Increased Probate Fees from April 2019 and Tax Planning

The government has revisited it’s controversial proposals to increase Probate Application Fees and have announced a new banded structure that will apply to applications from April 2019. The current flat rate fee of £155 if using a solicitor or £215 if making a personal application is to be replaced by a charging structure that is linked to the size of the estate.

The Ministry of Justice say the increased fees are to be reinvested in the courts systems, but many families will view this tiered charging regime as an additional tax on estates that may already be exposed to 40% IHT.

From April 2019 estates up to £50k will be exempt from probate application fees but executors administering estates with assets passing through probate between £50k and £300k face fees of £250, between £300k and £500k £750 fees, £500k to £1m £2,500 fees and above £2m the fees will be £6k. Although the small estate exemption is welcomed, those higher value estates are faced with disproportionate fees for an administrative process. Looking at an estate with a value of £600k the fee will be £2,500 which is more than ten times the current fee.

So will be there a surge of probate applications before 1 April 2019 for estates over £50k to take advantage of the existing fee structure?

Concerns have been raised about the ability of executors to pay the probate fees which are due on application. For example, if bank accounts are frozen or other assets held in the sole name of a late husband being passed to a wife, they will be included for probate purposes and inflate the probate fees but will not be subject to IHT.

What may be viewed as an additional tax could encourage people to hold assets jointly as opposed to tenants in common so that they pass by the survivorship rules, as opposed to under the terms of the Will. This can be effective and appropriate in some circumstances, but it may lead to inequality, for example between children in second marriages.

The above highlights the need for individuals to seek appropriate advice about Will Structures and Life Time Planning and then revisit it every five years or sooner if there are any events or concerns for the person making the will or plans or anyone that is likely to benefit from their wishes.

Please email Alison Houghton, Private Client Manager, if you wish to discuss IHT matters including Will, lifetime planning including trusts and personal tax matters. Alternatively, please call us on 01772 821 021.