.
Currently, estates worth under £5,000 are exempt from probate court fees. It is proposed that this threshold will increase to £50,000, and it is estimated that this rise would lift 30,000 estates out of court fees entirely, with 57% of estates paying no probate court fees under the new system. By contrast, estate above the threshold would begin to suffer court fees on a sliding scale based on the value of the estate, never amounting to more than 1% of the value of the estate, raising an additional £250 million per year.
Although the consultation report estimates that only 50% of all estates actually go through a probate process, whether due to the nature or value of these precluding the need for a grant of probate, with an average of 270,000 applications for grant of probate made annually. The current court fees for applications are set at £155 for solicitor applications and £215 for individual applications, the latter of which require greater involvement by the probate registry to ensure compliance. This ‘flat fee’ system came into use in 1999 when the fee of £40-50 for solicitor applications (£90-130 for individual) jumped to its current level. Prior to this, between 1981 and 1999, there was a system based on estate value, not dissimilar to that proposed in the consultation document.
The proposed fee structure (based on value of estate before IHT) is as follows:
Up to £50,000 or exempt from requiring a grant of probate – £0
Estate Exceeds £50,000 but does not exceed £300,000 – £300
Estate Exceeds £300,000 but does not exceed £500,000 – £1,000
Estate Exceeds £500,000 but does not exceed £1m – £4,000
Estate Exceeds £1m but does not exceed £1.6m – £8,000
Estate Exceeds £1.6m but does not exceed £2m – £12,000
Estate Above £2m- £20,000
The probate court system is proposing investment in new technology to streamline the application system, with a view to undertaking online applications, with significant changes proposed to the current system where an Oath is ‘sworn’ by the executors to an estate to confirm the details and values presented to the Court.
Currently, Executors can pay both the Funeral account and Inheritance Tax on an estates directly from the funds of the deceased, rather than having to fund these themselves or through loans. Whether or not this scheme will be formally extended to the payment of the new fees will need to be established once the detail of this is finalised. Evidently this is a significant charge which will need to be funded in order to obtain a Grant of Probate, or it may simply rely on the goodwill of banks and building societies to incorporate this fee into the charges which are deductible from frozen estates. Executors will also need to consider the nature of assets in an estate, as those estates which are ‘property-rich and cash-poor’ may need to seek loans from the deceased’s bank for this purpose. It appears that the recent increase in tax free allowances to spouses tied to the matrimonial home, are being balanced by an increase in charges on all estates under the new scheme. Detailed support and advice will need to be sought by Executors to tackle the new system once in place, as well as by Testators during their lifetimes when considering tax efficient lifetime gifting to reduce the value of their death estates.
If you would like advice about estate planning, grant of probate applications, lifetime or testatory gifting or any other related issue, please contact Judith Bleetman or Lucy Thomas our Cockfosters office on 020 8441 1556